Deutsche Bank 5 th Annual Global Industrials and Basic Materials Conference Marta R. Stewart Executive Vice President Finance & Chief Financial Officer June 05, 2014 1
Norfolk Southern Update First Quarter Summary Second Quarter Update Business Outlook Long Term Productivity Opportunities Capital Allocation 2
1Q Railway Operating Revenues 2011 2014 ($ in millions) $2,620 $2,789 $2,738 $2,689 2011 2012 2013 2014 Coal GM Intermodal 3
Volumes by Major Group 1Q - 2011 vs. 2014 and Full Year - 2011 vs. 2013 1Q 24% 32% 17% 33% 44% 50% Year 23% 32% 18% 33% 45% 49% General Merchandise Intermodal Coal 4
Volume and Crew Start Variances Full Year 2013 vs. 2011 Coal Shipments -17% Crew Starts Intermodal Shipments -21% 11% Total Shipments 3% Crew Starts 0% Merchandise Shipments 6% Crew Starts -3% Crew Starts 4% 5
1Q Operating Results 2014 vs. 2013 ($ millions) Revenue decline partly offset by lower expense. (Unfavorable) Favorable 2014 2013 $ % Railway operating revenues $ 2,689 $ 2,738 $ (49) (2%) Railway operating expenses 2,022 2,047 25 1% Income from railway operations $ 667 $ 691 $ (24) (3%) Railway operating ratio 75.2 74.8 (0.4) (1%) 6
1Q Railway Operating Expenses 2014 vs. 2013 ($ millions) Net decrease of $25 / 1%. $40 $10 $3 $3 $1 $2,047 $2,022 2013 Compensation Purchased Depreciation Fuel Materials & Benefits Services & Rents & Other 2014 7
Net Income and Diluted Earnings per Share First Quarter 2014 vs. 2013 ($ millions except per share) Lower NI and EPS largely due to absence of land sale gain. Net Income Change vs. Prior Period: - 18% $450 Diluted Earnings per Share Change vs. Prior Period: - 17% - 6% * - 4% * $1.41 $390 * $368 $1.22 * $1.17 2013 2014 2013 2014 *Excluding land sale gain - please see reconciliation to GAAP posted on our web site. 8
Norfolk Southern Update 2014 First Quarter Overview Second Quarter Update Business Outlook Long Term Productivity Opportunities Capital Allocation 9
Current Railway Volume 2Q Quarter-to-Date units through Week 22 (May 31, 2014) 2014 QTD Volume: 1,366K units, up 8% Units (000) 1,365.6 97.7 Increase 1,267.9 2013 2014 10
Increased Volume by Major Group 2Q Quarter-to-Date through Week 22 (May 31, 2014) Change in Units (000)/% 2QTD14 vs. 2013 Intermodal 65.0/11% Met/Con Agriculture Coal Chemicals -0.2/0% -0.9/-2% 15.3/13% 7.5/7% 5.7/2% 5.3/7% Automotive Paper 11
Miles per Hour Train Speed 1Q11 2QTD14 Better 25.0 24.0 23.0 23.4 24.2 22.0 21.0 20.0 19.0 20.9 22.3 22.1 12
Hours Terminal Dwell 1Q11 2QTD14 Better 27.0 26.0 25.0 24.0 23.0 22.0 21.0 20.0 13
April-May Volumes and Crew Starts 2014 vs. 2013 % Variances Total Variances Shipments 8% Crew Starts -1% 14
Norfolk Southern Update 2013 Overview First Quarter Update Business Outlook Long Term Productivity Opportunities Capital Allocation 15
Business Outlook for 2014 COAL Improved demand for utility coal due to weather; stockpiles reduced from 67 to 44 days supply Strong competition in the Atlantic metallurgical and thermal markets Contract loss in utility coal Reduced domestic met volumes related to plant closures and sourcing shifts 16
Business Outlook for 2014 COAL Improved demand for utility coal due to weather; stockpiles reduced from 67 to 44 days supply Strong competition in the Atlantic metallurgical and thermal markets Contract loss in utility coal Reduced domestic met volumes related to plant closures and sourcing shifts INTERMODAL Continued opportunities for highway conversion Continued growth in Crescent Corridor services Growth with International shipping partners Continued growth from new facilities South Carolina Inland Port and Charlotte Terminal 17
Business Outlook for 2014 COAL Improved demand for utility coal due to weather; stockpiles reduced from 67 to 44 days supply Strong competition in the Atlantic metallurgical and thermal markets Contract loss in utility coal Reduced domestic met volumes related to plant closures and sourcing shifts INTERMODAL Continued opportunities for highway conversion Continued growth in Crescent Corridor services Growth with International shipping partners Continued growth from new facilities South Carolina Inland Port and Charlotte Terminal MERCHANDISE Projected growth in crude oil, increased volume for shalerelated liquid petroleum gases and asphalt Gains in steel, frac sand Continued automotive growth Favorable corn and soybean crop for 2013/2014 puts and takes Improved housing & related construction materials market 18
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.) 12 11 10 9 8 7 U.S. Vehicle Age vs. Sales US Vehicle Sales (M) 20 18 16 14 12 10 8 6 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 6 19 Source: WardsAuto Forecast, Polk
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 NS Chicago to the East Coast Crude Corridor
Norfolk Southern Update 2013 Overview First Quarter Update Business Outlook Long Term Productivity Opportunities Capital Allocation 22
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 23
24 Bellevue Yard Expansion
UTCS - Movement Planner All 11 Divisions on Base System 7 of 11 Divisions on Movement Planner with remaining in 2014 Realizing benefits in velocity, productivity, and schedule adherence 25
Juniata Locomotive Shop 26 26
27 Locomotive Rebuild Programs
Norfolk Southern Update 2013 Overview First Quarter Update Business Outlook Long Term Productivity Opportunities Capital Allocation 28
Capital Expenditures ($ millions) Robust Capital Plan - $2.2 billion. $2,160 $2,241 $1,971 $2,200 2011 2012 2013 2014B Positive Train Control 29
Cash From Ops and Capital Expenditures ($ millions) $3,227 $3,065 $3,078 $2,160 $2,241 $1,971 2011 2012 2013 Cash from Operations Capital Expenditures 21 30
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 $0.68 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 +33% +42% +41% +27% +11% +3% +19% +17% +4% +4% 31
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, www.nscorp.com. 32
33 Thank You