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Credit Suisse Transportation Conference September 9, 2010 James A. - PowerPoint PPT Presentation

Credit Suisse Transportation Conference September 9, 2010 James A. Squires Executive Vice President Finance and CFO Norfolk Southern Corporation Agenda Recent Financial Results Current Business Environment Productivity Scorecard


  1. Credit Suisse Transportation Conference September 9, 2010 James A. Squires Executive Vice President Finance and CFO Norfolk Southern Corporation

  2. Agenda  Recent Financial Results  Current Business Environment  Productivity Scorecard  Corridor Strategy Update  Shareholder Returns

  3. First Half Financial Highlights 2010 vs. 2009

  4. Productivity Scorecard Second Quarter 2010 vs. 2009 • Carload Volume 22% • Crew Starts 10% • Railroad Employees 0% • GTMs per Employee 24% • GTMs per Gallon 5% • GTMs per Train Hour 3%

  5. 2010 Year-Over-Year Volumes 23% 22% 20% 19% 16% 15% 5% 2% January February March April May June July August

  6. Railway Volume January-June 2010 vs. 2009 Year-to-Date vs. 2009 Units Abs. % Chg.  Improving economy & Agriculture 311,235 45,826 17% comparisons to weak first MetCon 313,666 75,580 32% half 2009 Chemicals 202,557 41,731 26%  Strong project growth Paper 163,684 15,075 10% Automotive 142,956 20,272 17%  Metals/Construction, Merchandise 1,134,098 198,484 21% Paper, Chemicals & Intermodal produce 52- Intermodal 1,409,877 190,272 16% week high loadings Coal 758,695 46,005 6% Total 3,302,670 434,761 15%

  7. Railway Volume Third Quarter through Week 34 2010 vs. 2009 3QTD 2010 vs. 2009 Units Abs. % Chg. Agriculture 90,850 4,126 5% Chemicals 65,286 7,155 12% MetCon 100,848 16,660 20% Paper 51,603 2,830 6% Automotive 40,860 5 0% Merchandise 349,447 30,776 10% Intermodal 460,975 72,208 19% Coal 238,738 24,409 11% Total 1,049,160 127,393 14% Source: AAR carloadings, which are reported weekly and may not equal NS' reported volumes.

  8. Outlook – Business Portfolio Chemicals • Manufacturing recovery & project growth Agriculture • Build out of ethanol network Domestic Intermodal • Truckload conversions International Intermodal & • Improving imports/exports Export Coal Domestic Met Coal & Steel • Recovery in global steel production • Falling stockpiles and increased electricity Utility Coal generation • New business, improved auto production and Automotive sales • Uncertainty in housing, but improving paper Forest Products markets

  9. Outlook Summary 1Q 2009 – 2Q 2010 Units 1,719,809 1,582,861 1,567,133  Continued growth in core 1,522,215 1,455,567 1,412,342 markets  Strong project growth and new business 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010

  10. Franchise Strengths • Safety Performance • Service Consistency and Reliability • Operating Efficiency • Innovative Technology • Corridor Strategy • Cash Flow

  11. Franchise Strengths • Corridor Strategy • Cash Flow

  12. U.S. Demographics Within our service territory:  74% of the 2009 US population  Over half of the states with high projected population growth  One study suggests that at least 30 million truck shipments over 550 miles touch our service territory

  13. Patriot Corridor Heartland Corridor Mid America Corridor Crescent Corridor Meridian Speedway Central Florida

  14. Patriot Corridor Heartland Corridor Mid-America Corridor Meridian Speedway Central Florida

  15. Heartland Corridor Project 664 CIMT L E G E N D NIT (Proposed) CIDMMA 1. Central Corridor Double-Stack Initiative, and Roanoke and 564 Pritchard Intermodal Facilities 64 Norfolk Maersk To Chicago, 2. Related Terminal Capacity Detroit, and OH Points West 16`4 3. Western Freeway Rail Corridor PMT Portsmouth 264 Columbus 664 264 Rickenbacker 464 Ashville Western Freeway Rail Corridor Washington, DC WV Portsmouth Huntington VA Kenova Prichard Richmond Williamson Welch Roanoke KY Petersburg Bluefield Christiansburg Portsmouth The Heartland Corridor

  16. Heartland Corridor Tunnel Work

  17. Detroit Chicago Columbus Cincinnati Roanoke Pritchard Norfolk • First Double Stack Train in September, 2010 • Saves up to 233 miles off current routes • Early 2 nd Morning service from Norfolk to Columbus • Late 2 nd Morning service from Norfolk to Chicago Heartland Corridor Existing Terminals New Terminals

  18. Patriot Corridor Heartland Corridor Mid-America Corridor Crescent Corridor Meridian Speedway Central Florida

  19. Crescent Corridor Purpose: Create a truck- • competitive corridor between the Northeast and Southeast Scope: New/expanded • terminals and route improvements Status: • Initial Virginia route • improvements complete 12% intermodal volume growth • from Northeast to Southeast in 2008 TIGER grants recently awarded •

  20. Franchise Strengths • Corridor Strategy • Cash Flow

  21. Free Cash Flow Generation* ($ Millions) $1,157 $1,080 $1,028 $992 $813 $561 2005 2006 2007 2008 2009 1H10 * Free Cash Flow as used here is defined as cash provided by operating activities minus property additions. Please see reconciliation to GAAP posted on our web site.

  22. Annual Dividend Per Share $1.36 $1.40 $1.22 $0.96 $0.68 $0.48 $0.36 $0.30 $0.26 $0.24 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Indicated

  23. Dividend Yields* 2.5% 2.0% 1.8% 1.7% 1.7% 1.6% CN UP CP CSX S&P 500 NS * As of Sept. 3, 2010

  24. Share Repurchase Program • Program increased in July 2010 • Authorization to repurchase an additional 50 million shares through 2014 • Timing and volume of repurchases based on cash flow and management’s assessment of market conditions

  25. Share Repurchases* ($ Millions) $1,196 $1,128 $964 $333 $0 2006 2007 2008 2009 2010* * As of September 3, 2010

  26. Total Shareholder Distributions Relative to Free Cash Flow* 2005-2009 $5.1 Billion $4.8 Billion • All of NS’ Free Cash Flow Returned to $3.3 Billion Shareholders $1.8 Billion Dividends Share Repurchases Free Cash Flow *Please see reconciliation to GAAP posted on our website

  27. Balanced Cash Flow Utilization* 2005-2009 $6.4 Billion $5.1 Billion $3.3 Billion $1.8 Billion Dividends Share Repurchases Capital Expenditures *Please see reconciliation to GAAP posted on our website

  28. Debt Maturities June 30, 2010 ($ millions) $717 $600 $580 $550 $550 $500 $500 $482 $440 $367 $350 $350 $346 $314 $138 $84 $44 $29 $13 $11 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '25 '27 '29 '31 '37 '43 '97 2105

  29. Memphis and Charleston 6% Century Bond

  30. Engine of the Future

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