Norfolk Southern (NSC) 10-Q2023 Q1 Quarterly report

 

 

 

 

In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly Norfolk Southern Corporation (Norfolk Southern) and subsidiaries’ (collectively, NS, we, us, and our) financial position at March 31, 2023 and December 31, 2022, our results of operations, comprehensive income and changes in stockholders’ equity for the first quarters of 2023 and 2022, and our cash flows for the first three months of 2023 and 2022 in conformity with U.S. Generally Accepted Accounting Principles (GAAP).

 

These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our latest Annual Report on Form 10-K.

The following table disaggregates our revenues by major commodity group:

We recognize the amount of revenues to which we expect to be entitled for the transfer of promised goods or services to customers. A performance obligation is created when a customer under a transportation contract or public tariff submits a bill of lading to us for the transport of goods. These performance obligations are satisfied as the shipments move from origin to destination. As such, transportation revenues are recognized proportionally as a shipment moves, and related expenses are recognized as incurred. These performance obligations are generally short-term in nature with transit days averaging approximately one week or less for each commodity group. The customer has an unconditional obligation to pay for the service once the service has been completed. Estimated revenues associated with in-process shipments at period-end are recorded based on the estimated percentage of service completed. We had no material remaining performance obligations at March 31, 2023 and December 31, 2022.

We may provide customers ancillary services, such as switching, demurrage and other incidental activities, under their transportation contracts. The revenues associated with these distinct performance obligations are recognized when the services are performed or as contractual obligations are met. These revenues are included within each of the commodity groups and represent approximately 6% and 7% of total “Railway operating revenues” on the Consolidated Statements of Income for the first quarters of 2023 and 2022, respectively.

Revenues related to interline transportation services that involve another railroad are reported on a net basis. Therefore, the portion of the amount that relates to another party is not reflected in revenues.

Under the typical terms of our freight contracts, payment for services is due within fifteen days of billing the customer, thus there are no significant financing components. “Accounts receivable – net” on the Consolidated Balance Sheets includes both customer and non-customer receivables as follows:

Non-customer receivables include non-revenue-related amounts due from other railroads, governmental entities, and others. We do not have any material contract assets or liabilities at March 31, 2023 and December 31, 2022.

During the first quarter of 2023, we granted stock options, restricted stock units (RSUs) and performance share units (PSUs) pursuant to the Long-Term Incentive Plan (LTIP), as follows:

PSUs provide for awards based on the achievement of certain predetermined corporate performance goals at the end of a three-year cycle and are settled through the issuance of shares of Common Stock. All PSUs will earn out based on the achievement of performance conditions and some will also earn out based on a market condition. The market condition fair value was measured on the date of grant using a Monte Carlo simulation model.

The following table sets forth the calculation of basic and diluted earnings per share:

During the first quarters of 2023 and 2022, dividend equivalent payments were made to certain holders of stock options and RSUs.  For purposes of computing basic earnings per share, dividend equivalent payments made to holders of stock options and RSUs were deducted from net income to determine income available to common stockholders. For purposes of computing diluted earnings per share, we evaluate on a grant-by-grant basis those stock options and RSUs receiving dividend equivalent payments under the two-class and treasury stock methods to determine which method is more dilutive for each grant. For those grants for which the two-class method was more dilutive, net income was reduced by dividend equivalent payments to determine income available to common stockholders. The dilution calculations exclude options having exercise prices exceeding the average market price of Common Stock as follows: 0.1 million in both the first quarters ended March 31, 2023 and 2022.

 

 

Through a limited liability company, we and CSX Corporation (CSX) jointly own Conrail Inc. (Conrail), whose primary subsidiary is Consolidated Rail Corporation (CRC). We have a 58% economic and 50% voting interest in the jointly-owned entity, and CSX has the remainder of the economic and voting interests. Our investment in Conrail was $1.6 billion at March 31, 2023 and December 31, 2022.

CRC owns and operates certain properties (the Shared Assets Areas) for the joint and exclusive benefit of Norfolk Southern Railway Company (NSR) and CSX Transportation, Inc. (CSXT). The costs of operating the Shared Assets Areas are borne by NSR and CSXT based on usage. In addition, NSR and CSXT pay CRC a fee for access to the Shared Assets Areas. “Purchased services and rents” and “Fuel” include expenses payable to CRC for operation of the Shared Assets Areas totaling $45 million and $38 million for the first quarters of 2023 and 2022, respectively. Our equity in Conrail’s earnings, net of amortization, was $16 million and $14 million for the first quarters of 2023 and 2022, respectively. These amounts partially offset the costs of operating the Shared Assets Areas and are included in “Purchased services and rents.”

“Other liabilities” includes $534 million at both March 31, 2023 and December 31, 2022 for long-term advances from Conrail, maturing in 2050 that bear interest at an average rate of 1.31%.

We and seven other North American railroads collectively own TTX Company (TTX), a railcar pooling company that provides its owner-railroads with standardized fleets of intermodal, automotive, and general use railcars at stated rates. We have a 19.78% ownership interest in TTX.

Expenses incurred for use of TTX equipment are included in “Purchased services and rents.” These expenses amounted to $66 million and $64 million for the first quarters of 2023 and 2022, respectively. Our equity in TTX’s earnings partially offsets these costs and totaled $9 million and $10 million for the first quarters of 2023 and 2022, respectively.

In February 2023, we issued $500 million of 4.45% senior notes due 2033.

We have in place an accounts receivable securitization program with a maximum borrowing capacity of $400 million and a term that expires in May 2023. Amounts received under this facility are accounted for as borrowings. We had no amounts outstanding under this program at March 31, 2023 and our available borrowing capacity was $400 million. At December 31, 2022, we had $100 million (at an average variable interest rate of 5.05%) outstanding, which is included within “Short-term debt” and our available borrowing capacity was $300 million. Our accounts receivable securitization program was supported by $916 million and $883 million in receivables at March 31, 2023 and December 31, 2022, respectively, which are included in “Accounts receivable – net”.

 

We have both funded and unfunded defined benefit pension plans covering eligible employees. We also provide specified health care benefits to eligible retired employees; these plans can be amended or terminated at our option.  Under our self-insured retiree health care plan, for those participants who are not Medicare-eligible, certain health care expenses are covered for retired employees and their dependents, reduced by any deductibles, coinsurance, and, in some cases, coverage provided under other group insurance policies. Eligible retired participants and their spouses who are Medicare-eligible are not covered under the self-insured retiree health care plan, but instead are provided with an employer-funded health reimbursement account which can be used for reimbursement of health insurance premiums or eligible out-of-pocket medical expenses.

Pension and postretirement benefit cost components were as follows:

The service cost component of defined benefit pension cost and postretirement benefit cost are reported within “Compensation and benefits” and all other components of net benefit cost are presented in “Other income (expense) – net” on the Consolidated Statements of Income.

 

The fair values of “Cash and cash equivalents,” “Accounts receivable – net,” “Accounts payable,” and “Short-term debt,” approximate carrying values because of the short maturity of these financial instruments. The carrying value of corporate-owned life insurance is recorded at cash surrender value and, accordingly, approximates fair value. There are no other assets or liabilities measured at fair value on a recurring basis at March 31, 2023 or December 31, 2022. The carrying amounts and estimated fair values, based on Level 1 inputs, of long-term debt consist of the following:

 

On February 3, 2023, a train we operated derailed in East Palestine, Ohio. The derailed equipment included 38 railcars, 11 of which were non-Company-owned tank cars containing hazardous materials. Fires associated with the derailment threatened certain of the tank cars. There was concern about the risk that the content of five of the tank cars carrying vinyl chloride might polymerize, which would have posed the risk of a catastrophic explosion. As a consequence, on February 6, 2023, the local incident commander—in consultation with the incident command that included, among others, federal, state and local officials and Norfolk Southern—opted to conduct a controlled vent and burn of five derailed tank cars, all of which contained vinyl chloride. This procedure involved creating holes in the five tank cars to drain the vinyl chloride into adjacent trenches that had been dug into the ground where such vinyl chloride was then burned, with any material remaining after burning of the vinyl chloride being remediated. The February 3rd derailment, the associated fire, and the resulting vent and burn of the tank cars containing vinyl chloride on February 6th is hereinafter referred to as the “Incident.”

Although we cannot predict the final outcome or estimate the reasonably possible range of loss with certainty, we have recognized $387 million of expense for costs directly attributable to the Incident, which is presented in “Eastern Ohio incident” on the Consolidated Statements of Income. During the first quarter, our cash expenditures attributable to the Incident were $55 million, which are presented in “Net cash provided by operating activities” on the Consolidated Statement of Cash Flows. The remainder, $332 million, is primarily comprised of our estimates of

probable and reasonably estimable liabilities principally associated with environmental matters and legal proceedings, which are discussed in further detail below.

While certain costs recorded in the first quarter may be recoverable under our insurance policies in effect at the date of the Incident, no estimate of potential recoveries has yet been recorded. Any amounts recoverable under our insurance policies will be reflected in future periods in which recovery is considered probable. For additional information about our insurance coverage, see “Insurance” below.

As set forth above, we are subject to inquiries and investigations by numerous federal, state, and local government authorities and regulatory agencies regarding the Incident, including but not limited to, the DOJ and the U.S. EPA, the Ohio EPA, the National Transportation Safety Board (NTSB), the Federal Railroad Administration (FRA), the Occupational Safety and Health Administration, the Ohio Attorney General, and the Pennsylvania Attorney General. Further details regarding the NTSB and FRA investigations are set forth below. We are cooperating with all inquiries and investigations, including responding to civil and criminal subpoenas and other requests for information (the aforementioned inquiries and investigations, as well as the civil and criminal subpoenas are collectively referred to herein as the Incident Inquiries and Investigations). The outcome of any current or future Incident Inquiries and Investigations is uncertain at this time, including any related fines, penalties or settlements. Therefore, our first quarter expenses do not include estimates of the total amount that we may incur for any such fines, penalties or settlements.

Subsequent to the Incident, investigators from the NTSB examined railroad equipment and track conditions; reviewed data from the signal system, wayside defect detectors, local surveillance cameras, and the lead locomotive’s event recorder and forward-facing and inward-facing image recorders; and completed certain interviews (the NTSB Investigation). The NTSB issued a preliminary report indicating that one of the cars involved in the derailment appeared to have a wheel bearing in the final stage of overheat failure moments before the derailment. Their preliminary report also indicates that the rail crew was operating the train within our rules; the rail crew operated the train below the track speed limit, the wayside heat detectors were operating as designed; and once the rail crew was alerted by the wayside detector, they immediately began to stop the train. The NTSB’s investigation remains ongoing.

Concurrent with the NTSB Investigation, the FRA is also investigating the Incident. Similar in scope to the NTSB Investigation, the FRA is examining railroad equipment, track conditions, hazardous materials train placement and routing, and emergency response (the FRA Incident Investigation). The FRA Incident Investigation may result in the assessment of civil penalties. In addition to the FRA Incident Investigation, the FRA announced on March 7, 2023 that it would conduct a 60-day supplemental safety assessment (the FRA Safety Assessment). The FRA Safety Assessment will review findings from a previously completed 2022 system audit and assess operational elements including, but not limited to: track, signal, and rolling stock maintenance, inspection and repair practices; protection of employees; communications between transportation departments and mechanical and engineering staff; operation control center procedures and dispatcher training. The overall scope of the FRA Safety Assessment is to examine our safety culture. At the conclusion of the FRA Safety Assessment, the FRA will issue a public report which will include its findings and recommended corrective actions. The FRA Incident Investigation and the FRA Safety Assessment remain ongoing.

 

We and/or certain subsidiaries are defendants in numerous lawsuits and other claims relating principally to railroad operations.  When we conclude that it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, it is accrued through a charge to earnings and, if material, disclosed below. While the ultimate amount of liability incurred in any of these lawsuits and claims is dependent on future developments, in our opinion, the recorded liability is adequate to cover the future payment of such liability and claims. However, the final outcome of any of these lawsuits and claims cannot be predicted with certainty, and unfavorable or unexpected outcomes could result in additional accruals that could be significant to results of operations in a particular year or quarter. Any adjustments to the recorded liability will be reflected in earnings in the periods in which such adjustments become known. For lawsuits and other claims where a loss may be reasonably possible, but not probable, or is probable but not reasonably estimable, no accrual is established but the matter, if potentially material, is disclosed below. We routinely review relevant information with respect to our lawsuits and other claims and update our accruals, disclosures and estimates of reasonably possible loss based on such reviews.

In 2007, various antitrust class actions filed against us and other Class I railroads in various Federal district courts regarding fuel surcharges were consolidated in the District of Columbia by the Judicial Panel on Multidistrict Litigation. In 2012, the court certified the case as a class action. The defendant railroads appealed this certification, and the Court of Appeals for the District of Columbia vacated the District Court’s decision and remanded the case for further consideration. On October 10, 2017, the District Court denied class certification. The decision was upheld by the Court of Appeals on August 16, 2019. Since that decision, various individual cases have been filed in multiple jurisdictions and also consolidated in the District of Columbia. We believe the allegations in the complaints are without merit and intend to vigorously defend the cases. We do not believe the outcome of these proceedings will have a material effect on our financial position, results of operations, or liquidity.

In 2018, a lawsuit was filed against one of our subsidiaries by the minority owner in a jointly-owned terminal railroad company in which our subsidiary has the majority ownership. The lawsuit alleged violations of various

state laws and federal antitrust laws. On January 3, 2023, the court granted summary judgment to us on all of the compensatory claims but denied summary judgment for all equitable relief claims. On January 18, 2023, the court dismissed the federal equitable relief claims, leaving the state equitable relief claims as the sole remaining issue under consideration. On April 19, 2023, the court disposed of all remaining state equitable relief claims. These rulings may be appealed. If appealed, we will continue to vigorously defend the lawsuit and, although it is reasonably possible we could incur a loss in the case, we believe that we will prevail. However, given that litigation is inherently unpredictable and subject to uncertainties, there can be no assurances that the final outcome of the litigation (including any related appeal) will not be material. Until such appeal is final, we cannot reasonably estimate the potential loss or range of loss associated with this matter.

Casualty claims include employee personal injury and occupational claims as well as third-party claims, all exclusive of legal costs.  To aid in valuing our personal injury liability and determining the amount to accrue with respect to such claims during the year, we utilize studies prepared by an independent consulting actuarial firm.  Job-related personal injury and occupational claims are subject to the Federal Employer’s Liability Act (FELA), which is applicable only to railroads. The variability inherent in FELA’s fault-based tort system could result in actual costs being different from the liability recorded.  While the ultimate amount of claims incurred is dependent on future developments, in our opinion, the recorded liability is adequate to cover the future payments of claims and is supported by the most recent actuarial study.  In all cases, we record a liability when the expected loss for the claim is both probable and reasonably estimable.

 

We are subject to various jurisdictions’ environmental laws and regulations.  We record a liability where such liability or loss is probable and reasonably estimable. Environmental specialists regularly participate in ongoing evaluations of all known sites and in determining any necessary adjustments to liability estimates.  

In addition to environmental claims associated with the Incident, our Consolidated Balance Sheets include liabilities for other environmental exposures of $61 million at March 31, 2023 and $66 million at December 31, 2022, of which $15 million is classified as a current liability at the end of both periods. At March 31, 2023 and December 31, 2022, the liability represents our estimates of the probable cleanup, investigation, and remediation costs based on available information at 85 known locations and projects. At March 31, 2023, twenty sites accounted for $49 million of the liability, and no individual site was considered to be material. We anticipate that most of this liability will be paid out over five years; however, some costs will be paid out over a longer period.

At eight locations, one or more of our subsidiaries in conjunction with a number of other parties have been identified as potentially responsible parties under CERCLA or comparable state statutes that impose joint and several liability for cleanup costs.  We calculate our estimated liability for these sites based on facts and legal defenses applicable to each site and not solely on the basis of the potential for joint liability.

As set forth above, with respect to known environmental sites (whether identified by us or by the U.S. EPA or comparable state authorities), estimates of our ultimate potential financial exposure for a given site or in the aggregate for all such sites can change over time because of the widely varying costs of currently available cleanup techniques, unpredictable contaminant recovery and reduction rates associated with available cleanup technologies, the likely development of new cleanup technologies, the difficulty of determining in advance the nature and full extent of contamination and each potential participant’s share of any estimated loss (and that participant’s ability to bear it), and evolving statutory and regulatory standards governing liability.

The risk of incurring environmental liability for acts and omissions, past, present, and future, is inherent in the railroad business.  Some of the commodities we transport, particularly those classified as hazardous materials, pose special risks that we work diligently to reduce.  In addition, several of our subsidiaries own, or have owned, land used as operating property, or which is leased and operated by others, or held for sale.  Because environmental problems that are latent or undisclosed may exist on these properties, there can be no assurance that we will not incur environmental liabilities or costs with respect to one or more of them, the amount and materiality of which cannot be estimated reliably at this time.  Moreover, lawsuits and claims involving these and potentially other unidentified environmental sites and matters are likely to arise from time to time.  The resulting liabilities could have a significant effect on financial position, results of operations, or liquidity in a particular year or quarter.

 

Based on our assessment of the facts and circumstances now known, we believe we have recorded the probable and reasonably estimable costs for dealing with those environmental matters of which we are aware.  Further, we believe that it is unlikely that any known matters, either individually or in the aggregate, will have a material adverse effect on our financial position, results of operations, or liquidity.

 

Approximately 80% of our railroad employees are covered by collective bargaining agreements with various labor unions. Pursuant to the Railway Labor Act, these agreements remain in effect until new agreements are reached, or until the bargaining procedures mandated by the Railway Labor Act are completed. Moratorium provisions in the labor agreements govern when the railroads and unions may propose changes to the agreements. We largely bargain nationally in concert with other major railroads, represented by the National Carriers’ Conference Committee.

The latest round of national bargaining concluded in December 2022, when agreements were either ratified or enacted through legislative action for all twelve of our unions. We are currently participating in additional

discussions (none of which carry the risk of a work stoppage) with several of our unions to conclude the implementation of these national agreements. With the conclusion of national bargaining, neither party can compel mandatory bargaining around any new proposals until November 1, 2024.

In addition, we understand the imperative to continue improving quality of life for our craft employees and are actively engaged in voluntary local discussions with our unions on this important issue.

 

We purchase insurance covering legal liabilities for bodily injury and property damage to third parties. This insurance provides coverage above $75 million and below $800 million (or up to $1.1 billion for specified types of pollution releases) per occurrence and/or policy year. In addition, we purchase insurance covering damage to property owned by us or in our care, custody, or control. This insurance covers approximately 82% of potential losses above $75 million and below $275 million per occurrence and/or policy year.

Our ability to recoup any of the foregoing amounts under our insurance coverage, including any amounts that may be recoverable with respect to the Incident, is subject to certain conditions, including but not limited to our insurers’ reservation of rights to further investigate and contest coverage, the express restrictions and sub-limits of coverage, and various policy exclusions, including those for some governmental fines or penalties, as well as potential coverage disputes over payments we make as part of our effort to mitigate the impact to the community and affected residents. We are working with our insurers to confirm applicable coverage with respect to the Incident, but no estimate for potential insurance recovery has been accrued at this time.

 

 

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes.

 

 

We are one of the nation’s premier transportation companies, moving goods and materials that help drive the U.S. economy. We connect customers to markets and communities to economic opportunity with safe, reliable, and cost-effective shipping solutions. Our Norfolk Southern Railway Company subsidiary operates in 22 states and the District of Columbia. We are a major transporter of industrial products, including agriculture, forest and consumer products, chemicals, and metals and construction materials. In addition, in the East we serve every major container port and operate the most extensive intermodal network. We are also a principal carrier of coal, automobiles, and automotive parts.

Our first quarter results were impacted by a February 2023 derailment in Eastern Ohio. The derailment consisted of 38 railcars and resulted in the release of certain chemicals that were being transported for our customers. Following the Incident (as defined and as further described in Note 10 in the Notes to Consolidated Financial Statements), we have worked to clean the derailment site safely and thoroughly and to monitor for any impact on public health and the environment. Expenses recognized in the first quarter amounted to $387 million and relate to our initial response costs, ongoing cleanup efforts and estimates associated with environmental remediation and legal proceedings. Our current estimates of future environmental cleanup and remediation liabilities related to the Incident may change over time due to various factors, and the final outcome of any legal proceedings cannot be predicted with certainty. Thus, unfavorable or unexpected developments or outcomes could result in additional accruals that could be significant to results of operations in a particular year or quarter. This amount does not include any estimate of loss for specific items for which we believe a loss is either not probable or not reasonably estimable for the reasons noted. In addition, this amount does not include any amounts that may be recoverable from third parties, including expenses or liabilities that may be recovered under our insurance policies and for which such amounts will be reflected in future periods when reimbursement is considered probable. Please see Note 10 in the Notes to Consolidated Financial Statements for a detailed discussion of these estimates and exclusions. We continue to work with federal, state, and local officials to mitigate impacts from the Incident and to provide support to affected members of the community.

Revenue growth over the prior year was driven by higher average revenue per unit, as our volumes for the quarter were flat. In addition to the costs recognized from the Incident, our operating expenses were higher, driven by inflationary pressures and service-related costs. As we continue to make progress in response to the derailment and support the impacted community, we are committed to our strategy — a balanced approach of delivering safe, reliable and resilient service, smart and sustainable growth, and continuous productivity improvement.

First-quarter 2023 income from railway operations included $387 million of expenses arising from the Incident, which reduced net income by $293 million and diluted earnings per share by $1.28. For more information see Note 10 in the Notes to Consolidated Financial Statements. First quarter income from railway operations, net income, and diluted earnings per share were further impacted by the factors set forth further below.

The following table adjusts our 2023 GAAP financial results to exclude the effects of the Incident. The income tax effect of this non-GAAP adjustment was calculated based on the applicable tax rates to which the non-GAAP adjustment related. We use these non-GAAP financial measures internally and believe this information provides useful supplemental information to investors to facilitate making period-to-period comparisons by excluding the 2023 costs arising from the Incident. While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant to be considered in isolation, or as a substitute for, the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similar measures presented by other companies.

In the table below, references to 2023 results and related comparisons use the adjusted, non-GAAP results from the reconciliation in the table above.

On a non-GAAP basis excluding the impact of the Incident, income from railway operations increased due to higher railway operating revenues. Revenue growth was driven by higher fuel surcharge revenues and pricing gains, as volumes remained flat compared to the same period last year. The rise in revenues was partially offset by increased railway operating expenses, primarily driven by inflationary pressures and service-related costs.

 

The following tables present a comparison of revenues ($ in millions), units (in thousands), and average revenue per unit ($ per unit) by commodity group.

Railway operating revenues increased $217 million compared with the same period last year. The table below reflects the components of the revenue change by major commodity group ($ in millions).

 

Approximately 95% of our revenue base is covered by contracts that include negotiated fuel surcharges. Revenues associated with these surcharges totaled $375 million and $244 million in the first quarters of 2023 and 2022, respectively. The increase in fuel surcharge revenues is driven by higher fuel commodity prices.

For the remainder of 2023, we expect that revenue growth will be a challenge, as there is substantial economic uncertainty. We expect revenue headwinds resulting from lower fuel prices, softening coal pricing, and declining storage service charges.

Merchandise revenues increased due to higher average revenue per unit, driven by higher fuel surcharge revenue and increased pricing, as well as higher volumes in all commodity groups.

Agriculture, forest and consumer products volume increased as the shipment demand for corn, soybeans, ethanol, feed, and lumber, more than offset the declines in pulpboard. Volume gains in corn, ethanol, feed and lumber were driven by increased market demand. Higher soybean volume was due to an extended export season. The decline in pulpboard was due to higher inventories slowing down the demand for shipments.

Chemicals volume rose as growth in shipments of sand, petroleum products, and solid waste more than the offset declines in plastics, organic chemicals and natural gas liquids. Volume gains for sand were driven by current market demand, while the volume increases for petroleum and solid waste were both driven by growth with existing customers. Plastics volumes declined due to lower demand as a result of decreased activity in the housing market, while organic chemicals volumes declined as a result of production delays due to weather events. Natural gas liquid volumes were down due to decreased demand.

Metals and construction volume increased, largely driven by higher demand for aggregates and scrap metal.

Automotive volume was higher due to an increase in production of vehicles partially offset by elongated cycle times.

 

Intermodal revenues decreased, driven by lower volumes, and lower average revenue per unit, a result of decreased storage service charges partially offset by higher fuel surcharge revenue.

Intermodal units (in thousands) by market were as follows: