Norfolk Southern Corporation · NYSE:NSC
Norfolk Southern — Investor Presentation (June 2009)
58 slides from Norfolk Southern's investor presentation, Jun 4, 2009
Slide 1: Donald W. Seale, Executive Vice President & Chief Marketing Officer
Donald W. Seale Executive Vice President & Chief Marketing Officer
Slide 2: Summary of current business levels and agenda
Summary of current business levels Recap of franchise & business results since Conrail acquisition Key growth drivers since 2000 Update on Corridor Strategy The Railroad ahead
Slide 3: Industrial production and global recession impact
Industrial Production at lowest level since 1994 Impact of global recession on international trade Declining coal demand for electricity and steel production Excess capacity & lower rates in trucking industry Threat of Re-regulation
Slide 4: Lower volumes across markets
Lower fertilizer and export grain volume Falling steel production & housing related construction losses Weakened lumber volume and conventional paper declines Lower plastics & basic chemicals production Continued restructuring of the auto industry Lower consumer spending and international trade Lowe
Slide 5: Changes since the Conrail acquisition
Tiger wins 8 times on the tour and wins his 2nd major in 1999 - Won his 65th PGA Tour event in 2008 Oil price/barrel - $13 (Jan. 1999) to $145 (July 2008) to $41 (Dec. 2008) U.S. Unemployment 4.3% to 7.2% NS rail shipments grew by 1.4 million Return on investment - from 5.2% to 12.1% NS Revenue $5.2
Slide 6: Norfolk Southern System Pre-Conrail
Brunswick Jacksonville Norfolk Southern System Pre-Conrail
Slide 7: Current System
Current System € 2 7 ES 7) is o = =| 5 a = o "3 S z
Slide 8: Key growth drivers since 2000
Strong global trade - Imports Growth in utility and metallurgical coal New Intermodal terminals and products Resurgent steel industry Growth in ethanol and biofuels Industrial Development Strong service (Thoroughbred Operating Plan) and pricing gains Effective fuel recovery
Slide 9: NS volume versus industrial production and truck tonnage
2000Q1 2000Q2 2000Q3 2000Q4 2001Q1 2001Q2 2001Q3 2001Q4 2002Q1 2002Q2 2002Q3 2002Q4 2003Q1 2003Q2 2003Q3 2003Q4 2004Q1 2004Q2 2004Q3 2004Q4 2005Q1 2005Q2 2005Q3 2005Q4 2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 NS Volume 0 0.047 0.033 0.002 -0.014 0.006 -0.03
Slide 10: Major group volume 2000 vs. 2008
2000 Total Volume| Automotive 692,154 10% ‘Agriculture 525,269 a Major Group Volume 2000 vs. 2008 2000-2008 +7.3% CAGR_+0.9% MetCon Automottal 412,197 Agriculture 612.427
Slide 11: Top NS growth markets in volume
Top NS Growth Markets in Volume Ethanol Miscellaneous Wood International Intermodal Military/Misc. Transportation Domestic Intermodal Soybeans Scrap Metal Aggregates Triple Crown Services Export Coal Utility Coal 10,057 10,928 922,438 30,487 726,003 25,276 102,232 146,264 272,868 194,389 1,116,061 2
Slide 12: Revenue per unit 2000-2008
2000 2001 2002 2003 2004 2005 2006 2007 2008 Rev/Unit 900 931 933 943 980 1095 1191 1242 1451 2000 - 2008 +61% CAGR +6.2%
Slide 13: Revenue by market 2000-2008
2000 2001 2002 2003 2004 2005 2006 2007 2008 Intermodal 1119 1123 1181 1239 1537 1826 1971 1921 2058 Merchandise 3605 3526 3648 3729 4047 4586 5106 5196 5492 Coal 1435 1521 1441 1500 1728 2115 2330 2315 3111 $9,407 $8,527 $7,312 $6,468 $6,270 $6,170 In $ Millions $10,661 $9,432 $6,159 2000-2008 +73%
Slide 14: Components of Revenue Growth
Components of Revenue Growth 2000 - 2008 2000 = 2008 Summary Revenue Up $4.5 Billion - +73% Units Up 503,000 - +7% RPU Up $551 - +61% Major Revenue Growth"Components Merchandise - Industrial Development +$1.884 Billion Coal +$1.676 Billion Intermodal +$939 Million
Slide 15: NS Revenue From Industrial Development
NS Revenue From Industrial Development Total - $1.247 Billion 2000 - 2008 Distribution Services $22.5 Rev. $ Mill.
Slide 16: Industrial development revenue and carloads
2000 2001 2002 2003 2004 2005 2006 2007 2008 Revenue 137.998 105.323 125.488 113.914 128.55 131.373 154.129 181.298 253.062 Carloads 100208 95051 91135 85218 109333 88404 95246 118924 136504
Slide 17: North Manchester, IN; Portland, IN
North Manchester, IN Portland, IN
Slide 18: Marquis Energy — Hennepin, IL
Marquis Energy — Hennepin, IL
Slide 19: Louis Dreyfus — Claypool, IN
Louis Dreyfus — Claypool, IN
Slide 20: Mar-Jac Poultry — Maysville, GA
Mar-Jac Poultry — Maysville, GA
Slide 21: ThyssenKrupp — Calvert, AL
ThyssenKrupp — Calvert, AL
Slide 22: BMW — Greer, SC
— Greer, SC BMW
Slide 23: Honda — Lincoln, AL
Honda — Lincoln, AL
Slide 24: Southeast Toyota — Jacksonville, FL
Southeast Toyota — Jacksonville, FL
Slide 25: Volkswagen — Chattanooga, TN
Volkswagen — Chattanooga, TN
Slide 26: Coal markets 2000 vs. 2008
Metallurgical 264,222 16% 2000 Total Volume| Coal Markets 2000 vs. 2008 219,735 12% Metallurgical 189,960, 11%
Slide 27: NS coal network 2000 vs. 2008
Western Coal 2000 = 12.8 M 2008 = 39.7 M N. App / Ohio 2000= 34.5 M 2008 = 48.8 M Central Appalachia 2000= 105.2M 2008 = 80.1 M Imports 2000= 0 2008 = 1.1 M Illinois / Indiana 2000 = 12.0 M 2008 = 10.3 M NS Coal Network 2000 vs. 2008
Slide 28: Coal Sourcing Strategy
Coal Sourcing Strategy NAPP Powder River Basin Haverhill Illinois Basin River Docks Wheelersburg Import Coal
Slide 29: NS Coal Terminal - Wheelersburg, OH
NS Coal Terminal - Wheelersburg, OH
Slide 30: SunCoke — Haverhill, OH
SunCoke — Haverhill, OH
Slide 31: AT Massey Mammoth Mine — Kanawha County, WV
AT Massey Mammoth Mine —- Kanawha County, WV
Slide 32: NS Intermodal Network 1999 - Pre Conrail
NS Intermodal Network 1999 - Pre Conrail Atlanta Charlotte Chicago Columbus Detroit Savannah Miami Cincinnati Front Royal Norfolk New Orleans Memphis Huntsville Jacksonville Charleston Georgetown Kansas City St Louis Louisville Greensboro Peoria Decatur Alexandria Taylor Cleveland Ayer Albany Buffal
Slide 33: NS Intermodal Network today
Pittsburgh Atlanta Charlotte Chicago Columbus Rickenbacker Detroit Savannah Miami Cincinnati Harrisburg Front Royal Norfolk New Orleans Memphis Dallas Huntsville Jacksonville Charleston Georgetown Kansas City St Louis Louisville Baltimore Greensboro Toledo Decatur Taylor Maple Heights Ayer Albany Bu
Slide 34: Within our service territory
Within our service territory: 74% of the 2009 US population Over half of the states with high projected population growth One study suggests that at least 30 million truck shipments over 550 miles touch our service territory touch our service territory touch our service territory touch our service t
Slide 35: By 2020, traffic on congested highways will be over 30% trucks
By 2020, Traffic on Many Congested Interstate Highways Will Consist of Over 30% Trucks
Slide 36: Crescent Corridor
Shreveport Mechanicville Crescent Corridor
Slide 37: Public Private Partnership for Improving Rail in the East
The Most Comprehensive Public Private Partnership for Improving Rail in the East 300+ miles of passing tracks and double track 13 new or expanded terminals Potential $2.5 billion in new investment More Options for Shippers 2,500 mile rail network parallel to Interstate highways Linking Northeast ? S
Slide 38: Crescent Corridor Parallel Rail-Highway Infrastructure
38 Crescent Corridor Parallel Rail-Highway Infrastructure Interstate Hwy. NS Rail Line
Slide 39: Clean, Green Relief for Congested Roads
Clean, (Green Relief forCongested Roads TENNESSEE Benefits to Tennessee 415,000 28 Million Gallons 307,000 Tons $15 Million Annual Trucks Diverted to Rail Fuel Saved per Year CO, Reduction per Year Annual Congestion Savings Projected 2020 interstate Highway Congestion (Source US, Deparment of Transp
Slide 40: Crescent Corridor terminals and markets
Atlanta Charlotte Chicago Cincinnati Harrisburg New Orleans Memphis Dallas Kansas City St Louis Louisville Philadelphia Birmingham North Jersey Western Maryland Roanoke Region East Tennessee So. Central Pennsylvania Columbus Allentown Ayer/Boston Mechanicville
Slide 41: Crescent Corridor with Pan Am Southern
Shreveport Pan Am Southern Mechanicville Crescent Corridor
Slide 42: New Facility at Mechanicville, NY and Ayer
New Facility at Mechanicville, NY Intermodal facility with over 50,000 units of capacity Automotive facility Significant expansion capability Ayer Intermodal Expanded and improved intermodal facility Over 75,000 units of immediate capacity Expandable up to 175,000+ units Sanvel Automotive 800 parkin
Slide 43: Mechanicville, Ayer and Sanvel timelines
Mechanicville Break Ground: August, 2009 Complete: 3rd Qtr. 2010 Ayer Intermodal Improvements Incremental through 2009 and 2011 Sanvel (Ayer) Automotive Break Ground: April, 2009 Complete: 4th Qtr. 2009
Slide 44: MidAmerica Corridor
Shreveport Pan Am Southern Mechanicville MidAmerica Corridor Crescent Corridor
Slide 45: MidAmerica Corridor development
Under development with the CN and WTNN Railroad Shorter/Faster routes between Midwest and Southeast New coal route - Illinois Basin to Southeast Longer term potential as Intermodal route from Chicago to Florida
Slide 46: Meridian Speedway
Shreveport Meridian Speedway Pan Am Southern Mechanicville MidAmerica Corridor Crescent Corridor
Slide 47: Meridian Speedway investments and service improvements
NS has contributed $283 million to be used for capital improvements Improvements from Speedway Investments Entire Route is CTC signaled 80% of route will be 60 mph, 90% will be 50 mph or higher Extended multiple tracks Higher Speed Services Created NS & UP have created shortest-fastest route between
Slide 48: Heartland Corridor
Shreveport Meridian Speedway Heartland Corridor Pan Am Southern Mechanicville MidAmerica Corridor Crescent Corridor
Slide 49: Heartland Corridor public private partnership
Public Private Partnership 28 Tunnels being cleared Work is 75% completed Mid - 2010 completion date New Rickenbacker Logistics Center - Columbus, Ohio opened March 2008
Slide 50: Rickenbacker — Columbus, OH
Rickenbacker — Columbus, OH
Slide 51: Cowan Tunnel - Before
Cowan Tunnel - Before (ee ~\ deat eee
Slide 52: Slide 52
Slide 53: Cowan Tunnel - After
Slide 54: The railroad ahead: market outlook
Complexity - multiple markets, channels, and shifting industrial production/global trade patterns Motor carrier costs will continue to rise and capacity will decline or remain static Approximately 80% of intercity freight tonnage originates or terminates within the NS service area Highway conversion
Slide 55: Growth outlook by market
Domestic Intermodal New Intermodal corridors, terminals and market extensions Decreasing truck supply & higher costs Growth in utility and metallurgical coal Continued growth in biofuels Recovery in steel market Industrial Development Continued service & pricing improvement
Slide 56: The Road Railroad Ahead
The Read Railroad Ahead Br
Slide 57: Congestion is everywhere and getting worse
Congestion is everywhere.... ....and getting worse!
Slide 58: The remedy for congestion!
The remedy for congestion!