1
Stephens Fall Investment Conference November 8, 2016 Marta R. - - PowerPoint PPT Presentation
Stephens Fall Investment Conference November 8, 2016 Marta R. - - PowerPoint PPT Presentation
Stephens Fall Investment Conference November 8, 2016 Marta R. Stewart Executive Vice President Finance and Chief Financial Officer 1 Forward-Looking Statements Certain statements in this presentation are forward-looking statements within the
Forward-Looking Statements
2
Certain statements in this presentation are forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995, as amended. In some cases, forward-looking statements may be identified by the use of words like “believe,” “expect,” “anticipate,” “estimate,” “plan,” “consider,” “project,” and similar references to the future. Forward-looking statements are made as of the date they were first issued and reflect the good-faith evaluation of Norfolk Southern Corporation’s (NYSE: NSC) (“Norfolk Southern” or the “Company”) management of information currently available. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company’s control. These and other important factors, including those discussed under “Risk Factors” in the Company’s Form 10-K for the year ended December 31, 2015, as well as the Company’s other public filings with the SEC, may cause our actual results, performance or achievement to differ materially from those expressed
- r implied by these forward-looking statements. Forward-looking
statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. We undertake no obligation to update or revise forward-looking statements, whether as a result of new information, the occurrence of certain events
- r otherwise, unless otherwise required by applicable securities law.
First Nine Months 2016 Highlights
Improved service supported record OR
14 16 18 20 22 24 50% 55% 60% 65% 70% 75% 80% 85%
Train Speed (mph) Composite Performance
3
% vs. PY
Railway operating revenues
(7%)
Railway operating expenses 12% Railway operating ratio
5%
Income from railway operations
3%
EPS
8%
$5,751 $236 $163 $139 $128 $5,085 $ ---
Fuel Purchased Svcs & Rents
2015
Materials & Other
2016
Comp & Benefits
Service Improvement Expense Improvement ($ in millions)
Net decrease of $666 / 12%
Depreciation
Current Railway Volume
Fourth Quarter through Week 44 (ended November 5, 2016)
4
Total Units (000’s)
12,795; 3% 3,010; 5% 1,676; 3% 589; 1% (2,414); (9%) (6,467); (13%) (7,776); (8%) Paper Chemicals Coal Intermodal MetCon Agriculture Automotive 730.2 731.6 2015 2016
Lapping Triple Crown restructuring and inventory builds 0.2% Increase in Units
4QTD 2016 vs. 2015
Source: EIA; Platts; SNL; NYMEX; EVA
$40 $60 $80 $100 $120 $140 $160 $180 $200 $220 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015 4Q 2015 1Q 2016 2Q 2016 3Q 2016 4Q 2016*
Export Prices
Queensland Coking Coal API 2
* API 2 for 4Q projected from forward curve
- Utility:
‒ Weather ‒ Natural gas prices ‒ Stockpiles
- Export:
‒ Market prices ‒ Production availability
20 40 60 80 100
Days of Burn
Utility - Total Stockpiles
5
$0 $1 $2 $3 $4 $5 $6 $7
Dollars per MMBtu
Natural Gas Prices - Henry Hub
Coal Drivers
Source: EIA; WardsAuto; Federal Reserve
- Industrial production muted
- Crude oil limited by low prices and
narrow WTI/Brent spread
- Automotive tied to North American
vehicle production
$20 $40 $60 $80 $100 $120 $140
Dollars per Barrel
Brent and WTI Oil Prices
Brent WTI
15,801 16,501 17,423 17,955 18,207
2012 2013 2014 2015 2016
North American Vehicle Production
+5.6% +3.1% +1.4% +4.4%
98 100 102 104 106 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16
Industrial Production
(Index 2012 = 100)
Manufacturing
6
Merchandise Drivers
Source: Census Bureau; BEA; Truckstop.com
- Truck competition
- Consumer demand
- Retail inventory levels
1.20 1.25 1.30 1.35 1.40 1.45 1.50 1.55 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16
Inventory/Sales Ratio
Retail Total Business 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015 4Q 2015 1Q 2016 2Q 2016 3Q 2016
Consumer Spending
(% Change vs. Preceding Period, Seasonally Adj)
5 10 15 20 25 30 35
Jan Feb Mar Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Truckstop.com Market Demand Index
2012 2013 2014 2015 2016
7
Intermodal Drivers
4Q16 Revenue Outlook
Volume Pricing
Fourth quarter year-over-year, flat to
moderate growth expected, despite continued challenges
− Excess capacity in the trucking market − Stockpiles and weather impact
coal volumes
− Crude oil and Automotive declines − Stronger intermodal as we clear
Triple Crown comparison
− Metals market laps fourth quarter 2015
declines
Focus on Pricing
− 2016 pricing remains strong − Domestic truck rates lower − Leveraging value of service product
Long-term view of markets and pricing
Volume and Resource Alignment
Flexibility to adapt to changing market
conditions and volume expectations
8
Fourth quarter volumes stabilize, solid pricing leveraging value of service, mix headwinds continue
4Q16 Expense Outlook
9
3Q16
- vs. 3Q15
4Q16 Outlook
- vs. 4Q15
Compensation and benefits: Headcount
~ 2,400 ~ 2,200
Wage and H&W rates
$26M ~ $26M
Incentive compensation
$39M ~ $39M
Triple Crown – purchased services
$37M ~ $20M
Fuel
$40M Price and consumption driven
Depreciation
$17M ~ $25M
Materials
$15M ~ $15M
Improving efficiencies and reducing costs to drive shareholder value
Strategic Plan Enhancing Shareholder Value
- NS well positioned to achieve 2016 financial and operational targets
– Operating ratio below 70% – Productivity savings of ~ $250 million – Capital spending of ~ $1.9 billion – On track for $800M in share repurchases
- Dedicated team focus on delivering long-term shareholder value
– $650M of annual productivity savings by 2020 – Top line growth – Operating ratio below 65% by 2020 – EPS double digit compound annual growth rate by 2020 – Returning capital to shareholders
10
Agile NS team reliably delivers shareholder value in the near- and long- term
Thank you.
11