Reaffirms full-year 2024 adjusted operating
ratio guidance improvement, including 400+ basis
points improvement in the second half
Provides progress update on actions to close
margin gap with peers
Results include $600M agreement in principle related to
East Palestine derailment class action litigation
ATLANTA, April 9,
2024 /PRNewswire/ -- Norfolk Southern Corporation
(NYSE: NSC) announced Tuesday preliminary first quarter 2024
financial results.
Preliminary first quarter 2024 results
|
GAAP
Results
|
Adjusted
Results
|
Railway operating
revenues
|
$3,004
million
|
$3,004
million
|
Railway operating
expenses
|
$2,791
million
|
$2,100
million
|
Income from railway
operations
|
$213 million
|
$904 million
|
Operating
ratio
|
92.9 %
|
69.9 %
|
Diluted earnings per
share
|
$0.23
|
$2.49
|
"In the first quarter, we delivered an adjusted operating ratio
in line with our guidance, which called for a seasonal increase of
100-200 basis points sequentially from the fourth quarter," said
Norfolk Southern President and Chief Executive Officer Alan H. Shaw. "We achieved this result
despite macroeconomic challenges and the continued impact of our
revenue mix being weighted towards lower-rated traffic, including
international intermodal, which continues to be a significant
driver of volume growth. We are encouraged that non-GAAP margin
improved each month throughout the quarter. Looking ahead, we have
strong momentum in our effort to achieve a full year 100-150 basis
points improvement, including 400+ basis points of year-over-year
improvement in the second half of the year."
"Norfolk Southern is becoming a more productive and efficient
railroad. There is still work to be done to achieve
industry-competitive margins and our target of a sub-60% adjusted
operating ratio in 3-4 years and we are taking all the right steps
to deliver on our promise," Shaw continued. "Our recently appointed
Chief Operating Officer, John Orr,
is executing precision scheduled railroading principles and
accelerating our operational improvements, which are already
yielding positive results. We are moving with urgency, and we are
confident in our ability to achieve our near- and long-term
operating and financial targets."
Norfolk Southern's first quarter results include the impact of a
$600 million agreement in principle
to resolve a consolidated class action lawsuit relating to the East
Palestine derailment. Additionally, preliminary GAAP results
include charges associated with the company's involuntary and
voluntary separation programs that will eliminate management
positions, as well as costs associated with the recruitment of a
new chief operating officer, expenses associated with shareholder
matters, and a deferred tax adjustment. Collectively, these
increased the company's railway operating expenses by $691 million, increased its operating ratio by
2,300 basis points, and reduced earnings per share by $2.26.
Despite 4% volume growth, revenues were down 4% due to RPU
headwinds primarily from lower fuel surcharge and the continuation
of adverse mix along the patterns we experienced in Q4 2023.
Additionally, lower Intermodal storage fees, persistent pressure in
Domestic Intermodal RPU from over-capacity in the domestic truck
market, and lower seaborne coal prices were headwinds to RPU in the
quarter. While there were also adverse mix impacts within
Merchandise, our laser focus on strong core pricing, supported by
considerably improved service, helped deliver all-time quarterly
records for revenue less fuel and revenue per unit less fuel in our
Merchandise markets.
The unaudited results in this press release are preliminary and
subject to the completion of accounting and interim review
procedures and are therefore subject to adjustment. Norfolk
Southern will announce its full first quarter 2024 financial
results during a live conference call and internet webcast at 8:45
a.m. ET on Wednesday, April 24, 2024.
Quarterly earnings results will be released in advance of the call
and a press release will be posted on the Investors page of the
company's website.
Accelerating Operational Performance
On April 4, the company announced additional
initiatives to accelerate strategic and operational progress. These
actions include changing the reporting structure in Operations to
instill additional rigor, establishing near-term operational
initiatives, classifying two hump yards as "High Performance
Terminals" where the Company anticipates achieving 33% improvement
in dwell time over the next 60 days, and executing a lane
rationalization program.
Together, these changes are helping to increase the speed of the
Merchandise network and open the door for broader network fluidity
and efficiency. In just over two weeks tangible results have
already been realized, including:
- Improved Terminal Dwell by 8%;
- Increased Merchandise Train Speed by 10%; and
- Decreased Active Train Count by 11%.
Expected Impact from Baltimore Bridge Collapse
In
response to the March 26 Francis
Scott Key Bridge collapse, Norfolk Southern is taking proactive
steps to mitigate supply chain disruptions and ensure
uninterrupted service for customers. Leveraging the company's
extensive franchise footprint and strategic partnerships with ocean
carriers, short line railroads, East Coast ports, and other
transportation providers, Norfolk Southern is collaborating with
customers of all commodity types. Already, the company has launched
a new dedicated service to facilitate the flow of freight between
the Elizabeth Marine Terminal at the Port of New York and New
Jersey and the Seagirt Marine Terminal in
Baltimore. Despite ongoing mitigation efforts, and depending
on the duration of the port outage, we expect there to be a
$50 – 100 million impact on revenue
in the second quarter.
East Palestine derailment class action
settlement
Norfolk Southern separately announced Tuesday
that it has reached a $600 million
agreement in principle to resolve a consolidated class action
lawsuit relating to the East Palestine derailment. If approved by
the court, the agreement will resolve all class action claims
within a 20-mile radius from the derailment and, for those
residents who choose to participate, personal injury claims within
a 10-mile radius from the derailment. This settlement furthers the
work Norfolk Southern has done to make it right in East Palestine
and the surrounding communities, while providing finality and
flexibility for settlement class members. This agreement does
not include or constitute any admission of liability, wrongdoing,
or fault. Norfolk Southern continues to pursue all applicable
insurance coverage with respect to this agreement.
The press release pertaining to this announcement can be found
at https://norfolksouthern.mediaroom.com/. To learn more about
Norfolk Southern's commitment and ongoing remediation efforts for
East Palestine and the surrounding communities, visit
NSMakingItRight.com.
To learn more ahead of Norfolk Southern's Annual Meeting, visit
VoteNorfolkSouthern.com
About Norfolk Southern
Since 1827, Norfolk Southern
Corporation (NYSE: NSC) and its predecessor companies have safely
moved the goods and materials that drive the U.S. economy. Today,
it operates a customer-centric and operations-driven freight
transportation network. Committed to furthering sustainability,
Norfolk Southern helps its customers avoid approximately 15 million
tons of yearly carbon emissions by shipping via rail. Its dedicated
team members deliver more than 7 million carloads annually, from
agriculture to consumer goods, and Norfolk Southern originates more
automotive traffic than any other Class I Railroad. Norfolk
Southern also has the most extensive intermodal network in the
eastern U.S. It serves a majority of the country's population and
manufacturing base, with connections to every major container port
on the Atlantic coast as well as major ports in the Gulf of Mexico and Great Lakes. Learn more by
visiting www.NorfolkSouthern.com.
Important Additional Information and Where to Find
It
The Company has filed a definitive proxy statement (the
"2024 Proxy Statement") on Schedule 14A and a WHITE proxy card with
the Securities and Exchange Commission (the "SEC") in connection
with the solicitation of proxies for its 2024 Annual Meeting of
Shareholders (the "2024 Annual Meeting"). SHAREHOLDERS ARE STRONGLY
ADVISED TO READ THE COMPANY'S 2024 PROXY STATEMENT (INCLUDING ANY
AMENDMENTS OR SUPPLEMENTS THERETO), THE WHITE PROXY CARD AND ANY
OTHER DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Shareholders may
obtain a free copy of the 2024 Proxy Statement, any amendments or
supplements to the 2024 Proxy Statement and other documents that
the Company files with the SEC from the SEC's website at
www.sec.gov or the Company's website at
https://norfolksouthern.investorroom.com as soon as reasonably
practicable after such materials are electronically filed with, or
furnished to, the SEC.
Certain Information Regarding Participants in
Solicitation
The Company, its directors and certain of its
executive officers and employees may be deemed participants in the
solicitation of proxies from shareholders in connection with the
matters to be considered at the 2024 Annual Meeting. Information
regarding the direct and indirect interests, by security holdings
or otherwise, of the persons who may, under the rules of the SEC,
be considered participants in the solicitation of shareholders in
connection with the 2024 Annual Meeting is included in Norfolk
Southern's 2024 Proxy Statement, filed with the SEC on March 20, 2024. To the extent holdings by our
directors and executive officers of Norfolk Southern securities
reported in the 2024 Proxy Statement for the 2024 Annual Meeting
have changed, such changes have been or will be reflected on
Statements of Change of Ownership on Forms 3, 4 or 5 filed with the
SEC. These documents are available free of charge as described
above.
Cautionary Statement on Forward-Looking
Statements
Certain statements in this press release are
"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
our future financial performance, including statements relating to
our ability to satisfy the performance goals set under the 2024
annual incentive plan and to execute on our strategic plan and our
2024 Annual Meeting 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," "plan,"
"anticipate," "intend," "believe," "goals," "estimate,"
"opportunity," "targets," "project," "consider," "predict,"
"potential," "feel," or other comparable terminology. The Company
has based these forward-looking statements on its current
expectations, assumptions, estimates, beliefs, and projections.
While the Company believes these expectations, assumptions,
estimates, and projections are 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. These and other important
factors, including those discussed under "Risk Factors" in our
Annual Report on Form 10-K for the year ended December 31, 2023, as well as the Company's
subsequent filings with the SEC, may cause actual results,
performance, or achievements to differ materially from those
expressed or implied by these 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, the Company disclaims any intention or obligation
to update or revise any forward-looking statements, whether as a
result of new information, future events, or otherwise.
Non-GAAP Financial Measures
Information included
within this press release contains non-GAAP financial measures,
including adjusted railway operating expenses, adjusted income from
railway operations, adjusted operating ratio, and adjusted diluted
earnings per share. Non-GAAP financial measures should be
considered in addition to, not as a substitute for, the financial
measures reported in accordance with U.S. generally accepted
accounting principles (GAAP).
Our preliminary first quarter 2024 non-GAAP financial results
exclude the effects of certain charges related to the Eastern Ohio incident, restructuring efforts,
shareholder matters, and a deferred tax adjustment. The following
table adjusts our preliminary first quarter 2024 GAAP financial
results to exclude the effects of the charges. The income tax
effects of the non-GAAP adjustments were calculated based on the
applicable tax rates to which the non-GAAP adjustments related. We
use these non-GAAP financial measures internally and believe this
information provides useful supplemental information to investors
to facilitate making period-to-period comparisons by excluding
these costs. While we believe that these non-GAAP financial
measures are useful in evaluating our business, this information
should be considered as supplemental in nature and is not meant to
be considered in isolation from, or as a substitute for, the
related financial information prepared in accordance with GAAP. In
addition, these non-GAAP financial measures may not be the same as
similar measures presented by other companies. With respect
to projections and estimates for future adjusted operating ratio,
including full-year 2024 adjusted operating ratio guidance and our
longer term adjusted operating ratio target, we are unable to
predict or estimate with reasonable certainty the ultimate outcome
of certain items required for the GAAP measure without unreasonable
effort. Information about the adjustments that are not currently
available to us could have a potentially unpredictable and
significant impact on future GAAP results.
($ in millions except
per share amounts)
|
First
|
|
|
|
Quarter
2024
|
|
|
|
|
Railway operating
expenses
|
$
|
2,791
|
|
Effect of the Incident
and restructuring
and other charges
|
|
(691)
|
Adjusted railway
operating expenses
|
$
|
2,100
|
|
|
|
|
|
|
|
|
Income from railway
operations
|
$
|
213
|
|
Effect of the Incident
and restructuring
and other charges
|
|
691
|
Adjusted income from
railway operations
|
$
|
904
|
|
|
|
|
Operating
ratio
|
|
92.9 %
|
|
Effect of the Incident
and restructuring
and other charges
|
|
(23.0 %)
|
Adjusted operating
ratio
|
|
69.9 %
|
|
|
|
|
Diluted earnings per
share
|
$
|
0.23
|
|
Effect of the Incident,
restructuring and
other charges, shareholder advisory costs, and deferred tax
adjustment
|
|
2.26
|
Adjusted diluted
earnings per share
|
$
|
2.49
|
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SOURCE Norfolk Southern Corporation