Norfolk Southern Corporation · NYSE:NSC
Norfolk Southern — Q2 2023 Earnings Presentation
23 slides from Norfolk Southern's earnings presentation, Jul 27, 2023
Slide 1: Q2 2023 Earnings Call
Q2 2023 Earnings Call July 27, 2023
Slide 2: Forward-Looking Statements / Non-GAAP Measures
Forward-Looking Statements / Non-GAAP Measures This presentation and the related materials contain 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 future perfor
Slide 3: CEO Remarks
01 CEO Remarks Alan Shaw President & Chief Executive Officer CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 3
Slide 4: Our Strategy
OUR STRATEGY Safely Deliver Reliable and Resilient Service Propel Smart and Sustainable Growth Drive Continuous Productivity Improvement CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 4
Slide 5: Financial Overview
02 Financial Overview Mark George Executive Vice President & Chief Financial Officer CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 5
Slide 6: Estimate of Eastern Ohio derailment-related costs
Expense Paid- Q1 Q2 Total to-date Environmental-related costs $317 $264 $581 $208 • Environmental response efforts Estimate of • Expected remediation and oversight activity Eastern Ohio Legal and other costs 70 152 222 79 derailment- • Legal-related activities related costs $ millions • Community fu
Slide 7: Key Financial Data
Key Financial Data Q2 2023 and comparison to Q2 2022 favorable / unfavorable $ millions except per share Second Quarter Operating Operating Operating Net Earnings Revenue Expense Ratio Income Income per Share Q2 2023 GAAP $2,980 $2,404 80.7% $576 $356 $1.56 Eastern Ohio incident/response - ($416) 14
Slide 8: Operating Expense Components
Operating Expense Components Adjusted Q2 2023(1) vs. Q2 2022 favorable / unfavorable $ millions $1,979 $17 $1,988 $9 $33 $25 $79 ↑5% ↑6% $145 --% ↑19% ↑13% ↓36% Wage infl. ($54) Other ($19) Purch Svcs. ($20) Road study ($8) Price $141 EE levels ($30) Materials ($18) Rents ($5) Claims $4 1 2022 Compe
Slide 9: Financial Results
Financial Results Q2 2023 vs. Q2 2022 favorable / unfavorable $ millions except per share GAAP Adjusted Adjusted Variance vs ‘22 2022 2023 2023(1) $ % Income from railway operations $1,271 $576 $992 ($279) (22%) Other income (expense) – net (14) 57 57 71 NM Interest expense on debt 170 170 170 - - I
Slide 10: Free Cash Flow & Shareholder Distributions
Free Cash Flow & Shareholder Distributions First Six Months / $ millions $2,045 $918 $1,846 $1,454 $948 $898 Share $303 repurchases $591 $615 Dividends Cash from Property Free cash operations additions flow $276M 2022 2023 $165M $111M 2023 Free Cash Flow(1) Shareholder Distributions (1) Please see r
Slide 11: Operations Overview
03 Operations Overview Paul Duncan Executive Vice President & Chief Operating Officer CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 11
Slide 12: Safety Update
Safety Update FRA Personal Injury Index FRA Accident Rate FRA Mainline Accident Rate 1.52 0.99 4.23 0.93 1.26 0.85 3.99 1.01 3.66 Better Better Better 0.89 3.50 0.55 2020 2021 2022 YTD 2020 2021 2022 YTD 2020 2021 2022 YTD 2023* 2023* 2023* FRA Personal Injury Index calculates the number of FRA Trai
Slide 13: Service Update
Service Update 21.8 31.7 21.5 20.7 20.4 29.0 29.0 19.7 27.2 Better 19.3 Better 19.1 26.7 18.6 25.9 25.8 18.2 25.2 25.0 17.8 23.8 17.5 22.6 Q1 Q2 Q3 Q4 Jan Feb Mar Apr May Jun Jul * Q1 Q2 Q3 Q4 Jan Feb Mar Apr May Jun Jul * 2022 2022 2022 2022 2023 2022 2022 2022 2022 2023 Train Speed (mph) Terminal
Slide 14: We normalized the pipeline of Cars On Line quickly and as-promised
Cars On Line 185,000 180,000 175,000 We normalized the 170,000 pipeline of Cars On Line quickly and as-promised 165,000 160,000 155,000 CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 14
Slide 15: Trainee Pipeline to Moderate in 2H23
Trainee Pipeline to Moderate in 2H23 Conductor Trainees Qualified T&E 7,718 • Equipping our workforce 7,656 to provide reliable and 999 7,564 932 925 937 961 resilient service 922 7,398 • Focused on crew bases 7,218 below minimum staffing 636 levels based on 6,937 6,987 anticipated demand Q1 Q2 Q3 Q
Slide 16: Productivity Update
Productivity Update Locomotives Workforce Fuel Efficiency Miles per Day GTMs per T&E Hour Worked Gallons per kGTM 1% 5% 184 22,030 1.12 182 12% Better Better Better 19,322 1.07 Q2 Q2 Q2 Q2 Q2 Q2 2022 2023 2022 2023 2022 2023 CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 16
Slide 17: Outlook: Safely and productively deliver reliable and resilient service
Outlook: Safely and productively deliver reliable and resilient service • Everything will start with safety • With service improved, further plan calibrations to support productivity • More efficient use of resources through velocity gains • Relentless focus on process standardization to increase ef
Slide 18: Market Overview
04 Market Overview Ed Elkins Executive Vice President & Chief Marketing Officer CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 18
Slide 19: Intermodal headwinds pressure volume and revenue results
Intermodal headwinds pressure volume and revenue results Q2 2023 vs. Q2 2022 / Revenue change $ millions / favorable / unfavorable $3,250 ($27) $2,980 ($227) ($16) Q2 2022 Q2 2023 Merchandise Intermodal Coal Total Revenue $1,826M (1%) $745M (23%) $409M (4%) $2,980M (8%) Volume 566,700 (1%) 925,400 (
Slide 20: Market Outlook
Merchandise • Steel Demand • US Light Vehicle Production • Energy Market Intermodal Market Outlook • IPI Share Growth • Truck Capacity • Consumer Demand/Inventory Levels Coal • Coal Production • Natural Gas Prices • Stockpiles CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 20
Slide 21: Electric Vehicle supply chain developing on NS network
Electric Vehicle supply chain developing on NS network • $70+ billion announced investment for battery supply chains in North America in the past 18 months • Nearly a third of the total planned investments are located on the NS network, including most recently $3B for the GM/Samsung plant on NS in I
Slide 22: 2023 Outlook Update
2023 Outlook Update • Revenue down at least 3% ▪ 1H23 volume impacted by derailment-related service challenges as well as weaker demand ▪ Lower fuel surcharge driven by moderating commodity price ▪ Accelerated decline in accessorials • CapEx of ~ $2.2B • Acceleration of safety & growth investments C
Slide 23: Thank You
Thank You www.norfolksouthern.com