Baird Industrial Conference November 9, 2011 James A. Squires Executive Vice President Finance and Chief Financial Officer
Norfolk Southern System
Norfolk Southern Update Recent Results 3 rd Qtr Financial Highlights 3 rd Qtr Revenues Nine Months Summary Current Status 4 th Qtr-to-date Volumes 4 th Qtr-to-date Service Performance Business Outlook Traffic Volumes Service Performance Corridors and Terminals Shareholder Returns
Third Quarter Financial Highlights ($ in millions, except per share) 3Q11 vs. 3Q10 Change Revenues $433 18% Income From Ops $192 26% Net Income $109 24% Earnings per Share $0.40 34%
Railway Volume Third Quarter 1,810 Automotive 8% 1,753 Intermodal 8% 3% MetCon 7% 15% Coal 1% 1,522 Paper -5% Agriculture -7% Chemicals -11% 3Q09 3Q10 3Q11 Change in Units Units (000) 3Q11 vs. 3Q10
Revenue Per Unit Third Quarter Coal * 26% $1,596 MetCon* 21% Agriculture * 16% 14% $1,401 Chemicals* 16% $1,355 3% Paper* 13% Intermodal 10% Automotive* 8% 3Q09 3Q10 3Q11 Change in RPU RPU 3Q11 vs. 3Q10 * Record RPU
Total Railway Revenues Third Quarter $2,889 MetCon 29% $2,456 18% Coal 27% $2,063 Intermodal 19% 19% Automotive 17% Agriculture 7% Paper 7% Chemicals 4% 3Q09 3Q10 3Q11 Change in Revenue Revenue in $ Mill. 3Q11 vs. 3Q10
Export Coal Market Export volume of 61,844 carloads, up 11,688 or 23% Tightened global supply Global steel production up 11% Lamberts Point up 39% Baltimore down (2%) Export Carloads 1Q 2008 - 3Q 2011 70,851 75,786 61,844 59,933 56,863 61,557 55,121 59,078 59,663 50,156 49,234 45,873 40,995 45,107 22,238 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 8
Utility Coal Market Utility volume of 265,148 carloads, down (10,369) or (4%) Utility North down (5%), South down (3%) Competition from gas/lower electricity demand 50% of Northern utilities, and 36% of Southern utilities are below targeted inventory levels Utility Carloads 1Q 2008 - 3Q 2011 315,508 317,619 314,890 324,644 294,169 267,045 254,070 237,117 245,240 257,349 275,517 275,243 276,685 265,148 256,548 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 9
Nine Months Financial Summary Change vs. Prior Year ($ in millions, except per share) Sep YTD Revenues $1,251 18% Income From Ops $379 19% Net Income $342 31% Earnings per Share $1.12 38%
Fuel Price Comparison Price per Barrel $150 $140 $130 NS Diesel $120 Brent $110 $100 $90 WTI $80 $70
Current Railway Volume Fourth Quarter through Week 44 (November 5, 2011) 718 Automotive 15% 5% 686 Intermodal 11% MetCon 9% 10% 624 Coal 0% Paper -4% Agriculture -9% Chemicals -12% 2009 2010 2011 Change in Units Units (000) 2011 vs. 2010 Source: AAR carloadings, which are reported weekly and may not equal NS’ reported volumes.
Fourth Quarter – Primary Volume Drivers Increase in Units Intermodal 32,916 Continued strong domestic demand Metals and Construction 5,449 Increased steel production Automotive 4,924 US production, VW plant
Train Speed Year-to-Date through October 28, 2011 NS Train Speed Better (miles per hour) 22.5 22.0 21.5 21.0 20.5 20.0 19.5 19.0 Source: As reported publicly to the AAR
Terminal Dwell Year-to-Date through October 28, 2011 NS Terminal Dwell Better (hours) 33 31 29 27 25 23 21 Source: As reported publicly to the AAR
Outlook – Business Portfolio Improving volumes through project growth in crude oil and Chemicals waste products, and long-term improved feedstock prices Increased domestic steel production and growth in Metals & Construction shipments for natural gas drilling Growth in ethanol, offset by later harvest impact Agriculture Continued European, Asian and South American demand for Export Coal met coal Increased domestic steel production – low domestic met Domestic Metallurgical Coal stockpiles Sequential growth to replenish below target stockpiles – Utility Coal tempered by lower electrical demand & competition from gas New business, increased North American auto production Automotive Increasing demand and highway conversions Domestic & Premium Intermodal Favorable global trade International Intermodal Challenged housing market, modest growth in paper Paper 16
NS Corridor Strategy Mechanicville Ayer Detroit Bethlehem Chicago NY/NJ Greencastle Philadelphia Columbus Cincinnati Lynchburg Pritchard Roanoke Norfolk Charlotte Memphis Corinth Atlanta Birmingham Shreveport Meridian New Orleans
Intermodal Terminal Expansion Update Ground Breaking Completion Annual Volume Date Date Capability (Lifts) Mechanicville, NY July 2010 Spring 2012 70,000 Memphis, TN January 2011 Fall 2012 200,000 Greencastle, PA June 2011 Fall 2012 85,000 Birmingham, AL June 2011 Fall 2012 100,000 Charlotte, NC Summer 2011 Summer 2013 200,000
2011 Capital Program ($ millions) Total Projected Spending = $2.2 billion $194 $79 $96 Roadway $763 Freight Cars $146 Facilities & Terminals Locomotives PTC $212 Technology Infrastructure Other Projects $244 $489 19
Free Cash Flow Generation* ($ millions) $1,331 $1,244 $1,157 $1,028 $992 $561 2006 2007 2008 2009 2010 YTD 2011 * Free Cash Flow is defined as cash provided by operations less property additions. Please see reconciliation to GAAP on our website, www.nscorp.com.
Capital Structure as of September 30, 2011 Investment Grade Rating BBB+ (Standard & Poor’s) Baa1 (Moody’s) Recent Capital Markets Transactions Debt May Debt Issuance 40% Equity • 100-year bond 60% • $400 million at 6.00% September Debt Exchange • Waterfall exchange • $600 million - 30-year notes at 4.837% • $159 million in cash 21
Debt Maturities as of September 30, 2011 ($ millions) $600$585 $596 $550 $550 $500 $473 $440 $447 $404 $367 $350 $314 $295 $273 $133 $138 $83 $51 $47 $3 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '25 '27 '29 '31 '35 '37 '41 '43 '97 2105 2111
Balanced Cash Flow Utilization 2006 through Third Quarter 2011 $8.3 Billion* $8.3 Billion $5.8 Billion $2.5 Billion Dividends (CGR 20%) Share Repurchases Capital Expenditures * See reconciliation to GAAP of Total Shareholder Distributions posted on our website, www.nscorp.com.
Thank You
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