J.P. Morgan Aviation, Transportation & Defense Conference March 15, 2012 James A. Squires Executive Vice President Finance and Chief Financial Officer
Norfolk Southern Update Current Status 1 st Qtr-to-date Volumes 1 st Qtr-to-date Service Performance Business Outlook Corridors and Terminals Capital Structure 2012 Capital Budget Shareholder Returns Debt Issuance
Current Railway Volume First Quarter through Week 10 (March 10, 2012) Units (000) Change in Units Quarter-to-date QTD12 vs. QTD11 1,325 21% 1,316 Automotive 10% MetCon 2% Intermodal -1% Chemicals 7% 1,233 Agriculture -2% -5% Paper -13% Coal 2010 2011 2012
Heating Degree Days in NS Region January-February 2012 vs. 2011 Heating Degree Days January-February 2,000 (21%) 1,500 1,000 500 0 2011 2012 Source: NOAA Average heating degree days within NS region in January & February.
Train Speed 2011 through March 9, 2012 NS Train Speed Better (miles per hour) 25.0 24.0 23.0 22.0 21.0 20.0 19.0 18.0 Source: As reported publicly to the AAR
Train Speed 2011 through March 9, 2012 NS Train Speed Better (miles per hour) 25.0 24.0 23.0 22.0 21.0 20.0 19.0 18.0 Source: As reported publicly to the AAR
Train Speed 2011 through March 9, 2012 NS Train Speed Better (miles per hour) 25.0 24.0 23.0 22.0 21.0 20.0 19.0 18.0 Source: As reported publicly to the AAR
Terminal Dwell 2011 through March 9, 2012 NS Terminal Dwell Better (hours) 33.0 31.0 29.0 27.0 25.0 23.0 21.0 19.0 17.0 Source: As reported publicly to the AAR
Composite Service Performance 1Q10 – 1Q12* 84% 82% 80% 78% 76% 74% 72% 70% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12* * 1Q12 reflects February year-to-date.
2012 Business Outlook Merchandise Project growth in crude oil and waste products • Growth in ethanol to terminals • • Increasing demand for materials in natural gas drilling operations • Stronger domestic steel and automotive production
2012 Business Outlook Merchandise Project growth in crude oil and waste products • Growth in ethanol to terminals • • Increasing demand for materials in natural gas drilling operations • Stronger domestic steel and automotive production Coal • Impact of mild winter and competition from natural gas • New opportunities for Illinois Basin coal • Export driven by port capacity improvements, new coal production and new steam coal opportunities
2012 Business Outlook Merchandise Project growth in crude oil and waste products • Growth in ethanol to terminals • • Increasing demand for materials in natural gas drilling operations • Stronger domestic steel and automotive production Coal • Impact of mild winter and competition from natural gas • New opportunities for Illinois Basin coal • Export driven by port capacity improvements, new coal production and new steam coal opportunities Intermodal Increasing opportunities for highway conversion • Tightening truck capacity •
R to the Power of 3! Right ght Box Right ght Ca Car Right ght Lane Lane The Goal is to Maximize Train Density: 53’ Containers in Doublestack Cars 40’ Containers in 40’ Doublestack Cars
R3 - Phases Phase I - Only 53’ Doublestack Cars Between Western Points Eastern Points Atlanta Erail Chicago 47 th Morrisville Kansas City Harrisburg Memphis St. Louis Phase 1A – 53’ doublestack cars for containers between 47 th and Ayer/Albany Phase 2 – Eliminate 53’ stacks to the Piers (West to East) Phase 3 – Focus on main service triangle
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
Crescent Corridor X Crescent Corridor Terminal Under Construction 16
Intermodal Terminal Expansion Update Ground Breaking Completion Annual Volume Date Date Capability (Lifts) 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
Memphis (Rossville) TN Intermodal Facility 21
Birmingham (McCalla) AL Intermodal Facility 21
Greencastle, PA Intermodal Facility 21
2012 Capital Improvement Budget Replacement/Core -- Growth -- PTC Total Spending = $2.4 billion 23% 10% 67% Replacement/Core Positive Train Control Growth/Productivity
2012 Capital Improvement Budget Replacement/Core vs. Growth vs. PTC Total Spending = $2.4 billion Strengthen the franchise 23% Renew the coal fleet 10% 67% Grow Intermodal network Invest in business growth Replacement/Core Positive Train Control Growth/Productivity
Capital Expenditures ($ millions) $2,160 $1,558 $1,470 $1,341 $1,299 $1,178 2006 2007 2008 2009 2010 2011 21
Cash From Ops and Capital Expense ($ millions) $3,227 $2,714 $2,715 $2,333 $2,206 $2,160 $1,860 $1,558 $1,470 $1,299 $1,341 $1,178 2006 2007 2008 2009 2010 2011 Cash from Operations Capital Expenditures 21
Annual Dividend Per Share $1.66 $1.40 $1.36 Compound annual $1.22 growth rate of 23% for 2002 through 2011 $0.96 $0.68 $0.48 $0.36 $0.30 $0.26 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 +15% +20% +33% +42% +41% +27% +11% +3% +19%
Balanced Cash Flow Utilization 2006 through 2011 $8.9 Billion* $9.0 Billion $6.2 Billion $2.7 Billion Dividends Share Repurchases Capital Expenditures * See reconciliation to GAAP of Total Shareholder Distributions posted on our website, www.nscorp.com.
Capital Structure Change 2002 vs 2011 ($ millions) 12/31/02 12/31/11 $1,218 $806 7% 6% $7,540 $7,364 $5,694 $8,693 43% 53% 41% 50% Common Stock Common Stock Retained Earnings Retained Earnings Debt Debt 1
Debt Maturities as of December 31, 2011 ($ millions) $600 $585 $596 $550 $550 $500 $473 $447 $440 $404 $367 $350 $314 $295 $273 $138 $133 $83 $51 $47 $3 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '25 '27 '29 '31 '35 '37 '41 '43 '97 2105 2111
Pro Forma Debt Maturities ($ millions) $600 $585 $600 $596 $550 $550 $500 $473 $447 $440 $404 $367 $350 $314 $295 $273 $138 $133 $83 $51 $47 $3 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '25 '27 '29 '31 '35 '37 '41 '43 '97 2105 2111
Funding of Organic Growth Trend in Weighted Avg Interest Rate & Maturities 2007 – 2011 Weighted Avg Interest Rate Weighted Avg Maturities (yrs) 25.9 6.79% 6.84% 6.77% 6.57% 21.9 21.4 20.4 19.3 6.09% Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11
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