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First Quarter 2012 Results
Donald W. SealeExecutive Vice Presidentand Chief Marketing Officer
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Revenue$2.8 Billion, up 6%
RPU$1,611, up 5%
Volume1,730,800 units, up 1%
1Q 2011 RPU Volume 1Q 2012
$2,620$2,789$139 $30
1Q 2012 Revenue $ in Millions & y-o-y Percent Change
Components of Revenue Growth $ in Millions
Railway Operating RevenueFirst Quarter 2012 vs. 2011
Merchandise$1,496+13%
Coal$766(6%)
Intermodal$527+9%
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First Quarter RPU
vs. 2011 Abs.
vs. 2011% Chg.
Agriculture $2,429 $172 8%
MetCon $2,068 $258 14%
Paper $2,552 $249 11%
Chemicals $3,772 $240 7%
Automotive $2,345 $87 4%
Merchandise $2,549 $185 8%
Intermodal $671 $22 3%
Coal $2,134 $125 6%
Total $1,611 $80 5%
Revenue Per UnitFirst Quarter 2012 vs. 2011
1Q 2012 Volume (000’s) & y-o-y Percent Change
4
0
500
1,000
1,500
2,000
1Q 2011 1Q 2012
Coal
Merchandise
Intermodal
+5%
+5%
(12%)
1,711.2 1,730.8Coal volume down (12%)
(17%) decline in Utility 19% gain in Domestic Met(10%) decline in Export
Intermodal volume up 5% 13% gain in Domestic more than offsets (3%) decline in International
Merchandise up 5% Automotive and MetCon gains more than offset declines in Agriculture and Paper
+19,600 units, or 1%
Railway Volume First Quarter 2012 vs. 2011
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Revenue$766 Million, down (6%)
RPU$2,134, up 6%
Volume359,000 units, down (12%)
Crews and Locomotives Down in line with volume decline
Coal ComparisonsFirst Quarter 2012 vs. 2011
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Utility228.3(17%)
Export63.7
(10%)
Met48.7
+19%
Industrial18.3 +3%
Utility Reduced electric demand from mild temperatures & competition from gas
Domestic Met Continued domestic demand for steel and greater coking availability during the quarter
ExportLamberts Point down (9%) Baltimore down (15%)New export steam coal
Industrial New business
Volume of 359,000 units, down (12%) 1Q 2012 Volume (000’s) & y-o-y Percent Change
Coal MarketFirst Quarter 2012 vs. 2011
0
200
400
600
800
1,000
1,200
Jan-12 Feb-12 Mar-12
Heating Degree Days by Month
ActualLast yearNormal
Source: NOAA: Average heating degree days within NS region
Utility CoalHeating Degree Days in NS Region First Quarter 2012 vs. 2011
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1Q 2012 Heating Degree Days down (27%) vs. 2011
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Utility228.3(17%)
Export63.7
(10%)
Met48.7
+19%
Industrial18.3 +3%
Utility Reduced electric demand from mild temperatures & competition from gas
Domestic Met Continued domestic demand for steel and greater coking availability during the quarter
ExportLamberts Point down (9%) Baltimore down (15%)New export steam coal
Industrial New business
Volume of 359,000 units, down (12%) 1Q 2012 Volume (000’s) & y-o-y Percent Change
Coal MarketFirst Quarter 2012 vs. 2011
Coal Market
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Utility Utility North Utility South Export Domestic Met
Relative Length of Haul in Coal Market Segments
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Revenue$527 Million, up 9%
RPU $671, up 3%
Volume785,000 units, up 5%
Intermodal ComparisonsFirst Quarter 2012 vs. 2011
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Domestic Continued highway conversionsTightening truck capacity
International Negative comp partially offset by favorable imports and exports
Triple CrownIncreased demand for truckload services
Volume of 785,000 units, up 5% 1Q 2012 Volume (000’s) & y-o-y Percent Change
Domestic390.6+13%
International252.7(3%)
Premium64.4
--
Triple Crown77.3 4%
Intermodal MarketFirst Quarter 2012 vs. 2011
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Intermodal MarketImproved Efficiency
Volume
Crew Starts
+5%0
25
50
75
100
1Q 2011 1Q 2012
77%
Percent of Domestic Containers on Stack Cars
86%
+2%
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Revenue$1.5 Billion, up 13%
RPU$2,549, up 8%
Volume586,800 units, up 5%
Merchandise ComparisonsFirst Quarter 2012 vs. 2011
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Automotive Increased light vehicle production and new business
MetCon Increased domestic steel production and strong demand in materials for natural gas drilling
ChemicalsGrowth in plastics and crude oil offset declines in rock salt
Agriculture Negative fertilizer comp effect partially offset by increased ethanol
Paper Weaker volumes for newsprint, pulp and pulpboard with gains in lumber
Volume of 586,800 units, up 5% 1Q 2012 Volume (000’s) & y-o-y Percent Change
Agriculture152.3(2%)
MetCon165.5+12%
Chemicals96.0
--
Paper76.7(4%)
Automotive96.3
+23%
Merchandise MarketFirst Quarter 2012 vs. 2011
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CoalImpact of mild temperatures and competition from natural gasContinued strength within the domestic metallurgical market due to robust domestic demand for steel Weaker demand in European market, partially offset by new steam coal opportunities Improving world met coal prices and tighter supply
IntermodalIncreasing opportunities for highway conversion amidst tightening truck capacity Favorable international trade patternsGrowth in premium
MerchandiseProject growth in crude oil and waste products
Growth in ethanol to terminals
Increasing demand for materials in natural gas drilling operations
Stronger steel/automotive production and new business gains
Business Outlook
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First Quarter 2012 Results
Mark Manion
Executive Vice President
and Chief Operating Officer
Safety Performance By Quarters 2011 - 2012 (Injury Ratio per 200,000 Employee-Hours)
0.00
0.50
1.00
1.50
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
0.7
9
0.8
2
0.7
4
0.6
0
0.7
0
2011
2012
Composite Service Performance By Quarters 2011 - 2012
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
72
.2%
76
.6%
78
.2%
76
.3%
82
.8%
2011
2012
Train Speed By Quarter 2011 - 2012
16
17
18
19
20
21
22
23
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
20.9
21.1
21.4
21.4
23.4
Miles p
er
Ho
ur
2011
2012Better
20
21
22
23
24
25
26
27
28
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
26.2
23.9
23.6
24.5
21.8
Avera
ge
Ho
urs
2011
2012
Terminal Dwell By Quarter 2011 - 2012
Better
Productivity Improvements 1st Quarter - 2012 vs. 2011
Train & Engine Service Overtime Reduced 15%
Re-Crews Reduced 35%
Equipment Rents (Velocity Driven) Reduced 9%
Locomotives In Service Reduced 3%
Fuel Consumption Reduced 2%
Gross Ton Miles per Gallon Improved 1%
Gross Ton Miles per Train Hour Improved 4%
First Quarter 2012 Results
James A. Squires
Executive Vice President Finance
and Chief Financial Officer
Operating ResultsFirst Quarter 2012 vs. 2011 ($ Millions)
First Qtr First Qtr Favorable
2012 2011 $ %
Railway operating revenues $ 2,789 $ 2,620 $ 169 6%
Operating ResultsFirst Quarter 2012 vs. 2011 ($ Millions)
First Qtr First Qtr
Favorable
(Unfavorable)
2012 2011 $ %
Railway operating revenues $ 2,789 $ 2,620 $ 169 6%
Railway operating expenses 2,044 2,020 (24) (1%)
Income from railway operations $ 745 $ 600 $ 145 24%
Railway operating ratio (OR) 73.3 77.1 3.8 5%
*OR excluding 1Q 2011 arbitration 73.3 74.9 1.6 2%
*Please see reconciliation to GAAP posted on our web site.
Railway Operating Expense AnalysisFirst Quarter 2012 vs. 2011 ($ Millions)
Net Increase $24 Million / 1%
- $42
+ $21+ $24
Depreciation
+ $8+ $13
Materials and other
Purchased services and rents
Compensation and benefits
Fuel
Fuel Expense AnalysisFirst Quarter 2012 vs. 2011 ($ Millions)
First Qtr
2011
First Qtr
2012
Decreased
Consumption
Higher
Prices
$413- $13+ $37
$389
Railway Operating Expense AnalysisFirst Quarter 2012 vs. 2011 ($ Millions)
Net Increase $24 Million / 1%
- $42
+ $21+ $24
Depreciation
+ $8+ $13
Materials and other
Purchased services and rents
Compensation and benefits
Fuel
Compensation and Benefits AnalysisFirst Quarter 2012 vs. 2011 ($ Millions)
Increase/
(Decrease)
Pay rates $ 11
Employee health and welfare 6
Payroll taxes 6
Employee activity levels 5
Stock-based compensation (8)
Other 1
Net increase $ 21
Railway Operating Expense AnalysisFirst Quarter 2012 vs. 2011 ($ Millions)
Net Increase $24 Million / 1%
- $42
+ $21+ $24
Depreciation
+ $8+ $13
Materials and other
Purchased services and rents
Compensation and benefits
Fuel
Railway Operating Expense AnalysisFirst Quarter 2012 vs. 2011 ($ Millions)
Materials and other
Depreciation Purchased services and rents
Compensation and benefits
Fuel
+ $21+ $24
+ $8
+ $13
+ $16
- $42
* - $58
*Unfavorable arbitration ruling - please see
reconciliation to GAAP posted on our web site.
Other Income - NetFirst Quarter 2012 vs. 2011 ($ Millions)
First Qtr First Qtr
Favorable
(Unfavorable)
2012 2011 $ %
Interest on tax deficiencies $ (1) $ 2 $ (3) --
Corporate-owned life insurance 3 1 2 --
All other 27 24 3 13%
Other income - net $ 29 $ 27 $ 2 7%
Interest expense on debt $ 120 $ 112 $ (8) (7%)
Income TaxesFirst Quarter ($ Millions)
Change vs.
Prior Period: + 28%
$190
$244
2011 2012
Net Income and Diluted Earnings per ShareFirst Quarter ($ Millions except per share)
Net Income Diluted Earnings per Share
$325
$410
$1.23
$0.90
Change vs. Prior Period: + 26% Change vs. Prior Period: + 37%
2011 2012 2011 2012
Cash Flows and Related BalancesFirst Quarter 2012 vs. 2011 ($ Millions)
2012 2011
Source
(Use)
Cash from operating activities $ 1,035 $ 652 $ 383
Property additions (461) (423) (38)
*Free cash flow $ 574 $ 229 $ 345
Share repurchases $ 400 $ 343 $ (57)
Dividends $ 155 $ 142 $ (13)
Cash and cash equivalents at March 31 $ 829 $ 236 $ 593
*Please see reconciliation to GAAP posted on our web site.