Morgan Keegan Industrial/Transportation Conference · Change vs. Prior Year ($ in millions, except...
Transcript of Morgan Keegan Industrial/Transportation Conference · Change vs. Prior Year ($ in millions, except...
Morgan Keegan
Industrial/Transportation ConferenceSeptember 14, 2011
Marta R. Stewart
Vice President and Treasurer
Norfolk Southern System
Norfolk Southern Update
Recent results
2nd Qtr Financial Highlights
2nd Qtr Revenues
Six Months Summary
Current status
3rd Qtr-to-date Volumes
3rd Qtr-to-date Service Performance
Business Outlook
Traffic Volumes
Service Performance
Corridors and Terminals
Shareholder Returns
Second Quarter Financial Highlights($ in millions, except per share)
2Q11 vs. 2Q10 Change
Revenues $436 18%
Income From Ops $142 19%
Net Income* $102 26%
Earnings per Share* $0.34 33%* Excludes income tax-related benefits, see reconciliation to GAAP posted on our website, www.nscorp.com.
Railway VolumeSecond Quarter
17%
9%
2%
-1%
-2%
-7%
-10%
Automotive
Intermodal
Coal
MetCon
Agriculture
Paper
Chemicals
1,412
1,720 1,787
2Q09 2Q10 2Q11
Units (000) Change in Units2Q11 vs. 2Q10
22%
4%
Revenue Per Unit Second Quarter
26%
18%
17%
16%
13%
9%
3%
Coal *
Chemicals *
Agriculture *
MetCon*
Paper*
Intermodal
Automotive*
$1,315$1,413
$1,604
2Q09 2Q10 2Q11
RPUChange in RPU2Q11 vs. 2Q10
7%
14%
* Record RPU
Total Railway RevenuesSecond Quarter
28%
20%
20%
15%
15%
6%
5%
Coal
Intermodal
Automotive
MetCon
Agriculture
Chemicals
Paper
$1,857
$2,430
$2,866
2Q09 2Q10 2Q11
Revenue in $ Mill.Change in Revenue 2Q11 vs. 2Q10
31%
18%
Export volume of 75,786 carloads, up
14,200 or 23%
Highest volume since Conrail
acquisition
Improves overall coal length of haul
Tightened global supply
Global steel production up 5%
Export Carloads 1Q 2008 - 2Q 2011
Export Coal Market
1Q 2008
2Q 2008
3Q 2008
4Q 2008
1Q 2009
2Q 2009
3Q 2009
4Q 2009
1Q 2010
2Q 2010
3Q 2010
4Q 2010
1Q 2011
2Q 2011
55,121 59,078 59,66345,873 40,995
22,238
45,10759,933 56,863 61,557
50,156 49,234
70,851 75,786
Utility volume of 256,548 carloads,
flat with 2010
Utility South up 9%, North down 8%
Impact from flooding and planned
outages at utilities
Inventories remain under target
1Q 2008
2Q 2008
3Q 2008
4Q 2008
1Q 2009
2Q 2009
3Q 2009
4Q 2009
1Q 2010
2Q 2010
3Q 2010
4Q 2010
1Q 2011
2Q 2011
315,508 317,619 314,890 324,644294,169
267,045 254,070 237,117 245,240 257,349275,517 275,243 276,685
256,548
Utility Carloads 1Q 2008 - 2Q 2011
Utility Coal Market
Six Months Financial SummaryChange vs. Prior Year ($ in millions, except per share)
1Q11 2Q11 First Half 2011
Revenues $382 $436 $818 18%
Income From Ops* $103 $142 $245 19%
Net Income* $104 $102 $206 32%
Earnings per Share* $0.32 $0.34 $0.66 33%
* Excludes insurance arbitration charge and income tax-related benefits, see reconciliation to GAAP posted on our website, www.nscorp.com.
Current Railway VolumeThird Quarter through Week 36 (September 10, 2011)
9%
8%
7%
1%
-5%
-6%
-11%
Automotive
Intermodal
MetCon
Coal
Paper
Agriculture
Chemicals
1,154
1,314
1,358
2009 2010 2011
Units (000) Change in Units2011 vs. 2010
14%
4%
Source: AAR carloadings, which are reported weekly and may not equal NS’ reported volumes.
Third Quarter – Primary Volume Drivers
Increase in Units
Intermodal 43,995 Continued strong domestic demand
Metals and Construction 9,151 Increased steel production
Automotive 4,598 US production, VW plant
Train SpeedYear-to-Date through September 2, 2011
19.5
20.0
20.5
21.0
21.5
22.0
NS Train Speed (miles per hour) Better
Source: As reported publicly to the AAR
Terminal DwellYear-to-Date through September 2, 2011
Source: As reported publicly to the AAR
21
23
25
27
29
31
33
NS Terminal Dwell (hours) Better
0.890.77
0.00.20.40.60.81.01.21.41.61.8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 thru
July *
Injury Ratio per 200,000 Employee Hours2010: NS
Record Year
Leading Industry in Safety
NS Earns 22nd Consecutive Harriman Gold Medal in 2010
*Pending
Business Outlook
• Improving volumes through project growth in crude oil and waste products, and long-term improved feedstock prices
Chemicals
• Increased domestic steel production, favorable seasonal paving and construction, and new business gains
Metals and Construction
• Increasing demand for U.S. agricultural productsAgriculture
•Continued European, Asian and South American demandExport Coal
• Increased domestic steel production – low domestic met stockpiles
Domestic Metallurgical Coal
• Falling stockpiles and new business offsetting gas displacement/lower industrial electric demand, record cooling days
Utility Coal
•New business, improved auto production for 2nd halfAutomotive
•Highway conversionsDomestic and Premium Intermodal
• Import growth and continued strength of exportsInternational Intermodal
• Improving rental construction market, more favorable paper demand
Paper and Forest Products
Manpower Planning ModelTotal Qualified T&E plus Trainees
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Ja
n-1
0
Fe
b-1
0
Ma
r-10
Ap
r-10
Ma
y-1
0
Ju
n-1
0
Ju
l-10
Au
g-1
0
Se
p-1
0
Oc
t-10
No
v-1
0
Dec
-10
Ja
n-1
1
Feb
-11
Ma
r-11
Ap
r-11
Ma
y-1
1
Ju
n-1
1
Ju
l-11
Au
g-1
1
Se
p-1
1
Oc
t-11
No
v-1
1
Dec
-11
Qualified Employees Trainees
Chicago
Cincinnati
Columbus
Pritchard Roanoke
Norfolk
Detroit
Philadelphia
Ayer
Atlanta
Charlotte
Lynchburg
Corinth
Shreveport
Meridian
New Orleans
Memphis
NY/NJ
Bethlehem
NS Corridor Strategy
Greencastle
Mechanicville
Birmingham
Intermodal Terminal Expansion Update
Ground Breaking Date
Completion Date
Annual Volume Capability (Lifts)
Mechanicville, NY July 2010 Spring 2012 70,000
Memphis, TN January 2011 Fall 2012 200,000
Greencastle, PA June 2011 Fall 2012 85,000
Birmingham, AL June 2011 Fall 2012 100,000
Charlotte, NC Summer 2011 Summer 2013 200,000
$763
$489
$244
$212
$146
$96
$79
$194
Roadway
Freight Cars
Facilities & Terminals
Locomotives
PTC
Technology
Infrastructure
Other Projects
2011 Capital Program($ millions)
Total Projected Spending = $2.2 billion
2006 2007 2008 2009 2010 1H11
$1,028 $992
$1,157
$561
$1,244
$812
* Free Cash Flow is defined as cash provided by operations less property additions.
Please see reconciliation to GAAP on our website, www.nscorp.com.
Free Cash Flow Generation*($ millions)
Capital Structure as of June 30, 2011
Equity60%
Debt40%
Investment Grade Rating
BBB+ (Standard & Poor’s)
Baa1 (Moody’s)
Recent Capital Markets Transactions
May Debt Issuance
• 100-year bond
• $400 million at 6.00%
September Debt Exchange
• Waterfall exchange
• $600 million - 30-year notes at 4.837%
• $159 million in cash
$51 $47
$447
$3
$500
$550
$600$585
$314
$83
$367
$440
$350
473
$133
295
$596
$138
273
$550
$404
'12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '25 '27 '29 '31 '35 '37 '41 '43 '97 2105 2111
Debt Maturities Pro Forma($ millions)
Cash Flows and Related BalancesFirst Six Months 2011 vs. 2010 ($ Millions)
2011 2010
Cash from operating activities $ 1,700 $ 1,382
Property additions (888) (569)
Free cash flow * $ 812 $ 813
Share repurchases $ (792) $ (114)
Dividends $ (283) $ (252)
Proceeds from borrowing – net $ 396 $ --
Cash and Short Term investments at
June 30$ 906 $ 1,060
* Free Cash Flow is defined as cash provided by operations less property additions.
Please see reconciliation to GAAP on our website, www.nscorp.com.
Dividends (CGR 19%) Share Repurchases Capital Expenditures
Balanced Cash Flow Utilization2006 through Second Quarter 2011
$7.4 Billion*$7.7 Billion
$5.0 Billion
$2.4 Billion
* See reconciliation to GAAP of Total Shareholder Distributions posted on our website, www.nscorp.com.
$5.0 Billion
$2.4 Billion
Total Shareholder Return2006 through Second Quarter 2011
Source: Bloomberg
Thank You