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Norfolk Southern Adapts to COVID-19 Challenges

CEO: Economic downturn triggered by COVID-19 will impact railroad’s business

Norfolk Southern railroad

Despite economic challenges posed by the COVID-19 pandemic, Norfolk Southern is well-positioned to safely and successfully weather the unprecedented situation, CEO James A. Squires said last Thursday at the company’s annual meeting of shareholders.

“We will get through the challenges ahead and emerge as an even stronger company,” Squires said. “We’ll continue to manage our assets well and control our costs. Our emphasis on superior service will continue to drive our long-term growth strategy. And through it all, our Norfolk Southern employees will continue to get the job done safely, with excellence and pride.”

Squires addressed shareholders during the company’s first virtual-only annual meeting, a board decision made in light of public health concerns and social distancing guidance arising from the COVID-19 pandemic.

In his remarks, Squires expressed confidence in the Norfolk Southern team, saying the company’s agile response to the coronavirus pandemic demonstrates the railroad’s resilience and unwavering commitment to customers and the communities it serves.

The effort required innovation and collaboration, he noted, and ranged from equipping departments to work remotely, including most of customer service, to purchasing hand sanitizer from local distilleries in the midst of a nationwide shortage.

“As they always do in a crisis, our employees responded heroically,” Squires said. “The entire Norfolk Southern team has rallied around our customers, and we’re delivering with the best service product in the history of our company. We’re keeping the steel wheels moving as we play our part to keep the shelves stocked and the lights on.”

In addition to this strong employee performance, Squires said the company’s Reimagine ’21 strategic plan, rolled out in 2019 and built on the tenets of precision scheduled railroading, is driving long-term, transformational improvements in operating efficiencies and customer service. A centerpiece is the railroad’s TOP21 operating plan, which has transformed how it operates trains on the network and contributed to record levels of train performance and service.

“As a result of our transformation, we’ve set records for metrics such as train speed, terminal dwell, and shipment consistency,” Squires said. “We’ve decongested our yards and road network, allowing cars to turn quicker in the terminals and trains to move faster on the network. Our success enabled us to dispose of 703 locomotives that are no longer needed because our network is more efficient – a strong sign that our strategic plan is working.”

These efficiency gains helped the railroad achieve an adjusted operating ratio of 63.7% in the first quarter of 2020, when excluding the charge related to the disposition of locomotives. While the company has withdrawn guidance for revenue and the operating ratio in 2020, Squires said the railroad remains committed to its 2021 goal of driving down the OR to 60%.

Squires said the economic downturn triggered by COVID-19 will impact the railroad’s business, noting that traffic volumes decreased by 11% in the first quarter of 2020 and continue to trend downward.

While acknowledging that Norfolk Southern is not immune to COVID-19 disruptions, Squires reaffirmed his confidence in the company’s overall financial standing, with access to ample liquidity and the lowest levels of capital expenditures since 2010. When paired with operational efficiencies and industry-leading personnel, the company is positioned for future growth opportunities that will create long-term shareholder value, he said.

“Norfolk Southern has a history of successfully managing through business cycles and challenging economic environments,” Squires said. “None of us can predict the severity or duration of this economic downturn, so we are focused on the factors within our control. By continuing to execute our strategic plan and provide superior service to our customers, we will move through this period successfully and be ready to capture opportunities as the economy recovers.”

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