Significant momentum underway in key
operational metrics including train speed, terminal dwell,
Intermodal on-time service and Merchandise velocity
Strong management and board oversight in place
to meet company objectives
Norfolk Southern urges shareholders to vote
"FOR" ONLY Norfolk Southern's 13 highly qualified nominees on the
WHITE proxy card today
ATLANTA, May 1, 2024
/PRNewswire/ -- Norfolk Southern Corporation (NYSE: NSC) Wednesday
sent a letter to shareholders in connection with its Annual Meeting
of Shareholders on May 9, 2024. In
the letter the company highlighted:
- Norfolk Southern's balanced strategy is delivering superior
long-term upside for shareholders.
- Norfolk Southern has dramatically enhanced network
performance and service, improving train speed by
22%1, terminal dwell by 11%2, Intermodal
on-time service performance by 30%3, and Merchandise
velocity by 24%4 since Alan
Shaw became CEO.
- Norfolk Southern is an industry leader in safety and
achieved a 38% reduction in its mainline accident rate in
2023, and the fewest mainline accidents since 1999.
- Norfolk Southern is on a clear and achievable path to close
the margin gap with peers by achieving a sub-60% operating
ratio in 3-4 years5, while remaining well-positioned to
deliver top-tier earnings and EPS growth over the long-term.
- The company is actively executing on a detailed plan to
unlock 400 basis points of margin improvement from
productivity savings and upcycle improvement over the next three
years.
- The plan is expected to deliver 100-150 basis points of
operating ratio 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 has the right management team to deliver a
safer, more profitable railroad.
- CEO Alan Shaw is a decisive,
crisis-tested leader who delivered record annual railway
operating revenue in his first year as CEO, all while
positioning the company to become the gold standard of safety and
deliver reliable service.
- COO John Orr is a renowned
expert best equipped to execute our PSR operating plan, and is
already driving improvements to rapidly accelerate our
productivity while maintaining network stability.
- The Norfolk Southern board has superior skillsets to
provide independent oversight.
- The board has undergone a thoughtful refreshment process
and is comprised of highly engaged industry leaders with the
necessary skills to oversee the company's strategy, drive
sustainable value, and hold management accountable.
- The board has been an agent of change to advance the
company's success, and has added the right experts to Norfolk
Southern's leadership team, enhanced corporate governance practices
to better align with shareholders' interests, and guided
transformational initiatives that continue to improve safety and
operational performance.
- Ancora's candidates and reckless plan would unnecessarily
put Norfolk Southern at risk and destroy long-term value.
- Ancora is attempting to replace Norfolk Southern's qualified
director candidates with inferior nominees with little to no
board and safety experience.
- Ancora's CEO candidate has no CEO or railroad experience
and its COO candidate has a reputation for extreme cost-cutting
measures resulting in the deterioration of service quality,
safety, and performance.
- Achieving Ancora's near-term targets would require ~2,900
employee furloughs, putting service and safety at substantial
risk, sparking backlash from regulators, and jeopardizing long-term
shareholder value.
- Multiple independent third parties have recognized that
Ancora's near-term targets are highly unrealistic and its
management candidates would reverse Norfolk Southern's progress and
undermine customer relationships.
The letter to shareholders and other important information
related to Norfolk Southern's Annual Meeting can be found at
VoteNorfolkSouthern.com
The full text of the letter to shareholders follows:
Dear Fellow Shareholder,
We are entering the final days before Norfolk Southern's Annual
Meeting on May 9, 2024, and your vote
will decide the future of our railroad. Under the board of
directors' guidance and president and CEO Alan Shaw's leadership, Norfolk Southern is
executing a balanced strategy that we are confident will deliver
superior shareholder value. A vote for Norfolk Southern's 13
nominees is a vote to protect the value of your investment.
We are creating a safer, more profitable railroad with long-term
upside for shareholders. In stark contrast, Ancora Alternatives LLC
("Ancora") would implement a reckless strategy that,
in the words of Ancora's COO nominee, would "strip this
thing down to the
studs."6 Ancora's
plan is laden with false assumptions, would require
thousands of job cuts, and would put safety and service at
risk.
Protect your investment by VOTING the WHITE proxy card TODAY
FOR ONLY Norfolk Southern's 13 nominees. Time is short. Submit
your proxy electronically by following the simple instructions on
the enclosed WHITE proxy card.
NORFOLK SOUTHERN IS DRIVING A BETTER STRATEGY TO DELIVER
LONG-TERM SHAREHOLDER VALUE
Our balanced strategy is grounded in
a Precision Scheduled Railroading (PSR) operating plan
that ensures our network is:
- Flexible across market environments
- Disciplined in operational execution
- Supported by the right resources
Our modern approach supports superior shareholder value and
long-term volume growth and prevents avoidable service problems
that Ancora's outdated PSR approach and extreme cost-cutting would
create.
Importantly, our strategy is working. Since Alan Shaw's appointment as CEO, and in the face
of the impact of the East Palestine incident, we have
dramatically improved network performance, safety, and
service:
- 22% Train speed improvement7
- 11% Terminal dwell
improvement8
- 3,040 bps Improvement in Intermodal on-time service
performance from 57% to 88%9
- 24% Increase in Merchandise
velocity10
- 38% Reduction in mainline accident rate in 2023
PSR EXPERT JOHN ORR HAS ACCELERATED OUR OPERATIONAL
PERFORMANCE
We have realized meaningful results in the weeks
since John was appointed COO and are on track to close the margin
gap with peers by achieving a sub-60% operating ratio in three
to four years.11 We will do this while continuing to
enhance service and becoming the gold standard of safety in the
industry.
Annualized Productivity
- ~$250M Next 6 Months
- ~$400M 12-24 Months
Out
- ~$550M 24-36 Months
Out
WE HAVE THE RIGHT MANAGEMENT TEAM TO DELIVER ON OUR
PROMISE
CEO Alan Shaw – The Right
Leader For Norfolk Southern At A Critical Time
- Crisis-tested leader who has taken decisive actions to protect
our franchise and execute Norfolk Southern's strategic
transformation.
- Delivered a 62% operating ratio in 2022 with record annual
railway operating revenue in first year as CEO.
- Positioned the company to become the gold standard of safety
and deliver reliable service while closing the margin gap with
peers.
Newly Appointed COO John Orr –
The Renowned Expert Best Equipped To Execute Our PSR Operating
Plan
- Well-recognized track record of operational excellence and
successfully improving network performance at multiple Class I
railroads.
- Proven ability to build strong relationships with customers,
regulators, unions, and industry partners – a crucial asset to
enhance our ability to deliver long-term shareholder value.
- Currently leading a network assessment and implementing a clear
plan to rapidly accelerate our productivity while maintaining
network stability – a plan that is already demonstrating
success.
OUR BOARD NOMINEES HAVE SUPERIOR SKILLSETS TO PROVIDE
INDEPENDENT OVERSIGHT
The Norfolk Southern board has been an agent of change
to advance the company's success and enhance shareholder
value. It has:
- Made leadership changes to equip Norfolk Southern with
the right experts central to the development and execution of our
strategy;
- Strengthened the board through a comprehensive refreshment
process to ensure we have highly engaged industry leaders with
the necessary skills to oversee our strategy, drive sustainable
value, and hold management accountable;
- Implemented significant corporate governance
enhancements, including better aligning executive compensation
practices with shareholders' interests; and
- Overseen transformational initiatives that continue to
improve safety and operational performance.
As part of its value-destructive campaign, Ancora is
attempting to replace our qualified director candidates with
inferior nominees with little to no board and safety
experience.
Ancora's Approach Would Destroy Long-Term Shareholder
Value
Ancora's misguided changes would undermine the important
progress we have made and unnecessarily introduce significant risks
to our business. They are demanding we replace our management
with a CEO candidate with no CEO or railroad experience, and a COO
with a reputation for extreme cost-cutting measures resulting in
the deterioration of service quality, safety, and performance.
Ancora wants to impose a reckless plan on Norfolk Southern that
would:
- Put the safety of our network and our service at
risk
- Decelerate the momentum of our strategic
transformation
- Spark immediate backlash from regulators who have
already expressed deep concerns
- Upset customer relationships resulting in lower
volumes
- Force substantial furloughs
- Fail to deliver upside to management's long-term
targets
We can achieve an operating ratio below
60%12 with our plan, our
management, and our board – without thousands of furloughs or
reversing safety, service and growth.
ANCORA'S MISGUIDED PLAN PRESENTS HIGHLY UNREALISTIC
NEAR-TERM FINANCIAL TARGETS
Despite Ancora's assertions, targeting a 62-63%
operating ratio (~$800 million in
cost savings) in 12 months would require ~2,900 employee
furloughs. Ancora's "estimated savings" are simply not
supported by the mathematical reality. This suggests that
Ancora either does not understand our business or is willingly
distorting figures to mislead shareholders.
Ancora's Flawed
12-Month Assumptions
|
Mathematical
Reality
|
Cost
Actions
|
Est.
Savings
|
Real
Savings
|
Why Ancora's
Numbers are WRONG
|
450 locomotives
removed
|
~$165m
|
~$125m
|
- Ancora grossly
overestimates NSC's active locomotives to inflate savings - our
active fleet has consistently been at least 400 units
lower
- Removing 450, based
on our cost profile, does not equate to Ancora's distorted savings
assumptions
|
35,000 freight cars
taken offline
|
~$250m
|
~$135m
|
- Estimate is based
on an inaccurate disparity and misleading comparison between cars
online at CSX and NSC
- CSX's data is
publicly available, which calls into question why Ancora is using
wrong numbers
- Over half of NSC's
cars are customer-owned, therefore cost savings per car would be
lower than Ancora's highly unrealistic targets
|
Reduced fuel per GTM to
0.95 gallons
|
~$200m
|
~$90m
|
- Ancora's 15%
improvement in 1-year is highly unrealistic; improvement beyond ~5%
per year has only been achieved once (CP improved by ~8% in 2013);
otherwise, no railroad has exceeded 5% per year improvement in the
past decade
- Ancora is
misleading shareholders by overpromising improvement
levels
|
Reduced switching to
gain efficiency from network redesign
|
~$185m
|
~$50m
|
- Blatantly
misrepresents NSC's required handlings and switching, resulting in
inflated savings
- Based on public
Form R-1 disclosures filed with STB, NSC's switching hours per
merchandise carload have not exceeded ~8% higher than CSX over the
past 3 years vs the misleading 100% that Ancora claims
|
Total
|
~$800m
|
~$400m
|
|
Reality of Ancora
Required Employee Furloughs
|
~$400m
|
- While Ancora claims they would not
furlough, achieving the remaining ~$400m in cost savings in 12
months would require ~2,900 furloughs. For reference, we have
~8,000 train and engine employees.
|
Industry Experts Recognize Ancora's Faulty Data and
Assumptions and How Their Candidates Would Reverse Our Progress and
Undermine Customer
Relationships:13
"Ancora's presentation makes
apples-to-oranges comparisons of various NS and CSX
operational data."
– BILL STEPHENS,
Trains
"This seems to be indicative of a pattern
perhaps designed to sway sophisticated investors who are not
sophisticated in railroad operations."
– ANTHONY HATCH,
Independent Analyst
"If Ancora is comparing CSX dwell with
run-through trains to NS dwell excluding run-through, that would
really be a rookie mistake."
– RICK PATERSON, Loop
Capital Markets
"Boychuk's tenure at CSX wasn't all smooth
sailing. Customers were so frustrated during the rollout
of its PSR strategy that the Surface Transportation Board called a
special listening session to allow them to air grievances.
Memories of the tumult still linger: 80% of shippers recently
surveyed by analysts at Stephens Inc. said they would shift
volume away from Norfolk if Ancora implements its
strategy."
– BROOKE SUTHERLAND AND KIEL PORTER, Bloomberg
"Barber's involvement at CHRW has so far not
solved that company's ills. Nor has a CEO change made a
difference… And if Ancora is bothered by NSC's industry lagging
margins, then it surely can't like what it is seeing from CHRW
right now."
– DON BILSON, Gordon
Haskett Research Advisors
ANCORA CONSISTENTLY MISLEADS NORFOLK SOUTHERN
SHAREHOLDERS:
Ancora has repeatedly contradicted its own narrative while
ignoring and misrepresenting key facts and the current operating
environment. Ancora has misled shareholders by:
- Excluding key data and peers from its benchmarking analyses
to further its narrative
- Ignoring the progress Norfolk Southern has achieved to date
in implementing PSR
- Failing to acknowledge the obvious and significant financial
impact of East Palestine
- Disregarding the clear and present risks of their plan from
regulatory and customer perspectives
Vote The White Proxy Card Today
Norfolk Southern's board and management team have a clear and
achievable strategy to close the margin gap with peers and deliver
sustainable shareholder value. Ancora's plan is not actionable
despite their rosy projections and repeated attempts to mislead
shareholders to win a proxy contest.
We strongly urge you to vote for the entire slate of 13
highly qualified and experienced Norfolk Southern director
nominees. Please use the enclosed WHITE proxy card
to vote FOR ONLY Norfolk Southern's 13 nominees
today.
We look forward to you joining us for our 2024 Annual Meeting in
just a few days. Even if you plan to join us virtually, please be
sure to vote ahead to ensure that your vote is received and
counted. Your vote is extremely important, no matter how many
shares you own.
Thank you for your continued support and investment in Norfolk
Southern.
Sincerely,
The Norfolk Southern Board of Directors
Your Vote is Important
Norfolk Southern believes all of its 13 nominees are uniquely
qualified to oversee the company's strategy, drive long-term
shareholder value, and hold management accountable. Norfolk
Southern strongly urges shareholders to protect their investment by
VOTING the WHITE proxy card TODAY "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
|
Train speed through
March 31, 2024, representing the latest monthly data publicly
available on our website.
|
|
|
2
|
Terminal dwell through
March 31, 2024, representing the latest monthly data publicly
available on our website.
|
|
|
3
|
Reflects rolling
12-week average through April 14, 2024. Latest internal data
available.
|
|
|
4
|
Reflects rolling
12-week average through April 14, 2024. Latest internal data
available.
|
|
|
5
|
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.
|
|
|
6
|
Source: Fireside chat
with Deutsche Bank's Transportation and Shipping markets analyst
Amit Mehrotra on April 15, 2024.
|
|
|
7
|
Train speed through
March 31, 2024, representing the latest monthly data publicly
available on our website.
|
|
|
8
|
Terminal dwell through
March 31, 2024, representing the latest monthly data publicly
available on our website.
|
|
|
9
|
Reflects rolling
12-week average through April 14, 2024. Latest internal data
available.
|
|
|
10
|
Reflects rolling
12-week average through April 14, 2024. Latest internal data
available.
|
|
|
11
|
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.
|
|
|
12
|
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.
|
|
|
13
|
Taken from publicly
available sources. Permission to use quotes was neither sought nor
obtained. Emphasis to language added.
|
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SOURCE Norfolk Southern Corporation