Rail Capacity & Economic Recovery
Scott D. McGregor
Group Vice President
Paper, Clay & Forest Products
March 22, 2011
Railway Volume
2010 Volume vs. 2009
4Q 2010 Volume (000) & y-o-y Percent Change
Coal
395.3
+12%
Fourth quarter volume of 1,708,800
Merchandise
558.5
+3%
Intermodal
755.0
+13%
–
Increase of 141,600 units, or 9%
–
Record Agriculture volume
–
52-week high loadings for Agriculture,
Coal & Intermodal
2010 volume of 6,764,100
2010 Volume (000) & y-o-y Percent Change
Coal
1,556.7
+10%
Intermodal
2,927.1
+16%
Merchandise
2,280.3
+14%
–
Increase of 806,800 units, or 14%
–
Record Agriculture volume
Strong project growth
Corridor initiatives
Conversions from the highway
Economic recovery
Merchandise Comparisons
Fourth Quarter 2010 vs. 2009
4Q 2010 Volume (000) & y-o-y Percent Change
Total Merchandise revenue of $1.2 billion, up $117
million, or 10%
Total Merchandise volume of 558,500 carloads up
16,600, or 3%
–
Agriculture
162.0
+4%
Automotive
73.5
(20%)
–
–
MetCon
147.3
+16%
–
–
MetCon volume growth driven by new business & 11%
increase in domestic steel production
Record Agriculture volume led by fertilizer and corn
Chemicals growth led by gains in petroleum, plastics and
industrial intermediates
Paper volume led by newsprint, pulpboard & lumber
Automotive comparisons impacted by network redesign
and quality holds
Year-over-Year Change
Paper
79.1
+1%
Chemicals
96.6
+9%
10%
7%
3%
Revenue
Volume
Rev/Unit
Coal Comparisons
Fourth Quarter 2010 vs. 2009
4Q 2010 Volume (000) & y-o-y Percent Change
Utility
275.3
+16%
Industrial
18.0
(4%)
Metallurgical
52.7
+36%
Total Coal revenue of $685 million, up $105
million, or 18%
Total Coal volume of 395,300 carloads, up
40,800 or 12%
– Utility volume increased due to stockpile rebuilding
– Metallurgical volume was up due to new
business & increased steel production
– Export volume was impacted by strong 4Q
2009 comparisons
Year-over-Year Change
Export
49.3
(18%)
18%
12%
6%
Revenue
Volume
Rev/Car
Intermodal Comparisons
Fourth Quarter 2010 vs. 2009
4Q 2010 Volume (000) & y-o-y Percent Change
Domestic
351.5
+22%
Triple Crown
74.8
+4%
Premium
70.3
+14%
Total Intermodal revenue of $471 million, up $64
million or 16%
Total Intermodal volume of 755,000 units up
84,200 or 13%
– Domestic volume up 22%, led by highway
conversions
– International volume up 4%, driven by
improving global demand
– Premium volume up 14%, driven by gains in
parcel and LTL markets
Year-over-Year Change
International
258.4
+4%
16%
13%
3%
Revenue
Volume
Rev/Unit
Outlook – Business Portfolio
Chemicals
• Manufacturing recovery
Agriculture
• Build out of ethanol network and export grain
growth
Domestic Intermodal
• Highway conversions
International Intermodal &
Export Coal
• Improving imports/exports
Domestic Met Coal & Steel
• Recovery in global steel production
Utility Coal
• Falling stockpiles and increased electricity
generation
Automotive
• New business, improved auto production and
sales
Forest Products
• Uncertainty in housing, but improving paper
markets
NS 2011 Capital Improvement Budget
Total Capital Program = $2.2B in 2011
Capital Expenditures
$146M
$763M
$334M
$212M
Maintenance of Way
Facilities & Terminals
Freight Cars
Positive Train Control
$244M
$79M
Infrastructure
Locomotives
Technology
Other Projects
Baseline Capital Program
– $1.7B; 19% more than 2010 total
– Maintain Safety; Support Business Growth
– Maintenance of Way; Facilities & Terminals;
Locomotives; Technology
– Infrastructure (Mid - America; Crescent
Corridor, CREATE)
Additional Capital Program
– $480M
– Freight Car Purchases – historically leased
{$334M}
– Positive Train Control – upgrades to system
and track structure {$146M}
Hot Topics in Rail Transportation: Capex
2011 – Large Rail Capex
U.S. Class I Railroad Capital Spending
$10.2
($ Billions)
$10.0
$9.9
$9.2
$8.5
$5.4
$5.7
$5.9
2001
2002
2003
$6.2
$6.4
2004
2005
2006
2007
2008
2009
2010e
2011
e - preliminary AAR estimate
Source: AAR
NS Corridor Strategy
Mechanicville
Ayer
Detroit
Bethlehem
Chicago
NY/NJ
Greencastle
Philadelphia
Columbus
Cincinnati
Pritchard
Lynchburg
Roanoke
Norfolk
Charlotte
Memphis
Corinth
Birmingham
Corridor Volume
Increases
Atlanta
Shreveport
Meridian
Jacksonville
New Orleans
Titusville
4Q 2010
vs. 2009
2010 vs.
2009
Premier Route
13%
18%
PanAm Southern
21%
32%
Crescent Corridor
33%
31%
Meridian
Speedway
27%
36%
Titusville
78%
146%
NS has made significant progress on network
investments targeting Intermodal growth
• Meridian Speedway:
$300mm
– Complete 2010
• Heartland Corridor:
$290mm
– Service Launched Sept. 2010
• Pan Am Southern:
$140mm
– Complete 2010 / 2011
• Ph I Crescent Corridor:
– Launched 2008
$600mm
NS Infrastructure
Investment
Claypool,
IN IN
Claypool,
Northeast PA PA
Northeast
Sidings
Sidings
Cleveland,
OHOH
Cleveland,
Dayton
Dayton
District
District
Croxton,
NJ NJ
Croxton,
New
NewCastle
Castle
Harrisburg,
PA PA
Harrisburg,
Illinois
Illinois
CNOTP
CNOTP
Mt.
IL
Mt.Carmel,
Carmel,
Atlanta
AtlantaNorth
North
IL
Alloy,
Alloy,WV
WV
Charleston
Charleston
Corridor
Corridor
Memphis - Memphis
Chattanooga
Chattanooga
Eastern
Eastern
N.
N.Carolina
Carolina
B’ham
B’ham- Atlanta
- Atlanta
Savannah,
GAGA
Savannah,
Burstall,
ALAL
Burstall,
Macon
Macon- Jacksonville
- Jacksonville
Meridian,
MSMS
Meridian,
Atlanta
Atlanta
Jacksonville
Jacksonville
The Rail Market Ahead
• Complexity - multiple markets, channels, and shifting industrial
production/global trade patterns
• Motor carrier costs will continue to rise and capacity will decline or
remain static
• Approximately 80% of intercity freight tonnage originates or
terminates within the NS service area
• Highway conversions and continued yield management will be key
drivers
• Environmental advantages of rail shipping will become more
prominent
Our Goal: Be the safest, most customer-focused
and successful transportation company in the world
Revenue Growth
from New
Business
• Industrial
Development
• Market research
• Growth markets
Market Reach
Extension
Customer
Satisfaction
Resource
Management
• Corridor
development
• Public Private
Partnerships
• Truck Diversions
• Coal sourcing
network
• Distribution
Network
• Customer
survey
• Communication
and outreach
• Continuous
improvement in
service
• Technology
• Locomotives
• Employees
• Track
• Structures