Credit Suisse Global Industrials Conference

Transcription

1 Credit Suisse Global Industrials Conference December 4, 2013 James A. Squires President 1

2 Norfolk Southern Update Responses to Traffic Changes Business Outlook Fourth Quarter Update General Merchandise Trends Long Term Productivity Opportunities Capital Allocation 2

3 Traffic Volume Changes Percentage of Total Volumes Coal GM Intermodal 43% 45% 47% 48% 34% 32% 33% 33% 23% 23% 20% 19% YTDSep13 3

4 Operating Efficiencies First Nine Months 2013 vs Volume Train Starts 6% 2% 3% 0% -1% -4% -3% -9% Coal Gen Merch Intermodal Total 4

5 Operating Efficiencies First Nine Months 2013 vs Year-Over-Year Percent Improvement Train and Engine Service Overtime -10% Re-Crews -10% Equipment Rents (Velocity Driven) -1% Carloads/Units per Locomotives in Service 6% Gross Ton Miles per Gallon 1% 5

6 Norfolk Southern Update Responses to Traffic Changes Business Outlook Fourth Quarter Update General Merchandise Trends Long Term Productivity Opportunities Capital Allocation 6

7 Business Outlook Utility coal impacted by reduced demand for electricity, competition from natural gas and higher stockpiles in the South Soft domestic metallurgical market to support steel production Weak demand in European market for both met and steam coal Excess global supply and weaker Australian dollar Coal 7

8 Business Outlook Utility coal impacted by reduced demand for electricity, competition from natural gas and higher stockpiles in the South Soft domestic metallurgical market to support steel production Weak demand in European market for both met and steam coal Excess global supply and weaker Australian dollar Coal Continued opportunities for highway conversion New Intermodal service lanes ahead as new corridor terminals open Growth with International shipping partners Greer, SC Inland Port Q4 Intermodal 8

9 Business Outlook Utility coal impacted by reduced demand for electricity, competition from natural gas and higher stockpiles in the South Soft domestic metallurgical market to support steel production Weak demand in European market for both met and steam coal Excess global supply and weaker Australian dollar Continued opportunities for highway conversion New Intermodal service lanes ahead as new corridor terminals open Growth with International shipping partners Greer, SC Inland Port Q4 Project growth in crude oil, plastics for housing and automotive and increased volume for shale related liquid petroleum gases Gains in steel, frac sand Continued automotive growth Favorable corn and soybean crop for with export potential Improved housing & related construction materials market Coal Intermodal Merchandise 9

10 Norfolk Southern Update Responses to Traffic Changes Business Outlook Fourth Quarter Update General Merchandise Trends Long Term Productivity Opportunities Capital Allocation 10

11 Current Railway Volume Fourth Quarter through Week 48 (November 30, 2013) Total Volume: 1,314,600 units, up 6% Change in Units 4QTD13 vs Chemicals 24% 1,242.1 Units (000) 1,314.6 Automotive Agriculture Intermodal MetCon Paper (5%) 14% 10% 7% 6% 2% Coal

12 Miles per Hour Train Speed 1Q10 4QTD Better

13 Hours Terminal Dwell 1Q10 4QTD Better

14 Norfolk Southern Update Responses to Traffic Changes Business Outlook Fourth Quarter Update General Merchandise Trends Long Term Productivity Opportunities Capital Allocation 14

15 Continued Strength in Automotive NSC Automotive volume up 6% YTD North American vehicle production forecasted at 16.5 million units for 2013, up 4% vs. last year Average vehicle age at all-time high Vehicle Age (yrs.) U.S. Vehicle Age vs. Sales US Vehicle Sales (M) Source: Ward s, Polk

16 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 26 Assembly Plants Titusville Assembly Plants on Short Line connecting with NS 16 Miami

17 Crude Oil Market Dynamics Domestic Production Growth Driving Interior Oil to Coasts $105 ANS Oil Sands Current: 1.8M Projected: 3.2M-4.8M $69 WCS Williston Basin Current: 980K Projected: 1.3M-2.1M $84 Williston Prices represent October 2013 averages ($/bbl) Projected 2020 daily production levels (bbl) Niobrara Current: 280K Projected: 330K-765K Utica Current: 35K Projected: 100K-118K $109 Brent Permian Current: 1.3M Projected: 1.9M-2.3M $101 WTI Eagle Ford Current: 1.3M Projected: 1.4M-1.8M $103 LLS Source: EIA, Bentek, Industry Sources, Bloomberg

18 North American Crude Oil Pipelines NS Markets Politically and Topographically Isolated from Pipeline Connectivity US Rail Network

19 Supply Chain Routing East Coast Options Include NS Crude Corridor NS has the shortest, most direct route to East Coast Proven transit times of hours on NS Crude Corridor

20 NS Chicago to the East Coast Ample Corridor Capacity to Destination 87% of the Crude Corridor Operates Below 80% Capacity < 85% < 80% NS Capacity Factor Across Crude Corridor by Miles

21 Norfolk Southern Update Responses to Traffic Changes Business Outlook Fourth Quarter Update General Merchandise Trends Long Term Productivity Opportunities Capital Allocation 21

22 Roanoke Hump Closure Columbus Philadelphia Roanoke Norfolk Atlanta Charleston

23 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

24 Bellevue Yard Expansion

25 UTCS - Movement Planner 10 of 11 Divisions on Base System 4 of 11 Divisions on Movement Planner with remaining in Realizing benefits in velocity, productivity, and schedule adherence

26 Productivity Initiatives Right-sizing the workforce Enabled by technology Enabled by better coordination Maintain high network velocity and customer service Expect to exceed $100M in productivity gains in 2013

27 Norfolk Southern Update Responses to Traffic Changes Business Outlook Fourth Quarter Update General Merchandise Trends Long Term Productivity Opportunities Capital Allocation 27

28 Capital Expenditures ($ millions) $2,160 $2,241 $2,008 $1,558 $1,299 $1, Budget 21 28

29 Cash From Ops and Capital Expenditures ($ millions) $2,715 $1,860 $2,714 $3,227 $3,065 $2,160 $2,241 $2,404 $1,558 $1,299 $1,470 $1, YTD Cash from Operations Capital Expenditures 21 29

30 Annual Dividend Per Share $1.94 $2.04 $1.66 Compound annual growth rate of 21% for 2003 through 2013 $0.96 $1.22 $1.36 $1.40 $0.68 $0.30 $0.36 $ % +20% +33% +42% +41% +27% +11% +3% +19% +5% 30

31 Balanced Cash Flow Utilization 2006 through 3Q 2013 $12.5 Billion $11.9 Billion* $8.1 Billion $3.8 Billion Dividends Share Repurchases Capital Expenditures * See reconciliation of Total Shareholder Distributions to GAAP posted on our website, 31

32 32 Thank You