Credit Suisse 5 th Annual Industrials Conference November 29, 2017 Cindy C. Earhart Executive Vice President and Chief Financial Officer 1 / Norfolk Southern Corporation
Forward-Looking Statements 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, 2016, 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 or 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 or otherwise, unless otherwise required by applicable securities law. 2 / Norfolk Southern Corporation
First Nine Months 2017 Highlights Operating Ratio Improvement First Nine Months 2017 vs PY 75% 2015 Railway operating 7% revenues 70% 2016 Railway operating 4% expenses 2017 65% 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Expense Components ($ in millions) Railway operating ratio 130 bp RE RECORD CORD RE RESUL ULTS Net increase of $225 / 4% $21 $5,310 $97 Income from railway $3 $10 11% $120 operations $5,085 EPS 17% RECORD RE CORD RE RESUL ULTS Materials 2017 Purchased 2016 Comp. Fuel Deprec. & Other Svcs & Rents & Benefits 3 3 / Norfolk Southern Corporation
Extensive Market Reach Supports Growth Norfolk Southern’s network, alignment with ~19,500 Route Miles 22 States Served 40+ Ports shipping partners and market approach of Track by Network 250+ Short Lines generates long-term growth: Serves more than 50% of the US population, manufacturing activity, and energy consumption 65% of all freight shipped greater than 500 miles begins or ends in our region Superior Eastern intermodal network Alignment with steamship lines adding capacity in the East Largest metals franchise Most expansive network of automotive plants Industry-leading short line access First-in-class industrial development Diversified customer and market base 4 / Norfolk Southern Corporation
Current Economic Environment Truckstop.com Market Demand Index (MDI) Consumer Confidence (available loads vs. available trucks) 130.0 52.0 2014 125.0 47.0 Index Value (1985=100) 2015 120.0 42.0 2016 115.0 37.0 2017 110.0 32.0 27.0 105.0 22.0 100.0 17.0 95.0 12.0 90.0 7.0 85.0 2.0 07/16 08/16 09/16 10/16 11/16 12/16 01/17 02/17 03/17 04/17 05/17 06/17 07/17 08/17 09/17 10/17 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Gross Private Domestic Investment [Nonresidential] Industrial Production Index (percent change from preceding period in Real GDP) 106.5 12.0% Index Value (2012 = 100) 106.0 105.5 8.0% Percent Change 105.0 4.0% 104.5 104.0 0.0% 103.5 103.0 (4.0%) 102.5 (8.0%) 102.0 Source: Truckstop.com, The Conference Board, Federal Reserve Bank of St. Louis, BEA 5 / Norfolk Southern Corporation
Norfolk Southern Volume Trend Fourth quarter AAR carloads through week 47 (November 25, 2017) 4.8% increase in AAR units Total units (000’s) 4QTD 2017 vs. 2016 1,197.9 7% 1,143.4 Intermodal 42,737 5% Coal 7,646 +4.8% 6% MetCon 6,656 5% Paper 1,979 1% Chemicals 885 (2%) Automotive (1,369) (4%) Ag (4,075) 2016 2017 6 / Norfolk Southern Corporation
Fourth Quarter Outlook Revenue Outlook Operating Expense Outlook 4Q17 Outlook 3Q17 Actual vs. 4Q16 vs. 3Q16 Compensation and benefits: Growth in Industrial Production Tightening truck capacity Increased construction activity Alignment with shipping Headcount ~ 1,100 ~ 800 partners Declines due to pipeline activity Wage and H&W rates $29M ~ $29M Incentive compensation $47M ~ $47M Price and Fuel $17M consumption driven High seaborne pricing Mild weather and low natural gas prices 7 / Norfolk Southern Corporation
Strategic Plan Enhancing Shareholder Value NS progressing on financial and operational targets Operating ratio declined y-o-y for seven consecutive quarters Productivity savings of ~ $150 million for 2017 On track for $1 billion in share repurchases Dedicated team focus on delivering long-term shareholder value $650M of annual productivity savings by 2020 Market approach facilitating top line growth Operating ratio below 65% by 2020 or sooner EPS double digit compound annual growth rate by 2020 Returning capital to shareholders 8 8 / Norfolk Southern Corporation
Thank You www.norfolksouthern.com 9 / Norfolk Southern Corporation
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