Norfolk Southern Corporation · NYSE:NSC
Norfolk Southern — Q4 2015 Earnings Presentation
17 slides from Norfolk Southern's earnings presentation, Jan 27, 2016
Slide 1: Fourth Quarter Earnings Conference Call
1 Fourth Quarter Earnings Conference Call January 27, 2016
Slide 2: Forward-Looking Statements
Forward-Looking Statements 2 Certain statements in this presentation are forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995, as amended. In some cases, forward-looking statements may be identified by the use of words lik
Slide 3: Norfolk Southern Strategic Plan
3 Norfolk Southern Strategic Plan January 27, 2016 Jim Squires Chairman, President, and Chief Executive Officer
Slide 4: Foundation for Success
Foundation for Success 4 Superior service levels restored G&A reorganization consolidated headquarters Triple Crown restructuring Delaware & Hudson Railway Company line acquisition Reduced 2015 capital spending Division consolidation and line rationalizations
Slide 5: Norfolk Southern's Strategic Plan
Norfolk Southern’s Strategic Plan 5 Revenue Plan − Optimize pricing − Contribution growth from service-sensitive markets − Conservative pricing and volume forecasts Cost Reduction Plan − Commitment to drive operating ratio below 65 by 2020 − Specific initiatives underway to achieve more than $65
Slide 6: Norfolk Southern's Revenue Plan
6 Norfolk Southern’s Revenue Plan
Slide 7: Overview of Norfolk Southern Revenue Plan
Overview of Norfolk Southern Revenue Plan 7 Revenue growth from both pricing and volume increases − Disciplined pricing increases and strong revenue growth from service-sensitive markets to deliver increasing earnings and returns on capital Detailed, bottom-up plan for revenue growth over the ne
Slide 8: Volume and Pricing Guidance
Volume and Pricing Guidance 8 1. Excluding restructured Triple Crown (TCS). RPU growth from 2015 – 2020 of ~2.5%, around 0.5% above projected CPI − Decline in fuel surcharge headwinds, recent price initiatives and reduced negative mix drive RPU increases in excess of CPI Volume growth from 2015
Slide 9: Volume Growth Details
Volume Growth Details 9 2010 – 2015 Performance 2015 – 2020 Outlook Coal Merchandise Intermodal (7.1%) CAGR Volume impacted by earlier MATS impact, with all retiring plants cleared by 2016 Steep drop in natural gas price since 2014 Expected CAGR: ~(1%) Coal volume declines in 2016 giving w
Slide 10: Norfolk Southern's Expense Reduction and Cost Control Plan
10 Norfolk Southern’s Expense Reduction and Cost Control Plan
Slide 11: Overview of Expense Reduction and Cost Control Initiatives
Overview of Expense Reduction and Cost Control Initiatives 11 Focus on maintaining industry-leading service levels and driving substantial operating ratio improvements Clear path to achieve an operating ratio below 65 by 2020 − Robust review of various expense initiatives to maximize efficiency
Slide 12: Norfolk Southern's Model Provides Significant Flexibility to Address Future Market Conditions
12 Over the past year, the railroad industry has experienced significant headwinds related to a number of external factors, particularly challenging commodity markets Focused on both reducing costs as well as providing additional flexibility to rapidly address both market headwinds and opportuni
Slide 13: Faster Railroad = Lower Cost and Better Service
Faster Railroad = Lower Cost and Better Service 13 Service product of consistency, reliability and availability Less overtime Lower fuel costs Lower asset costs Lower car-hire costs Fewer recrews Lower cost and more profitable railroad + + + + + + = Train Speed C ost In d e x Lower Faster New Plan P
Slide 14: Path to Achieve Operating Ratio Below 65%
Path to Achieve Operating Ratio Below 65 14 Compensation & Benefits ~65% Materials ~12% Fuel ~12% Purchased Services & Rents ~11% Cost Reduction and Expense Control Detail Annual Savings by 2020: $650MM Compensation & Benefits – ~$420MM Overtime reductions with improving service levels Build on
Slide 15: Path to Achieve Operating Ratio Below 65% (cont'd)
Path to Achieve Operating Ratio Below 65 (cont’d) 15 Cost Reduction and Expense Control Detail Annual Savings by 2020: $650MM Materials – ~$80MM Increased efficiencies to allow reduced fleet size Continued rationalization of yard and local locomotive fleet New locomotives to replace older, hig
Slide 16: Driving Increasing Shareholder Value
Driving Increasing Shareholder Value 16 Increase asset utilization Optimize revenue – both pricing and volume Double-digit compound annual EPS growth Improve productivity to deliver efficient and superior service Reward shareholders with significant return of capital Operating Ratio < 70 Focus capit
Slide 17: Important Additional Information and Where to Find It
Important Additional Information and Where to Find It Norfolk Southern Corporation (the “Company”), its directors and certain of its executive officers and employees may be deemed to be participants in the solicitation of proxies from stockholders in connection with the Company’s 2016 Annual Meeting