Transportation Conference

Transcription

1 Credit Suisse Automotive & Transportation Conference September 10, 2009 New York, New York Donald W. Seale Executive Vice President and Chief Marketing Officer

2 Agenda Summary of current business results Operating metrics update Future drivers of revenue & volume growth Industrial Development The Railroad ahead

3 First Half 2009 Financial Summary Favorable (Unfavorable) % Chg. Railway Operating Revenues $3.80 Bill. (28%) Railway Operating Expenses $2.95 Bill. 24% Income From Railway Operations $851 Mill. (38%) Net ti Income $424 Mill. (43%) Operating Ratio 77.6 (5.1%) 3

4 Railway Volume January-June June 2009 vs Year-to-Date vs Units Abs. % Chg. Agriculture 265,409 (43,315) (14%) Declines across all business units MetCon 238,086 (158,758) (40%) Chemicals 160,826 (45,275) (22%) Paper 148,609 (53,980) (27%) Automotive 122,684 (113,237) (48%) Merchandise 935,614 (414,565) (31%) Intermodal 1,219,605 (283,859) (19%) Coal 712,690 (162,648) (19%) Total 2,867,909 (861,072) (23%) Very weak integrated steel and automotive traffic Falling consumer demand & associated Intermodal volume Weak export met coal Weak domestic met and utility ty coal

5 Railway Volume July-August 2009 vs July 2009 vs August 2009 vs Units Abs. % Chg. Units Abs. % Chg. Agriculture 47,608 (7,402) (13%) 48,531 (4,064) (8%) MetCon 44,860 (25,526) 526) (36%) 46,344 (23,004) (33%) Chemicals 31,488 (5,155) (14%) 32,672 (1,720) (5%) Paper 27,274 (7,399) (21%) 26,218 (7,656) (23%) Automotive 19,191 (6,289) (25%) 24,519 (4,107) (14%) Merchandise 170,421 (51,771) (23%) 178,284 (40,551) (19%) Intermodal 211,742 (54,350) (20%) 213,912 (52,115) (20%) Coal 112,116 (30,532) (21%) 121,177 (35,102) (23%) Total 494,279 (136,653) (22%) 513,373 (127,768) (20%)

6 Revenue Per Unit January June 2009 vs Year-to-Date vs Rev/Unit Abs. % Chg. Agriculture $2,127 $104 5% MetCon $1,488 ($169) (10%) Chemicals $2,994 ($47) (2%) Paper $2, $29 1% Automotive $1,808 ($122) (6%) Merchandise $2,088 $7 0% Intermodal $602 ($75) (11%) Coal $1,561 ($81) (5%) Total $1,325 ($87) (6%) Declining fuel related revenue Agriculture & Paper gains driven by improved pricing Average of 8% pricing gain for the first half of 2009 Negative mix and RCAF-U impact

7 Norfolk Southern is the 2008 winner of the Harriman Award, which recognizes outstanding safety achievements. Norfolk Southern has won this award for 20 consecutive years.

8 Service Metrics January August 2009 vs Percentage Improvement Train Performance 10.1% 1% Connection Performance 1.0% Plan Adherence 3.2% 8

9 Asset Management 24,822 Cars Stored 6,581 Coal cars 1,283 Intermodal cars 16,958 Merchandise cars 458 Locomotives Stored 292 from road service 166 from yard service 9

10 Road & Yard Crew Starts January August* 2009 vs Road Trains 17% Reduction Yard Assignments 16% Reduction 479, , , , Road Crews * Based on preliminary data for August Yard Crews

11 Drivers of Future Volume & Revenue Demographics Domestic Intermodal New Intermodal corridors, terminals and market extensions Decreasing truck supply & higher costs Growth in utility and metallurgical l coal Continued growth in bio-fuels Recovery in steel market Industrial Development Continued service & pricing improvement

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 2009 Capital Budget Total Spending = $1.3 Billion 73% of spending is to maintain our existing franchise, 27% is for growth and productivity

14 Intermodal Volume January August 2009 Total 1,645,259 Units Down 390, Units, 19% vs Excess truck supply Continued highway diversions Global recession continues to impact International volume

15 New Intermodal Services in new Intermodal Services have been launched in 2009 Refrigerated Service from Los Angeles to Atlanta with Union Pacific Chicago to Titusville/Orlando Domestic containers from Savannah to Rutherford, PA Private trailers from Memphis to the Northeast

16 Six Corridor Strategy New market extensions across the NS Network Significant modal conversion opportunities East of the Mississippi River Public-Private Private Partnerships New Interline Rail Partners

17 Pan Am Southern MidAmerica Corridor Heartland Corridor Memphis Meridian Speedway Birmingham Titusville Charlotte Crescent Corridor NS 6 Corridor Strategy Includes joint ventures with other carriers

18 Pan Am Southern MidAmerica Corridor Heartland Corridor Memphis Meridian Speedway Birmingham Titusville Charlotte Crescent Corridor NS 6 Corridor Strategy Includes joint ventures with other carriers

19 Pan Am Southern MidAmerica Corridor Heartland Corridor Memphis Meridian Speedway Birmingham Titusville Charlotte Crescent Corridor NS 6 Corridor Strategy Includes joint ventures with other carriers

20 Pan Am Southern MidAmerica Corridor Heartland Corridor Memphis Meridian Speedway Birmingham Titusville Charlotte Crescent Corridor NS 6 Corridor Strategy Includes joint ventures with other carriers

21 Pan Am Southern MidAmerica Corridor Heartland Corridor Memphis Meridian Speedway Birmingham Titusville Charlotte Crescent Corridor NS 6 Corridor Strategy Includes joint ventures with other carriers

22 Pan Am Southern MidAmerica Corridor Heartland Corridor Memphis Meridian Speedway Birmingham Titusville Charlotte Crescent Corridor NS 6 Corridor Strategy Includes joint ventures with other carriers

23 Mechanicville Ayer Harrisburg Harrisburg Greencastle Bethlehem North Jersey Philadelphia East Tennessee Huntsville Charlotte Memphis Birmingham Atlanta Crescent Corridor Existing/Planned Terminals New Orleans

24 Coal Volume January-August 2009 Total 945,983 Units Down 228,282 Units, 19% vs Lower electricity demand & higher stockpiles Competition from natural gas & Decline in domestic & global steel production

25 NS Coal Market Drivers Utility Stockpiles impacting domestic volume Competition from natural gas New Keystone business Export September 2009 will be NS first exports to China 2.3 million tons booked at ports for September Domestic Metallurgical Restart of blast furnaces

26 Coal Sourcing Strategy Powder River Basin Haverhill River Docks Wheelersburg NAPP Illinois Basin Import Coal

27 NS Coal Terminal - Wheelersburg, OH

28 SunCoke Haverhill, OH Phase II coke ovens opened July 2008 Granite City, IL New coke batteries being built Middletown, OH New coke batteries currently in developmentelopment

29 Merchandise Volume January August 2009 Total - 1,284,319 Units Down 506,887 Units, 28% vs Volume Continued impact of weak housing market Overall weakness in manufacturing 49% decline in U.S. steel production Impact of 45% decline in North American vehicle production Project growth

30 NS Automotive Market Drivers North American Vehicle Production 8.3 million units in 2009, down 34% 10.1 million units in 2010, up 22% Average age of North American cars is 9.4 years, light trucks is 7.5 years Need 12 million in production for replacement Well positioned with New Domestics manufacturers and Detroit 3 Source: Ward s Automotive

31 Mechanicville Lafayette, IN Normal, IL Greensburg, IN Princeton, IN Georgetown, KY Greer, SC Shreveport Vance, AL Lincoln, AL International Auto Assembly Plants on NS 10 - NS-served 4 - Toyota 2 - Honda 1 - BMW 1 - Mercedes 1 - Mitsubishi 1 -Subaru/Toyota 1 Honda Plant on Short Line connecting with NS

32 NS Agriculture Market Drivers Domestic & Export Markets Grains Other Commodities Strong world demand for U.S. soybeans due to poor South Recovery in NS fertilizer market as PCS re-opens phosphate h American crop will drive production facility in White increased exports from October Springs, FL (anticipate full 2009 April 2010 production late 4Q 2009 or 1Q 2010) Lower potash prices will drive a return in demand by farmers 2010 U.S. domestic markets will remain challenged, but projects will drive major growth with two new ethanol plants and one new feed mill

33 NS Agriculture Market Drivers Ethanol Network 61 terminals served 9 new terminals opening between September 2009 and March million gallons delivered monthly, 2.1 billion gallons annually NS shipments represent 16% of current US production

34 NS Metals Market Drivers Steel Production Capacity January June capacity was 44% July August capacity was 46% September December capacity is estimated to be 57% - 65% Blast furnaces re-opening New inter-mill spot movements Scrap market moving upward

35 Mechanicville Shreveport Total US Market Blast Furnaces NS Served Idled Blast Furnaces (14) NS Served Operating Blast Furnaces (17) Non-served Idled Blast Furnaces (5) Non-served Operating Blast Furnaces (2)

36 NS Chemical Market Drivers Improving Plastics and Industrial Intermediates Volumes New unit train Fly Ash business Projected growth opportunities 25,000 carloads

37 TVA Kingston Ash Unit Train Kingston, TN Uniontown, AL Memphis Birmingham

38 NS Industrial Development

39 Industrial Development January August 2009 New Estimated Annual Total Employees Carloads New Industries 46 1,420 69,192 Expansions ,002 Total 62 1, ,194

40 Volkswagen Chattanooga, TN

41 ThyssenKrupp Calvert, AL

42 BMW Greer, SC

43 The Rail Market Ahead Complexity - multiple markets, channels, and shifting industrial production/global trade patterns Motor carrier costs will continue to rise and capacity will decline or remain static Approximately 80% of intercity freight tonnage originates or terminates within the NS service area Highway conversions and continued yield management will be key drivers Environmental advantages of rail shipping will become more prominent

44 Thank You