BB&T Capital Markets Transportation Conference. Marta R. Stewart Executive Vice President Chief Financial Officer February 12, 2014

Transcription

1 BB&T Capital Markets Transportation Conference Marta R. Stewart Executive Vice President Chief Financial Officer February 12,

2 Norfolk Southern Update 2013 Overview First Quarter Update Business Outlook Long Term Productivity Opportunities Capital Allocation 2

3 Railway Operating Revenues ($ in millions) $11,172 $11,040 $11, Coal GM Intermodal 3

4 Traffic Volume Changes Percentage of Total Volumes 45% 47% 49% 32% 33% 33% 23% 20% 18% Coal GM Intermodal 4

5 Total Volumes (Units in thousands) 7, , , Volumes 5

6 Railway Operating Expenses ($ in millions) $7,959 $7,916 $7, Operating Expenses 6

7 Composite Service Performance % 83.3% 75.9% Composite Service Metric 7

8 Volume and Crew Start Variances 2013 vs Coal Shipments -5% Crew Starts -9% Total Intermodal Shipments 6% Shipments 3% Crew Starts 0% Crew Starts -3% Merchandise Shipments 4% Crew Starts 0% 8

9 Operating Efficiencies 2013 vs Year-Over-Year Percent Improvement Train and Engine Service Overtime -10% Re-Crews -9% Carloads/Units per Locomotive 5% Gross Ton Miles per Gallon 1% 9

10 Norfolk Southern Update 2013 Overview First Quarter Update Business Outlook Long Term Productivity Opportunities Capital Allocation 10

11 Current Railway Volume First Quarter through Week 6 (February 8, 2014) 2014 Volume: 764,700 units, down (5%) Change in Units 1QTD14 vs Units (000) Chemicals 13% (1%) Intermodal (5%) Agriculture (7%) MetCon (8%) Paper (10%) Automotive (15%) Coal

12 Current Railway Operating Expenses First Quarter through January Increased labor hours Increased overtime Severe Weather Effects Increased locomotives in service Increased fuel consumption 12

13 Miles per Hour Train Speed 1Q11 1QTD14 Better

14 Hours Terminal Dwell 1Q11 1QTD14 Better

15 Norfolk Southern Update 2013 Overview First Quarter Update Business Outlook Long Term Productivity Opportunities Capital Allocation 15

16 Business Outlook for 2014 COAL Utility coal impacted by reduced demand for electricity and natural gas competition Strong competition in the Atlantic metallurgical market Soft demand and oversupply of thermal coal Flat domestic met coal 16

17 Business Outlook for 2014 COAL Utility coal impacted by reduced demand for electricity and natural gas competition Strong competition in the Atlantic metallurgical market Soft demand and oversupply of thermal coal Flat domestic met coal INTERMODAL Continued opportunities for highway conversion Continued growth in Crescent Corridor services Growth with International shipping partners Continued growth opened Charlotte Terminal December 9 17

18 Business Outlook for 2014 COAL Utility coal impacted by reduced demand for electricity and natural gas competition Strong competition in the Atlantic metallurgical market Soft demand and oversupply of thermal coal Flat domestic met coal INTERMODAL Continued opportunities for highway conversion Continued growth in Crescent Corridor services Growth with International shipping partners Continued growth opened Charlotte Terminal December 9 MERCHANDISE Project growth in crude oil, increased volume for shale related liquid petroleum gases and asphalt Gains in steel, frac sand Continued automotive growth Favorable corn and soybean crop for 2013 puts and takes Improved housing & related construction materials market 18

19 Continued Strength in Automotive NSC Automotive volume up 7% in 2013 North American light vehicle production forecasted at 17.1 million units for 2014, up 3.6% vs. last year Average vehicle age at all-time high Vehicle Age (yrs.) U.S. Vehicle Age vs. Sales US Vehicle Sales (M) Source: WardsAuto Forecast, Polk

20 Merchandise Network Automotive Facilities Detroit Buffalo Albany Ayer Chicago Toledo Cleveland Harrisburg Ft. Wayne Pittsburgh Columbus NY/NJ Philadelphia Baltimore Kansas City St Louis Cincinnati Louisville Lexington Norfolk Memphis Chattanooga Charlotte Dallas Birmingham Atlanta Charleston Meridian Savannah NS Automotive Network New Orleans Jacksonville NS Automotive Network and Haulage 27 Assembly Plants Titusville Assembly Plant on Short Line connecting with NS 20 Miami

21 Supply Chain Routing An East Coast Refinery Illustration Most direct route to East Coast refineries Resiliency in yard and routing infrastructure Demonstrated service performance (36-40 hr. transit from Chicago) 21

22 Crude Oil Market Dynamics North American Production, Pricing, and Specs ANS $111 Oil Sands Current: 1.8M Projected: 3.2M-4.8M WCS $71 Williston Basin Current: 780K Projected: 1.3M-2.1M Williston $77 Prices represent December 2013 averages ($/bbl) Projected 2020 daily production levels (bbl) Niobrara Current: 120K Projected: 330K-765K Utica Current: 5K Projected: 100K-118K Brent $111 Sources: EIA, Bentek, Bloomberg Permian Current: 1.3M Projected: 1.9M-2.3M WTI $98 Eagle Ford Current: 750K Projected: 1.4M-1.8M LLS $103 22

23 23 NS Chicago to the East Coast Crude Corridor

24 Norfolk Southern Update 2013 Overview First Quarter Update Business Outlook Long Term Productivity Opportunities Capital Allocation 24

25 Roanoke Hump Closure Columbus Philadelphia Roanoke Norfolk Atlanta Charleston 25

26 Bellevue Yard Expansion Elkhart, IN Conway, PA Bellevue, OH Allentown, PA Enola, PA Chattanooga, TN Sheffield, AL Birmingham, AL Knoxville, TN Linwood, NC Macon, GA 26

27 27 Bellevue Yard Expansion

28 UTCS - Movement Planner All 11 Divisions on Base System 5 of 11 Divisions on Movement Planner with remaining in 2014 Realizing benefits in velocity, productivity, and schedule adherence 28

29 Norfolk Southern Update 2013 Overview First Quarter Update Business Outlook Long Term Productivity Opportunities Capital Allocation 29

30 Capital Expenditures ($ millions) $2,160 $2,241 $1,971 $2, Budget 21 30

31 Intermodal Corridors Harrisburg 31

32 32 X Crescent Corridor Crescent Corridor Crescent Terminal

33 2014 Capital Improvement Budget Core vs. Growth vs. PTC Maintain the franchise, invest in business growth. Core/Replacement Investments 24% 10% Rail, Tie, Ballast programs Locomotive rebuild program Coal car replacements Growth/Productivity Investments New locomotives 66% Yard expansions Technology Infrastructure improvements Positive Train Control 33

34 Cash From Ops and Capital Expenditures ($ millions) $3,227 $3,065 $3,078 $2,160 $2,241 $1, Cash from Operations Capital Expenditures 21 34

35 Weighted Avg Interest Rate & Maturities Weighted Avg Interest Rate Weighted Avg Maturities (yrs) 6.75% 6.69% 6.57% 6.14% % 5.44% Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 35

36 Balanced Cash Flow Utilization 2006 through 2013 $13.2 Billion $12.1 Billion* $4.0 Billion $8.1 Billion Capital Expenditures Share Repurchases Dividends * See reconciliation of Total Shareholder Distributions to GAAP posted on our website, 36

37 Annual Dividend Per Share Compound annual growth rate of 20% for 2004 through 2014 $1.22 $1.36 $1.40 $1.66 $1.94 $2.04 $2.16 $0.96 $0.36 $0.48 $ % +42% +41% +27% +11% +3% +19% +17% +4% +4% 37

38 38 Thank You