Outlines clear path to close the margin gap
with peers by achieving a sub-60% operating ratio in 3-4
years
Urges shareholders to vote "FOR" ONLY Norfolk
Southern's 13 highly qualified nominees on the WHITE proxy
card today
Identifies safety, service and financial risk
of Ancora's "tear it down to the
studs"1 strategy
ATLANTA, April 18,
2024 /PRNewswire/ -- Norfolk Southern Corporation
(NYSE: NSC) filed an investor presentation Thursday with the U.S.
Securities and Exchange Commission and sent an accompanying letter
to shareholders in connection with its Annual Meeting of
Shareholders on May 9, 2024. The
presentation and letter are available at
www.VoteNorfolkSouthern.com and on the company's investor relations
page.
Highlights of the presentation include:
- Norfolk Southern is on a clear and achievable path to close
the margin gap with peers by achieving a sub-60% operating ratio
(OR) in three to four years2
- This includes a detailed, ground-up plan to capture 400 basis
points of productivity savings and upcycle improvement
- In 2024, the plan targets to deliver 100-150 basis points of OR
improvement year-over-year, with line of sight to 400-450 basis
points of improvement in the second half of 2024, compared to the
prior year period
- Norfolk Southern is actively delivering on a better strategy
with greater long-term upside for shareholders
- The board appointed Alan Shaw CEO in 2022 because the depth and
breadth of his experience best positions us to leverage Precision
Scheduled Railroading (PSR) to deliver top-tier revenue and
earnings growth with industry-competitive margins
- Shaw has developed a balanced strategy focused on service,
productivity, and growth, with safety at its core
- The strategy was working prior to the East Palestine (EP)
incident in February 2023 – in 2022,
the company delivered record revenues, closed the margin gap to
Class I peers with an OR in the low 60%'s, and achieved the second
highest five-year total shareholder returns among Class I
peers
- Shaw and the board addressed the challenges following the EP
incident head on and acted decisively to overhaul safety standards
to protect the franchise. Following EP-related network disruptions
and necessary investments in service and safety in 2023, the
strategy is back on track and driving meaningful improvements
- Norfolk Southern has accelerated the execution of its
strategy, making a series of organizational changes, including the
appointment of seasoned PSR expert, John Orr, as chief operating officer
- Orr is a 40-year industry veteran with a successful track
record of implementing scheduled railroading strategies to drive
sustainable, long-term value creation
- Since Orr joined the company four weeks ago, he has instilled
more diligent plan adherence and began efforts to streamline
operations. Already, these initiatives have improved Merchandise
velocity by 8% and terminal dwell by 8%
- The company expects to deliver further sequential OR
improvement as operational changes scale throughout the
network
- In the next 60 to 90 days, under Orr's leadership, the company
expects to:
- Reduce terminal dwell in two major yards by 30%
- Reduce overtime by 20%
- Reduce recrew rate by 20%
- Increase on-time connections system wide by 10%
- Strong execution from Norfolk Southern's crisis-tested
leadership is delivering a safer, more profitable railroad
- Following the EP incident, the company acted decisively to
overhaul safety standards to protect the franchise and long-term
shareholder value
- The company reduced its mainline accident rate by 38%
year-over-year in 2023, achieving the lowest rate since 1999 and
positioning itself among the best of the North American Class I
railroads
- Norfolk Southern has improved service levels despite EP's
adverse impact – increasing train speed by 22% and decreasing
terminal dwell by 11% since Shaw became CEO
- Norfolk Southern's engaged, highly qualified board is
committed to transformation and accountability
- The board has been thoughtfully constructed and refreshed with
six new directors added in the last five years, including two in
2023
- The company's directors bring areas of expertise highly
relevant to Norfolk Southern's success, and necessary to ensure
effective board oversight, including in rail transportation,
operations, regulatory, safety, sustainability, and
cybersecurity
- The board has refined its executive compensation plans to
ensure accountability, including adding safety as a component to
the annual incentive plan, and adopting a supplemental clawback
policy that exceeds the NYSE requirements
- Most recently, the board added operating ratio as an additional
performance metric for management compensation to align with the
improvements needed to achieve a sub-60% OR in three to four
years2
- Ancora's plan would dangerously put Norfolk Southern's
safety and service at risk, damaging Norfolk Southern's long-term
viability and destroying future value
- Ancora intends to take control of the company and execute
wholesale leadership and board changes to implement an ungrounded
and irresponsible PSR implementation strategy that would, in
Jamie Boychuk's own
words1 "…strip this thing down to the studs."
This strategy would require thousands of job cuts, put the
franchise at risk, and be detrimental to long-term shareholder
value
- It is attempting to replace a crisis-tested CEO with a
candidate who has no railroading experience, and a highly regarded
COO with a candidate who has a demonstrably poor track record on
service quality, safety, and overall performance
- Ancora's inferior director nominees bring little board and
safety experience, and would unseat incumbents who are critical to
the proper oversight of the company and functioning of the
board
- Ancora's slash-and-burn playbook is unsuited to our regulatory,
labor, and competitive environments, and has already prompted
public concern from regulators and customers
Your Vote is Important
Norfolk Southern believes all its 13 nominees are uniquely
qualified to oversee the company's strategy, drive sustainable
value, and hold management accountable. Norfolk Southern
strongly urges shareholders to protect their investment by VOTING
the WHITE proxy card "FOR" ONLY Norfolk Southern's 13
nominees.
Please simply DISCARD any Blue proxy card you may receive
from Ancora. If you inadvertently voted using a Blue proxy card,
you may cancel that vote simply by voting again TODAY using the
company's WHITE proxy card. Only your latest-dated vote will
count!
If you have any
questions or require any assistance with respect to voting your
shares, please contact our proxy solicitor:
INNISFREE M&A INCORPORATED Shareholders may call:
1 (877) 750-9496 (toll-free from the U.S. and Canada)
+1 (412) 232-3651 (from other countries)
|
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
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 Concerning Participants
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 communication 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
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," "estimate," "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
This document includes the presentation and discussion of
adjusted operating ratio. This figure adjusts our GAAP financial
results to exclude the effects of the direct costs resulting from
the East Palestine incident. We use this non-GAAP financial measure
internally and believe this information provides useful
supplemental information to investors to facilitate making period
to period comparisons by excluding the costs arising from the East
Palestine incident, and in 2024, also excluding other charges
relating to restructuring efforts, shareholder matters and a
deferred tax adjustment. While we believe that this non-GAAP
financial measure is 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, this non-GAAP financial measure may not be the
same as similar measures presented by other companies. See below
for a reconciliation of the 2023 non-GAAP operating ratio figures
provided in this document to GAAP operating ratio. With respect to
projections and estimates for future non-GAAP operating ratio,
including full year 2024 adjusted operating ratio guidance and our
longer term adjusted operating ratio target, the Company is 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 the Company could have a potentially
unpredictable and significant impact on future GAAP results.
The following table adjusts our 2023 GAAP financial results to
exclude the effects of the East Palestine incident. The income tax
effects of this non-GAAP adjustment were calculated based on the
applicable tax rates to which the non-GAAP adjustment related:
|
Non-GAAP
Reconciliation for 2023
|
Reported
(GAAP)
|
East Palestine
Incident
|
Adjusted
(non-GAAP)
|
($ in millions,
except per share amounts)
|
Income from railway
operations
|
$2,851
|
$1,116
|
$3,967
|
Income taxes
|
$493
|
$270
|
$763
|
Net income
|
$1,827
|
$846
|
$2,673
|
Diluted earnings per
share
|
$8.02
|
$3.72
|
$11.74
|
Railway operating ratio
(percent)
|
76.5
|
(9.1)
|
67.4
|
1 Source: Fireside chat with Deutsche Bank's
Transportation and Shipping markets analyst Amit Mehrotra on April
15, 2024.
2 The operating ratio improvements represent adjusted
operating ratio. See "Non-GAAP Financial Measures" below for
information regarding the definition and reconciliation to GAAP
operating ratio.
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SOURCE Norfolk Southern Corporation