Rail Capacity & Economic Recovery Scott D. McGregor Group Vice President Paper, Clay & Forest Products March 22, 2011.

Rail Capacity & Economic RecoveryScott D. McGregorGroup Vice PresidentPaper, Clay & Forest Products

March 22, 2011

Railway Volume2010 Volume vs. 2009

Fourth quarter volume of 1,708,800

– Increase of 141,600 units, or 9%

– Record Agriculture volume

– 52-week high loadings for Agriculture,

Coal & Intermodal

2010 volume of 6,764,100

– Increase of 806,800 units, or 14%

– Record Agriculture volume

Strong project growth

Corridor initiatives

Conversions from the highway

Economic recovery

4Q 2010 Volume (000) & y-o-y Percent Change

Intermodal 755.0+13%

Coal 395.3+12%

Merchandise 558.5+3%

2010 Volume (000) & y-o-y Percent Change

Intermodal 2,927.1+16%

Coal 1,556.7+10%

Merchandise 2,280.3+14%

Merchandise ComparisonsFourth Quarter 2010 vs. 2009

Revenue Volume Rev/Unit

10%

3%

7%

Year-over-Year 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%

– 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

Agricul-ture

162.0+4%

Chem-icals 96.6+9%

MetCon 147.3+16%

Paper 79.1+1%

Automo-tive 73.5

(20%)

4Q 2010 Volume (000) & y-o-y Percent Change

Coal ComparisonsFourth Quarter 2010 vs. 2009

Revenue Volume Rev/Car

18%

12%

6%

Year-over-Year Change

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 re-building

– Metallurgical volume was up due to new business & increased steel production

– Export volume was impacted by strong 4Q 2009 comparisons

Utility 275.3+16%

Export 49.3

(18%)

Indus-trial 18.0(4%)

Metallurgical52.7

+36%

4Q 2010 Volume (000) & y-o-y Percent Change

Intermodal ComparisonsFourth Quarter 2010 vs. 2009

Revenue Volume Rev/Unit

16%13%

3%

Year-over-Year Change

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

Domestic 351.5+22%

Interna-tional 258.4+4%

Pre-mium 70.3

+14%

Triple Crown74.8+4%

4Q 2010 Volume (000) & y-o-y Percent Change

Outlook – Business Portfolio

•Manufacturing recovery

Chemicals

•Build out of ethanol network and export grain growth

Agriculture

•Highway conversions

Domestic Intermodal

•Improving imports/exportsInternational Intermodal & Export Coal

•Recovery in global steel production

Domestic Met Coal & Steel

•Falling stockpiles and increased electricity generation

Utility Coal

•New business, improved auto production and sales

Automotive

•Uncertainty in housing, but improving paper markets

Forest Products

Total Capital Program = $2.2B in 2011

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}

NS 2011 Capital Improvement Budget

Capital Expenditures

Maintenance of Way Infrastructure Facilities & Terminals Locomotives Freight Cars Technology Positive Train Control Other Projects

$244M

$763M

$334M

$212M $79M

$146M

Hot Topics in Rail Transportation: Capex

Source: AAR

2011 – Large Rail Capex

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e 2011

$5.4 $5.7 $5.9 $6.2 $6.4

$8.5 $9.2

$10.2 $10.0 $9.9

$14.0 U.S. Class I Railroad Capital Spending($ Billions)

e - preliminary AAR estimate

Chicago

Cincinnati

Columbus

Pritchard Roanoke

Norfolk

Detroit

Crescent Corridor

HeartlandCorridor

PanAm SouthernCorridor

Meridian Speedway

Philadelphia

Ayer

Atlanta

Charlotte

Lynchburg

Corinth

Shreveport

Meridian

New Orleans

Memphis

Premier Route NY/NJ

Bethlehem

Titusville

Titusville

Jacksonville

MidAmerica Corridor

Corridor Volume Increases

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 Corridor Strategy

Greencastle

Mechanicville

Birmingham

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: $600mm– Launched 2008

Jacksonville

Atlanta North

Memphis - Chattanooga

Macon - Jacksonville

Atlanta

B’ham - Atlanta

Burstall, AL

Meridian, MS

New Castle

Harrisburg, PA

Croxton, NJ

Cleveland, OH

Claypool, IN

Dayton District

Illinois

CNOTPMt. Carmel, IL

Alloy, WV

Charleston Corridor

EasternN. Carolina

Savannah, GA

Northeast PA Sidings

Jacksonville

Atlanta North

Memphis - Chattanooga

Macon - Jacksonville

Atlanta

B’ham - Atlanta

Burstall, AL

Meridian, MS

New Castle

Harrisburg, PA

Croxton, NJ

Cleveland, OH

Claypool, IN

Dayton District

Illinois

CNOTP

Mt. Carmel, ILAlloy, WV

Charleston Corridor

EasternN. Carolina

Savannah, GA

Northeast PA Sidings

NS Infrastructure Investment

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•Corridor

development •Public Private

Partnerships•Truck Diversions•Coal sourcing

network•Distribution

Network

Customer Satisfaction•Customer survey•Communication

and outreach•Continuous

improvement in service

Resource Management•Technology•Locomotives•Employees•Track•Structures