Slides
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January 29, 2025 Q4 2024 EARNINGS CALL
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2A BETTER WAY This presentation and the related materials contain "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, as amended. These statements relate to future events or future performance of Norfolk Southern Corporation (NYSE: NSC) (“Norfolk Southern,” “NS,” the “Company,” “we,” “our,” or “us”) and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or our achievements or those of our industry to be materially different from those expressed or implied by any forward-looking statements. In some cases, forward-looking statements may be identified by the use of words like "may," "will," "could," "would," "should," "expect," "anticipate," "believe," "project," or other comparable terminology. The Company has based these forward-looking statements on management’s current expectations, assumptions, estimates, beliefs, and projections. While the Company has based these forward-looking statements on those expectations, assumptions, estimates, beliefs, and projections it views as reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which involve factors or circumstances that are beyond the Company's control, including but not limited to: (i) the Company's ability to successfully implement its operational, productivity, and strategic initiatives; (ii) changes in domestic or international economic, political or business conditions, including those impacting the transportation industry; (iii) a significant adverse event on our network, including but not limited to a mainline accident, discharge of hazardous material, or climate-related or other network outage; (iv) the outcome of claims, litigation, governmental proceedings, and investigations involving the Company, including those with respect to the Eastern Ohio incident; (v) the nature and extent of the Company’s environmental remediation obligations with respect to the Eastern Ohio incident; (vi) new or additional governmental regulation and/or operational changes resulting from or related to the Eastern Ohio incident; and (vii) a significant cybersecurity incident or other disruption to our technology infrastructure. These and other important factors, including those discussed under “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”), may cause actual results, benefits, performance, or achievements to differ materially from those expressed or implied by these forward-looking statements. Please refer to these and our subsequent SEC filings for a full discussion of those risks and uncertainties we view as most important. Forward-looking statements are not, and should not be relied upon as, a guarantee of future events or performance, nor will they necessarily prove to be accurate indications of the times at or by which any such events or performance will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. The forward-looking statements herein are made only as of the date they were first issued, and unless otherwise required by applicable securities laws, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition to disclosing financial results in accordance with U.S. GAAP, the accompanying presentation contains non-GAAP financial measures. These non-GAAP measures should be viewed as a supplement to and not a substitute for our U.S. GAAP measures, and the financial results calculated in accordance with U.S. GAAP and reconciliations from these results should be carefully evaluated. Reconciliations to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP can be found on slides 14 and 25-28 hereto, as well as on our website at www.norfolksouthern.com on the Investors page under Events and Presentations for this event. FORWARD-LOOKING STATEMENTS / NON-GAAP MEASURES
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01 OPENING REMARKS President & Chief Executive Officer Mark George
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4A BETTER WAY 2024 OPERATING RATIO COMMITMENTS (1) ACHIEVED (1) The operating ratio improvements discussed and presented on this page represent adjusted operating ratio. See reconciliation to GAAP operating ratio on our website on the Investors page under Events and Presentations for this event. Actual 67.5% Actual 64.1% Actual 65.8% Actual ∆ 170 bps 480 bps 160 bps NS delivered on its commitments throughout 2024 as transformation drove safety, operational excellence, and productivity gains.
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02 OPERATIONS OVERVIEW Executive Vice President & Chief Operating Officer John Orr
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6A BETTER WAY 1.28 1.04 1.10 1.15 2021 2022 2023 2024 YTD 3.73 4.53 4.09 3.00 2021 2022 2023 2024 YTD The amounts above are reported through December 31, 2024, and remain subject to future adjustment due to updated medical reports (with respect to the FRA Personal Injury Index) or cost information (with respect to the FRA Accident Rate and the FRA Mainline Accident Rate) or other FRA review. The amounts provided for 2024 are preliminary and include data not yet reported to the FRA. SAFETY UPDATE FRA Personal Injury Index Better FRA Accident Rate FRA Mainline Accident Rate FRA Personal Injury Index calculates the number of reportable injuries/illnesses per year per 200,000 hours worked. FRA Train Accident Rate calculates the total number of reportable accidents per million train miles. FRA Mainline Accident Rate calculates the total number of reportable events occurring on that portion of the track that connects stations (other than auxiliary track) on which trains operate (a “Mainline”) per one million Mainline miles. Better Better 0.83 0.93 0.59 0.33 2021 2022 2023 2024 YTD Sustained positive performance has significantly reduced the mainline accident rate. Focus remains on leading causes of injuries.
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7A BETTER WAY 74% 78% 81% 82% 80% Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 18.4 19.2 19.3 20.3 20.320.8 21.5 21.8 22.4 22.6 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 NETWORK UPDATE 104 107 113 117 118 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Car Miles per Day 24.6 23.9 23.0 22.5 22.1 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Terminal Dwell (hours) Train Speed (mph) 108 109 114 121 129 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 GTMs / Avail HP BetterBetter Better Better 79% 87% 91% 89% 86% Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Intermodal Svc Composite MER Plan Compliance Better Better Network Health Asset Efficiency Customer Facing Additional information regarding how these metrics are defined and calculated is set forth on slide 29 hereto.
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8A BETTER WAY 2024 2025 2026 UPDATE: CLOSING THE MARGIN GAP • Operating plan refreshment underway to continue stretching performance • Underpinned by network gains and stability in ‘24 • Additional handling reductions • Improved dwell times • Enhanced connection plan • Aligning and optimizing mechanical infrastructure around service plan • Continued runway on fuel procurement, distribution, and efficiency • Next phase of purchased services optimization …We Are Targeting Additional Opportunities in 2025 ~$250M ~$400M ~$550M (1) The operating expense improvements discussed and presented on this page represent adjusted operating expense. See reconci liation to GAAP operating expense on our website on the Investors page under Events and Presentations for this event. Setting and Achieving Challenging Goals Propelled Us in 2024… Goals Committed to and Achieved in 2024 • Terminal dwell improvement by 10%+ • Reduce overtime by 20% • Reduce recrew rate by 20% • Increase AAR train speed by 10% • Reduce AAR terminal dwell by 15% • Store 500 locomotives by end of 2024 • Reduce scheduled crew starts by 4% • Eliminate ~$160M/year in temp. service costs • GTMs per Available HP improvement of 10% • Increase Car Miles per Day by 7% Original Annualized Productivity Commitment ~$150M ~$150M Exceeded by ~$50M
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MARKET OVERVIEW 03 Executive Vice President & Chief Marketing Officer Ed Elkins
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10A BETTER WAY (1) Please see reconciliation to GAAP posted on our website on the Investors page under Events and Presentations for this event. 4TH QUARTER 2024RESULTS Q4 2024 vs. Q4 2023 / Revenue change $ millions / favorable / unfavorable 38 out of 39 consecutive quarters of y-o-y RPU (less fuel)(1) growth in Merchandise Merchandise Intermodal Coal Fuel Total Volume 560,500 - 1,063,200 5% 169,500 (1%) 1,793,200 3% Revenue $1,842M - $792M - $390M (9%) $3,024M (2%) RPU $3,287 (1%) $744 (5%) $2,297 (9%) $1,686 (4%) Revenue (less fuel)(1) $1,771M 3% $662M 7% $386M (7%) $205M (35%) $2,819M 2% RPU (less fuel)(1) $3,161 2% $622 2% $2,271 (6%) $1,571 (1%) Q4 2023 Q4 2024 Q4 RECORD
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11A BETTER WAY VOLUME STRENGTH OFFSET BY ADVERSE MIX IMPACTED FY RESULTS Overall revenue flat for the year despite higher shipments due to mix and lower fuel surcharge (1) Please see reconciliation to GAAP posted on our website on the Investors page under Events and Presentations for this event. 7.1 Million Units $12.1 Billion Revenue $1,718 Revenue per Unit $1,582 RPU Less Fuel(1) 2% 5% 5% ($140) - Record Annual Merchandise Revenue, RPU, RPU (Less Fuel)
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12A BETTER WAY Merchandise • Vehicle Production • Manufacturing Activity • Chemicals (Non-Energy) Intermodal • East Coast Port Rebalancing • Import/Export Demand • Truck Capacity Coal • Seaborne Prices • Export Demand • Utility Demand MARKET OUTLOOK Sentiment versus prior expectation
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Q4 FINANCIAL RESULTS 04 Executive Vice President & Chief Financial Officer Jason Zampi
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14A BETTER WAY $ in millions, except EPS FOURTH QUARTER RESULTS GAAP Q4’24 Revenues $3,024 Operating expenses $1,893 Operating ratio 62.6% Operating income $1,131 Other income - net ($4) Income taxes $195 Net income $733 EPS - diluted $3.23 Adjusted (1) Q4’24 $3,024 $1,962 64.9% $1,062 $4 $179 $688 $3.04 Gains on Railway Line Transactions - $53 180 bps ($53) - ($13) ($40) ($0.17) E. Ohio Incident - $43 140 bps ($43) - ($11) ($32) ($0.14) Restructuring and Other Charges - ($27) (90) bps $27 - $6 $21 $0.09 Non-GAAP adjustments Increase / (Decrease) E. Ohio Detail Insurance ($98) Legal & Env $25 Other $30 Net ($43) Shareholder Advisory Costs - - - - $8 $2 $6 $0.03 (1) Adjusted results modifies Q4’24 GAAP results for expenses associated with the Eastern Ohio incident, gains on railway line transactions, restructuring and other charges, and shareholder advisory costs (as reflected on the preceding slide). Please see the reconciliation to GAAP posted on our website on the Investors page under Events and Presentations for this event.
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15A BETTER WAY EASTERN OHIO INCIDENT-RELATED COSTS $ millions Paid to date Expense 2023 2024 Total $836 $190 $1,026 $782 381 785 1,166 722 (101) (650) (751) (733) $1,116 $325 $1,441 $771 • Environmental response efforts and expected remediation and monitoring activity • Legal-related activities and community assistance Environmental-related costs Legal and other costs Total impact Insurance recoveries Eastern Ohio Incident & Response costs are current estimates, which may be subject to changes in future periods. Additional insurance or other third-party recoveries will be recognized in future periods when recovery is deemed to be probable. No amounts have been recorded related to potential third-party recoveries, which may reduce amounts payable by our insurers under applicable insurance coverage.
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16A BETTER WAY $ in millions, except EPS FOURTH QUARTER ADJUSTED RESULTS (1) Revenues Operating expenses Operating ratio Operating income Net income EPS - diluted Adjusted (1) Q4’24 Q4’23 Q3’24 $3,024 $3,073 $3,051 $1,962 $2,115 $1,934 64.9% 68.8% 63.4% $1,062 $958 $1,117 $688 $640 $737 $3.04 $2.83 $3.25 Y-o-Y Variances ($49) (2%) ($153) (7%) 390 bps $104 11% $48 8% $0.21 7% (1) Adjusted results modifies Q4’24 GAAP results for expenses associated with the Eastern Ohio incident, gains on railway line transactions, restructuring and other charges, and shareholder advisory costs (as reflected on slide 14). The Q4’23 GAAP results are adjusted for charges related to the Eastern Ohio incident (see appendix slide for further details). Adjusted results modifies Q3’24 GAAP results for expenses associated with gains on railway line sales, the Eastern Ohio incident, and restructuring and other charges (see appendix slide for further details). All presentations of revenues above and on slide 14 refer to U.S. GAAP revenue. Please see the reconciliation to GAAP posted on our website on the Investors page under Events and Presentations for this event. favorable / unfavorable Q4-Q3 Variances ($27) (1%) $28 1% 150 bps ($55) (5%) ($49) (7%) ($0.21) (6%)
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17A BETTER WAY RAILWAY OPERATING EXPENSES Adjusted (1) Q4 2024 vs. 2023 $2,115 $73 $44 $24 $24 $12 $1,962 Fuel Compensation & Benefits Materials & Other 2023 Depreciation 2024Purchased Svcs & Rents ↓24% Price $59 Efficiency $10 ↓8% ↓3% Purch Svcs $40 Rents $4 $153 ↑7% ↑4% (1) Adjusted results modifies Q4'24 and Q4’23 GAAP results for expenses associated with the Eastern Ohio incident, gains on railway line transactions, and restructuring and other charges. Please see the reconciliation to GAAP posted on our website on the Investors page under Events and Presentations for this event. (1) ↓Employees $58 Overtime $11 Inc. Comp $25 Pay rates $25 $ millions favorable / unfavorable (1) ↓11% Other $18 Materials $8 Claims $2
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18A BETTER WAY $11.74 $11.85 2023 2024 EARNINGS PER SHARE $0.11 1% ADJUSTED(1) FULL-YEAR RESULTS 2024 vs. 2023 favorable / unfavorable $ millions except per share $12,156 $12,123 2023 2024 $33 --% $8,189 $7,977 2023 2024 67.4% 65.8% 2023 2024 160 bps REVENUE OPERATING EXPENSE OPERATING RATIO $212 3% (1) Reflects Adjusted 2024 and 2023 results for Operating Expense, Operating Ratio, Operating Income, Net Income, and Earnings Pe r Share by modifying GAAP results for the Eastern Ohio incident, restructuring and other charges, gains on railway line transactions, shareholder advisory costs, and a deferred tax adjustment. All presentations of revenues above refer to U.S. GAAP revenue. Please see reconciliation to GAAP posted on our website on the Investors page under Events and Presentations for this event. 11 1 1 $3,967 $4,146 2023 2024 OPERATING INCOME $179 5% $2,673 $2,684 2023 2024 NET INCOME $11 -% Delivered ~ $300 million in annualized productivity, exceeding our $250 million commitment
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05 CLOSING REMARKS President & Chief Executive Officer Mark George
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20A BETTER WAY 2025 GUIDANCE ➢ 3% revenue growth ➢ Building on operational momentum across the network ▪ >$150M of year-over-year productivity savings in 2025 on the back of nearly $300M in 2024 ➢ 150bps of year-over year Operating Ratio improvement ▪ Focused on closing the gap with peers ➢ Improving cash flow and shareholder returns ▪ Capex expected to be ~$2.2B in 2025 ▪ Initiating share repurchases starting in 1Q25
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Thank You www.norfolksouthern.com
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22A BETTER WAY APPENDIX
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23A BETTER WAY $3,051 $41 $3 $32 $33 $3,024 Fuel Surcharge Revenue Intermodal (ex fuel) Coal (ex fuel) Merchandise (ex fuel) Q3 2024 Q4 2024 SEQUENTIAL OPERATING REVENUES Q4 2024 vs. Q3 2024 $ millions favorable / unfavorable --% ↓8% ↑7% $27 ↓1% -1% Vol. -% RPU +1% Vol. +5% RPU -9% Vol. -% RPU ↓14% -% Vol. -1% RPU (1) Please see reconciliation to GAAP posted on our website on the Investors page under Events and Presentations for this event.
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24A BETTER WAY SEQUENTIAL OPERATING EXPENSES Adjusted Q4 2024 (1) vs. Adjusted Q3 2024 (1) $1,934 $14 $10 $7 $3 $6 $1,962 Fuel Compensation & Benefits DepreciationQ3 2024 Materials & Other Q4 2024Purchased Svcs & Rents ↑6% Q3 recoveries $20 Usage $3 Price $13 ↑2% ↑1% Purch Svcs $6 Rents $4 $28 ↑1%↓3% (1) Adjusted results modifies Q4'24 and Q3'24 GAAP results for gains on railway line transactions, expenses associated with the Eastern Ohio incident, and restructuring and other charges. Please see the reconciliation to GAAP posted on our website on the Investors page under Events and Presentations for this event. (1) Inc. Comp $23 Payroll tax $11 ↓Employees $7 $ millions favorable / unfavorable (1) ↑1% Materials $13 Claims $7
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25A BETTER WAY $ in millions, except EPS RECONCILIATION OF Q3 2024 NON-GAAP MEASURES GAAP Q3’24 Revenues $3,051 Operating expenses $1,455 Operating ratio 47.7% Operating income $1,596 Income taxes $328 Net income $1,099 EPS - diluted $4.85 Adjusted (1) Q3’24 $3,051 $1,934 63.4% $1,117 $211 $737 $3.25 Gains on Railway Line Transactions - $380 1250 bps ($380) ($93) ($287) ($1.27) E. Ohio Incident - $159 520 bps ($159) ($39) ($120) ($0.53) Restructuring and Other Charges - ($60) (200) bps $60 $15 $45 $0.20 Non-GAAP adjustments Increase / (Decrease) (1) Adjusted results modifies Q3’24 GAAP results for expenses associated with the Eastern Ohio incident, gains on railway line transactions, and restructuring and other charges. All presentations of revenues above refer to U.S. GAAP revenue. Please see reconciliation to GAAP posted on our website on the In vestors page under Events and Presentations for this event.
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26A BETTER WAY $ in millions, except EPS RECONCILIATION OF Q4 2023 NON-GAAP MEASURES GAAP Q4’23 Revenues $3,073 Operating expenses $2,265 Operating ratio 73.7% Operating income $808 Income tax expense $124 Net income $527 EPS – diluted $2.32 Adjusted (1) Q4’23 $3,073 $2,115 68.8% $958 $161 $640 $2.83 (1) Adjusted results modifies Q4’23 GAAP results for expenses associated with the Eastern Ohio incident. All presentations of revenues above refer to U.S. GAAP revenue. Please see reconciliation to GAAP posted on our website on the Investors page under Events and Presentations for this event. E. Ohio Incident Costs - ($150) (490) bps $150 $37 $113 $0.51 Non-GAAP adjustment Increase / (Decrease)
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27A BETTER WAY $ in millions, except EPS RECONCILIATION OF 2024 NON-GAAP MEASURES GAAP 2024 Revenues $12,123 Operating expenses $8,052 Operating ratio 66.4% Operating income $4,071 Other income – net $65 Income taxes $707 Net income $2,622 EPS - diluted $11.57 Adjusted (1) 2024 $12,123 $7,977 65.8% $4,146 $104 $759 $2,684 $11.85 Gains on Railway Line Transactions - $433 360bps ($433) - ($106) ($327) ($1.44) E. Ohio Incident - ($325) (270)bps $325 - $78 $247 $1.09 Restructuring and Other Charges - ($183) (150)bps $183 ($20) $38 $125 $0.55 Non-GAAP adjustments Increase / (Decrease) Shareholder Advisory Costs - - - - $59 $15 $44 $0.20 Favorable Deferred Tax Adjustment - - - - - $27 ($27) ($0.12) (1) Adjusted results modifies 2024 GAAP results for expenses associated with the Eastern Ohio incident, gains on railway line transactions, restructuring and other charges, shareholder advisory costs, and a favorable deferred tax adjustment. All presentations of revenues above refer to U.S. GAAP revenue. Please see reconciliation to GAAP posted on our website on the Investors page under Events and Presentations for this event.
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28A BETTER WAY $ in millions, except EPS RECONCILIATION OF 2023 NON-GAAP MEASURES GAAP 2023 Revenues $12,156 Operating expenses $9,305 Operating ratio 76.5% Operating income $2,851 Income tax expense $493 Net income $1,827 EPS – diluted $8.02 Adjusted (1) 2023 $12,156 $8,189 67.4% $3,967 $763 $2,673 $11.74 (1) Adjusted results modifies 2023 GAAP results for expenses associated with the Eastern Ohio incident. All presentations of revenues above refer to U.S. GAAP revenue. Please see reconciliation to GAAP posted on our website on the Investors page under Events and Presentations for this event. E. Ohio Incident Costs - ($1,116) (910) bps $1,116 $270 $846 $3.72 Non-GAAP adjustment Increase / (Decrease)
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29A BETTER WAY NETWORK METRICS (DEFINITIONS) • Terminal Dwell: The average time a car resides at the specified terminal location expressed in hours. The measurement begins with a customer release, received interchange, or train arrival event and ends with a customer placement (actual or constructive), delivered or offered in interchange, or train departure event. Cars that move through a terminal on a run-through train are excluded, as are stored, bad ordered, and maintenance of way cars. • Train Speed: Measures line-haul movement between terminals. The average speed is calculated by dividing train-miles by total hours operated, excluding yard and local trains, passenger trains, maintenance of way trains, and terminal time. • Car Miles per Day: Daily mileage per car in the operating inventory. • GTMs per Available Horsepower: Average gross ton miles moved each day divided by locomotive horsepower available for use in transportation service. • Intermodal Svc Composite: Measures container level trip plan performance in our three lines of Intermodal business: Premium, Domestic, and International, weighted by the proportion of revenue each represents. • MER Plan Compliance: Percentage of loaded shipments delivered no later than +24hrs of the First NS Trip Plan ETA.