Norfolk Southern Corporation (NYSE:NSC) Q4 2014 Earnings Conference Call - Final Transcript

Jan 26, 2015 • 08:45 am ET


Norfolk Southern Corporation (NYSE:NSC) Q4 2014 Earnings Conference Call - Final Transcript


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Greetings and welcome to the Norfolk Southern Corporation Fourth Quarter 2014 earnings call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Katie Cook, Director of Investor Relations. Thank you, Ms. Cook. You may now begin.

Katie Cook

Thank you, Rob and good morning. Before we begin today's call, I would like to mention a few items. First, the slides of the presenters are available on our website at in the Investors section. Additionally, transcripts and downloads of today's call will be posted on our website.

(Forward-looking cautionary statements)

Katie Cook

That is not a GAAP number, has been reconcilled on website in the investor section. Now it's my pleasure to introduce Norfolk Southern, Chairman and CEO, Wick Moorman.

Wick Moorman

Thank you, Katie, and good morning everyone. It is my pleasure to welcome you to our fourth quarter of 2014 earnings conference call. With me today are several members of our senior team including our president Jim Squires; our Chief Marketing Officer, Don Seale; our Chief Operating Officer, Mark Manion; and our Chief Financial Officer, Marta Stewart.

As all of you know by now, after 39 years of exemplary service, Don has decided to retire effective March 1st. Therefore, this will be his last earnings call. And I know all of you join me in wishing him a long and happy retirement.

Turning now to our financial results. I'm pleased to report that Norfolk Southern achieved another solid quarter, which completed an outstanding 2014 financial performance, with record annual results across the board, including all-time highs for revenues, income from operations, operating ratio, net income, and earnings per share.

Looking at our top-line, revenues for the fourth quarter were $2.9 billion flat compared to our record 2013 fourth quarter revenue, despite a 15% decrease in coal revenue and lower fuel surcharge revenue. Overall volumes increased 4% as growth in intermodal and merchandise more than offset a 6% decline in coal volumes. For the full year, revenues were $11.6 billion, up 3% not withstanding a 6% decline in coal revenue. Don will provide you with all of the revenue details in a few minutes.

Our fourth quarter operating expenses were down 1% resulting in a fourth quarter record to $891 million of income from railway operations, and 69.0% operating ratio, which is a 40 basis point improvement compared to 2013. This enabled us to in the full year with an operating ratio of 69.2%; the company's first-ever sub 70 operating ratio, and then 180 basis improvement over 2013.

As all of you know, we were able to achieve these results in the face of service challenges, and the fourth quarter was no exception. However, as you also know, we have worked diligently to improve our velocity and operating metrics, and we saw definite improvement after the Thanksgiving holidays. Mark will go over our service