Post on 31-May-2020
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Third Quarter 2015 Marketing Overview
Alan H. Shaw
Executive Vice President
and Chief Marketing Officer
Current Conditions
‒ Fuel Surcharges
‒ Commodity Prices and Strength of Dollar
‒ Increased Truck Capacity
‒ Solid Pricing
Approach to Broad Economic Changes
‒ Continued Focus on Pricing
‒ Network Reach
‒ Strategic Structuring
Adapting to our Changing Environment
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Revenue $ in Millions & y-o-y Percent Change Revenue in $ Millions
Railway Operating Revenue Third Quarter 2015 vs. 2014
Merchandise
$1,610
(7%)
Coal
$482
(23%) Intermodal
$621
(7%) $2,655 $2,600
$368
$113
$1,000
$1,400
$1,800
$2,200
$2,600
$3,000
3Q 2014 3Q 2015Revenue Less Fuel * Fuel Surcharge
($255)
($55)
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Revenue RPU RPU Less Fuel* Volume
$2.7 Billion; $1,401; $1,343; 1,936,300 units;
down (10%) down (7%) up 1% down (3%)
* Please see reconciliation to GAAP posted on our website.
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0
50
100
150
200
Utility Export Dom Met/Ind
188.8
31.2
58.8
Coal Market Third Quarter 2015 vs. 2014
Units
(000’s)
(11%) (38%) (15%)
Low natural gas prices, strong U.S. dollar, and a weak global market
Revenue $482 Million (23%)
Volume 278,800 (16%)
RPU $1,726 (8%)
Less Fuel
Revenue $466 Million* (16%)
RPU
$1,666* 0%
* Please see reconciliation to GAAP posted on our website.
0
200
400
600
800
Domestic International
627.7
371.8
Intermodal Market Third Quarter 2015 vs. 2014
(5%) 9%
Units
(000’s)
Domestic headwinds with International growth
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Revenue $621 Million (7%)
Volume 999,500 (1%)
RPU $622 (6%)
Less Fuel
Revenue $543 Million* 2%
RPU
$544* 2%
* Please see reconciliation to GAAP posted on our website.
0
50
100
150
200
MetCon Ag Chem Auto Paper
183.3
152.9
134.3
109.7
77.8
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Merchandise Market Third Quarter 2015 vs. 2014
(9%) 5% 2% 5% (2%)
Units
(000’s)
Growth in Automotive, Agriculture, and Chemicals markets
Revenue $1,610 Million (7%)
Volume 658,000 (1%)
RPU $2,447 (6%)
Less Fuel
Revenue $1,591 Million* 1%
RPU
$2,420* 3%
* Please see reconciliation to GAAP posted on our website.
Commodity Pricing and
Strength of Dollar
– Export Coal
– Crude Oil
– Export Soybeans
Domestic Intermodal
Fuel Surcharges
Market Based
– Consumer Products
– International and
Domestic Intermodal
– Housing
Price Improvement
Strategic Changes
Near Term Headwinds Growth Opportunities
Business Outlook
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Third Quarter 2015 Operations Overview
Mark Manion
Executive Vice President
and Chief Operating Officer
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0.83
1.18 1.22
1.05
0.0
0.5
1.0
1.5
2012 FY 2013 FY 2014 FY 2015 YTD
Reportable Personal Injuries (Per 200,000 Employee-Hours)
3.44 3.59 3.89 3.51
0
2
4
6
2012 FY 2013 FY 2014 FY 2015 YTD
Crossing Accidents (Per Million Train Miles)
2.02 2.02 2.03 1.97
0.0
1.0
2.0
3.0
2012 FY 2013 FY 2014 FY 2015YTD
Train Incidents* (Per Million Train Miles)
Safety Performance
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Year-to-Date Comparison
Injury rate (1.05) is down compared to
2014ytd (1.19)
Train Incident rate (1.97) is down compared
to 2014ytd (2.15)
Grade Crossing Accident rate (3.51) is down
compared to 2014ytd (3.98)
*Train incident ratio is calculated using FRA methodology
50%
55%
60%
65%
70%
75%
80%
85%
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15
73%
75%
69%
63% 64%
72%
75%
Composite
Composite Service Performance
3
16
18
20
22
24
26
Jan
-13
Jan
-25
Feb
-06
Feb
-18
Ma
r-02
Ma
r-14
Ma
r-26
Ap
r-07
Ap
r-19
Ma
y-0
1M
ay
-13
Ma
y-2
5J
un
-06
Ju
n-1
8J
un
-30
Ju
l-12
Ju
l-24
Au
g-0
5A
ug
-17
Au
g-2
9S
ep
-10
Sep
-22
Oct-
04
Oct-
16
Speed (mph)
15
20
25
30
35
Jan
-13
Jan
-25
Fe
b-0
6F
eb
-18
Ma
r-02
Ma
r-14
Ma
r-26
Ap
r-07
Ap
r-19
Ma
y-0
1M
ay
-13
Ma
y-2
5J
un
-06
Ju
n-1
8J
un
-30
Ju
l-12
Ju
l-24
Au
g-0
5A
ug
-17
Au
g-2
9S
ep
-10
Sep
-22
Oct-
04
Oct-
16
Dwell (Hrs) Better( ) Better( )
Train Speed & Terminal Dwell 2015
4
Coal Line Rationalization Reductions in Central Appalachian Region
5
Out-of-Service /
Restricted Investment
300 miles within the last 18
months
Includes Oct 1st changes:
− 33 miles (Elmore, WV and
Princeton, WV)
− 31 miles (Dismal, VA to
Richlands, VA)
Not abandoning lines to allow
for participation in a market
return
Third Quarter 2015 Financial Overview
Marta R. Stewart
Executive Vice President Finance
and Chief Financial Officer
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Operating Results Third Quarter 2015 vs. 2014 ($ millions)
(Unfavorable)
Favorable
2015 2014 $ %
Railway operating revenues $ 2,713 $ 3,023 $ (310) (10%)
Railway operating expenses 1,891 2,025 134 7%
Income from railway operations $ 822 $ 998 $ (176) (18%)
Railway operating ratio 69.7 67.0 (2.7) (4%)
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Sub 70 operating ratio despite lower volumes and restructuring costs
Net decrease of $134 / 7%
$2,025
$166
$26
$3
$39
$22
$1,891
2015
Railway Operating Expenses Third Quarter 2015 vs. 2014 ($ millions)
Fuel Compensation
& Benefits
Depreciation Purchased
Svcs & Rents
2014 Materials
& Other
3
Restructuring Costs Third Quarter 2015 ($ millions)
Triple Crown Roanoke
Restructuring Closure Total
Accelerated depreciation $ 26 $ -- $ 26
Moving and other costs 1 10 11
Effect on Operating Expenses $ 27 $ 10 $ 37
Effect on Net Income $ 23
Effect on Earnings per Share $ 0.08
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Fuel Third Quarter 2015 vs. 2014 ($ millions)
2014 Price * Consumption * Other Fuel 2015
$387
$147
$2 $17
$221
* Reflects locomotive fuel only 5
Total decrease of $166 / 43%
$2.96
per gallon *
$1.71
per gallon *
Compensation and Benefits Third Quarter 2015 vs. 2014 ($ millions)
6
Lower incentive compensation
Increased pay rates
Higher payroll taxes
Increased trainee levels
2014 2015
$728 $702
Net decrease of $26 / 4%
Materials and Other Third Quarter 2015 vs. 2014 ($ millions)
7
Decline in material usage
Lower derailment related
expenses
Roanoke relocation costs
2014 2015
$245 $242
Net decrease of $3 / 1%
Depreciation Third Quarter 2015 vs. 2014 ($ millions)
8
2014 2015
$236 $275
Increase of $39 / 17%
Sept 2014 Sept 2015
$37,970 $40,026
Properties Balance
TCS restructuring
Increased capital base
Purchased Services and Rents Third Quarter 2015 vs. 2014 ($ millions)
Higher equipment rents
Increased engineering costs
Roanoke relocation costs
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2014 2015
$429 $451
Net increase of $22 / 5%
10
Other Income - Net Third Quarter 2015 vs. 2014 ($ millions)
Net increase of $7 / 22%
2014 2015
$32
$39
Gain from sales of property
Lower returns from corporate-
owned life insurance
Decline in coal royalties
Income Taxes Third Quarter 2015 vs. 2014 ($ millions)
11
2014 2015
$333
$272
Effective tax rate for the quarter was 37.6%
Eff. Rate
37.3%
Eff. Rate
37.6%
12
2014 2015
$1.79 $1.49
2014 2015
$559
$452
Net Income and Diluted Earnings per Share Third Quarter 2015 vs. 2014 ($ millions except per share)
Net Income Change vs. Prior Period: (19%)
Diluted Earnings per Share Change vs. Prior Period: (17%)
Decline of $107 million or 30 cents per share
2015 results included expenses associated with restructuring the company’s Triple Crown Services subsidiary and closing
its Roanoke, Va., office, which together reduced net income by $23 million, or $0.08 per diluted share.
Thank You
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