First Quarter 2015 Results. James A. Squires President

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1 First Quarter 2015 Results James A. Squires President 1

2 Railway Operating Revenue First Quarter 2015 vs Fuel surcharge revenues decreased significantly. Components of Revenue Change $ in Millions Revenue $2.6 Billion, down (5%) $2,689 ($50) ($132) $60 $2,567 RPU $1,425, down (7%) RPU less fuel* $1,334, down (2%) Volume 1,802,100 units, up 2% 2014 Mix/Price Fuel Volume Q 2015 Revenue $ in Millions & y-o-y Percent Change Intermodal $592 (1%) Coal $455 (16%) Merchandise $1,520 (2%) 2 * Please see reconciliation to GAAP posted on our website.

3 Railway Volume First Quarter 2015 vs Total volume up 2%. 1Q 2015 Volume (000 s) & y-o-y Percent Change Coal down (7%) Weak shipments across coal markets, with (6%) decline in Utility and (20%) decline in Export 2,000 Coal 1, ,802.1 (7%) Intermodal up 5% Gains in Domestic and International markets 1,500 1,000 Intermodal +5% Merchandise up 3% Gains in all markets, with continued strength in Chemicals 500 Merchandise +3%

4 Coal Market First Quarter 2015 vs Excess global supply and low natural gas prices. Utility (9%) decline to Northern utilities and (2%) decline to Southern utilities Export Reduced thermal and metallurgical export volumes Domestic Met / Industrial Gains of coke shipments offsetting metallurgical decline and customer shifts to natural gas generation Units (000 s) Utility Export Dom Met/Ind (6%) (20%) (1%) Revenue: $455 Million; down (16%) Volume: 277,400; down (7%) RPU: $1,642; down (9%) 4

5 Intermodal Market First Quarter 2015 vs Volume growth of 5% offset by fuel and mix. Domestic Continued focus on highway conversions and key customer growth International Gains due to customer awards and organic growth Units (000 s) Domestic International 3% 8% Revenue: $592 Million; down (1%) Volume: 926,700; up 5% RPU: $639; down (5%) 5

6 Merchandise Market First Quarter 2015 vs Growth across all business units. MetCon Gains of aggregates and frac sand; reduced steel pipe and coil Units (000 s) 200 Agriculture Increased volumes of corn, feed, and fertilizers partially offset by reduced export soybean volumes Chemicals Gains of crude by rail and NGLs Automotive Increased vehicle production levels at NSserved plants 50 Paper Strength in lumber; reduced wood chips and waste 0 MetCon Ag Chem Auto Paper 2% 2% 10% 4% 0% Revenue: $1,520 Million; down (2%) Volume: 598,000; up 3% RPU: $2,541; down (5%) 6

7 Business Outlook Volume Growth in most markets. Opportunities for highway conversions Growth with strategic corridor projects West Coast port disruptions Growth of natural gas liquids Crude oil shipments to East Coast refiners Increased consumer spending Strength in automotive production and sales Improved construction activity Growth in ethanol and soybean exports Softening steel production Coal burn rate impacted by lower natural gas prices High coal stockpiles Strong competition in global coal markets 7

8 Business Outlook Revenue and RPU Declining fuel surcharges, positive pricing, negative mix. Fuel Surcharge Revenue Revenue ($M) $400 $350 $358 $368 $300 $295 $308 $250 Increased pricing Increased volume Growth in ethanol and soybean exports impacting RPU $200 $150 $100 $50 $0 1Q Q Q Q 2014 $163 1Q 2015 Further declines expected Q Q Q 2015 Decreases in Export and Utility Coal Increased volumes of Intermodal impacting RPU Impact of further declines in fuel surcharge revenue 8

9 First Quarter 2015 Operations Update Mark Manion Executive Vice President and Chief Operating Officer

10 Safety Performance st QTR Safety initiatives led to employee injury reduction in first quarter. Reportable Personal Injuries (Per 200,000 Employee-Hours) 4.0 Train Incidents (Per Million Train Miles) Q15 Crossing Accidents (Per Million Train Miles) Q Q15 1Q15 vs. 1Q14 COMPARISON Injury rate (1.08) down significantly over last year (1.49) Train Incident rate (3.0) is up over last year (2.6) Grade Crossing Accident rate (3.2) is down slightly over last year (3.8)

11 01/02 01/09 01/16 01/23 01/30 02/06 02/13 02/20 02/27 03/06 03/13 03/20 03/27 04/03 Composite Service Performance st QTR 2015 The quarter over quarter gain in service despite challenging weather conditions is a positive indication that NS service has turned the corner. 90% Composite Quarterly Comparison 75% 1 st QTR By Week Composite 85% 80% 75% 73% 75% 69% 70% 70% 65% 63% 64% 65% 60% 60% 55% 50% 1Q14 2Q14 3Q14 4Q14 1Q15 55% 3 * 1Q15 based on official Composite data

12 01/03/14 02/03/14 03/03/14 04/03/14 05/03/14 06/03/14 07/03/14 08/03/14 09/03/14 10/03/14 11/03/14 12/03/14 01/03/15 02/03/15 03/03/15 04/03/15 01/03/14 02/03/14 03/03/14 04/03/14 05/03/14 06/03/14 07/03/14 08/03/14 09/03/14 10/03/14 11/03/14 12/03/14 01/03/15 02/03/15 03/03/15 04/03/15 Train Speed & Terminal Dwell st QTR 2015 Recovery in Train Speed and Dwell indicates the effects of winter have abated. Speed (mph) Better( ) Better( ) Dwell (Hrs)

13 Going Forward Additional Crews and Locomotives: March 1 st vs. July 1 st Additional resources will be available during the 2 nd quarter, which will improve service and asset utilization. 1. Additional Crew Resources: Qualified conductors +600 Locomotive Engineers Additional Locomotives: +200 SD90MAC receipts +40 Reduction in B/O percentage

14 Going Forward Infrastructure: March 1 st vs. July 1 st 3. Infrastructure Chicago Connection Track: April 10 th Goshen, IN Siding Extension: April 27 th Bellevue Plan o Phase 2-A: April 6 th o Phase 2-B: June/July 6

15 First Quarter 2015 Results Marta R. Stewart Executive Vice President Finance and Chief Financial Officer 1

16 Operating Results First Quarter 2015 vs ($ millions) Weather and service recovery efforts dampened 1 st quarter results (Unfavorable) Favorable $ % Railway operating revenues $ 2,567 $ 2,689 $ (122) (5%) Railway operating expenses 1,961 2, % Income from railway operations $ 606 $ 667 $ (61) (9%) Railway operating ratio (1.2) (2%) 2

17 Weather & Service Recovery Costs First Quarter 2015 ($ millions) Compensation & Benefits $24 Purchased Services & Rents $7 Materials & Other $6 Fuel $5 Total $42 3

18 Railway Operating Expenses First Quarter 2015 vs ($ millions) Net decrease of $61 / 3% $168 $31 $25 $8 $2,022 $43 $1, Fuel Compensation Purchased Materials & Benefits Svcs & Rents & Other Depreciation

19 Fuel First Quarter 2015 vs ($ millions) Total decrease of $168 / 39% $160 $432 $3.11 per gallon * $2 $6 $264 $1.83 per gallon * 2014 Price Consumption Other Fuel *Price per gallon reflects locomotive fuel only

20 Compensation and Benefits First Quarter 2015 vs ($ millions) Net increase of $43 / 6% Increased pay rates Higher payroll taxes Increased employee activity levels Labor agreement signing bonus Reduced incentive and stockbased compensation $740 $

21 Purchased Services and Rents First Quarter 2015 vs ($ millions) Net increase of $31 / 8% Higher volume-related costs: Equipment rents Intermodal terminals Higher service-related costs: Slower velocity also increased equipment rents and intermodal terminal costs $392 $

22 Materials and Other First Quarter 2015 vs ($ millions) Net increase of $25 / 11% Increased material expenses Higher environmental and personal injury accruals Higher travel costs, primarily for train service employees $221 $

23 Depreciation First Quarter 2015 vs ($ millions) Increase of $8 / 3% Increased capital base Properties Balance $37,280 $38,849 $237 $245 Mar 2014 Mar

24 Expense Headwinds Service recovery costs Wage increases and payroll tax rates Labor agreement lump sum Roanoke relocation costs 10

25 Income Taxes First Quarter 2015 vs ($ millions) Effective tax rate for the quarter was 37.4% 2014 included $20 million reduction for state tax law change Eff. Rate 33.6% Eff. Rate 37.4% $186 $185 Eff. Rate 33.6% Eff. Rate 37.4%

26 Net Income and Diluted Earnings per Share First Quarter 2015 vs ($ millions except per share) Decline of $58 million or 17 cents per share Net Income Change vs. Prior Period: (16%) Diluted Earnings per Share Change vs. Prior Period: (15%) $368 $310 $1.17 $

27 Cash Flows and Balances First Quarter 2015 vs ($ millions) Almost $600 million returned to shareholders Cash from operating activities $ 605 $ 588 Capital expenditures (392) (381) *Free cash flow $ 213 $ 207 Returns to shareholders: Dividends $ (181) $ (167) Share repurchases $ (415) $ (50) 13 *Please see reconciliation to GAAP posted on our web site.

28 14 Thank You