Third Quarter 2012 Results Donald W. Seale Executive Vice President - PowerPoint PPT Presentation

Third Quarter 2012 Results Donald W. Seale Executive Vice President and Chief Marketing Officer 1

Railway Operating Revenue Third Quarter 2012 vs. 2011 Components of Revenue Change $ in Millions $2,889 $84 $72 Revenue $40 $2,693 $2.7 Billion, down (7%) RPU 3Q 2011 Mix/Price Fuel Volume 3Q 2012 $1,509, down (5%) 3Q 2012 Revenue $ in Millions & y-o-y Percent Change Coal $701 Volume (22%) Merchandise $1,425 1,785,000 units, down (1%) (1%) Intermodal $567 +3% 2

Revenue Per Unit Third Quarter 2012 vs. 2011 Third Quarter vs. 2011 vs. 2011 RPU Abs. % Chg. Agriculture $2,415 ($72) (3%) MetCon $1,897 ($8) -- Paper $2,530 $76 3% Chemicals $3,739 $43 1% Automotive $2,363 ($21) (1%) Merchandise $2,502 $14 1% Intermodal $653 ($14) (2%) Coal $2,014 ($205) (9%) Total $1,509 ($87) (5%) 3

Primary Negative Mix Drivers Third Quarter 2012 vs. 2011  Coal volume down (14%) or (57,000) units at an average revenue per unit of $2,000  Intermodal volume up 5%, or 40,000 units, with average revenue per unit of $650  Met/Con volume down (7%), or (13,000) with average RPU of $1,900  Agriculture volume flat, but negative mix within due to increase in shorter haul business with lower than average RPU As a share of the total volume in the quarter, Coal volume fell by 3% points from the third quarter 2011 while Intermodal share increased by 3% points. 4

Railway Volume Third Quarter 2012 vs. 2011 Total volume down (1%) 3Q 2012 Volume (000’s) 90% of decline in September & y-o-y Percent Change Coal down (14%) 1,809.9 1,785.0 2,000 (15%) decline in Utility (7%) decline in Export (14%) (17%) decline in Domestic Met Coal 1,500 Intermodal up 5% 11% gain in Domestic more than Intermodal +5% 1,000 offsets (1%) decline in International Merchandise down (1%) 500 Merchandise (1%) Declines in MetCon and Paper partially offset by Automotive and Chemical gains 0 3Q 2011 3Q 2012 5

Coal Comparisons Third Quarter 2012 vs. 2011 Revenue $701 Million, down (22%) RPU $2,014, down (9%) Volume 348,200 units, down (14%) 6

Coal Market Third Quarter 2012 vs. 2011 3Q 2012 Volume (000’s) & Volume of 348,200 units, down (14%) y-o-y Percent Change Utility Continued competition from natural gas and reduced demand for electricity Industrial Utility 16.2 Export 225.1 (16%) Baltimore down (15%) (15%) Met Lamberts Point down (6%) 49.2 (17%) Domestic Met Decelerating steel production Export and closure of RG Steel 57.7 (7%) 7

Intermodal Comparisons Third Quarter 2012 vs. 2011 Revenue $567 Million, up 3% RPU $653, down (2%) Volume 867,100 units, up 5% 8

Intermodal Market Third Quarter 2012 vs. 2011 Volume of 867,100 units, up 5% 3Q 2012 Volume (000’s) & y-o-y Percent Change Domestic Continued highway conversions Tightening truck capacity International Domestic Negative comp partially offset by Triple Crown 434.9 other gains across International 73.2 +11% customer base (3%) Premium Triple Crown 66.8 Soft retail activity and retooling +3% at automotive plants International 292.2 Premium (1%) Increased volumes with key accounts 9

Crescent Corridor Sets the Stage for up to 34 New Service Lanes in 2013 Bethlehem Harrisburg Greencastle Memphis To/From West Charlotte Atlanta Birmingham Meridian Meridian New Orleans To/From Mexico To Mexico Terminal Investments 10

Merchandise Comparisons Third Quarter 2012 vs. 2011 Revenue $1.4 Billion, down (1%) RPU $2,502, up 1% Volume 569,700 units, down (1%) 11

Merchandise Market Third Quarter 2012 vs. 2011 Volume of 569,700 units, down (1%) 3Q 2012 Volume (000’s) & y-o-y Percent Change MetCon Lower iron & steel shipments driven by RG steel closure and weaker volumes of aggregates and frac sand Agriculture Agriculture 142.6 Higher shipments of soybeans and -- feed offset decline in ethanol and wheat Automotive Chemicals MetCon 85.8 Growth in crude oil; currently shipping 165.6 +7% crude oil to six NS served refineries (7%) Automotive Paper Increased light vehicle production 76.7 tempered by retooling/model changes Chemicals (5%) Paper 99.0 Declines in pulp and waste partially +4% offset by lumber gains 12

Drilling Activity in NS Service Region 27% Decline in Active Rig Counts Active Rigs 200 180 (27%) WV 160 140 120 WV 100 PA 80 PA 60 40 20 OH OH 0 3Q11 3Q12 13 Source: RigData

Merchandise Market Third Quarter 2012 vs. 2011 Volume of 569,700 units, down (1%) 3Q 2012 Volume (000’s) & y-o-y Percent Change MetCon Lower iron & steel shipments driven by RG steel closure and weaker volumes of aggregates and frac sand Agriculture Agriculture 142.6 Higher shipments of soybeans and -- feed offset decline in ethanol and wheat Automotive Chemicals MetCon 85.8 Growth in crude oil; currently shipping 165.6 +7% crude oil to six NS served refineries (7%) Automotive Paper Increased light vehicle production 76.7 tempered by retooling/model changes Chemicals (5%) Paper 99.0 Declines in pulp and waste partially +4% offset by lumber gains 14

Third Quarter Automotive Volume Drivers  Transfer of Ford Escape from Kansas City Assembly to Louisville Assembly  Increased production of Ford F-150 at Kansas City  Extended downtime for retooling at two NS served GM assembly plants  Growth at other NS served plants 15

Merchandise Market Third Quarter 2012 vs. 2011 Volume of 569,700 units, down (1%) 3Q 2012 Volume (000’s) & y-o-y Percent Change MetCon Lower iron & steel shipments driven by RG steel closure and weaker volumes of aggregates and frac sand Agriculture Agriculture 142.6 Higher shipments of soybeans and -- feed offset decline in ethanol and wheat Automotive Chemicals MetCon 85.8 Growth in crude oil; currently shipping 165.6 +7% crude oil to six NS served refineries (7%) Automotive Paper Increased light vehicle production 76.7 tempered by retooling/model changes Chemicals (5%) Paper 99.0 Declines in pulp and waste partially +4% offset by lumber gains 16

Business Outlook Coal  Utility coal impacted by competition from natural gas and reduced demand for electricity  Softer domestic metallurgical market to support steel production  Weaker demand in European and Asian markets for both met and steam coal Intermodal  Continued opportunities for highway conversion  New Intermodal service lanes ahead as new corridor terminals open  Growth with international shipping partners excluding negative Maersk comp  Expansion in premium market segment Merchandise  Project growth in crude oil  Declining demand for sand and other materials for natural gas drilling  Continued automotive growth but tougher comps  Reduced U.S. corn and soybean crop Pricing  Continued commitment to pricing above rail cost inflation 17

Thank You 18