Posts Tagged ‘NS CEO James Squires’

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.

NS Donates $25K to Help W.Va. Flood Victims

July 1, 2016

The Norfolk Southern Foundation is donating $25,000 to help West Virginia get back on its feet after a series of thunderstorms last week dumped up to 7 inches on parts of the state and the subsequent flooding resulted in the deaths of 26 people.

Thousands were forced out of their homes with more than 1,200 homes destroyed by the flooding or the fires that erupted.

NS logo 2The storm was the third deadliest in state history.

NS said it will send its donation to the American Red Cross, which is helping displaced West Virginians cope.

“The American Red Cross has the proven track record for delivering fast and effective help when disaster hits,” said Jim Squires, NS chairman, president, and CEO. “If our support can provide even the smallest measure of relief for our West Virginia employees, business partners, and neighbors, then we consider ourselves fortunate and grateful to be able to provide it.”

The flooding disrupted railroad operations for four days, but rail service has since resumed operating.

CP’s Harrison Highest Paid Class 1 CEO in 2015

May 7, 2016

He may have lost out on becoming the CEO of Norfolk Southern, but E. Hunter Harrison has 15 million reasons to be happy with being the head of Canadian Pacific.

Trains magazine reported that Harrison is the highest paid CEO among North American Class I railroads.

In 2015, he took home $15.4 million in compensation (C$19.9 million). That was well above the $10 million made by Union Pacific CEO Lance Fritz.

E. Hunter Harrison

E. Hunter Harrison

Other CEO pay last year included: Michael Ward, CSX, $9.2 million; James Squires, NS, $7.9 million; David Starling, Kansas City Southern, $7.9 million; and Claude Mongeau, Canadian National, $7.7 million.

BNSF is a part of privately-owned Berkshire Hathaway and executive compensation figures are not publically available.

Not everyone at CP believes Harrison should be so well compensated. At last month’s CP annual meeting, stockholders rejected by 50.1 to 49.9 percent CP’s executive compensation package.

In response, the CP board of directors said it would take the non-binding resolution into account when setting the pay for executives this year.

However, Harrison and the CP board won re-election to their posts, receiving 96.6 percent of the votes cast.

In 2015, Harrison was paid a base salary of $2,803,522, stock awards of $4,749,089, options awards of $5,163,279, non-equity incentive plan compensation of $6,002,537, and other compensation of $1,184,026. All figures are in Canadian dollars.

Trains reported that Harrison’s base salary is high because he had to forfeit $1.5 million in annual CN pension payments in order to take the job at CP. Harrison was the CEO of CN before joining CP in June 2012.

In a proxy filing, CP asserted that by subtracting the pension makeup payments, Harrison’s base salary is $700,000, which the Calgary-based company said is “significantly below his prior salary at CN, industry norms, and CEO salaries in CP’s comparator group.”

The proxy filing justified Harrison’s pay package by saying that under his leadership CP has transformed from the industry’s worst financial performer to among its best.

“Although Mr. Harrison’s total compensation is much higher than his peers, the return to shareholders during his tenure is equally impressive,” CP said, adding that during Harrison’s tenure as CEO that CP added $14.2 billion in total additional shareholder value.

Fritz, who became CEO of UP in February 2015, earned a salary of $966,000, a bonus of $2 million, stock awards of $3,600,488, option awards of $2,400,008, change in pension value and deferred compensation earnings of $980,911, and other compensation of $139,220.

Ward of CSX had a base salary of $1.2 million, stock awards of $7,064,833, non-equity incentive plan compensation of $864,000, and other compensation of $80,728.

Squires took over as NS CEO on June 1, 2015, and was paid a base salary of $837,500, stock awards of $1,625,268, option awards of $4,375,050, a change in pension value and deferred compensation earnings of $1,036,596, and other compensation of $115,151.

Starling at KCS pulled down a base salary of $900,000, a bonus of $326,669, stock awards of $5,529,963, option awards of $551,195, non-equity incentive plan compensation of $468,000, and other compensation of $124,683.

CN’s Mongeau received a base salary of $1,075,000, an incentive bonus of $1,290,000, performance share units of $3,256,065, and stock options worth $2,144,000.