1. Intermodal Report from Norfolk Southern
Dean Hurst
Market Manager
Thank you everyone for inviting me to speak tonight. I’ll give you a little background to my career with Norfolk Southern. I’ve been with NS for 8 years, majority spent with the marketing team. I’ve held roles in pricing, customer service, yield management, LTL sales, and now most recently as manager of the Chicago market.

2. Norfolk Southern Overview Components to Growth Market Outlook
Discussion Topics
Norfolk Southern Overview
Components to Growth
Service, Innovation, Investment
Market Outlook
Questions?
Here are a few things I’ll be talking about for the next 2 hours.
First we’ll go into a brief overview of NS,
Then talk about some of the components to growth that our company is targeting
And lastly, look at the outlook of the market with some of the tail and headwinds

3. Norfolk Southern Overview
Fourth largest Class I railroad in North America
Operates 20,000 track miles in 22 states and D.C.
30,000 employees and 4,200 locomotives
Norfolk Southern Corporation
Largest Intermodal franchise in the Eastern United States
Serves 55 intermodal terminals/ports in 36 markets
Access to the largest nationwide rail-owned 53’ container fleet
Norfolk Southern Intermodal
Route Miles: 21,362 miles in 22 states
31,000 Employees
We run about 350 to 500 trains per day
Top IM train speed: 59 MPH in some of our high speed corridors
Operates the Most Extensive IM Network in the East.
Serve 55 intermodal terminals in 36 Markets
8,500 intermodal miles, making up over 1,200 lane combination possibilities.
97% double stack clearance
Interline services with UP, BNSF, KCS,CP, & FEC

4. Intermodal Market First half 2016 vs. 2015
First Quarter: Volume flat
Strong International growth offset the negative volume impact of the TCS restructuring
Second Quarter: Volume down (5%)
Increased truck capacity and weaker import/export conditions impacted volume
Units (000’s) & Y-o-Y Percent Change
Units (000’s) & Y-o-Y Percent Change
Units (000’s) & Y-o-Y Percent Change
0% (71%) %
(1%) (74%) %
The first half of 2016 for domestic was pretty flat vs. 2015, while our international volumes are up strong mostly due to share shift of traffic. We obviously had the restructuring of the Triple Crown Network and that took a toll on our YoY numbers.
2nd quarter volumes were down due to increased truck capacity, low fuel prices, and weaker imports/exports for the US.
3rd quarter volume figures have not been released yet to the public, but it shows relatively flat YoY from what I’ve seen. But if you take out the TCS pull down, we are up between 4-6%

5. How does IM continue to grow?
So how do we continue to grow the way we have over the past several years. We’ll lets look at the last 6 years years first

6. NS Intermodal Volume Growth: 2010 – 2015
Business Segments: 2015
Intermodal Volume:
International
35%
Domestic
65%
Compound Annual Growth Rates (CAGR):
2.0% US GDP
4.0% US Intermodal
5.7% NS Intermodal
These domestic figures include our premium book of business and Triple Crown #’s that remain.
Last 6 years NS has seen a CAGR of almost 6%, which is pretty strong and consistent in any industry segment, outpacing US IM volumes and almost tripling US GDP.
So how do we keep that going?

7. #1: Reliable, Consistent Service
The first step is service.
Intermodal is an industry that relies heavily on consistent competitive service when compared to truck.
We’ve come to find out that customers can take the slower transit as long as they trust it and can rely on the service they were sold.
Fortunately this year, we’ve had pretty steady train speed, fluctuating between mph through most of the year. This is in line with 2013, our best service year we’ve ever had, and significantly outpacing some of worst service years in 2014 & 2015.
Each MPH difference equates to 75 locomotives per day needed on the network

8. US Major Railroads Intermodal Train Speeds Last 8 months
The consistency is not just with NS, as the top RR’s in the US have relatively stable speeds this year. BNSF has had a few struggle in the 3rd quarter relating to some derailments and bad weather.

9. #2 Innovation Dynamic Estimated Time of Grounding (DETG)
Optimized Terminal Control System ( )
Equipment Inventory
Load Plan Optimization
Gate Operations
Yard Management
The next step in a growth model is a continued drive for more innovation.
Our industry is becoming more reliant on computers, handhelds, ETA’s, and increased visibility. NS is targeting all of these areas with our recent technology developments.
First is Dynamic ETG (Estimated time of Grounding):
This chart shows our ability to estimate when a box will be available for pickup as it approaches destination. The hour bar illustrates that almost 80% of the ETGs generated between 48 and 24 hours out from grounding are accuarate to within 4 hours. This is our accuracy target for rollout. Future enhancements to the ETG process. OPTCS is the new system designed to manage our terminals. With this, there should be increased visibility, better terminal throughput, more focus on dwell reduction.
Within OPTCS, we have our driver app – ExpressNS, which allows for a driver to use his smartphone to access our terminals. He’ll be able to build missions, look at work events, scan ingate/outgate information, see J1’s, report damage, and search for units. He is able to access the parking lot where the unit is located at the terminal as soon as he ingates via geo-fencing capabilities. We are rolling out a new inventory application 1Q Once in use, we will be collecting GPS coordinates on equipment each time a terminal performs an inventory. Drivers using ExpressNS will be able to see the exact location of a box they are picking up as soon as they ingate.
Our new LoadPlan component of OPTCS is set to rollout 1Q This will give our LoadPlanners visibility to the drivers estimated ingate time that are using ExpressNS so that we may be able to save a spot on the train for them.
Also set for 2017 is our Yard Management application and upgrade of our manual ingate application and devices.

10. Metrics Average in app rating: 4.1 Adoption: 9% network wide Benefits:
Gate processing time: 51% reduction
Queue processing time: 33% reduction
Driver dwell: 22% reduction
The ExpressNS app was first implamented at our Atlanta terminals in Janurary 2015.
It has since gone through many enhancements and is starting to catch on as we install ExpressNS only lanes at our terminals.
Currently adoption is about 9% for all ingates and outgates at our terminals. We’d like this number to get to 30% by EOY 2016…

11. Improving Adoption ExpressNS enhancements focused on driver adoption
B2B implementation mid September 2016
ExpressNS Only lanes across the network
Accurate shipment inventory locations
Paperless gates
Intermodal ExpressNS Adoption Task Force
ExpressNS Roadshow
As we continue to improve the app, the benefits and the overall driver terminal experience, we are focused on adoption and usage.
This includes B2B implementation for those companies that want to directly integrate with ExpressNS, further improving the driver experience with additional automation and a reduction of manual entry required of the driver.
We are installing more expressNS only lanes across the network, improving inventory locations with our new inventory app and device, moving towards paperless gates (meaning no paper gate receipts needed), and even working on an ExpressNS roadshow where we’ll go to terminals and customers showcasing the ExpressNS benefits to the driver.

12. #2: Innovation continued…
Customer Provides Valid Deliver By
Scorecards provided to track compliance
NS Optimizes Loading and Unloading
Used today to prioritize loading
Customer Outgates Shipment by Deliver By
Incorporate into storage rules
Better Service!
Minimize late shipments
On top of the innovation that we are deploying to our customers, we are also relying on our customers to provide some important data back to us.
Deliver-By is a waybill field we require on all of our local domestic moves. It is a time/date combination that signifies when the customer expects to outgate the unit at terminal destination.
In cases where we have a full train, our load planners are able to prioritize freight loading by using deliver-by. Meaning if a train is set to arrive on Monday, but the customer doesn’t expect to outgate till Tuesday…we have the visibility to know what train that freight needs to ride to meet the customers expectations.

13. #3: Investment in the Future
Intermodal is largely in “return on investment” mode following an historic era of CapEx spending to expand routes, markets, and customer base. These major investments, coupled with current productivity initiatives and reliably high service, position NS for growth.
Good order chassis and container fleet to support growth goals
Crescent Corridor, including AGS technology
Northeast network extensions and improvements, via PanAm & D&H
CREATE, Chicago, and the Premier Corridor
The 3rd step is continuing to invest our network and our offerings to the market.
NS has invested billions of dollars in in building new terminals, introducing new IM lanes, and speeding up on our network.
I’ll go over the below bulleted items in the upcoming slides.

14. Equipment Management Program (EMP)
Fleet sizing plan for is centered on quality improvement and optimal capacity
NS Owned goal is 100% corrugated steel fleet EOY 2017
NS and UP continue to support and grow the 53’ EMP container capacity
Growth and investment continue with new, steel containers replacing aluminum.
In the long run, steel will offer shippers a more damage resistant container. Good for both the shippers and carriers.
But to have a reliable container product, we need to provide a safe and sturdy chassis.

15. Intermodal Maintenance & Repair System (IMRS) deployment
One vendor remaining to complete deployment
Real time reporting is improving productivity
Mechanics can address all maintenance needs, with data from all available sources – gates, DVIRs, other railroads, roadside inspections, and preventative maintenance schedules
CONFIDENTIAL
In order to do that, we’ve rolled out our IMRS system across the network to have better visibility on our chassis fleet.
This system allows us to make faster repairs, and communicate directly between the repairmen in the yard and the local terminal office via wireless handheld devices. We think this will help tremendously with our chassis health over the years.

16. Northeast Network Extensions
NS acquired 282 miles of “D&H South Lines”
Time-sensitive intermodal shippers moving traffic to/from Albany, NY and Ayer, MA (Boston) should get improved service, because the transaction directly connects NS to Pan Am Southern:
More consistently achieve the promised efficiencies of the PAS network / facilities
Improved service and competitive transportation options for intermodal shippers in the PAS corridor
This slide represents some of the details behind the NS purchase of the D&H railroad in NY. We purchased this to be able to dispatch and run our trains the way we want to provide the best service possible into the Boston and Albany markets.
There is still some work to do with track upgrades and bridgework, but we see this as a growth sector in our network.

17. Capital Projects: Northern Region
More than $750 M investment has been committed to increase
capacity along the critical NS Chicago Line Corridor.
Englewood Flyover
47th Street Expansion
Bellevue Expansion
Goshen Connection
Indiana Gateway
CF&E Railroad
Chicago
Cleveland
Indiana Gateway
Completion: 2Q’16
Englewood Flyover
Completed: 2014
Bellevue
Completed: 2Q’15
CREATE
Public-Private Partnership with 30+ projects benefitting NS
Adding and realigning pad track
Increasing paved area and parking
Improved stormwater drainage
Advanced gating system
In addition, numerous projects completed at 4 Chicago terminals:
CREATE: Chicago Region Environmental And Transportation Efficiency Program
Chicago remains the primary rail hub in the U.S. with 25% of rail traffic interchanged here and over 1300 trains operated daily.
NS is making strategic investments across our network to handle additional growth.
So to summarize – Service, Innovation & Technology upgrades, and Investment are the drivers to more growth. Getting a little uptick from the economy and higher fuel prices would certainly help too.

18. Market Outlook

19. Domestic Market Drivers
Growth Opportunity
Service improvement Truck regulations expected to tighten capacity Capacity for growth
Headwinds
Sluggish economic growth Abundant truck capacity
Low fuel prices
High inventories

20. Truck Market Beginning to Tighten
Truck utilization
Proxy for supply & demand
Too many trucks, not enough freight = tight competition
Low since 2015; beginning to tick up
Projected to tighten due to truck regulations
Fortunatley the Truck market is beginning to tighten
We look at truck utilization as a proxy for supply and demand. The truck utilization has been low since 2015, but we are now seeing that uptick, with FTR forecasts near 100% towards the end of 2017.
NS is optimistic in the future of intermodal and that sentiment is shared from the top executives down to the engineer running the train.
Source: FTR, 9/30/16

21. Thank You