Norfolk Southern Corporation · NYSE:NSC
Norfolk Southern — Q2 2010 Earnings Presentation
36 slides from Norfolk Southern's earnings presentation, Jul 29, 2010
Slide 1: Second Quarter 2010 Results
Exhibit 99.2 Second Quarter 2010 Results Donald W. Seale Executive Vice President and Chief Marketing Officer
Slide 2: Railway Operating Revenue Second Quarter 2010 vs. 2009
Railway Operating Revenue Second Quarter 2010 vs. 2009 Merchandise $1,283 +31% Coal $696 +36% Intermodal $451 +23% Total - $2.4 Billion Up $573 million, 31% vs. 2Q 2009 Volume $404 Revenue Per Unit $169 Total Change $573
Slide 3: Revenue Per Unit 2Q 2010 vs. 2Q 2009
Revenue Per Unit Second Quarter 2010 vs. 2009 2Q 2010 vs. 2Q 2009 Rev/Unit Abs. % Chg. Automotive - legacy contract renegotiation & extended hauls Coal – Improved export and utility yield Agriculture - decline due to shorter haul business Paper – lower RPU due to truck competition and increased shor
Slide 4: Railway Volume 2Q 2010 vs. 2Q 2009
Railway Volume Second Quarter 2010 vs. 2009 2Q 2010 Units Abs. % Chg. vs. 2Q 2009 • Improving economy & weak comparisons to nd quarter 2009 • Strong project growth • Metals/Construction, Paper, Chemicals & Intermodal produce 52 week high loadings Agriculture 152,951 17,914 13% MetCon 175,389 58,190
Slide 5: Merchandise Volume
Merchandise Volume Second Quarter 2010 vs. 2009 Chemicals 105,933 +32% Automotive 72,547 +19% Paper 85,250 +15% Agriculture 152,951 +13% Metals/Construction 175,389 +50% • Total Merchandise volume up 27% • Metals/Construction volume driven by increased steel demand, new business, and energy related
Slide 6: Merchandise Volume
Merchandise Volume Second Quarter 2010 vs. 2009 Chemicals 105,933 +32% Automotive 72,547 +19% Paper 85,250 +15% Agriculture 152,951 +13% Metals/Construction 175,389 +50% • Agriculture growth driven by increased corn, ethanol and fertilizer shipments • Paper & Forest volume increase in pulpboard and
Slide 7: Merchandise Volume First Quarter 2007 – Second Quarter 2010
Merchandise Volume First Quarter 2007 – Second Quarter 2010 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010 Merchandise Carloads +27%
Slide 8: Intermodal Volume
Intermodal Volume Second Quarter 2010 vs. 2009 Premium 57,140 +19% Triple Crown 74,051 +7% Domestic 335,900 +32% International 266,233 +10% • Total Intermodal volume up 20% • Domestic volume up 32%, led by truckload diversions • International volume up 10%, driven by improving global demand • Premiu
Slide 9: Intermodal Volume First Quarter 2007 – Second Quarter 2010
Intermodal Volume First Quarter 2007 – Second Quarter 2010 150,000 300,000 450,000 600,000 750,000 900,000 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010 Intermodal Units +20%
Slide 10: Heartland Corridor
Chicago Cincinnati Columbus Pritchard Roanoke Norfolk Detroit Heartland Corridor Existing Terminals New Terminals • First Double Stack Train in September, 2010 • Saves up to 233 miles off current routes • Early nd Morning service from Norfolk to Columbus • Late nd Morning service from Norfolk to Chi
Slide 11: Coal Volume
Coal Volume Second Quarter 2010 vs. 2009 Utility 257,349 Export 61,557 +177% Metallurgical 55,852 +125% Industrial 17,780 +11% • Total Coal volume up 19% • Strong growth in met coal to export and domestic markets • Growth in northern utility volume offset by weakness in the south • Recovery in indus
Slide 12: Export Coal Volume & World Steel Production
Export Coal Volume & World Steel Production First Quarter 2007 – Second Quarter 2010 Source: World Steel Association Crude Steel Production Statistics, NS Comparison Report NS Export Carloads World Steel Production - Tons
Slide 13: Domestic Metallurgical Coal Volume & Domestic Steel Production
Domestic Metallurgical Coal Volume & Domestic Steel Production – First Quarter 2007 – Second Quarter 2010 Source: World Steel Association Crude Steel Production Statistics, NS Comparison Report NS Domestic Met Carloads Domestic Steel Production - Tons +125%
Slide 14: Utility Coal Volume & Coal Stockpiles 2007 - 2010
Utility Coal Volume & Coal Stockpiles 2007 - 2010 Sources: EVA, EEI Utility Carloads (000) & Coal Stocks (MMT) % Change in GWh vs. Previous Year
Slide 15: Outlook – Business Portfolio
Outlook – Business Portfolio
Slide 16: Outlook Summary
Outlook Summary Continued growth in core markets Strong project growth and new business Continued revenue per unit improvement 1Q 2009 – 2Q 2010 Units 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010 1,455,567 1,412,342 1,522,215 1,567,133 1,582,861 1,719,809
Slide 17: Second Quarter 2010 Results
Second Quarter 2010 Results Mark Manion Executive Vice President and Chief Operating Officer
Slide 18: Rail Industry Safety Months 2010 Preliminary
Rail Industry Safety 6 Months 2010 Preliminary (Injury Ratio per 200,000 Employee-Hours )
Slide 19: Road & Yard Crew Starts By Quarters 2008 - 2010
Road & Yard Crew Starts By Quarters 2008 - 2010 -1.1%
Slide 20: Train & Engine Employees By Quarters 2008 - 2010
Train & Engine Employees By Quarters 2008 - 2010 3.2%
Slide 21: Composite Service Performance By Quarters 2008 - 2010
Composite Service Performance By Quarters 2008 - 2010 Change from Prior Year:
Slide 22: Productivity Scorecard 2Q 2010 vs. 2Q 2009
Productivity Scorecard 2Q 2010 vs. 2Q 2009 • Carload Volume 22% • Crew Starts 10% • Railroad Employees 0% • GTMs per Employee 24% • GTMs per Gallon 5% • GTMs per Train Hour 3% • Car Hire Days per Carload 4%
Slide 23: Second Quarter 2010 Results
Second Quarter 2010 Results James A. Squires Executive Vice President Finance and Chief Financial Officer
Slide 24: Operating Results ($ Millions)
Operating Results Second Quarter 2010 vs. 2009 ($ Millions) Second Qtr Second Qtr Favorable (Unfavorable) 2010 2009 $ % Railway Operating Revenues $ 2,430 $ 1,857 $ 31%
Slide 25: Operating Results ($ Millions)
Operating Results Second Quarter 2010 vs. 2009 ($ Millions) Second Qtr Second Qtr Favorable (Unfavorable) 2010 2009 $ % Railway Operating Revenues $ 2,430 $ 1,857 $ 31% Railway Operating Expenses 1,697 1,389 (308) (22%) Income from Railway Operations $ $ $ 57% Railway Operating Ratio 69.8 74.8 5.0 7
Slide 26: Railway Operating Expense Analysis ($ Millions)
Railway Operating Expense Analysis Second Quarter 2010 vs. 2009 ($ Millions) Net Increase $308 Million / 22% - $3 + $105 + $119 Depreciation + $40 + $47 Materials and Other Purchased Services and Rents Fuel Compensation and Benefits
Slide 27: Compensation and Benefits Analysis ($ Millions)
Compensation and Benefits Analysis Second Quarter 2010 vs. 2009 ($ Millions) Increase Incentive and Stock-Based Compensation $ Volume-Related Payroll Wage Rates Medical Benefits (Active and Retiree) Other Total Increase $
Slide 28: Railway Operating Expense Analysis ($ Millions)
Railway Operating Expense Analysis Second Quarter 2010 vs. 2009 ($ Millions) Net Increase $308 Million / 22% - $3 + $105 + $119 Depreciation + $40 + $47 Materials and Other Purchased Services and Rents Fuel Compensation and Benefits
Slide 29: Fuel Expense Analysis ($ Millions)
Fuel Expense Analysis Second Quarter 2010 vs. 2009 ($ Millions) $258 + $25 + $80 $153
Slide 30: Railway Operating Expense Analysis ($ Millions)
Railway Operating Expense Analysis Second Quarter 2010 vs. 2009 ($ Millions) Net Increase $308 Million / 22% - $3 + $105 + $119 Depreciation + $40 + $47 Materials and Other Purchased Services and Rents Fuel Compensation and Benefits
Slide 31: Railway Operating Expense Analysis ($ Millions)
Railway Operating Expense Analysis Second Quarter 2010 vs. 2009 ($ Millions) Net Increase $308 Million / 22% - $3 + $105 + $119 Depreciation + $40 + $47 Materials and Other Purchased Services and Rents Fuel Compensation and Benefits
Slide 32: Other Income - Net ($ Millions)
Other Income - Net Second Quarter 2010 vs. 2009 ($ Millions) Second Qtr Second Qtr Favorable (Unfavorable) 2010 2009 $ % Corporate-Owned Life Insurance $ (5) $ $ (12) (171%) Interest on Tax Deficiencies (2) (7) (140%) All Other -- --% Other Income - Net $ $ $ (19) (53%) Interest Expense on Debt $ $
Slide 33: Income Before Income Taxes Second Quarter ($ Millions)
Income Before Income Taxes Second Quarter ($ Millions) Change vs. Prior Period: + 62% $391 $635 2009 2010
Slide 34: Income Taxes Second Quarter ($ Millions)
Income Taxes Second Quarter ($ Millions) Change vs. Prior Period: + 69% $144 $243 2009 2010
Slide 35: Net Income and Diluted Earnings per Share Second Quarter
Net Income and Diluted Earnings per Share Second Quarter ($ Millions except per share) Net Income $247 Diluted Earnings per Share $392 $1.04 $0.66 Change vs. Prior Period: + 59% Change vs. Prior Period: + 58% 2009 2010 2009 2010
Slide 36: Cash Flows First Six Months 2010 vs. 2009 ($ Millions)
Cash Flows First Six Months 2010 vs. 2009 ($ Millions) *Please see reconciliation to GAAP posted on our web site. 2010 2009 Cash Provided by Operating Activities $ 1,382 $ Capital Expenditures (569) (566) *Free Cash Flow $ $ Dividends $ $ Share Repurchases $ $ -- Cash and Cash Equivalents at June 30