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Annual Meeting of Shareholders 2019

May 09, 2019

NS ANNUAL MEETING
ATLANTA, GEORGIA

Remarks by

James A. Squires
Chairman, President and CEO
Norfolk Southern Corporation

“Time … and the world … do not stand still. Change is the law of life.” That powerful statement is as true today as it was in 1963, when President John F. Kennedy delivered it in Frankfurt, Germany.  

While the president had in mind international political alliances and hopes for a new global social order, his insight applies just as readily to the corporate world and today’s ever-evolving business realities.

As a company that spans more than 180 years – from the age of steam to the digital revolution – Norfolk Southern is no stranger to change.

You just heard members of our executive team talk about Norfolk Southern’s new strategic plan and how we are transforming the railroad. Many of those interviews were recorded at the groundbreaking of our new corporate headquarters here in Atlanta in March. You can see and hear the excitement of that day as we begin to Reimagine Possible in every aspect of our business. I described our goals as “audacious” – a term I don’t use casually – but which is entirely appropriate here.

Today, I am here to tell you: Like the world of change that President Kennedy spoke of, we are moving full speed ahead with a new plan for the future – yes, an audacious plan – that provides a clear path to success – success that benefits our customers, our employees, and our shareholders.

In many ways, 2018 was a year of transition for our company. Only three years earlier, we had released our first strategic plan under my watch as chairman and CEO. 2018 became a year to take stock of our achievements, to think hard about our strengths and weaknesses, and then to develop a new plan to advance us toward next-generation railroading.

Thanks to the hard work of our management team, our dedicated employees, and our board of directors, I am proud to report that we are meeting our commitments to shareholders today, and we are preparing to meet them tomorrow.

I’ll talk more about where we’re going from here in just a minute, but let’s pause first to consider what we accomplished in 2018. Absent the 2017 tax adjustments to our 2017 results, full-year 2018 net income increased by $744 million, or 39 percent, and diluted earnings per share increased by $2.90, or 44 percent. These strong financial results allowed us to reinvest close to $2 billion back into the railroad to ensure safe and efficient operations and support growth. Our board raised the quarterly dividend twice for an overall increase of 31 percent and total dividend payouts of $844 million dollars. Adding in share repurchases, we returned over $3.5 billion to shareholders for the year.

As a result of these achievements, Norfolk Southern today is operating from a position of financial strength – and we have a plan to grow even stronger.

If 2018 was a year of transition, 2019 is a year of transformation, a year in which we . . . Reimagine Possible.  

In February we rolled out our new strategic plan, built on five principles that are at the heart of our reimagined company:

  1. Serve our customers
  2. Manage our assets
  3. Control our costs
  4. Work safely, and
  5. Develop our people.

Using these principles, we are transforming our operations, and, indeed, our entire organization. We’re getting the right people in the right positions and in the right places. We’re looking at old challenges in new ways.  And we’re turning challenges into opportunities.

Our new plan, based on precision scheduled railroading, is taking us to a higher level operationally. Through a process we call Clean Sheeting, we are moving rail cars more quickly through our terminals and increasing the efficiency of operations. Through our new operating plan, TOP21, we are rethinking how we run trains, to improve network velocity and fluidity. Through our new locomotive strategy, we are creating a more reliable and cost-efficient locomotive fleet. Through our new Cars-On-Line Team, we are identifying ways to move more freight with fewer rail cars.  All of these changes will yield a “capacity dividend” and a platform for future growth.

Communication and collaboration with our customers is another hallmark of our brand of precision scheduled railroading. We believe that our relationships with our customers will be a powerful driver of long-term shareholder value. We want to grow our business and our customers’ business, all while operating more efficiently and safely.

Our focus is on value creation for the long-haul.

Norfolk Southern is thinking differently, we are responding differently, and we are leading differently. With alignment and collaboration as key drivers, we are achieving many “firsts” with our plan.

For the first time, our new Network Operations Center in Atlanta consolidates in one location our train dispatchers and other groups involved in the safe and efficient movement of trains.

For the first time, our new Network Planning and Optimization Department has Operations and Marketing managers working side-by-side to achieve the same goals – to operate efficiently and serve the customer.

For the first time, our corporate team will be together under one roof, here in Atlanta, a world-class city and global transportation hub – a place where our company and our employees can thrive.

As we Reimagine Possible, Norfolk Southern’s record-setting results in the first quarter of 2019 offer a promising preview of the opportunities that lie ahead.

For the quarter, income from operations increased 16 percent, net income increased 23 percent, and earnings per share rose 30 percent – all first-quarter records. The company’s year-over-year operating ratio improved more than three percentage points, to an all-time first-quarter best 66 percent.

Underpinning these financial accomplishments were dramatic improvements in network performance. Year-over-year for the quarter, average train speeds increased 14 percent, while terminal dwell decreased by 23 percent. The network showed much-needed resiliency. In the depths of the polar vortex, when extreme temperatures slowed operations in the north to a crawl and some other railroads briefly stopped running altogether, we continued to roll – and we were able to resume normal operations in practically no time.

Our quest to Reimagine Possible is just beginning. Norfolk Southern is blessed with a superior franchise. We enjoy the most extensive intermodal network in the East, a diverse merchandise portfolio, and customers who still need coal to generate electricity or make steel. Our workforce is second to none, with employees on the front line of operations who dedicate themselves every day to safely and efficiently serve our customers.

In a rapidly changing marketplace, we have the right plan for our customers, employees, and shareholders. Time and the world do not stand still, and we won’t either. As we Reimagine Possible, we are building a railroad for tomorrow and for years to come.

Thank you for your confidence in us and your investment in Norfolk Southern.

Forward-looking statements
These annual meeting remarks contain forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995, as amended. These statements relate to future events or future performance of Norfolk Southern Corporation’s (NYSE: NSC) (“Norfolk Southern,” “NS” or the “Company”), including but not limited to statements regarding future financial performance and anticipated results, benefits, and targets related to the strategic plan. In some cases, these forward-looking statements may be identified by the use of words like “will,” “believe,” “expect,” “targets,” “anticipate,” “estimate,” “plan,” “consider,” “project,” and similar references to the future. The Company has based these forward-looking statements on management’s current expectations, assumptions, estimates, beliefs, and projections. While the Company believes these expectations, assumptions, estimates, and projections are reasonable, 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: general North American and global economic conditions; changes in energy prices and fuel markets; uncertainty surrounding timing and volumes of commodities being shipped; changes in laws and regulations; uncertainties of claims and lawsuits; labor disputes; transportation of dangerous goods; effects of changes in capital market conditions; and severe weather. 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, 2018, filed with the Securities and Exchange Commission (the “SEC”), as well as the Company’s subsequent filings with 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 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. We undertake no obligation to update or revise forward-looking statements, whether as a result of new information, the occurrence of certain events or otherwise, unless otherwise required by applicable securities law.