Cowen and Company Global Transportation & Aerospace/Defense Conference Wick Moorman Chairman and Chief Executive Officer September 3, 2014 1
Norfolk Southern Update Second Quarter Summary Third Quarter Update and Business Outlook Service Update Long Term Productivity Opportunities Capital Allocation 2
Operating Results Second Quarter 2014 vs. 2013 ($ millions) Revenue exceeds $3 billion, setting all-time quarterly record. Favorable (Unfavorable) 2014 2013 $ % Railway operating revenues $ 3,042 $ 2,802 $ 240 9% Railway operating expenses 2,023 1,966 (57) (3%) Income from railway operations $ 1,019 $ 836 $ 183 22% Railway operating ratio 66.5 70.2 3.7 5% 3
Railway Volume Second Quarter 2014 vs. 2013 (volume in thousands) Total volume up 8% Intermodal up 11% 8% gain in Domestic and 16% increase in International 2,000 2Q 2014 Volume and Year-over-Year Percent Change 1,838 1,983 Merchandise up 7% Strength in Metals & Construction, Chemicals, Agriculture and Automotive offset declines in Paper 1,500 1,000 Intermodal Merchandise +11% +7% Coal up 3% Increases in Utility offset decreases in Export 500 Coal +3% 0 2Q 2013 2Q 2014 4
Railway Operating Expenses Second Quarter 2014 vs. 2013 ($ millions) Net increase of $57 / 3%. $35 $17 $12 $4 $11 $2,023 $1,966 2013 Materials & Other Fuel Depreciation Purchased Svcs & Rents Compensation & Benefits 2014 5
Compensation and Benefits Second Quarter 2014 vs. 2013 ($ millions) Net decrease of $11 / 2%. Lower post-retirement medical and pension Lower health and welfare benefit costs Higher incentive compensation $726 $715 Increased pay rates Increased overtime 2013 2014 6
Net Income and Diluted Earnings per Share Second Quarter 2014 vs. 2013 ($ millions except per share) Net Income and Earnings per Share set all-time quarterly records. Net Income Change vs. Prior Period: + 21% Diluted Earnings per Share Change vs. Prior Period: + 23% $465 $562 $1.46 $1.79 2013 2014 2013 2014 7
Norfolk Southern Update 2014 Second Quarter Overview Third Quarter Update and Business Outlook Service Update Long Term Productivity Opportunities Capital Allocation 8
Current Railway Volume Third Quarter through Week 35 Total Volume: 1,364,800 units, up 8% Automotive Change in Units 3QTD 2014 vs. 2013 22% 1,259.3 Units (000) 1,364.8 Chemicals MetCon Intermodal Agriculture 15% 12% 10% 7% Paper (1%) 0% Coal 2013 2014 9
Business Outlook COAL Flat demand for utility coal as stockpile replenishment helps offset declines from falling natural gas prices and mild weather Strong competition in the Atlantic metallurgical and thermal markets Reduced domestic met volumes related to plant closures and sourcing shifts 10
Business Outlook COAL Flat demand for utility coal as stockpile replenishment helps offset declines from falling natural gas prices and mild weather Strong competition in the Atlantic metallurgical and thermal markets 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 Price increase on rail owned domestic container shipments 11
Business Outlook COAL Flat demand for utility coal as stockpile replenishment helps offset declines from falling natural gas prices and mild weather Strong competition in the Atlantic metallurgical and thermal markets 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 Price increase on rail owned domestic container shipments MERCHANDISE Projected growth in crude oil, increased volume for shalerelated liquid petroleum gases and asphalt Gains in steel, frac sand Continued automotive growth Normalized corn and soybean shipments Improved housing & related construction materials market 12
Norfolk Southern Update 2014 Second Quarter Overview Third Quarter Update and Business Outlook Service Update Long Term Productivity Opportunities Capital Allocation 13
Composite Service Performance 2013-2014 through June 90% Column1 85% 83.3% 83.7% 83.6% 82.4% 80% 75% 73.4% 74.5% 70% 65% 60% 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 14
Miles per Hour Train Speed 1Q11 3QTD14 Better 25.0 24.0 24.1 23.9 23.0 22.0 21.0 20.0 19.0 21.4 21.1 15
Hours Terminal Dwell 1Q11 3QTD14 Better 27.0 26.0 25.0 24.0 23.0 23.6 25.1 22.0 21.0 20.0 21.3 21.2 16
Norfolk Southern Update 2014 Second Quarter Overview Third Quarter Update and Business Outlook Service Update Long Term Productivity Opportunities Capital Allocation 17
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 18
19 Bellevue Yard Expansion
UTCS - Movement Planner All 11 Divisions on Base System 8 of 11 Divisions on Movement Planner with remaining in 2014 Realizing benefits in velocity, productivity, and schedule adherence 20
Juniata Locomotive Shop 21 21
22 Locomotive Rebuild Programs
Norfolk Southern Update 2014 Second Quarter Overview Third Quarter Update and Business Outlook Service Update Long Term Productivity Opportunities Capital Allocation 23
Capital Expenditures ($ millions) Robust Capital Plan - $2.2 billion. $2,160 $2,241 $1,971 $2,200 2011 2012 2013 2014B Positive Train Control 24
Cash From Ops and Capital Expenditures ($ millions) $3,227 $3,065 $3,078 $2,160 $2,241 $1,971 $1,437 $809 2011 2012 2013 2014 six months Cash from Operations Capital Expenditures 21 25
Annual Dividend Per Share Compound annual growth rate of 20% from 2004 through 2014 $1.22 $1.36 $1.40 $1.66 $1.94 $2.04 $2.22 $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% +5% +9% *2014 estimate assumes current dividend in December 26
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. 27
28 Thank You