JP Morgan Aviation, Transportation & Defense Conference · 1. JP Morgan Aviation, Transportation &...
Transcript of JP Morgan Aviation, Transportation & Defense Conference · 1. JP Morgan Aviation, Transportation &...
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1
JP Morgan Aviation, Transportation & Defense Conference
Wick MoormanChairman, President and Chief Executive Officer March 6, 2013
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Agenda
2
Recap of 2012 Results
Delivering Service
Investing in the Franchise
Current Markets and Outlook
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Revenue
$11 Billion, down 1%
RPU
$1,553, down 1%
Volume
7,107,200 units, flat
2011 Price/Mix Volume Fuel 2012
$11,172$11,040($143)
($12) $23
2012 Revenue $ in Millions & y-o-y Percent Change
Components of Revenue Change $ in Millions
Railway Operating Revenue2012 vs. 2011
Merchandise$5,920+6%
Coal$2,879(17%)
Intermodal$2,241+5%
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2012 Volume (000’s) & y-o-y Percent Change
4
0
2,000
4,000
6,000
8,000
2011 2012
Coal
Merchandise
Intermodal
+2%
+5%
(13%)
7,114.7 7,107.2
Coal down 13% 17% decline in Utility 5% decline in Domestic Met2% decline in Export
Intermodal up 5% 11% gain in Domestic more than offset 1% decline in International
Merchandise up 2% Strength in Automotive, Chemicals and MetCon more than offset declines in Paper and Agriculture
Railway Volume 2012 vs. 2011
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Railway VolumeYear over Year Change
5
1Q12 2Q12 3Q12 4Q12
Coal (12%) (12%) (14%) (13%)
Intermodal + 5% + 5% + 5% + 4%
Merchandise + 5% + 4% (1%) + 1%
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Favorable(Unfavorable)
2012 2011 $ %
Railway operating revenues $ 11,040 $ 11,172 $ (132) (1%)
Railway operating expenses 7,916 7,959 43 1%
Income from railway operations 3,124 $ 3,213 $ (89) (3%)
Other income – net 129 160 (31) (19%)
Interest expense on debt 495 455 (40) (9%)
Income before income taxes 2,758 2,918 (160) (5%)
Income taxes 1,009 1,002 (7) (1%)Net income $ 1,749 $ 1,916 $ (167) (9%)
Diluted earnings per share $ 5.37 $ 5.45 $ (0.08) (1%)
Consolidated Income Statement2012 vs. 2011
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Agenda
7
Recap of 2012 Results
Delivering Service
Investing in the Franchise
Current Markets and Outlook
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60%
65%
70%
75%
80%
85%
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
72.2
%
76.6
%
78.2
%
76.3
%
82.8
%
82.9
%
83.3
%
83.4
%
20112012
Improving Overall ServiceComposite Service Performance By Quarter 2011-2012
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Train Speed2011 - 2012
19.020.021.022.023.024.025.026.027.0
NS Train Speed (miles per hour) Better
Source: As reported publicly to the AAR
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16% 16%20%
25%
35%
28%
32%
42%
8% 9%
14% 14%
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Train & Engine Service Overtime Re-Crews Equipment Rents (Velocity Driven)
Operating EfficienciesYear-over-year Percentage Improvement, by Quarter
10
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Agenda
11
Recap of 2012 Results
Delivering Service
Investing in the Franchise
Current Markets and Outlook
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Capital Expenditures($ Millions)
2009 2010 2011 2012 2013BPositive Train Control
$1,299$1,470
$2,160 $2,241$2,008
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2013 Capital Improvement Budget($ Millions)
$831
$84 $203
$239
$181
$57
$229
$184
RoadwayInfrastructureFacilities & TerminalsLocomotivesFreight CarsTechnologyPTCOther Projects
Total Spending = $2.0 Billion
13
Down $233M, or 10%, vs. 2012
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Agenda
14
Recap of 2012 Results
Delivering Service
Investing in the Franchise
Current Markets and Outlook
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1,225,200 units, up 4%
11%
10%
2%
1%
(1%)
(5%)
(5%)
Change in Units1QTD13 vs. 2012
1,181.2 1,225.2
2012 2013
Units (000)
Current Railway VolumeFirst Quarter through Week 9 (March 2, 2013)
Chemicals
Intermodal
Paper
Automotive
Agriculture
MetCon
Coal
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• Continued opportunities for highway conversion
• New Intermodal service lanes ahead as new corridor terminals open
• Growth with international shipping partners
• Expansion in premium market segment
16
Business Outlook
• Utility coal impacted by reduced demand for electricity, competition from natural gas and higher stockpiles
• Softer domestic metallurgical market to support steel production
• Weak demand in European market for both met and steam coal, marginal improvement in Asia
Coal Intermodal Merchandise
• Project growth in crude oil, increased plastics due to low-cost feedstock
• Gains in steel, but weaker aggregate market
• Continued automotive growth despite tougher comps
• Reduced U.S. corn and soybean crop
• Improved housing & related construction materials market
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17 Excludes coke, iron ore & outbound Wheelersburg
Illinois Basin
20.4 M Tons14%
Northern Appalachia41.1 M Tons
27%
Western26.3 M Tons
18%
CentralAppalachia57.6 M Tons
39%SouthernAppalachia3.3 M Tons
2% Norfolk SouthernRailway and its Railroad Operating Subsidiaries
- - - NS Trackage and Haulage Rights
Dynamics of Coal Market2012
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Business Outlook
• Utility coal impacted by reduced demand for electricity, competition from natural gas and higher stockpiles
• Softer domestic metallurgical market to support steel production
• Weak demand in European market for both met and steam coal, marginal improvement in Asia
• Continued opportunities for highway conversion
• New Intermodal service lanes ahead as new corridor terminals open
• Growth with international shipping partners
• Expansion in premium market segment
Coal Intermodal Merchandise
• Project growth in crude oil, increased plastics due to low-cost feedstock
• Gains in steel, but weaker aggregate market
• Continued automotive growth despite tougher comps
• Reduced U.S. corn and soybean crop
• Improved housing & related construction materials market
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19
2012 Intermodal ScorecardYear-over-year Percent Improvement
6%
3%
6%
3%
0% 2% 4% 6%
Percentage of Containers on
Stack Cars
Units per Train
Train Speed
Platform Utilization
Intermodal DriversOver 30 New Crescent Corridor Lanes Launched in 2013
Volume over the Crescent Corridor was up 21% in 2012 versus 2011
Bethlehem
Greencastle
Birmingham
Memphis
AtlantaCharlotte
Harrisburg
To/From West
New Orleans
Terminal Investments
To/From Mexico
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Business Outlook
• Utility coal impacted by reduced demand for electricity, competition from natural gas and higher stockpiles
• Softer domestic metallurgical market to support steel production
• Weak demand in European market for both met and steam coal, marginal improvement in Asia
• Continued opportunities for highway conversion
• New Intermodal service lanes ahead as new corridor terminals open
• Growth with international shipping partners
• Expansion in premium market segment
Coal Intermodal Merchandise
• Project growth in crude oil, increased plastics due to low-cost feedstock
• Gains in steel, but weaker aggregate market
• Continued automotive growth despite tougher comps
• Reduced U.S. corn and soybean crop
• Improved housing & related construction materials market
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0.0
1.0
2.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
N.A. Vehicle ProductionU.S. Housing StartsU.S. Industrial Production - Basic Chemicals
Merchandise Fundamentals are Positive
21 Source: Global Insight, Ward’s
• Positive signs ahead, though housing still not
back to pre-recession levels
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22% 24% 24% 23% 23% 20%
37% 35%34%
34% 32% 33%
41%
41%42% 43%
45% 47%
2007 2008 2009 2010 2011 2012
Coal GM Intermodal
2007 2008 2009 2010 2011 2012
Operating Income
Operating Income
22
Railway Volumes and Operating Income2007 - 2012
$2 B
$1 B
$3 B
$4 B
$0 B
7,593 7,3506,764
7,115 7,107
5,957
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23
Thank You