Credit Suisse Global Industrials Conference December 4, 2013 James A. Squires President 1
Norfolk Southern Update Responses to Traffic Changes Business Outlook Fourth Quarter Update General Merchandise Trends Long Term Productivity Opportunities Capital Allocation 2
Traffic Volume Changes Percentage of Total Volumes Coal GM Intermodal 48% 47% 45% 43% 34% 33% 33% 32% 23% 23% 20% 19% 2010 2011 2012 YTDSep13 3
Operating Efficiencies First Nine Months 2013 vs. 2012 Volume Train Starts 6% 3% 2% 0% -1% -3% -4% -9% Coal Gen Merch Intermodal Total 4
Operating Efficiencies First Nine Months 2013 vs. 2012 Year-Over-Year Percent Improvement Train and Engine Service Overtime -10% -10% Re-Crews Equipment Rents (Velocity Driven) -1% Carloads/Units per Locomotives in Service 6% Gross Ton Miles per Gallon 1% 5
Norfolk Southern Update Responses to Traffic Changes Business Outlook Fourth Quarter Update General Merchandise Trends Long Term Productivity Opportunities Capital Allocation 6
Business Outlook • Utility coal impacted by reduced demand for electricity, competition from natural gas and higher stockpiles in the South • Soft domestic metallurgical market to support steel production • Weak demand in European market for both met and steam coal • Excess global supply and weaker Australian dollar Coal 7
Business Outlook • Utility coal impacted by • Continued opportunities reduced demand for for highway conversion electricity, competition from natural gas and • New Intermodal service higher stockpiles in the South lanes ahead as new corridor terminals open • Soft domestic metallurgical market to support steel production • Growth with International shipping • Weak demand in partners European market for both met and steam coal • Greer, SC Inland Port – • Excess global supply and Q4 weaker Australian dollar Coal Intermodal 8
Business Outlook • Utility coal impacted by • • Project growth in crude Continued opportunities reduced demand for oil, plastics for housing for highway conversion electricity, competition and automotive and from natural gas and increased volume for • shale related liquid New Intermodal service higher stockpiles in the petroleum gases South lanes ahead as new • Gains in steel, frac sand corridor terminals open • Soft domestic metallurgical market to • Continued automotive support steel production • growth Growth with International shipping • • Weak demand in Favorable corn and soybean crop for 2013- partners European market for both 2014 with export potential met and steam coal • • Greer, SC Inland Port – Improved housing & • Excess global supply and related construction Q4 weaker Australian dollar materials market Coal Intermodal Merchandise 9
Norfolk Southern Update Responses to Traffic Changes Business Outlook Fourth Quarter Update General Merchandise Trends Long Term Productivity Opportunities Capital Allocation 10
Current Railway Volume Fourth Quarter through Week 48 (November 30, 2013) Total Volume: 1,314,600 units, up 6% Change in Units Units (000) 4QTD13 vs. 2012 1,314.6 1,242.1 24% Chemicals 14% Automotive 10% Agriculture 7% Intermodal 6% MetCon Paper 2% (5%) Coal 2012 2013 11
Train Speed 1Q10 – 4QTD13 Better 25.0 24.0 Miles per Hour 23.0 22.0 21.0 20.0 19.0 12
Terminal Dwell 1Q10 – 4QTD13 Better 27.0 26.0 25.0 24.0 Hours 23.0 22.0 21.0 20.0 13
Norfolk Southern Update Responses to Traffic Changes Business Outlook Fourth Quarter Update General Merchandise Trends Long Term Productivity Opportunities Capital Allocation 14
Continued Strength in Automotive • NSC Automotive volume up 6% YTD • North American vehicle production forecasted at 16.5 million units for 2013, up 4% vs. last year • Average vehicle age at all-time high US Vehicle Vehicle Age U.S. Vehicle Age vs. Sales Sales (M) (yrs.) 12 20 18 11 16 10 14 9 12 8 10 7 8 6 6 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Ward’s, Polk 15
Merchandise Network Automotive Facilities Ayer Buffalo Albany Detroit Toledo Cleveland NY/NJ Chicago Harrisburg Philadelphia Ft. Wayne Pittsburgh Columbus Baltimore Cincinnati Kansas City St Louis Norfolk Louisville Lexington Chattanooga Memphis Charlotte Atlanta Dallas Birmingham Charleston NS Automotive Network Meridian Savannah NS Automotive Network and Haulage New Orleans Jacksonville 26 Assembly Plants Assembly Plants on Short Line Titusville connecting with NS 16 Miami
Crude Oil Market Dynamics Domestic Production Growth Driving Interior Oil to Coasts Oil Sands Prices represent October 2013 averages ($/bbl) Projected 2020 daily production levels (bbl) $105 Current: 1.8M Williston Basin ANS Projected: 3.2M-4.8M Current: 980K Projected: 1.3M-2.1M $69 WCS $84 Williston Niobrara Utica $109 Current: Current: 35K Brent 280K Projected: 100K-118K Projected: 330K-765K $101 WTI Permian Current: 1.3M Projected: 1.9M-2.3M $103 Eagle Ford LLS Current: 1.3M Projected: 1.4M-1.8M Source: EIA, Bentek, Industry Sources, Bloomberg
North American Crude Oil Pipelines NS Markets Politically and Topographically Isolated from Pipeline Connectivity US Rail Network
Supply Chain Routing East Coast Options Include NS “Crude Corridor” NS has the shortest, most direct route to East Coast Proven transit times of 36-40 hours on NS Crude Corridor
NS Chicago to the East Coast Ample Corridor Capacity to Destination 87% of the Crude Corridor Operates Below 80% Capacity < 85% < 80% NS Capacity Factor Across Crude Corridor by Miles
Norfolk Southern Update Responses to Traffic Changes Business Outlook Fourth Quarter Update General Merchandise Trends Long Term Productivity Opportunities Capital Allocation 21
Roanoke Hump Closure Columbus Philadelphia Roanoke Norfolk Atlanta Charleston
Bellevue Yard Expansion Elkhart, IN Bellevue, OH Allentown, PA Conway, PA Enola, PA Knoxville, TN Linwood, NC Chattanooga, TN Sheffield, AL Birmingham, AL Macon, GA
Bellevue Yard Expansion
UTCS - Movement Planner 10 of 11 Divisions on Base System 4 of 11 Divisions on Movement Planner with remaining in 2013-14 Realizing benefits in velocity, productivity, and schedule adherence
Productivity Initiatives Right-sizing the workforce Enabled by technology Enabled by better coordination Maintain high network velocity and customer service Expect to exceed $100M in productivity gains in 2013
Norfolk Southern Update Responses to Traffic Changes Business Outlook Fourth Quarter Update General Merchandise Trends Long Term Productivity Opportunities Capital Allocation 27
Capital Expenditures ($ millions) $2,241 $2,160 $2,008 $1,558 $1,470 $1,299 2008 2009 2010 2011 2012 2013 Budget 21 28
Cash From Ops and Capital Expenditures ($ millions) $3,227 $3,065 $2,715 $2,714 $2,404 $2,241 $2,160 $1,860 $1,558 $1,470 $1,470 $1,299 2008 2009 2010 2011 2012 2013YTD Cash from Operations Capital Expenditures 21 29
Annual Dividend Per Share $2.04 $1.94 $1.66 Compound annual $1.40 $1.36 growth rate of 21% for $1.22 2003 through 2013 $0.96 $0.68 $0.48 $0.36 $0.30 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 +15% +20% +33% +42% +41% +27% +11% +3% +19% +5% 30
Balanced Cash Flow Utilization 2006 through 3Q 2013 $12.5 Billion $11.9 Billion* $8.1 Billion $3.8 Billion Dividends Share Repurchases Capital Expenditures * See reconciliation of Total Shareholder Distributions to GAAP posted on our website, www.nscorp.com. 31
Thank You 32
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