Norfolk Southern reports fourth-quarter and full-year 2015 results
NORFOLK, Va., Jan. 27, 2016 – Norfolk Southern Corporation (NYSE: NSC) today reported fourth-quarter and 2015 financial results.
Fourth-quarter net income
was $361 million, or $1.20 per diluted share, compared with $511
million, or $1.64 per diluted share, in fourth-quarter 2014. For 2015, net income was $1.6 billion, or $5.10 per diluted share, compared with $2.0 billion, or $6.39 per diluted share, in 2014.
Results
included expenses related to restructuring the company’s Triple Crown
Services subsidiary and closing its Roanoke, Va., office, which together
reduced 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.
In
a separate press release issued today, Norfolk Southern provided
additional detail regarding its strategic plan to streamline operations
and drive profitability and growth. The plan includes cost reductions
across the organization and improved operational efficiencies. As a
result of this plan, the Company expects to achieve annual productivity
savings of more than $650 million by 2020, with approximately $130
million to be realized in 2016.
Through the initiatives announced today, Norfolk Southern is confident
in its ability to achieve an operating ratio below 65 percent by 2020.
“We
are implementing a plan to reduce costs and enhance profitable growth,”
said James A. Squires, Norfolk Southern’s chairman, president and CEO.
“This plan will enable us to achieve significant annual expense savings
beginning in 2016 without compromising the company’s
ability to capitalize on volume and revenue growth opportunities. We
are making progress despite a challenging operating environment,
including successfully restoring our rail service to previous high
levels, realigning resources, and completing strategic capacity
investments to improve efficiency and productivity.
“Through
these actions, we are positioning Norfolk Southern for improved
performance and value creation in 2016 and beyond. We are confident in
our ability to deliver superior shareholder value through our strategic
plan, which is built on exceptional customer service, growth through
pricing and new business, cost reduction and control, and increasing
returns on capital. Our fourth-quarter results reflect current
challenges in domestic and global markets.”
FOURTH-QUARTER SUMMARY
§ Railway operating revenues declined 12 percent compared with fourth-quarter 2014, to $2.5 billion. Traffic
volume declined 6 percent, a result of lower coal volumes and the
effects of low commodity prices. Average revenue per unit decreased 6
percent as the effects of higher rates were more than offset by a $226
million, or 73 percent, decline in fuel surcharge revenues.
§ General
merchandise revenues were $1.5 billion, 9 percent lower than the same
period last year. Volume declined 4 percent, as a 9 percent gain in
automotive traffic was more than offset by decreases in the other four
commodity groups.
§ Intermodal revenues declined to $563 million, 13 percent below fourth-quarter 2014. The Triple Crown restructuring and fewer domestic shipments combined to reduce traffic volume by 5 percent.
§ Coal
revenues were $433 million, 20 percent lower compared with fourth
quarter of 2014. A weak global export market, record high temperatures
in the East, and low natural gas prices combined to decrease volume by
18 percent.
§ Railway
operating expenses decreased $103 million, or 5 percent, to $1.9
billion compared with same period of 2014, notwithstanding $49 million
of expenses related to the Triple Crown restructuring and Roanoke office
closure.
§ Income from railway operations was $642 million, 28 percent lower compared with fourth-quarter 2014.
§ The operating ratio, or operating expenses as a percentage of revenues, was 74.5 percent,
compared with 69 percent during the same quarter in 2014. Triple Crown
restructuring and Roanoke office closure expenses added 2.0 percentage
points to the operating ratio.
2015 SUMMARY
§ Railway
operating revenues were $10.5 billion, 10 percent lower compared with
2014, reflecting an $852 million, or 64 percent, reduction in fuel
surcharge revenues. Traffic volume was down 3 percent, driven by a sharp
decline in coal.
§ General
merchandise revenues declined 6 percent to $6.3 billion, while traffic
volume was about even compared with the prior year.
§ Intermodal revenues totaled $2.4 billion, 6 percent lower compared with 2014. Traffic volume was up slightly for 2015.
§ Coal revenues were $1.8 billion, down 23 percent, due to a 16 percent decline in traffic volume compared with 2014.
§ Railway
operating expenses of $7.6 billion declined $422 million, or 5 percent,
compared with 2014, despite $93 million of additional expenses related
to the Triple Crown restructuring and Roanoke office closure.
§ Income from railway operations was $2.9 billion, 19 percent lower compared with 2014.
§ The operating ratio for the year was 72.6 percent compared with 69.2 percent the prior year. The Triple Crown restructuring and Roanoke office closure costs added 0.9 percentage points to the operating ratio.
For 2016, Norfolk Southern plans to invest $2.1 billion to maintain the safety of its rail network, enhance service, improve operational efficiency, and support growth opportunities.
About Norfolk Southern
Norfolk Southern Corporation
(NYSE: NSC) is one of the nation’s premier transportation companies.
Its Norfolk Southern Railway Company subsidiary operates approximately
20,000 route miles
in 22 states and the District of Columbia, serves every major container
port in the eastern United States, and provides efficient connections
to other rail carriers. Norfolk Southern operates the most extensive
intermodal network in the East and is a major transporter of coal,
automotive, and industrial products.
Forward-Looking Statements
Certain
statements in this press release 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 the Company’s future financial performance
and involve known and unknown risks, uncertainties, and other factors
that may cause the actual results, levels of activity, performance, or
achievements of the Company or its industry to be materially different
from those expressed or implied by any forward-looking statements. In
some cases, forward-looking statements can be identified by terminology
such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,”
“anticipate,” “intend,” “believe,” “estimate,” “project,” “consider,”
“predict,” “potential,” or other comparable terminology. The Company has
based these forward-looking statements on management’s current
expectations, assumptions, estimates, beliefs, and projections. While
the Company believes these expectations, assumptions, estimates, and
projections are reasonable, 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 the Company’s Form 10-K for the year ended Dec.
31, 2014, as well as the Company’s subsequent filings with the
Securities and Exchange Commission, may cause actual results,
performance, or achievements to differ materially from those expressed
or implied by these forward-looking statements. The forward-looking
statements in this press release 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. Copies of Norfolk Southern
Corporation’s press releases and additional information about the
Company are available at www.norfolksouthern.com, or you can contact the Norfolk Southern Corporation Investor Relations Department by calling 757-629-2861.