Norfolk Southern (NSC) 26 Apr 232023 Q1 Earnings call transcript

Greetings. Welcome to Norfolk Southern's First Quarter 2023 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].

conference recorded. this reminder, a is being As

It Senior you, Director my pleasure Mr. Luke Nichols, to introduce of is now Nichols. Investor Relations. Thank

You begin. may

are Thank Securities the to future materially meaning that to the uncertainties safe statements results. Please subject will morning, relate of future certain Act of you, performance the of and provision Southern call, These Private make within or today's Corporation, Reform and of we note differ statements forward-looking harbor and good Litigation events which during risks Norfolk may everyone. actual XXXX. from

refer Please of the those and as reports disclosure SEC uncertainties and filed we view to with annual our risks most full for a important. quarterly

section, today a measures presentation any non-GAAP the of to along with Our available the are slides used reconciliation GAAP at comparable measures. nscorp.com Investors in

to introduce X. Alan to Turning Executive Norfolk Southern's now pleasure Officer, It's and Chief Shaw. Slide my President

for begin guided safe and the earnings principle. morning, focus on we quarter operations. thank update you and ongoing one joining Palestine been have an East with beginning, our first our Good will by From I call. on

surrounding are We do takes the it make right to for and Palestine whatever it East to going areas.

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We in the non-profits area's families local future and are assisting long-term businesses and prosperity. supporting investing projects for

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preliminary were after work, were right track According defects. the report, to the the and properly the receiving no National detectors and Safety operating there actions took train they alarm, Board's Transportation the wayside

the already have technologies designed increasing work, safety, early its installing further continues enhance as NTSB begun of we such safety first to accelerating actions detection to the responders. As deployment sensors, advanced take for safety training and additional

emergency They gratitude firefighters that Palestine heroes. scene The East respect. deepest and have responders to other the are our night who ran and in

the and state, helping and federal to events. finding appreciate We approaches of response agencies their affected of leadership to also evidence-based in We by and local, share derailment the officials rail goals people safety. these

are a railroad. We safe

lowest other two XXXX, In rate any of year had strive and a do better. to in last the We decades, derailments Norfolk Southern the employee our fewer than decade. was injuries in in

last first the few continuing a events declined national attention While Southern of the trend on months quarter in Norfolk at the period same last safety, the have improvement. from focused year, of remits rail

company. an safer are to We from accident this to become even learn going

been in specific have I to legislative provisions personally enhance federal support Washington safety. to engaged

we embrace As made require to Norfolk enhancements of meaningful the companies, efforts equipment leasing that and companies. learnings initial from in the be will clear, that Southern effort, industry, leader the East owners, entire Palestine and railroad a intends manufacturers railcar the have role. combined

our strategy. and industry-leading direction even This that I'm short-term. just on to rather value to everything commitment new important improvements. been smart today, the and December, reaffirming a a launch strategy. Slide With team railroad to that to sustainable chartered creation. the Day with we with new drive than will long-term and Turning strategy that is Balance we value growth our starts for and my sustainable building priorities working more first to and were X. our last safe, do, we long-term At vision the service We focus Investor have we reliable, for customers. course resilience productivity execute

sustainably customers will approach enable service with operations-driven for the both customer-centric and safety and to supports long-term. Our our us grow

we volumes Our seasonality. Springfield were channel desirable and years, impact Consistent on define geographic January, decisions. were highs, was Norfolk best-in-class strategy. customers, long-term have vision, Palestine a Southern to powerful When valued with noticing East knew made after XX we the deliver in the typical derailments, uniquely at and capacity, our two position We best and would network, with customers weeks in relationships and strong service, on spoke two near-term partners December our revenue. footprint, service the

and of this running are from the the in pulling a at track early tracks time response service and to one soil in This our to Xrd, and our removing site we a up Palestine Jersey, We the June. there's have community the anticipate with impact the First, Eastern quarter. completing New having and by service at York, Pennsylvania, segment we of only restricted Chicago derailment New in had both Since of section remediation at in March busiest through mainline East tracks strength speed links feedback of the EPA. trains franchise.

abundance accelerated caution, an early March, the of out which improve service, thereafter. broader of analysis of safety, productivity, as and began efforts we we rules makeup train soon to Second, of our in part implementing

purposeful As capacity our in part, train these result this address actions was detail. greater Paul will on a limited of initially.

will long-term new right meaningful We were anticipate cost or not dial We on of decisions to strategy also time as any to the and capacity long-term best are do. resiliency, making processes. delivering we're set It restoring enhance progress. service. this to build capacity impacts of were we our These service, They deliver things structure. in ability do take to our some resilient the on

and customers are safe have We service. the they best-in-class provide with team continue where resources our to invest needed to we to ensure right

on new our announced OR undermine December, managing for our short-term that actions strategy more. will shared when we with we goals. strive we aren't last We As longer-term focused

margins Our measures longer-term such revenue, commitment ROIC. balanced and be EPS, to financial growth with important competitive as other in will

plan that into making position strategic investments us the value. Putting we are long-term deliver in that to action, near-term

more people revenue capture markets we growth the resources us will and to need quickly through maintain to and This downturns. when investments is recover. One of economic those respond allow

Even more to chains build supports rail enables customers our and supply to significant, rail into resilient conversions. service confidently highway their

opportunities to of downturns in training, craft invest Southern. temporary the use who will are for and railroaders Norfolk creating career We soul heart the

I what spend colleagues it for crew craft enjoy the need. listen culture made model I won't and to they is about rooms and to working have our my personal my in safety the time I acknowledged service goal the industry. stop until

to forward employees, right we industry. Our is for it's a way serve. our a better the the It's the strategy value thing and communities deliver to way our to do and better shareholders, customers, for

it recognize I'd the received take a our challenges over support amount letters, have throughout it turn to Mark, who like the of partnerships to first forged calls, dedication countless be our e-mails Norfolk Southern's customers. from the we I proud shown quarter. part customers Before with Norfolk Southern to the demonstrates of tremendous customers to right. response moment me a made and and positive have truly It's recognizing I've deep team of and making and

over I'll now to it turn Mark.

you good represents you, see The On the results Page for financial key measures. X, morning, Thank our will and row the everyone. quarter. GAAP top

On response. Ohio to estimates impacts related the and and the row second current incident the Eastern cost are

results. the On adjusted row, the you third see

claims community includes costs the The legal advisory that payments, of settlements. and site, support and a the associated with and and for expense million cleanup expenses, the estimate restoration recorded $XXX incident we of of preliminary

revisions other associated in and that estimates is recoveries are quarters. note and as important cost no credits will determined to that these we accruals in these be future recoveries of or assumed insurance It result recorded can in periods. estimates learn future more, with in subsequent one Similarly, to will expect the

will versus and QX growth bottom of growth were The growth income Ohio earnings Ed two and rows along of down expense that variances I X% revenue were in with of Slide the The at the X XXXX. will at reflect drivers, through XX%. recorded. variances the the the which up shortly, due cost detail adjusted reflects operating details to adjusted adjusted X% the walk year-over-year quarter, EPS now. bottom that were XX% GAAP Adjusted net Eastern

inflation an In to in and continue resilient of help Inflationary incremental for to being bend, Adjusted or with and growth. and in pressures resources all up from our operating majority saw P&L reliable more notably comp long-term settlements. costs. much service-related are in were million expenses of most the increase support driven headcount $XXX pretty the become wage T&E by in us as comp bend build categories, XX%, and we year's we strategy also last increase our visible

costs, also aimed we at Purchase service on work enhanced our network. equipment of as material by main meaningful in the Ohio an also disruptions operational the corridor growth help is rents, increase network by line of executability, resulting safety. that slower from our a investments, The a fleet the improving rules is strategically bring well inflation, impact critical impacted projects service train part including our productivity, inflates shutdown speeds associated service in and while but by in costs, makeup technology enhanced triggered in incremental part derailment, our accelerate into also as because is to stored locomotives driving Eastern having driven in to acceleration

completed recall headwind study, headwind contributed depreciation, to a that subsequent continue quarter, the gave roadway a please in Moving $X of that that depreciation and depreciation quarters. and million this in we headwind will year from on recently as guidance

quarter versus another in fuel We the by drove also efficiency X% improvement last year.

adjusted on life income variances and million, and on I'll in P&L by that in the EPS Operating the grew returns right-hand favorable to quarter. results X%. to grow income grew Slide aided income here income adjusted insurance Net Moving and X%. X% grew helped talk the XX% the pretax income operating columns. X, was $XX Other below company-owned

while operations strong in Turning with X. million from we flow committed to distributions higher share cash $XXX last repurchases. year, Slide and supplemented working from part in returning on flow shareholders million capital and a to than shareholder to was cash higher, by free $XXX remain capital, changes Cash dividend, was free

his to Let operations. Paul me now review on for turn

shared safety. we On with of every my the for the and operations joined I'll with Operating At to the reflects with kickoff first I Thank XX. our starts network. put Alan my Officer in you, Chief the us Mark. on call meetings. this team safety. January, meetings some time, of those begin Slide intention do on leaders we earnings topic. I This were middle leadership Everything begin update across priority my as

discussing in priority. started others. participated with We enterprise is leadership Our safety every it team meeting that marketing an

our in investing starting year safety. our with supervisors We are line with leadership conversation all this in of every ballast

and tone we tone leaders, the As influences set culture.

Bellevue, are We in of in a including regional new the facility training Ohio. development investing also responders, community

safe to do We a railroad and challenge even better. are constantly ourselves

safety-related areas. community these culture continue work initiatives will in that further with employees to We and partners our enhance our on

more XXX are safety we to adding steps network our technology, report on enhance hot our East after detectors of most bearing in preliminary we accelerating safety greater specific onto NTSB's bearing expanding acoustic derailment, portals, our note deployment train Palestine which of the described detectors digital I'll taking our advanced network, Investor during and detail Day. reviewing the the inspection including

you XX, will Slide On our safety see metrics.

in had go injuries noted, frequency a in same a the Alan the rate XXXX a XXXX, arrive. work injury As We all condition families employee and decade colleagues their of began to with with lowest continue X.XX our frequency home Norfolk to Southern in ratio. so they ratio of X.XX

our We making reduce to FRA are also accident strides rate.

one We accidents tracks. mainline of graph on the are reflecting frequency occur quarter, additional showing this that

with compared to strive flat QX communities year-over-year that serve. These to have accidents mainline While accidents, to the generally greater XXXX. we improvement through QX have impact to we tend reduce been all

equipment is technology continue accident Our infrastructure investment mainline focus to lower. our and on we're inspection in off, confident our drive will paying rate

significant on service. rules Slide makeup overall analysis and our provide enhancements Turning update the thereafter, performance our velocity the safety, service began and XX, implementing an We the to soon impact of as in In quarter, on railroad. a resulting broader to accelerated efforts improve train our we part productivity. of first of I'll short-term

thing become However, these productive. and to the changes reliability even the allowed and increased were do of to also us right more network have our

to modernization, was This of now long-term same locomotive more another Merchandise trains operating possible this are things continuing distributed example we than we commitment value. to our are time example, last For with only how year. investing XX% in power

mainline are two of all Alan also remediation derailment one track complete, until currently up reduced at and in soil. site explained, Premier remove As through is section made we March decision the June, operating busy that early the Xrd, expected the we the speeds only at to pull impacted From our tracks Corridor.

two to been we everything in our have was need from prior years. temporary derailment, that it had this recover our the setback the momentum. best We to Remember service to

already are seeing makeup As we to our enhancements, improvements dial our recent train in in weeks. we network

to long-term impacts. through do expect We will meaningful work any continue backlog and the not

strategy. to to We of the execution get back are our eager service-oriented

XX. Transitioning to Slide

have and resources of target in we one-third become invest on resilient, need and our more locations strategy the to minimum execute As staffing below people anticipated we demand. still our about based we our high-end

of continue to robust a pace pipeline at place. trainees hire We in have a strong and

candidates it We to are targeted is attract series and where in of employing taking incentives are we to steps support provide immediate a needed. locations,

go in For areas example, temporary our the transfers we network. leveraging continue and teams are we as to critical restore

maintaining in future the locomotive Moving XX update. and of Engine overall year's pipeline maintained capacity well to remains the in elevated trainees above workforce of to conductor for on below we productivity our last last productivity metric velocity as as service levels. Slide with support growth. keeping locomotives, Starting Train progress due The quarter year well &

our have service downturns deliberate we through growth volume and to provide productivity in service, represents strategy of and capacity an balanced of and As maintain to economic uncertainty. a support growth. for strategic aspect resilient investment essential service future is of This times discussed,

Lastly, benefits we for and another is This area efficiency initiatives where shareholders, invest customers, communities fleet fuel drive quarter of our continue record will our locomotive produced to and productivity. to fuel another we the serve. modernized

I'll now to Ed Elkins. turn it over

good call. speak year-over-year offset our growth Coal strong revenue our XX, results weaker Slide revenue portfolio leverage everyone we our the the first on I'm that were conditions in markets. on unit per Thanks, enabled Paul, Merchandise in in Intermodal in able starting where for and quarter and to to of This market the to benefits the diverse morning quarter. in and conditions our markets to

to increased showing best and has storage overall fuel due to can billion of Volume X% when and in revenue in As mix, been positive service you than it in years, see, volume truck was volume more product signs higher revenue our flat, lower revenue offset was the total but which and $X.X rebalancing. Intermodal. the strongest two in January were was market surcharges

decelerated ability our and Volume customer impacted the to disruptions quarter truck the markets to continued throughout market service key deteriorate. in meet revenue and as demand

customers January our operations-driven in significant value demonstrates can for that and performance yield shareholders. approach Our customer-centric our a

board. led plastics Within Merchandise, growth demand by sand, volume Volume by partially was and for markets. this aggregates growth was higher and grain fuel driver price strength of improvement Merchandise gains in These prices of followed by X% the were for automotive, in in offset and revenue gains. weakness pulp quarter, largest double-digit

Intermodal this lines a combined markets and business environment weak were truck notably sector drive weakening weaker volume domestic year-over-year. quarter, of where to a particularly decline within our freight a X%

was higher quarter this even X% as of declines. which helped services, for Intermodal spot the on domestic year-over-year with a fell, volumes mitigate IPI to imports bright demand International improving some overall

surcharges and revenue Intermodal fuel higher from price benefited quarter. this

drove lower volume, period. enough not the in the which of domestic X% However, to negative prior and overcome versus decline revenue impacts storage lower a revenue

IPI unwinding international revenue the a and supply that in is chain rapidly combination indication strong congestion the improving declining Now that of is I'd volumes storage U.S. note Intermodal

driven in led was well by service and the surcharge, first greater continued to up quarter, X% by XX% territory quarter winter first depressed demand. which Coal is muted fuel Coal prices demand experiencing and Coal high higher up levels somewhat mild weather. meet currently growth due supply in price declines year-over-year, Coal the shipments Volume that year-over-year natural export, in by revenue volumes, gains. was as as our utility in gas of to were

to moving Slide XX. Now

near-term of As headwinds throughout quarter. XXXX, second to revenue and the we volume remainder we look to pressure expect the ahead

return us be permit. service of the the optimistic much product we are However, half to when growth our improved conditions in positioning market will to year, back that

with exceptional seeking to the serve footprint. best value growth form the And new to walking are to their economy, transportation products on reduce to today working we marketing can offer Additionally, carbon to is identify customers their that hard in team team and to and in Even we deliver. field the overall in avenues spend decelerating reduce we a to on new markets of business. this the new know

rest quarters growth that X% automotive we ground backlog by growth the will be a year, by shipments, shipments counts growth at forecasted led vehicle As for light the of of XXXX. Also of we the supported in improves. Merchandise the remaining to in contributing automotive as U.S. look production work through is service shippable will our

growth to capacity experiencing also natural expect like drive of shipments be and our where will certain downtime enable demand. improved pipeline segments, gas crude We us expected in declines volume oil equipment Partially year-over-year serve and are strong in offsetting metals improvement chemicals will weaker plastics, increased in our times market cycle weakness demand. where will Facility unmet liquids. also markets

XXXX replenished Intermodal challenging the the be Currently, headwinds in consumer American excess our quarter, and a largely on are particularly negatively second our persist we economy, see inventories, consumer. volume markets, to impacting Within domestic business. particularly headwinds throughout will of conditions, dependent from the likely health economic in of volume, these capacity, lines and truck

Looking at continued all electronics, conditions economic We rebalanced spot the the truck the container. market, housing clearly, to and furniture, impacts back half in in to see want remain the rates of appliances, uncertain. earlier fall demand those which for weakness home has continuing That year negatively with anticipated contract that things market not as a this first we quarter. move throughout 'XX,

of our large timing rebalancing the on volume the a will outlook. have impact So

demand but will the be remainder which year. storage fluidity, faster which Fluidity is negatively a shipments of of supply we be and dimmed partners this Intermodal second volumes, will to tailwind driven function our domestic has improving. somewhat. is has import of Additionally, half by declining returned which which for chains for 'XX is a outlook for International the Intermodal volumes, IPI, to impact expected, will than chain revenue supply

together, are with to Taken our the Intermodal finish for these overcome potential and this long-term of near-term momentum we to optimistic challenges market. business the year realize to

in best success and the partners industry. hard market them is to Intermodal the ensure turns. as the working positioned have We with for our that we team are

Coal. 'XX remainder mines export Strength Lastly, volume will by NS-served at in expected more with utility markets demand the for be our shipments sourced Coal production of international will declines than new offsetting be Coal export versus in driven Coal for in online Coal. business sustained up in U.S. 'XX and coming Coal growth

more lower prices expected the be Coal reduced due revenue. in per However, seaborne surcharge lower and fuel to will volume unit increase revenue anticipated offset than by

The outlook is currently pricing, utility and upon BTU $X than per in to dependent natural is XX% which year. million less highly decrease last from weather average gas more 'XX, than a expected

currently are further shipments. demand stockpiles at levels, addition, pressures In increased utility which Coal for

near-term. Improving the a Overall, we have stubbornly will tailwind, outlook 'XX. a our service truck Overall, cautious be headwinds persistent will loose to ability the environment. macro in remainder of the growth on will a market in grow but and for levels market be dependent XXXX temper

We efforts we continue put control strategy. operations-driven our to that customer-centric to our deliver can on on things

investments experience. value customer are deliver a the the and to efficient required simple, reliable, logistics making through for We long-term compelling

by locating on demonstrates along XX, I'd Norfolk Slide backed recent locating Motors, in independent by Scout a plant Norfolk lines. Lastly, that like U.S. to manufacturing company value new development and success Volkswagen Blythewood, of Group a an served Carolina Southern. South is industrial a long-term site the Southern highlight

an selected Scout serving vehicles will revive that new XXXX. and produce Norfolk will we to billion permanent and happier of last forward brand produced X,XXX served Southern. investment than The jobs. the by iconic in by be Scout their plant by site that electric XXX,XXX over new this look We end X, a Phase In vehicles create more couldn't XXXX, business $X

to say that chains, supply these quarter. Before through to you supported thank I we us forward in growing have us the this opportunity every who customers close, like We they give challenges to appreciate of our look participate first I'd and to successfully partnerships. their

our forward growth to we realize and confident ability are delivering in for our results customers We for to long-term our look shareholders. and

to And I'll back with to us Alan over bring it that, home. turn

week first the as end CEO. of Ed. This Thanks, marks year my

broadly that for and true my of year people, organizations. the adversity the last I reveals are more the That's to at I'm rising I thing. for appreciate reflect who on Southern, character. few doing especially and by the Norfolk true challenge right it's As inspired months, colleagues

economy. our We are values that and and to the materials the by by safely driven anchored goods responsibility our move U.S. deliver

delivering Moving for for will be Norfolk and productivity, our growth new and Southern pioneering known strategy. operations safe through forward, service,

to the will in response a Palestine Whether setting communities Palestine, of Our value to our be East we source our customers, thing, industry. long-term for the for it's to of for we shareholders. company, pride commitment stronger years we citizens right deliver When operate our every the our in our or the pace will day. creation be employees, come, a all we East do which next and

call We questions. will to now open the Operator?

you. Thank

be conducting question-and-answer Instructions]. We will session. [Operator now a

Our Bank first Ken is from with of Please America. question Hoexter proceed.

for Great. the Good rundown Thanks there. morning.

or normal flat when below that level bit you of And yet much Alan through regions. you're about third first the levels some back little mentioned quarter? maybe a or service to still than targets timing then of this you in your a Just get you target Ed, T&E the volumes target levels, talked the Maybe the worse seed quarter-to-date, X% you talk about could down from quarter. about in are rebounding the

the and ability cost Maybe get to about talk big, you've there? given impact focus awfully seems hiring Third the had people. Thanks. on the sustained

We executing on the our our we attendant that volumes, industry. Ken, for and focus great unique had recovering right? our the Hey, vision, in and the of It question. to we're that. to the close impact on I a last proves in process works clear. it remain thanks Yes, unique year to strategy And service make service. unique really want in product saw And committed January. our this you And

our a to a well some make. our In focus because our had the it decisions operations-driven and aftermath aligned knowing they with service And tough those the growth, they core full and were align would values, with service customer-centric are have our as decisions of and made long-term right but productivity our East we Palestine, we to impact that organization. long near-term make, decisions on they

operating late marketing same with shape The year resources. the year beginning our we're place in and in last now. this better delivered team exceptional service is that same And product team of much and that

we don't the to And think back will track nearly in will And in so get Paul climb want Certainly, place East in be long. beginning the happen out I that, as of the probably as Palestine. noted, June.

to so as into position a from I Norfolk service think And us you're going quarter, Southern. move the see we third that through receiving product customers in accustomed and to to deliver that exceptional become have

Ed, hearing what customers do talk you that? about on want to you're from

as able Sure. think And preserve We of fortunate, We've I appreciate that's the strong a important later large of some our couple and this the this excess markets. really see very inventory with our off been through that happening been forward it's network. come work here question. in amount fluidity season move customers story of a very Intermodal really, performance frankly, we've is we because on a we different we year. bid as right to now, will

we're on so our the banking So the customers' Intermodal of on to terms in performance speak, come, side.

clearly in consumer the And Wall you that read still The you've market is Street Journal. it deteriorating. elsewhere, heard

bullish service. side, improve us still capacity there meet industrial that we our front. demand on out to lots there's with of And we're the On additional for as

is with muted. question proceed. your Please from Our if next Deutsche Amit check Amit, Bank. and line is Mehrotra please see

Okay.

to back him. come will We

Wetherbee question Chris will from proceed. next with Please be Citigroup. Our

I that derailment can made to prepared a if service little in structure. run, cost that the about, There's I get comments remarks color long talked wanted impacts you long-term just morning. maybe or Alan, over more we bit capacity no on the Thanks from you on. good two think, see the

that of dynamic that? structure So maybe about how and cost really sort thinking to wanted you're explore

you for a could of estimates in then And accruals. talked future I about Mark, cost little potential, the that bit result think,

obviously as I think very the important dynamic as long-term about thinking derailment. we're that's impact a the

get this we think it very from what if be longer-term forward, That could perspective can power outlook rate of sort the sort earnings is mean going So cost a going of we so might an helpful. would and just idea the forward? of of about run network what

and could environment talked the we impact I've trained marshaling because on new got which did rules rules, cost conservative and was of service structure frankly, It context about as an initially recent our really forward. based Chris, events. in Yes. train we going on the have our marshaling

analyzing adding will Paul As in we're opportunity our and network. line train length. significantly as our using back into power, train capacity ultimately segment, productivity to each on noted, each we are of increase and symbol our which And this we're enhance dialing the frankly use that an as distributed

thing and kind did feel the customers going time, our So very and benefit I confident that is vision we strategic right NS at our of that and shareholders, all for about. generate and long-term it's to what our that's Mark?

Yes.

costs and that EPA we $XXX that of preponderance So be with government likely really of that of the million. estimate to efforts have involvement to is the to it's as this, for The on also, facing be various note came future that East related made remediation time, of in we'd point well. environmental cleanup we elements that costs the Palestine, Chris, of the And first an is quarter reimburse there oversight because important the as and activities. environmental to in up of all

So that's part all the of estimate.

There was to be -- legal, to quarter, the to estimate There therefore, way and no and record that you really give Ohio three with are General not example could funds the going one related estimate that. that stuff the I'll established. Attorney are are in we not could things just

would that something that of future an in So would be example the come.

you and we that So no will as this insurance been record the that have recorded remind we those. point. learn of they're same time, new I they're probable things able and estimable, But realize there and estimates are are at recovery at that

estimates. of $XXX been most has on based fact, door the is $XX million, of So cash In that this million, okay? out really accrual

will a be really we costs cash from done Insurance incur the filings as perspective.

So credit. we'll due in insurance as and those road, we and down the filings the for record seeking be course will assembling a companies reimbursement, our

we if already. to And so estimate or have regard them those, impossible could probably with would it's predictability and booked we estimating

the So we'll reporting quarters. in as have go we to out just these keep subsequent

any I'll our add nor And Yes. include other well. parties estimate from as does potential recovery

Correct, correct. Yes.

Group Our question Research. proceed. is Please with next Wolfe from Scott

costs And I fell yields QX. Thank thought I high. from from Any lot on ratio have materials color repricing. were have little a QX to Merchandise yields the been that here? the Mark, Thanks. color any the Just actually then Ed, really better. Merchandise thoughts goes would has a on here? Any where bit QX would there? you. operating thought separately, of just from

Yes.

from had the what locomotives to basically network. We we to materials, the a sudden took stored So us Scott, get pretty year in out needed status. help dig we had profound on so the locomotives on out, impact impact early of

Some required lot take help they get rejuvenated out. them so work of us to could of a them

I incremental fluidity back quarter in will as that material linger the Ed? here second should costs half the the improve. be of think we network year some in see will there and our ease

Sure.

Our core pricing first quarter. remained very strong in the

As and several a matter including exceeded Coal in markets, of expectations our fact, we Intermodal. in

is and of right weak on you're issue. noted We happening housing a now. goes really It's into A of that's that some and knows to our the it housing seeing chemicals. was everybody the challenge, mix a Merchandise think a issue. but mix I lot side what's what plastics other markets

remains story intact in very pricing core for bullish Our and very much it. I'm fact,

Our next with Please Oglenski Barclays. is Brandon proceed. from question

you Paul, targets? makeup future guys to in but the the to taking good get and had discussed the change to impact, And that talk a going what's how that you changes can your you productivity Yes, for to back near-term question. morning. that allows train thanks

discussed something going Brandon, length. cover I that that's Hey I'm that and to at because Paul

symbol get to created on had each had our an deeply our until we opportunity train on some a And As Paul was was recent on make based in to environment I in reducing makeup the train thoroughly it network. tough and rules I ongoing really we quarter. March, because congestion some early we first of makeup -- events. the impact on our each decision to and conservative capacity we initial going rules train over the were noted, on an segment. decisions had That line network analyze discussion had and decided

his the right train train team are going the of the locomotives. physics, the figuring through segment, and looking for each symbol, configuration Paul configuration and analysis, doing at right out the each the line

do adding that, in. capacity we as back we're And

productivity that we going use it's to on and noted, going productivity. support to not As convinced capacity to And improve an impact many have our are in impact initiatives of forward. Paul ultimately, expanded It's that it's going have probably power, an to cases, is not distributed includes going service. going which on

Alan. you, Thank

Amit Our Please next Mehrotra Deutsche question with from proceed. Bank. is

Thanks.

about a learning to still I'm earlier. clearly Sorry use how telephone.

Alan, I again. how remediation you calling appreciate ask to in wanted are going. the So about efforts me

been? to you has in volume just Obviously, kind think do helpful early you XXX,XXX the -- snapback there's this impact were to Because a are at that of carloads. weekly think I that's think guys And pages EPA terms update you you the in progress the out just of weeks they to put the do what down, June? was XXX,XXX making. think few a that ago dipped positive pretty that, few related

is dollars year. around as income thoughts the you. what through yield maybe a progress neutrality progress understand operating And tailwind then the on as it It's and operating that on the downside, impact fuel year? fuel to into you or trying of headwind or I'm has been Mark, I'm in OI the just thinking Any also turns on volatile we the headwind terms Thank through to from income. and that

our and the going best to to Yes, the right core this we're we that values, Amit, what's we're do going long-term of your I'll first -- happened, we're for in Southern long-term we going Norfolk my Yes, taking organization what's three-part of right. one question. strategy means to to true response service customers, when that interest your interest And conviction best and handle do part you for said when the view, has shareholders, our a vision Palestine of your reinforced the your serve, a East East Norfolk as right operations-driven Southern. the the frankly, is And and customer-centric and Palestine. right employees communities stay

what the of made Head were than ground And people as And We've I personal sacrifices commitment willingness do the to so of with on seven got and families well. frankly, do they I week, XXX their to sacrifices whether appreciate a this, days employees and sincerely their the and are contractors, or less. their and going my you're we that EPA, met the that's seeing. I more

on And where something was they're EPA. an they're I They're and based community that ago, focused the place, week helping to that intently from finished thrive. done be and focused had but did didn't we environmental reached and And the citizens did, assistance we on about milestone we community from environmentally and on that remediation. was track another on community the intently intently in the half a received we've solution acceptable focused major the necessarily something feedback the that one under of And remediation started have track. need that on because we

seeing to and you want about do the of talk markets you're slower but impact the also what macro network volume the trends? the in Ed,

answer kind in a absolutely. Sure, try to parts. it's And it of I'll -- two

our as we going more network, to accelerate ready we customers are backlog load to first. additional off work inventory Let's go to the with that industrial And we're present Coal side capacity. that whether now markets. would to networks, know yards, the ag our steel fluidity at in our increased our demand, customers Clearly, that there auto of whether sustained and right the from able are it's believe our and scrap forward. benefit the markets, are going it's also It's markets. going capacity which mention I in certainly we in also to And the be

we're economy, figure out the I here. our products destruction opportunities. general here. on sitting the value the But and been story. can additional to additional demand team successfully look, lanes a the amount now working and more for a in said, customers deliver containerized how hands form ready best seeing our in we'll the marketplace to tremendous be the that we We and in out our in rotates market what when of industry right really would Intermodal demand not we're side, There's manifest of it's that itself got, I volume there like On call in the services execute and

are the demand. resizing And also you and on based Intermodal network current Paul

That's right.

And demand our invest for upside. of the of and a recover. not it's so to so volume when that that's going to question the the when downturn right? part through U.S. are is strategy happens, Look, It's we're the from it there consumers the

important so value. that's Norfolk the Yes. And as their most that's been today. many purposeful able and seen what to insulate that it, customers they go we've Intermodal of for to to customers part Southern's from makes the very because the our And our have network want part sell frankly, we disruptions on confidence that we've here

Mark, I was there think a.

Yes.

real We a just on quick lag fuel. So did have benefit.

that this into While benefit curves that down, the the fuel we fuel coming tailwind through if of quickly the year headwinds on but to go to the us we prices in are surcharge turn and is lag had a going quarter, provided as hold diminish some back true.

from Please is Jordan question Alliger Goldman Sachs. next with proceed. Our

Hi, cetera, of guys from sell in had were similarly, ways, went and year in to around terms impact I derailment out think I'm Has an And the metrics. side stuff you an remediation of as business? efforts? away just TOP|SPG, trying and this on has on of sort curious, operational et the the impact some some try equation this then of addressed marketing initiatives do you Thanks. had the the on into but the the to as service various go you the it you impact

more back are running. -- delivering not customers. out of only They East frankly, our -- group there had there's to capacity to we're them doing Palestine know They we thing, supportive Speaking right the to we network business, up really us have additional our the get to want that very the the a And for quickly. but and of than constituents customer not to for forward that looking side them.

Ed in They proud what outreach from support the that prepared appreciate of. this. we're and we're certainly response. through We made say us do And with and remarks. They we're what this and of seeing do, what we Hey to doing. I the that. our they're through both referenced our follow we they're know see They customers our Jordan, know going

plan this do better interaction between and a service? you our And operating and going so as about the stronger come we're to out of want Paul, current to result. talk

to of absolutely. the We're our when we have improving that service that major to Oh, was Intermodal in of that building the out TOP|SPG TOP|SPG last us was go back service, I simpler, improvements strong last executable few implementation franchise a more late, the TOP|SPG. interruptions. improvements over And to path on quicker I as especially provide point a as year seeing We've seen referenced. momentum the weeks. implemented will made around plan want

it. demand network this in about across to we're now, pent-up right the space, Merchandise Again, after continue all inventory our is to work and going

Ossenbeck Our next Brian Please proceed. with question is JPMorgan. from

morning. to taking Hey, good for first. question. follow-up with Thanks Maybe the Ed

some both affected tailwinds in more You storage in mentioned some if have on ARPU. of and them those you and recently have factors market Wondering been of Intermodal Coal as the the stronger-than-expected had some fees. that give both that you and export terms results could thoughts pretty distinct we because

give unprecedented. keeping in But and we it? on should still will the at your consider just that but there's more to of hearings public-facing East calendars sort hear or just time Palestine, mile are to view, update of of the next our if that public investigation, least comes us other be when of be any next of you. these numbers can you when or line sense maybe the that Alan, much updates then, NTSB we what it terms helpful those investigations hearing keep Thank in And sort maybe side recording, the pretty the it mind we their the should not are things, for things you're think a some timing for these of the for I markers takes public should of expected

I think a nesting might Brian. that be record All right, for questions.

off recent as pricing, U.S. Low-volatile quarter. We're third the still but performance least coal know, of XXX-ish still above in talk highs. XXX about a you predicated at the price indices off all is is the curves. Coal And and seeing forward strength forward have curves XXX, about come those API met our at first. Let's throughout have the lot

good we're So pretty feeling there.

tons that coal met know China revert mean side. but think is are stronger We story demand going I going supply And the on [indiscernible], mines real reopening which incremental some increasing back, and is metric to Australian supply flows. will to those tons. That's come the production that's the new move X.X trade will of U.S. is export. and think I most Australian production.

increased increase On the And limited seeing the forecast the U.S. side, has demand we're to about to European spot coal met about up production again. February, exports due blast demand, but month-over-month back and X.X%. furnaces in that's are still cranking XX% from

came I XX%. we could Now Index can we That's Chinese bullish. highest The be the to be two years. be prefer China. reading in above PMI bullish about in or Manufacturing bearish

demand demand So We the I from that auto some there. that there there's healthy know is believe sector.

going good So about we Coal feel forward.

markets X%, as our going that moving year. a last piece what On year I expected. the normalize, lot right that there's I markets about we as headwind it And volume normalize, freight was as for seeing those we're charges side. now. Intermodal highway remarks, mean and we're the was this to side, a storage And we way, than when those there's so was to last seeing on talked year how to international -- the ago noted about in Even those prepared unwind congestion noted volume, no that to we excuse it faster, the and me, unwind they doubt from for IPI revert predicted think that's grow were going a that's on the even though the good faster

cooperation at with it really have full to has announced hearings, noted. in yet last up. I don't just the Chair met scheduled here That that our the with Brian, as date summer, week of committed NTSB finalized. else And you pop but with a their the investigation. won't doesn't We anything the has point, conduct mean NTSB not field others been respect may this and

bills the note my offering with results, our preliminary six-point of in are full-throated And its occasions many safety elected I've released provisions NTSB for as D.C. our you And soon I'll officials the with rail also support initiated and regulators, as a in that safety multiple plan. that we the there. saw been out

take that we We to safety taken and role industry-leading initiatives, and an embrace are in advancing have role. we these going

from Tom and UBS. muted. Tom, is next check Our this Wadewitz please proceed. Instructions] if see [Operator is with Please question

Okay.

with from Kauffman proceed. Vertical come back question him. And be next to Please Partners. Research will Jeff We will our

a macro? on own that's But key how to of very a is volumes line Are terms recession? you back your do the effect what's in the trying I'd of a love believe of Where this into having traffic. and in in remediation And much. one your we of efforts the running recession? And question. Thank challenging quarter. traffic not single only figure hear got anomalies then of out, your kind here? because lot your on is part heading to we're data recession? you do congratulations headed? Everyone a Is of track in effect your view out I've a this There's that we a you're the

customers don't you're our be. you about as about tight Why what hearing? can you're Ed, as talk with

Sure.

a I see industrial the is of whether sight, is describes on or doesn't clearly. that the side, think for and of clear it of on side quite there line you're I or the one on word quarter matter that two the industrial think best murkiness, coin it the consumer demand. We markets frankly, a

know industrial of their calls we the that pent-up is further right there's particularly markets heard see clearly of has that the question also side. other that and The have there other outlook many changed now. in consumer We demand is deterioration still But entities the somewhat, markets. And you probably year. real on from the in these truckload half second

I turn there are of lot they amount do a terms will a am tremendous want turn. ready in be I of to of again with and positioning there's we thing you currents to you think the these one murkiness, So when and of, out reassure cross I ourselves but is markets

will come UBS. back we Please Tom with proceed. Wadewitz to And

Yes, good morning.

about if I you ratio. ask to you operating Mark, that. think us about help Sorry could wanted

XQ be Or think you being second in to would could parts beyond how you. car at when what's a second any seems helpful. about XQ? pattern do per some lot you a stability It if do or in pickup the parts, versus we charges look right of moving the storage given you clear normal now. thoughts think more in that how it maybe maybe some volume, on half, Just you OR in Thank got got if June, revenue pretty You've you assume of see OR network help lot seasonal But moving about think half you've but volume export? about or from relative fluid. in maybe

for the Tom. thanks Yes, question,

operating going think consistent pressure throughout So the year. be for ratio a to I point look inflation our is

another quarter a the second headwind, we Service think frame. be say of starts emerged to should that a we expecting start kind of we reality if for as unwinding back before is, it half, fairly quarter become were year. may does that get in And So continue we really I'd about to time consistent it to January that's where probably of assuming throughout be a bigger here. where that to tailwind headwind in that kind flip were first as kind service headwind. and know the probably primary the a and in the has

result good a just very is we and really Let's March. pain have a here of did the January really not and we're February the forget, in seeing quarter

been represent think touched that that the third mind if a the tailwind become modest there's tailwind will quarter. second get the back upon tailwind And in it I It in in more then in some constant, some fuel of of will is the again, I earlier, fuel, do year, a half. component be bear we curves the as the volume the believe might to quarter. in back half here first a hold headwind and

from with Please Shanker Morgan question is next Stanley. proceed. Our Ravi

everyone. thanks Great,

just here. a couple So of follow-ups

kind the for something are and could insurance come going over the go several up. the further high next of you how potentially the is is it's as the get settlement think message down in from watermark claims? legal accrual years itself, of made XQ action to number Just much do you could that of on kind or that like you Or the that kind you you cost place as that takes the settlements

trying U.S. of class have of the any to what slightly you you Just Thank going see trends kind of mention guys you using your this to the number of ability And be to probably also, does of is post the that think I proponents Do mixed freight diminished biggest been over you. X think afternoon? railroads. kind time. run

parts clear That includes are I Ravi, What we're potential that now that been there you accrue. pretty not that other claims Mark that to parties. moving given going have estimated. in our from some includes insurance There was able also charges. also third are for recoveries additional the to we think and It is estimate. things some we've hit know are what

drive that rules, network. With which really respect allow our that into to of to to marshaling going have freight, our the train enhanced are mix DP new use us leverage and productivity

Please question proceed. next Jason with Our is Seidl TD from Cowen.

I we a sort little of mentioned you as lot sequentially before headcount have about year? the And would going furloughs downturn, think on your I in you're think network. a throughout good just in you move levels that. past. of even get this the part we the like should think differently than to you around, about a How in gentlemen. of morning time Good bit operator. to below color you, minimum your then And mentioned Thank staffing

talked Jason, upturn. when. of thing a customers and throughout employees the do to we taking question make our our a we we industry, a of And -- we there serve. right going our for shareholders Well, and to a long-term for our question vision because if downturn and the It's That's as articulated the sure not about, demand we we're returns, communities it's only for to as approach. the unique invest we're want are

You add on want to headcount, a Mark? more color little bit

Paul's the being a our our on of some we're in service fair to to we think because feeling resilient have of you our us our here challenge to And Paul and want And yet, got slide still levels. new Well, there. the we're in committed not XXX strategy, conductor key seeing that still a here locations as count. below of get promise and deal yes, our got targeted see of we've We with pain part We locations why I over in that's we've get not there be resilient quarter. that levels amount we're are the trainees. in T&E here you're Unfortunately, trajectory made second again to resilient. mentioned,

hiring more there's So to do.

help are appropriate number. half I And will our we handle levels to the us dynamic outlook and once at e-counts our bring type, But they the and demand outlook does today, down really the lane. of by will it just than we start that think a by remember, numbers you'll normal on area, determine attrition. are train by to of commodity where get targeted see locations is more probably headcount by for depend volume all the

what trying appropriate a sophisticated So more put levels ever we to lot determine modeling than there's really are. our into

So I year. the course think up the it to throughout you go see will continue of

from Stephens Long Inc. question next with proceed. Justin Please is Our

known. is confidence XQ? into pressure in quarter that's well you've for that in domestic I talked consecutive about, at they've volumes? see circle sequentially to look Intermodal. your quarters. Thanks. first potential there terms And But a If I your continue wanted bottom Intermodal that Or back and of what's volumes, Intermodal sequential demand to is there's obviously, three we weakness domestic the declined

overall happens going I what to predicated sector. the that really think by it's be particularly economy, consumer in

very ability going bids get regarding We customers forward. our reports from their continue to win to strong

bullish we're part. So on that

to do the in because the very replenishment bit sales We're think certain there's the you've those a maybe front. normal little demand on so ratio, times close not rate still we're close many eye on at to volumes is themselves which other sectors, the heard about of in speak, not manifest keeping inventory but to normal now, they is that that that advertised bids, are places, I though, there. were a

of take I watching the happening as growth that positioned first market be comes the will in closely advantage well rotates, economy, gate. firmly we're out very So of very believe to what's we that the macro that

for the Yes, through the growth we're in the patch. right investing partners now aligned with industry. soft best And channel they're

we're And going them. the were grow international from share take to market. to So truck you Ed, and able with

putting we're additional Intermodal exactly the we a there. value that's and focused also would first say No, And emphasis markets quality final the on also of on product right. and can terminal deliver of how level. I our at lot we are mile

rotates. of this to well come So we the as positioned, market we're out very believe

Markets. question Capital Walter from with proceed. Please next is Our RBC Spracklin

Hey new like I it the strategy have what's of to bring type to? product? business excess utilizing Thanks. of eventually improved more my taking this railroad. the James And you morning. this Or plant to other the you speak Walter though you in EV pipeline? or Carolina. a to to for real Are that related estate any discuss on able McGarragle selling to Motors -- is this in team longer little this Thanks Scout South wanted for looking now a question. can and ask Is opportunities our question service term, the anything else

Absolutely. Sure.

additional and a of us. search as battery for Motors for And of well and present plant unique we our manufacturing that of Scout any battery tell while proposed ecosystems projects I about sites what for the active manufacturing. more lithium mine assembly those, NDA, XXX support can over are positioned have really pipeline. they opportunities to EV including plant you serve We recent we in under many reopening for really The and talk nearby, them is can't some

is opportunities three of one three moving participate those on in us segments. actively raw the and materials, moving one moving finished to EV for the working all is We're There's components is vehicles. One really space.

from Vernon proceed. David is question Bernstein. next with Please Our

here. me fitting thanks guys, Hey for in

sure throughout a is level, kind of little go to the -- just the opposed And X the mind, to if to per of to help revenue talk maybe that I take that in be with be you. to to a if surcharge mention headwind price to mention make not I ARPU. as we're core how accessorial. a ARPU off run would the employees of you million $XXX you inside want ex-fuel for could be accessorial about wouldn't you Thank Mark, the So Ed, and good can cost you asking number confusing us the minus Intermodal at bit year, then, could modeling and much that, trajectory want helpful.

quick, per on ben Yes. the comp employee. real and David,

pretty I much First kind throughout the had quarter of was quarter that do course from I guided like of And the go sideways last $XX,XXX year. range. expect here it to

these wage that service-related will by and folks, in third We costs. happens just the up step another wind-down in increase some the the a quarter from in a agreement that of third but for here quarter, the should be mitigated X% have

So $XX,XXX going that the -- I'd quarter. and per throughout be to in say it's year territory change

accessorial And the from It be ARPU to be we likely the expect what going more a on made in And by headwind experienced some pre-pandemic. of and is revenue 'XX revenue with to offset plan. positive line road fuel less declines remainder think much be a 'XX, we've that's accessorial and I beginning charges or in in significant year-over-year revenue. we volume, to then for really the our price impacts Yes. side, from

First a step significant quarter, noted. we normalization, I took as towards

Chappell Jon with from question Please proceed. next Our ISI. Evercore is

beginning about your from reduced do that just a lot line into What be associated costs morning. Good component there's quarter really there March. you a lay of And should normalization that the of think will go is you. ring-fenced to talk June? components, speed those starting cost running to about way think XQ? you the second when any we you the of in as with X, I early one in the of then associated second inflation quarter understand kind be the But through Slide some with Mark, out with Thank the OpEx on that. at

regard to to congestion that short-term terminal. costs incur, is Part have up service they had in the and we've leases a show Jon, related and recrews well. up purchase Yes, the the to had, as enter of some with the some ben to I'd we've show say that into cost services disruption just related drayage -- we in to the they little in to and relieve taxis comp even bit overtime land

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in materials probably, still and fourth cost incremental and So we'll the to will third again that, that in of quarter. diminish some quarter second start probably have

proceed. Rosa is Please with Credit question Our next Suisse. from Ari

good Great, morning.

operating that no Palestine Alan, in properly So incident. you track the mentioned and there is the defects crew East were

curious is are for kind associated what to that been $XXX what you think then to steps in that what avoid that just could have think Thanks. to six-point that a get moving Is a included plan with costs the that Just and forward. wanted the hear cost? have Or of the million? you incident? are you the with separate proposed, differently sense guys do And done

in Yes. that differently? we the could Obviously, solutions. some as I come And immediate up with team What my done have could CEO, better? I asked have think to day. every done aftermath we What about

of that As detectors box you in included can network. know box got spacing the adding do plan, you across industry. better. our report, augmenting hot saw note the XXX I'll our soon safety results NTSB we already preliminary amongst as detectors the the We're of which hot And six-point the we But what, was lowest that. the

we're so about And more hot XX% box detectors. adding

Tech going portals. We're next-generation the inspection Institute East Palestine. go one partnering the up is outside first Georgia Research to machine on visioning, And of with

to a safety doing That's goal. So that focus better. to because of are we're we're They're enhance our there. couple things all there doing to going continue on

$XX that million And related detectors, the years. over said those which would hot six-point we associated in next with be of incremental it's couple plan, capital to that really largely the the Ari, neighborhood box cost

meaningful our CapEx to a not impact So budget. overall

Got it.

thank you the for Okay, thoughts.

you. Thank

Mr. comments. end We session. to closing over to the our Shaw for have I back call of like would the Alan question-and-answer reached turn

morning. Thank in good and a Yes. your this you Southern interest morning. time Norfolk Have for your

participation. gentlemen, Ladies your thank conclude teleconference. today's for This and does you

disconnect lines a have day. may your You and wonderful