Norfolk Southern Corporation · NYSE:NSC

Norfolk Southern — 2016 Transportation Conference, Bank of America Merrill Lynch

18 slides from Norfolk Southern's conference presentation, May 17, 2016

  1. Slide 1: 2016 Transportation Conference, Bank of America Merrill Lynch

    1 2016 Transportation Conference Bank of America Merrill Lynch May 17, 2016 Alan H. Shaw Executive Vice President and Chief Marketing Officer

  2. Slide 2: Forward-Looking Statements

    Forward-Looking Statements 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. These statements relate to future events or Norfolk Southern Corporation’s (NYSE: NSC

  3. Slide 3: Norfolk Southern's Footprint

    Norfolk Southern’s Footprint 3 Extensive Network Reach Supports Future Growth ~20,000 Route Miles of Track 22 States Served by Network 40+ Ports 240+ Short Lines Norfolk Southern’s network interfaces with:  74% of U.S. population  66% of U.S. manufacturing  55% of total energy consumption in the

  4. Slide 4: Excellent Service in a Challenging Economic Environment

    Excellent Service in a Challenging Economic Environment 4 Service Market Headwinds  Improved service enhances opportunities for growth to further leverage our diversified franchise ‒ Composite service metric ‒ Train speed ‒ Terminal dwell  Operating expense reductions  Creating an excellent produ

  5. Slide 5: Steady Improvement in Composite Service Performance

    Steady Improvement in Composite Service Performance 5 50% 55% 60% 65% 70% 75% 80% 85% 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16* * 2Q16 through 05/13/16

  6. Slide 6: Train Speed & Terminal Dwell Drive Progress

    Train Speed & Terminal Dwell Drive Progress 6 Speed Dwell Better ( ) Better ( ) 15 17 19 21 23 25 27 M P H 15 17 19 21 23 25 27 29 31 Ho u rs * 2Q16 through 05/13/16

  7. Slide 7: Right-Sizing NS's Work Force

    Right-Sizing NS’s Work Force 7 26 27 28 29 30 31 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 T h o u sa n d s Railroad Employees (Average) Targeting average 5% employee reduction for the year

  8. Slide 8: Rationalizing Locomotive Fleet

    Rationalizing Locomotive Fleet 8 Road  250 stored units Yard & Local Fleet  185 units removed from service

  9. Slide 9: Expense Control and Outlook

     Aggressive cost control initiatives ‒ Materials cost savings were front-end loaded • Will moderate going forward ‒ Headcount to increase sequentially • Year-end average down 1,500  Incentive compensation higher versus prior year Expense Control and Outlook 9

  10. Slide 10: Changing Economic Projections

    Changing Economic Projections 10 Indicator 2016 Projection as of: Oct 2015 Feb 2016 April 2016 GDP (IHS) +2.9% +2.4% +2.1% GDP (Wells Fargo) +2.6% +1.8% +1.7% Housing Starts (millions) 1.30 1.22 1.20 N.A. Vehicle Production (millions) 18.3 17.9 18.2 Industrial Production +2.0% -0.4% -0.8% Real Consu

  11. Slide 11: Inventory Levels Provide Headwinds for Volume Growth

    Inventory Levels Provide Headwinds for Volume Growth 11 Source: Census Bureau; EVA 1.10 1.15 1.20 1.25 1.30 1.35 1.40 1.45 1.50 J a n-0 8 J u n-0 8 N o v -0 8 A pr -0 9 S e p -0 9 F e b-1 0 J u l- 1 0 D e c -1 0 M a y -1 1 O ct -1 1 M ar -1 2 A u g -1 2 J a n-1 3 J u n-1 3 N o v -1 3 A pr -1 4 S e p

  12. Slide 12: Truck Price Competition Due to Increased Capacity

    85% 90% 95% 100% Capacity Utilization (%) 12 (6%) (4%) (2%) 0% 2% 4% 6% 8% YoY Change in Dry Van Rates (seasonally adjusted, rev/mi, without fuel) Source: FTR Truck Price Competition Due to Increased Capacity

  13. Slide 13: Automotive Volume Will Face Tougher Comps Going Forward

    Automotive Volume Will Face Tougher Comps Going Forward 3,000 3,200 3,400 3,600 3,800 4,000 4,200 4,400 4,600 4,800 Th o u s a nd s of Un it s North American Vehicle Production 13 Source: WardsAuto

  14. Slide 14: Current Railway Volume

    Current Railway Volume Second Quarter through Week 19 (ended May 14, 2016) 14 Total Units (000’s)(9%) Decline in Units 2QTD 2016 vs. 2015 1,313; 3% 141; 0% (3,186); (9%) (5,746); (8%) (8,041); (12%) (24,815); (5%) (43,501); (32%) Paper Agriculture Chemicals Intermodal Coal Automotive MetCon 905.0 82

  15. Slide 15: 2016 Weekly Volume Declines

    125,000 130,000 135,000 140,000 145,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Week W e e k ly V olum e 15 Peak at week 9: 144,293 units 2016 Weekly Volume Declines Volume declined in mid-March and has not returned

  16. Slide 16: Mix Changes Should Follow 1Q Trends

    Mix Changes Should Follow 1Q Trends 16 $1,559 $542 $2,458 $1,607 $519 $2,518 Coal Intermodal Merchandise 1Q15 1Q16 +3% (4%) +2% Revenue per Unit Excluding Fuel & y-o-y Percent Change1 Overall RPU impacted by mix Mix Impacts Coal:  Larger decreases in utility will increase RPU Intermodal:  Flat wit

  17. Slide 17: 2016 Outlook

    2016 Outlook 17 Volume Pricing  Diversified franchise mitigates impact of commodity price volatility ‒ Low commodity prices will continue to limit crude oil, frac sand, steel, and utility and export coal volumes  Weather impact on Coal will continue across the industry through 4Q 2016 ‒ Estimated

  18. Slide 18: Thank You

    18 Thank You

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