Norfolk Southern Corporation · NYSE:NSC
Norfolk Southern — Q3 2023 Earnings Presentation
23 slides from Norfolk Southern's earnings presentation, Oct 25, 2023
Slide 1: Q3 2023 Earnings Call
Q3 2023 Earnings Call October 25, 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: Financial Overview
02 Financial Overview Mark George Executive Vice President & Chief Financial Officer CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 4
Slide 5: Estimate of Eastern Ohio derailment-related costs
Expense Expense Paid- 1H Q1 Q3 Q2 Total Total to-date Environmental-related costs $581 $118 $699 $372 • Environmental response efforts and expected remediation and monitoring activity Legal and other costs 222 70 292 139 Estimate of • Legal-related activities and community assistance Eastern Ohio de
Slide 6: Key Financial Data
Key Financial Data Q3 2023 and comparison to Q3 2022 favorable / unfavorable $ millions except per share Third Quarter Operating Operating Operating Net Earnings Revenue Expense Ratio Income Income per Share Q3 2023 GAAP $2,971 $2,215 74.6% $756 $478 $2.10 Eastern Ohio incident/response - ($163) 5.5
Slide 7: Railway Operating Revenues
Railway Operating Revenues Q3 2023 vs. 2022 $ millions favorable / (unfavorable) $3,343 $27 $2,971 ($372) ($254) ↓11% ($74) ($71) Fuel Rate ($243) 2022 Fuel Surcharge Volume Intermodal Price/Mix/Other 2023 Revenue Storage (fuel rate & volume) Revenue CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 7
Slide 8: Operating Expense Components
Operating Expense Components Adjusted Q3 2023(1) vs. 2022 $ millions favorable / (unfavorable) ↑7% ↑7% ↑26% $2,071 $2,052 ($20) ($33) ($42) $94 $20 $19 ↓25% ↓3% ↓1% Price $82 2022 Retro $85 Road Study ($8) Purch Svcs. ($29) Materials ($11) Labor adj. Rents ($4) PY Legal ($15) Pay rates ($31) Prop Ga
Slide 9: Service Costs and Resiliency Investments
Service Costs and Resiliency Investments Temporary Service Costs Incremental Expense from Resiliency Investments $48M $50M $40M $35M $20M $15M Q1 Q2 Q3 Q1 Q2 Q3 Will partially unwind in Q4 Will rise more modestly in Q4 CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 9
Slide 10: Financial Results
Financial Results Q3 2023 vs. Q3 2022 favorable / unfavorable $ millions except per share GAAP Adjusted Adjusted Variance vs ‘22 2022 2023 2023(1) $ % Income from railway operations $1,272 $756 $919 ($353) (28%) Other income (expense) – net (2) 40 40 42 NM Interest expense on debt 177 182 182 5 3% I
Slide 11: Free Cash Flow & Shareholder Distributions
Free Cash Flow & Shareholder Distributions First Nine Months / $ millions $3,165 $1,423 $2,506 $2,284 $1,496 $1,010 Share $503 repurchases $881 $920 Dividends Cash from Property Free cash operations additions flow $1,132M 2022 2023 $918M $214M 2023 Free Cash Flow(1) Shareholder Distributions (1) Ple
Slide 12: Operations Overview
03 Operations Overview Paul Duncan Executive Vice President & Chief Operating Officer CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 12
Slide 13: 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 3.86 1.06 1.01 3.66 Better Better Better 0.53 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 14: Service Update
Service Update 28.1 20.7 20.4 20.5 27.2 26.7 26.3 25.9 Better Better 19.1 25.2 18.7 18.2 23.2 17.5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2022 2022 2022 2022 2023 2023 2023 2022 2022 2022 2022 2023 2023 2023 Train Speed (mph) Terminal Dwell (hours) CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 14
Slide 15: Productivity Indicators
Productivity Indicators Locomotives Workforce Fuel Efficiency Miles per Day kGTMs per T&E Hour Worked Gallons per kGTM 21.1 1.13 192 192 1.10 Better Better Better 19.0 Q3 Q3 Q3 Q3 Q3 Q3 2022 2023 2022 2023 2022 2023 CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 15
Slide 16: Driving Safe, Reliable, and Resilient Service, Productivity, and Growth
Driving Safe, Reliable, and Resilient Service, Productivity, and Growth Disciplined Terminal Execution Full Plan Adherence – Train & Car Labor Modernization First-Mile Last-Mile Optimization CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 16
Slide 17: Market Overview
04 Market Overview Ed Elkins Executive Vice President & Chief Marketing Officer CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 17
Slide 18: Q3 Volume and Revenue Results
Q3 Volume and Revenue Results Q3 2023 vs. Q3 2022 / Revenue change $ millions / favorable / unfavorable $3,343 ($130) $2,971 ($205) ($37) Q3 2022 Q3 2023 Merchandise Intermodal Coal Total Revenue $1,800M (7%) $737M (22%) $434M (8%) $2,971M (11%) Volume 555,100 (3%) 965,400 (1%) 166,700 (9%) 1,687,20
Slide 19: Market Outlook
Merchandise • Manufacturing Activity • Energy Prices • Automobile Production / UAW Strike Intermodal Market Outlook • East Coast Import Demand • Truck Rates • Peak Season Activity Coal • Seaborne Coal Prices • Utility Coal Burn • Natural Gas Prices CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 19
Slide 20: New Services to Drive Incremental Volumes
New Services to Drive Incremental Volumes Quickly executing to add volume to network Sustained strength in Technology enabled solutions for Industrial our first and final mile customers Development activities across the Norfolk Southern network Intermodal Expansion in Florida NS expands portfolio of
Slide 21: 2023 Outlook
2023 Outlook • Revenue down ~4% • Lower than expected Q3 revenue including significant decline in fuel surcharge • CapEx of ~ $2.2B CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 21
Slide 22: Our Strategy
OUR STRATEGY Safely Deliver Reliable and Resilient Service Propel Smart and Sustainable Growth Drive Continuous Productivity Improvement CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 22
Slide 23: Thank You
Thank You www.norfolksouthern.com