Norfolk Southern Corporation · NYSE:NSC
Norfolk Southern — Investor Day (June 2009)
17 slides from Norfolk Southern's investor day presentation, Jun 4, 2009
Slide 1: Norfolk Southern Investor Day
NS 2009 INVESTOR DAY Norfolk Southern Investor Day James A. Squires Executive Vice President Finance & Chief Financial Officer June 3, 2009 Thank you, Don, and good morning. I will provide a financial overview and an update on our cost control initiatives. Norfolk Southern has a strong track-record
Slide 2: Fundamental Financial Focus
FUNDAMENTAL FINANCIAL FOCUS Free Cash Flow Generation Return on Invested Capital Return to Shareholders Capital Structure to Support Business and Strategy Cost Control Initiatives I’ll set the stage by describing a few fundamentals. First, our overarching goal is to maximize the present value of fut
Slide 3: Free Cash Flow Generation
FREE CASH FLOW GENERATION* ($ Millions) 2004 2005 2006 2007 2008 738 1080 1028 992 1157 *Please see reconciliation to GAAP posted on our website The growth in free cash flow you see here reflects the strong business environment of the last few years, driven by improved pricing and exceptional custom
Slide 4: Comparative Free Cash Flow
COMPARATIVE FREE CASH FLOW* 2004 2005 2006 2007 2008 NS 738 1080 1028 992 1157 Industry Composite** 549 452 744 812 1422 *Please see reconciliation to GAAP posted on our website ** Industry Composite comprised of BNSF, CSX and UP Our free cash flow compares favorably to the U.S. rail industry’s aver
Slide 5: Return on Invested Capital
2004 2005 2006 2007 2008 NS 0.083 0.1 0.108 0.107 0.121 Industry Composite** 0.052 0.089 0.106 0.104 0.114 RETURN ON INVESTED CAPITAL* Norfolk Southern versus Industry Composite** ** Industry Composite comprised of BNSF, CSX and UP *Please see reconciliation to GAAP posted on our website In addition
Slide 6: Dividends
DIVIDENDS ($ Millions) 2004 2005 2006 2007 2008 142 194 278 377 456 Norfolk Southern’s consistently strong cash flow generation facilitates shareholder distributions, the most enduring component of which is dividends. Over the last five years, we have increased our annual dividends at a 34% compound
Slide 7: Share Repurchases
SHARE REPURCHASES ($ Millions) 2004 2005 2006 2007 2008 0 0 964 1196 1128 The other, more discretionary component of shareholder distributions is share repurchases. We supplement the dividend with share repurchases as warranted, depending on the level of cash flow available. Currently, we have reign
Slide 8: Total Shareholder Distributions Relative to Free Cash Flow
TOTAL SHAREHOLDER DISTRIBUTIONS* RELATIVE TO FREE CASH FLOW* ($ Millions) 2004 2005 2006 2007 2008 Total Shareholder Dist. 142 194 1242 1573 1584 Free Cash Flow 738 1080 1028 992 1157 *Please see reconciliation to GAAP posted on our website Since 2004, nearly all of Norfolk Southern’s $5 billion in
Slide 9: Balanced Cash Flow Utilization
BALANCED CASH FLOW UTILIZATION ($ Millions) Total Shareholder Distributions* vs. Capital Expenditures 2004 2005 2006 2007 2008 142 1041 194 1025 278 1178 377 1341 456 1558 0 0 964 1196 1128 2004 2008 2007 2006 2005 Dividends Capital Expenditures Share Repurchases $142 $1,041 $194 $1,025 $1,242 $1,17
Slide 10: Cost Control Initiatives
COST CONTROL INITIATIVES Train and engine crew starts and wages Incentive compensation - bonus Fuel consumption Equipment rents Intermodal operations Casualties and claims Naturally, the business environment continues to evolve, and I’d like to spend a few minutes highlighting Norfolk Southern’s res
Slide 11: Train Crew Starts and Wages
TRAIN CREW STARTS AND WAGES 1st Qtr 2008 2nd Qtr 2008 3rd Qtr 2008 4th Qtr 2008 1st Qtr 2009 Wages ($ Millions) 179 181 185 176 159 Crew Starts (000s) 253 258 255 240 221 As Mark has already shown you, Norfolk Southern’s train crew starts and wages have declined in the wake of significant volume red
Slide 12: Incentive Compensation - Salaried and Union Bonus
INCENTIVE COMPENSATION - Salaried and Union Bonus ($ Millions) 1st Qtr 2008 2nd Qtr 2008 3rd Qtr 2008 4th Qtr 2008 1st Qtr 2009 Bonus 21 32 44 33 15 $21 $32 $44 $33 $15 Similarly, incentive compensation for both the salaried and union workforce has declined. Stock-based compensation is excluded from
Slide 13: Fuel Consumption
FUEL CONSUMPTION (Millions of Gallons) 1st Qtr 2008 2nd Qtr 2008 3rd Qtr 2008 4th Qtr 2008 1st Qtr 2009 East 130 123 118 112 105 Gallons Fuel consumption declined by approximately 20% since the first quarter of 2008. As you may recall, crew starts were down about 10 percent, which indicates that our
Slide 14: Equipment Rents
EQUIPMENT RENTS ($ Millions) 1st Qtr 2008 2nd Qtr 2008 3rd Qtr 2008 4th Qtr 2008 1st Qtr 2009 East 92 90 87 88 86 As Mark mentioned, Norfolk Southern is a net payer of equipment rents due to traffic flows. Through a solid operating plan and strong execution, we were able to manage rental payments to
Slide 15: Intermodal Operations
INTERMODAL OPERATIONS ($ Millions) 1st Qtr 2008 2nd Qtr 2008 3rd Qtr 2008 4th Qtr 2008 1st Qtr 2009 Bonus 47 49 52 52 42 $47 $49 $52 $52 $42 Our intermodal operations, one of which you will visit later today, represent a focus for cost reduction. As you can see, intermodal operations expense decline
Slide 16: Casualties and Claims
CASUALTIES AND CLAIMS ($ Millions) 1st Qtr 2008* 2nd Qtr 2008 3rd Qtr 2008 4th Qtr 2008 1st Qtr 2009 East 45 42 34 39 36 *1st Qtr 2008 excludes settlement costs related to Graniteville The improvement in our casualties and claims as shown here is an outgrowth of NS’ safety process and culture. Some
Slide 17: Norfolk Southern 2009 Investor Day
Norfolk Southern 2009 Investor Day June 3, 2009 The David R. Goode Building Atlanta, Georgia In conclusion, as I started out by saying, Norfolk Southern has a strong track-record of making money for its owners and a financial strategy based on reinvestment and distribution of surplus capital. Our go