Posts Tagged ‘NS CEO James Squires’

Some Shippers Question Value of Railroad Metrics

October 30, 2017

When it comes to the service metrics that CSX has been providing the U.S. Surface Transportation Board, the value of that data depends on who is reading it.

During a U.S. Surface Transportation Board hearing earlier this month, CSX said that it is now operating as well as or better than it did in 2016 and it has the numbers to prove.

The carrier cited statistics on declining terminal dwell time and an increase in average train speed.

CSX is not the only railroad that tracks those things. Many railroads use terminal dwell time and average train speed as a way of measuring how well they are doing.

Such numbers are given prominence in quarterly and annual reports because they are said to indicate how efficient and fluid that a railroad is.

That is a railroad perspective. Some shippers, though, say that what matters to CSX doesn’t matter as much to them.

Bruce Ridley, a vice president with Packaging Corporation of America, wrote to the STB last week to say that on-time arrivals, re-crew rates, terminal dwell times, and car-order fulfillment figures are “misleading metrics in CSX’s weekly reports to the Surface Transportation Board.”

PCA, one of the nation’s largest producers of container board and corrugated packaging, argues that on-time figures measure yard-to-yard performance of road trains and do not include local service.

“Even at 64 percent, which is dismal for any supply chain, it can be expected to be much worse if the first and last miles are considered,” Ridley wrote to the STB.

As for re-crew statistics, Ridley said they can be misleading because they do not appear to count a train that died and did not get a new crew right away because no crew was available.

An analysis published last week on the Trains magazine website said that Ridley’s point is similar to one that other shippers have made about service metrics publicized by CSX and the Association of American Railroads. Shippers say those metrics do not necessarily reflect the service that rail customers actually experience.

Some railroad executives recognize this. NS CEO James Squires noted last May that there is a difference between network performance and customer service.

Squires said that network performance measures — like average train speeds and terminal dwell time — may be important to railroad management, but customers have their own set of metrics that they value.

“What we’re trying to do with our customers is measure performance in the entire supply chain,” Squires said. “That’s different than merely measuring terminal-to-terminal train performance.”

Trains reported that Canadian National has taken this approach since 2010, after it noticed that its operating metrics, which were among the best in the railroad industry, didn’t necessarily match the service that shippers were receiving.

Some have said that trip-plan compliance should be the key measuring stick when it comes to service.

“Customers really only care about the first and last mile, pick up and drop-off on time; [it] doesn’t matter so much [what happens] in between,” said Linda Bauer Darr, who heads the American Short Line and Regional Railroad Association.

Bauer Darr said short lines and regional railroads need to work with their Class I railroad connections to do a better job of using data and presenting meaningful, accurate information to shippers in real time.

AAR head Ed Hamberger said during the STB’s CSX hearing that performance metrics need to be retooled, but he has yet to say how.

In his letter to the STB, Ridley raised doubts about whether terminal dwell figures for Avon Yard near Indianapolis actually have improved. He said some of his company’s cars have sat in Avon for seven to 14 days.

What PCA wants the STB to do is help resolve ongoing car-supply issues by measuring how many cars were ordered, how many were delivered, and how many were loaded.

Ridley said this would be more accurate and allow CSX to identify shippers who are ordering more cars than they need.

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NS 3rd Quarter Income Up 10%

October 26, 2017

Norfolk Southern on Wednesday reported that third quarter income was up 10 percent over the third quarter of 2016 to $506 million.

Income from railroad operations rose 11 percent from the third quarter of 2016 to $911 million while the operating ratio declined to a quarterly record 65.9 percent. Earnings per share totaled $1.75, up 13 percent from the previous year.

The operating ratio in the third quarter of 2016 was 67.5 percent.

Railroad operating revenues of $2.7 billion gained 6 percent as overall volumes were 4 percent higher due to growth in the major commodity categories of coal and intermodal.

Operating expenses increased $55 million, or 3 percent, to $1.8 billion as targeted expense reductions and gains from the disposition of operating property helped offset volume and inflation-related expenses and higher incentive compensation.

“Norfolk Southern continues to deliver strong financial results through execution of our strategic plan. We are unwavering in our commitment to improve productivity as demonstrated by seven consecutive quarters of year-over-year improvement in our operating ratio,” said NS CEO James A. Squires, in a statement. “Our balanced approach focuses on increasing efficiency and delivering a strong customer service product, giving us the ability to achieve our goals and deliver sustainable shareholder value.”

For the first nine months of 2017, net income was $1.4 billion, up 15 percent when compared to the same period in 2016. Record diluted earnings per share was 17 percent higher at $4.93. Operations income grew 11 percent while the nine-month operating ratio fell to a record 67.4 percent.

Although a number of factors contributed to the railroad’s performance, Wall Street analyst Jason Seidl told Railway Age magazine that NS gained market share from CSX, which experienced service issues last summer.

Although CSX has shown signs of finding its footing in the past month, Seidl believes that “it will be some time before [CSX] service returns to optimal levels.”

In the meantime, NS “is likely to continue to have a more competitive service product in the East for the foreseeable future. Traffic results lend support to the notion that NS has been taking market share.”

In doing this, NS has been selective in the new business it took on and demanded longer-term commitments from some customers.

“A key point here is that we believe the percentage of the rail network in the East that is peer- and truck-competitive is materially greater than that north of the U.S. border where [CSX CEO] Mr. [E. Hunter] Harrison achieved two of his big successes,” Seidl said. “That said, conversion from the highway remains its biggest market share gain opportunity.”

Seidl also noted that NS has been aggressive in cutting costs, by implementing such plans as consolidating division headquarters, and streamlining its network by reducing tracks and yards.

NS Net Profit Up 23% in 2nd Quarter

July 27, 2017

Norfolk Southern said this week that its second quarter 2017 net profit was up 23 percent and revenue had risen by 7 percent to $2.6 billion.

The railroad said traffic and revenue growth combined with productivity gains enabled it to achieve a record operating ratio of 66.3 percent. That compared with 68.6 percent during the same period in 2016.

Citing gains in coal and intermodal traffic, NS said it posted a 6 percent increase in volume. Income from operations was up 15 percent, to $888 million.

Intermodal traffic increased by 6 percent overall during the quarter with domestic business up 6 percent due to highway conversions and new service offerings.

International intermodal business rose 5 percent due partly to a 13 percent increase in volume from East Coast ports.

The company said it continues to see international volume shift from West Coast ports to the East Coast as a result of the expanded Panama Canal.

Coal traffic was up 27 percent with utility and export metallurgical coal both posting increases in traffic. Some of the traffic came from a 23 percent rise due to lower utility stockpiles and higher natural gas prices.

Export coal volume skyrocketed by 78 percent due to constrained Australian supply and increased steel making in China.

Merchandise traffic was flat with metals and construction the only categories seeing increases. There were declines in chemicals, automotive, agriculture, paper, clay and forest traffic.

NS reported earnings per share of $1.71, which beat the forecast of Wall Street analysts of $1.65 per share, according to Thomson Reuters I/B/E/S.

“Norfolk Southern’s strong financial results and all-time record operating ratio reflect the power of our team, successful execution of our dynamic plan, and focus on operating even more efficiently while providing high quality service to customers,” CEO Jim Squires during an earnings call.

NS Chief Marketing Officer Alan Shaw said the railroad has seen some traffic come its way from CSX, but it is a small amount. Trucks remain the chief competitor of NS, Shaw said.

Some key operating metrics suffered during the quarter due in part to flooding near the Cincinnati terminal and on its line linking Louisville, Kentucky.  There was also flooding near Kansas City and operating issues related to fires in northern Florida.

Average train speed decreased, while terminal dwell grew. “We’ve turned the corner on that,” Squires said. Train speed has increased 10 percent and terminal dwell bounced back to previous levels.

NS expects to achieve $100 million in productivity gains in 2017. It has retired 100 locomotives and cut the work force by 10 percent compared with 2015.

Chief Operating Officer Mike Wheeler said NS set quarterly marks for locomotive productivity, fuel efficiency, and train length,

In looking toward the rest of 2017, NS management expects continued growth in intermodal and coal traffic while merchandise traffic is likely to decline slightly due in part to slowing auto production and assembly plant downtime.
NS plans to increase its share buyback program by 25 percent to $1 billion for the year.

NS Watching CSX Changes, But Also Working With its Customers to Improve its Service Metrics

May 19, 2017

When it was his turn to speak at the Bank of America Merrill Lynch 2017 Transportation Conference, Norfolk Southern CEO James Squires did not shy from acknowledging the elephant in the room.

Squires said NS is closely watching how chief competitor CSX is reshaping its operating plans. At the same time, NS has its own operating changes to make and it feels good about its performance thus far.

“We’re extremely focused on industry developments right now and watching what’s going on carefully, all the while focused on executing our plan,” Squires said.

He spoke to the conference shortly after CSX Chief Financial Officer Frank Lonegro raved about the improvements CSX has made in its operating metrics nearly two months since its new CEO, E. Hunter Harrison, came aboard and began implementing his precision scheduled railroading philosophy.

Squires said there is a difference between network performance and customer service.

The former measures such things as train speeds and terminal dwell time, which Squires said may be important to railroad managers.

“But our real focus these days is on customer-facing metrics,” he said, adding that NS is working with its customers to define joint service metrics.

He said this would include such things as getting containers off intermodal trains when promised and providing shipment consistency for merchandise shippers.

“What we’re trying to do with our customers is measure performance in the entire supply chain,” Squires said. “That’s different than merely measuring terminal-to-terminal train performance.”

Squires said NS might borrow some operating ideas from CSX if they makes sense.

“Operations best practices are operations best practices and we all operate out in the open,” he said. “I’ve been very clear with our operations team that if they see the other guy doing something smart, then don’t let your pride get in the way of the right thing for the customer. And by smart, I mean better use of the assets and good for the customer and the business long term. If those two things are present, then we’re all over it.”

One area where NS might follow CSX’s lead is with hump yards. NS has 10 hump yards and has closed three humps during the past two years.

“And others are under review. That may make sense, it may not,” Squires said.

NS is seeking to reduce its operating ratio below 65 percent by 2020, but the railroad’s board of directors has sought an acceleration of that plan by offering management incentives to hit operating ratio and earnings per share targets by 2018.

“We’re pushing as hard as we can,” Squires said.

NS CEO Squires Cites Improving Performance

May 12, 2017

Norfolk Southern is touting its improving performance through a “successful execution” of the railroad’s five-year strategic plan.

NS President and CEO James Squires said at the company’s annual meeting this week that 2016 was the first full year of the company’s strategic plan to operate a faster, lower-cost and more profitable railroad.

He said NS achieved an “all-time best” operating ratio of 68.9 percent, productivity savings of $250 million, near record levels of network service performance and record locomotive fuel efficiency.

“Through successful execution of our plan, we achieved our key first-year financial and operational targets and we are well on pace to achieve our 2020 performance goals,” Squires said in a statement.

During the first quarter of 2017, Squires said, NS set records in operating ratio, operations income and earnings per share (EPS).

Among the company’s 2020 goals are annual expense savings of more than $650 million, double-digit percentage compound annual growth rate in earnings per share and an operating ratio below 65 percent.

“We are driving growth by providing superior service that optimizes pricing and increases volume and top-line revenue,” Squires said. “We are relentlessly focused on meeting the unique needs of our customers – and we are measuring service excellence as they define it.”

Squires said that in the longer term service will be NS’ competitive differentiator and will propel shareholder value.

NS 1st Quarter Net Income Up 12%

April 27, 2017

Norfolk Southern said on Wednesday that its first quarter 2017 net income rose by 12 percent to $433 million compared with the same period in 2016.

The railroad said it set records for operating ratio, income from operations and earnings per share.

The increase in net income was attributed to a 7 percent rise in income from railway operations, as well as a lower effective income tax rate.
Diluted earnings per share climbed 15 percent to $1.48 compared with the EPS for the first quarter of 2016.

Railway operating revenue rose 6 percent to $2.6 billion compared with 2016 as overall volume rose 5 percent due to growth in coal, intermodal and merchandise. Income from railway operations was a record $773 million, up 7 percent year over last year.

The operating ratio of 70.0 percent was a first quarter record, compared with 70.1 percent in 2016.

Operating expenses increased 6 percent to $1.8 billion compared with 2016. NS said that targeted expense cuts were offset by inflation, particularly related to fuel expenses, which were higher by $64 million.

Chief Marketing Officer Alan Shaw said overall traffic volume increased 5 percent. Merchandise traffic grew 1 percent, intermodal rose 4 percent, and coal was up by 21 percent.

A 71 percent spike in export coal was an aberration, Shaw said, due to the effect of cyclone damage in coal-producing regions of Australia. That tightened the global supply and created demand for U.S. coal.

Shaw said NS expects demand to remain strong in the second quarter before returning to more normal levels in the second half of the year.

Utility coal shipments grew 14 percent in the quarter thanks in part to higher natural gas prices.

“Norfolk Southern’s record results for the first quarter demonstrate the efficacy of our strategic plan, under which we are enhancing our service quality and network performance while driving significant efficiency improvements,” said Chairman, President and Chief Executive Officer James Squires in a statement. “Our focus on providing a superior service product has positioned us for growth and, coupled with our cost discipline, has contributed to a solid start to the year. Our strategy provides a strong foundation for growth at low incremental costs, a powerful formula for enhanced shareholder value.”

During a conference call with in analysts, Squires said NS is watching closely what is happening in the railroad industry, particularly at competitor CSX.

Squires said NS still plans to cut its operating ratio below 65 percent and continue to boost productivity while reducing costs by $650 million by 2020.

In 2017, Squires said NS expects to save $100 million in expenses.

When asked if NS expects to gain market share if CSX suffers service disruptions as it streamlines operations, Squires said, “We’re always looking for good revenue growth opportunities.”

NS Chief Operating Officer Mike Wheeler said that although the railroad has ceased yard humping operations at three yards in the past couple years its 10 hump yards are a vital part of the network and are key to providing good service to merchandise customers

Wheeler said NS will rationalize terminals if it can do so without affecting service.

He said NS has made improvements in key service metrics, including train length and locomotive productivity.

Train lengths grew for the sixth straight quarter largely due to an “aggressively accelerating use of distributed power.”

NS has mothballed 50 locomotives from its switching and local service operations and is eyeing the retirement of another 100 engines in the second quarter. Since early 2016, NS has sidelined 300 locomotives.

Wheeler said a smaller locomotive fleet reduces maintenance costs and improves fuel efficiency, noting that the railroad realized a 6 percent improvement in fuel efficiency in the first quarter of 2017.

NS VP Stewart to Retire Aug. 1

April 27, 2017

Norfolk Southern Executive Vice President And Chief Financial Officer Marta R. Stewart will retire on Aug. 1.

Stewart

Stewart joined NS in 1983 as an accountant and has been instrumental in developing the company’s accounting systems and controls.

She assumed her current position in 2013 and previously held the posts of vice president accounting and controller, and vice president finance and treasurer.

“Marta has made significant contributions to NS over the course of her career, most recently as one of the architects of our strategic plan,” said NS CEO James A. Squires in a statement. “Her intimate knowledge of the railroad business, engagement with stakeholders inside and outside the company, and relentless focus on driving shareholder value has positioned NS for continued success. On behalf of the board and management team, I thank Marta for her service and wish her the best in retirement.”

Stewart said she was proud of the company’s accomplishments during her tenure and the progress it made in implementing its strategic plan.

“I will miss working with a great leadership team and talented employees, and am confident NS is on track to achieve its objectives as it becomes an even stronger, more profitable railroad,” she said in a statement.

NS Cites 2016 Progress in Meeting Strategic Goals

March 23, 2017

Norfolk Southern released it 2016 annual report this week and claims to be well on its way to achieving goals that it hopes to reach by 2020.

NS CEO James Squires said in a news release that the railroad is in the midst of implementing a five-year strategic plan to streamline operations and drive profitability and growth.

Squires told NS stockholders that the railroad in 2016  met or exceeded its targets to lower operating costs, increase profitability and improve customer service.

In a news release, NS said that during 2016 it:

• Achieved an all-time best operating ratio of 68.9 percent.
• Reduced expenses in all areas of operations to generate $250 million worth of savings, surpassing a targeted $130 million.
• Increased income from railway operations and net income by 7 percent each, driven by an 11 percent decrease in operating costs.
• Disposed of 1,000 miles of secondary rail lines.

Squires said NS also made progress in its efforts to improve locomotive fuel-efficiency, reliability and emissions reduction continued as a cornerstone of the company’s sustainability and business strategy, he said.

NS is seeking to be “more focused than ever on services that will help convert freight from highway to rail,” Squires said.

This means focusing on customer-service initiatives that range from modernizing its e-commerce platforms to developing shared performance indicators for measuring service.

“We are changing the way we do business in order to meet and exceed our customers’ expectations and to drive superior value creation for shareholders,” Squires said.

NS Income up 15% in 4th Quarter of 2016

January 26, 2017

Norfolk Southern reported that its income rose 15 percent in the fourth quarter of 2016 when it also posted a record low operating ratio. All comparisons are with the fourth quarter of 2015.

NS logo 2NS net income for the 2016 quarter was $416 million compared to $361 million in 2015. Diluted earnings per share were $1.42, up 18 percent compared with $1.20 in 2015.

The operating ratio in the fourth quarter was 69.4 percent, a 510 basis point improvement compared with 74.5 percent in 2015.

For all of 2016, the NS operating ratio was a record 68.9 percent, a 370 basis point improvement compared with 72.6 percent in 2015.

The company said the quarterly dividend for stock holders will be 61 cents per share, a 3 percent, increase over the dividend for the third quarter of 2016.

On the downside, the railway operating revenues for the fourth quarter of 2016 was $2.5 billion, a drop of 1 percent from 2015.

In a news release, NS said this reflected lower merchandise and coal traffic and reduced fuel surcharges. Those declines were offset in part by intermodal volume growth that eclipsed the effects of the 2015 Triple Crown restructuring.

General merchandise revenues were $1.5 billion, 1 percent lower than in 2015. Volume was 3 percent lower overall, as growth in steel and agriculture was offset by declines in energy markets, vehicles, and paper and forest products.

In the railroad’s five merchandise commodity groups, NS reported the following year-over-year revenue results:

  • Agriculture: $399 million, up 4 percent.
  • Chemicals: $395 million, down 7 percent.
  • Metals/Construction: $296 million, up 6 percent.
  • Automotive: $237 million, down 5 percent.
  • Paper/Forest: $177 million, down 5 percent.

Intermodal revenues increased to $583 million, a 4 percent gain compared with the fourth quarter of 2015. Volumes increased 7 percent with growth in domestic and international traffic offsetting the Triple Crown restructuring.

Coal revenues declined 7 percent to $403 million compared with 2015. Volume fell 4 percent with an increase in export coal softening the decline in the utility market.

Railway operating expenses declined $147 million, or 8 percent, to $1.7 billion compared with same period last year due to expense reductions and the absence of last year’s restructuring costs.

Income from railway operations was $761 million, an increase of 19 percent compared with fourth-quarter 2015.

NS said its composite service metric, which measures train performance, terminal operations, and operating plan adherence, was 80 percent, a 200 basis point improvement compared with 78 percent in 2015.

For all of 2016, net income was $1.7 billion, up 7 percent compared with $1.6 billion in 2015.

Diluted EPS increased 10 percent to $5.62 compared with $5.10 per diluted share in the prior year.

Results for 2015 included restructuring expenses that reduced 2015 fourth quarter net income by $31 million, or $0.10 per diluted share, and lowered 2015 net income by $58 million, or $0.19 per diluted share for the full year.

Railway operating revenues were $9.9 billion, 6 percent lower compared with 2015. The decrease was driven by a 3 percent volume decline due to reductions in energy-related markets and the Triple Crown restructuring, as well as reduced fuel surcharges.

General merchandise revenues were $6.2 billion, a 2 percent decrease compared with the prior year. Volume declined 2 percent, primarily due to reduced demand in energy markets and lower fuel surcharges.

Intermodal revenues totaled $2.2 billion, 8 percent lower compared with 2015, reflecting the Triple Crown restructuring, as well as reduced fuel surcharges. International and domestic growth more than offset the volume decline from the Triple Crown restructuring.

Coal revenues were $1.5 billion, down 18 percent year-over-year. Reduced utility volumes combined with a weak global export market lowered total volume by 16 percent.

Railway operating expenses declined $813 million, or 11 percent, to $6.8 billion primarily due to cost cutting, lower fuel expenses, the absence of last year’s restructuring cost, and service improvements.

Income from railway operations was $3.1 billion, a 7 percent increase compared with the previous year.

The composite service metric was 80 percent, an 800 basis point improvement compared with 72 percent last year.

NS said that during 2017 it would invest $1.9 billion to maintain the safety of its rail network, enhance service, improve operational efficiency, and support growth opportunities. It invested a like amount in capital expenditures in 2016.

“2016 was a pivotal year as Norfolk Southern began implementing its new Strategic Plan. We delivered $250 million of productivity savings and recorded our best ever operating ratio, notwithstanding challenging business conditions,” said CEO James A. Squires.

“With the dedication and support of our talented employees, we improved service for customers while positioning the company for further growth in 2017 and beyond. We are poised to continue building on our success and deliver an additional $100 million of productivity savings in 2017 on the way to our goal of $650 million of annual savings by 2020. We remain steadfast in our commitment to delivering superior shareholder value through the execution of our Strategic Plan.”

NS Revenue, Profits Fell in 2nd Quarter of 2016

July 28, 2016

Norfolk Southern’s financial performance in the second quarter of 2016 followed a similar path of other Class 1 railroads with falling net income and profits, but an improved operating ratio.

NS logo 2NS said that its second quarter net income declined to $405 million, or $1.36 diluted earnings per share, from $433 million, or $1.41 earnings per share. The comparisons are to the second quarter of 2015.

Operating revenue declined by 10 percent to $2.5 billion compared with 2015 quarterly results. NS said that the fall in revenue was due to reduced volumes and lower fuel surcharge revenue. Overall, volume dropped 7 percent to 1.8 million units for the quarter.

Income from railroad operations was $770 million, a slip of 5 percent from the results of the second quarter of 2015.

However, NS said its operating ratio improved 1.4 points to 68.6 percent.

That was in part a result of cost-cutting measures the company imposed. It said lowering expenses and lower fuel costs resulted in an 11 percent decline in operating expenses, which totaled $1.7 billion for the second quarter of 2016.

“Our second-quarter results reflect our unwavering focus on cost-control, steadfast commitment to customer service, and significant improvements in network performance,” said NS Chairman, President and Chief Executive Officer James Squires in a statement.

Squires said NS expects to reap productivity savings of at least $200 million for 2016 and noted that the operating ratio of 69.4 percent for the first half of 2016 is a record.

NS is aiming to have an operating ratio of below 70 percent for all of 2016.

“Through the continued execution of our strategic plan, we remain confident in our ability to drive superior shareholder value through excellent customer service that positions us for future revenue growth, combined with network efficiency and asset utilization,” Squires said.

In looking at individual traffic figures, NS said that coal revenue plummeted 25 percent to $339 million and coal volume fell 24 percent.

It attributed that to continued high stockpiles of coal by utility companies, limited coal burn due to a mild winter and lower natural gas prices.

Merchandise revenue fell 3 percent to $1.6 billion, primarily because low oil prices have resulted in fewer chemicals being shipped.

The five merchandise commodity groups’ year-over-year revenue results were chemicals, down 6 percent to $426 million; agriculture, up 1 percent to $383 million; metals/construction, down 3 percent to $334 million; automotive, down 2 percent to $248 million; and paper/forest, down 5 percent to $186 million.

Intermodal revenue fell by 15 percent to $538 million, with volume down 5 percent. NS said this was a result of its restructuring of its Triple Crown Services subsidiary.

The Wall Street Journal reported that the NS second quarter earnings were better than had been anticipated by Wall Street analysts.