Norfolk Southern (NSC) 24 Jan 182017 Q4 Earnings call transcript

Company Profile

Participants

Clay Moore	IR
Alan Shaw	Executive VP & CMO
Cynthia Earhart	Executive VP of Finance & CFO
James Squires	Chairman, President & CEO
Michael Joseph Wheeler	Executive VP & COO
Matt Reustle	Goldman Sachs
Allison Landry	Credit Suisse
Jason Seidl	Cowen and Company
Ravi Shanker	Morgan Stanley
Amit Mehrotra	Deutsche Bank
Tom Wadewitz	UBS
Chris Wetherbee	Citi
Barry Oglenski	Barclays
Ken Hoexter	Merrill Lynch
Justin Long	Stephen's
Scott Group	Wolfe Research
Brian Ossenbeck	JPMorgan
Bascome Majors	Susquehanna
Walter Spracklin	RBC Capital Markets
Cherilyn Radbourne	TD Securities
David Vernon	Bernstein
Ben Hartford	Robert W. Baird
Tyler Brown	Raymond James

Call transcript

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Operator

Greetings, and welcome to the Norfolk Southern Fourth Quarter 2017 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the conference over to Clay Moore, Director of Investor Relations. Mr. you, Thank begin. may Moore, you

Clay Moore

Thank you, morning. and good Rob,

from along Before on we which full may please and note quarterly differ are our the of refer important. today's call, that the of The during materially risks may make and to reports and we results. annual SEC our our at uncertainties risks in and Please to begin, subject uncertainties, with available actual certain filed norfolksouthern.com forward-looking website the section with discussion we reconciliations. for Investors slides presenters a those view most non-GAAP are as statements,

Additionally, will downloads be the call. a transcript posted and after

pleasure and introduce Squires. it's Norfolk Southern's to CEO, my Jim Chairman, President Now the

James Squires

call. everyone, Southern's morning, Good welcome earnings to and Norfolk XXXX fourth quarter

today's Officer; to I'm shows X excluding year achieve call record Chief and the Shaw, tax Officer; Operating impacts on full Mike and we Chief fourth Earhart, Alan Chief pleased Officer. Marketing Cynthia of highlights say to quarter that and are me continue Financial XX% Wheeler, able the the Slide Joining fourth strategic operating year for was $X.XX. ratio plan. quarter XXX fourth up Net $XXX points through share successful were our XX.X. our million, the per increased from earnings to We a the basis execution and to XX% prior lower income results to of by quarter reform

make work determination dedication testament Southern Each several even in our of of growth a has billion. of basis achieved XX% cost XXXX, billion and the XXX and as earnings confident and to over strategic our XXXX. We increased stronger XX.X our which $X.X to our income to on the achievements these under will whose the I'm demonstrating full plan. year is who forward $XXX years increased we productivity, improvements net successes Norfolk For per share operating control past point powered employees, XX% focus was a and hard record ratio, move

rail investing to will our capital like vitality We $X.X and that economic Southern Moving across York's XXXX, totaled remain over in to in and that committed billion the Portageville expenditures our as region. grow our Slide Tier New Bridge support X. infrastructure in projects business completed investment recently jobs business, representing

also new had we in assisted XX We $X locating customers. our over from expanding XXXX invested along representing business realized by lines, industries, or in billion our

allocation growth through shareholders in returns the in our as that capital Our strategy, over been That as is business, a Southern since long-term. portfolio health optimism ongoing X/Xrd targeting active ratio repurchases. commitment Great long-term share in balanced invest with the mirrored Norfolk reflecting projects network's a Recession and continued of our payout it's development doing industrial and for capital to the our in maintains and the a solid strong to business is opportunities optimism a for dividend economy our

have repurchase board and our Our focus XXXX, underscored in our capital accommodating The results resource illustrates organization. of by growth. productivity can increase share has continuation share $X.X per the which X commitment utilization the seen in budget in on an enhanced throughout or this $X.XX authorizing dividend program. all unrelenting billion gains, our areas a Slide be XX% while

$XXX In and million asset traffic. despite saving utilization. in efforts, measures the top year total, for through to full the our X% productivity, highlight XXXX was year $XXX lower increased In to consumption yet prior by fuel increase XXXX, These million XXXX. lower efficiency in efficiencies was on last volumes were we levels. savings generated average we results deliver productivity our also fuel labor year's than X%, terms ability in of able cost versus by record in as of headcount our a

to Moving service.

composite compared declined metric service XXXX. to annual Our

year last were levels Our service than have liked. lower would we

improving and on focused are resilience, drive we continuing conditions, to while operating challenging network productivity. from stability recover we As

are fully our program I'll update details targets and I'll we head on a through now into efficiency, We and results after over of turn these XXXX. growth targets fourth to quarter as on and further long-term Cindy to you on provide combination outlook our Alan, delivering committed Alan. Mike and the

Alan Shaw

benefited record our to was difficult soybeans crop. decline fuel year, gains gains X% we Jim, for and you, sand morning, high, pricing our in improved the same the X. Beginning as Total everyone. to in on South improvement. with XX-year capacity the goods. mix gains Merchandise Merchandise delivered and the pricing comps near strong fourth by unit of Thank Slide production period good focus, volumes while the improved and $X.X truck Managers primarily and drove to quarter, and and the versus steel related increased tightening volume billion due frac Export coal. third revenue revenue volume driven had activity in Intermodal per for of up, both increased tighten high last for Purchasing market drilling revenue. record the XXXX, XXXX plastics, truck capacity in RPU pricing demand higher X%. and ISM market. XXXX American quarter with due fuel and compared quarter revenue up a positive the was to surcharges, intermodal increased strength Index finished reflecting surcharge export consumer consecutive revenue X% industrial Higher

low high mix. in prices, benefited prices and Revenue declines coal temperatures. utility our unit supporting declines per X% from decreased resulting seaborne mild the Our export in utility which negatively southern demand, from natural volume longer gas haul as impacted markets, business offset franchise

demonstrate to value. shareholder as Our fourth quarter delivering approach continue winning and our market business results

drilling businesses, and light Growth Revenue annual trends representing tightening in steel by drove quarter shipments. $XX.X We increased led offset respectively. increase a per for and driven construction changes production in and - an vehicle in e-commerce fuel are experienced to shipments, capacity activity full flat the in a the unit X% X% coal and XXXX, volume of a and Merchandise production was by growth partially was demand for increase volume results. the reflective volume our unfavorable declines increase less negatively on mix. rose X% coals. overseas Export total positive automotive to industry X% to and unit. Slide per revenue X% year pipeline results in was while traffic activity a year increase in as versus X, we compared chemicals impacted U.S. revenues in XXXX due pricing per we metals in and improved the to in a turn This intermodal of trucking achieve XX% U.S. XXXX increase. our fourth X% As billion, our

ago, we and articulated plan. we improved to plan marketplace. delivering delivered service results, benefit Since line conditions developing superior value due capitalized the of to our have As have team the introduction solutions bottom unfavorable two strategic inherence the markets our evolve, our customer of strategic the working of touch, to our innovative continuity in our and consistently our our customers, with approach, years

merits XXXX of this approach. Our the results demonstrate

their XX. of for a heightened revise this economists, quarter our Slide our upwardly prospective top continued has strength to share fourth XXXX, outlook our who to for Moving The of year. expectations customers buy and

expected will Natural crude expect and intermodal operational. prices In to oil and markets, and in and provide as we and drive sands. activity decline frac our year, the to are half liquids greater volumes in oil the pipeline of drilling energy Mariner fully East gas second X XXXX coil, higher expected steel our support opportunities is markets, becomes in increased growth coal construction production while merchandise primarily full plastics. industrial strength for in for activity in business decline. the In merchandise, aggregates, For

NS-served plants. We expect automotive production to volume manufacturing at trail U.S. vehicle slightly with specific slower

ton in business the million-ton be the first is last continued uncertainty mild trucking The of positively consumer anticipated quarter. low coal year range dated, expected shifts of in fully end prices Our push the to and first e-commerce. is gas will given industry, to the export XX be In although volumes the temperatures XX the quarter to opportunity X backward volumes elevated market higher to impacted summer by intermodal levels and an we is likely implemented, capacity constraints as to ELD in volumes. X boundary. ago be as produce to million range some strong, utility in with demand market, million pricing these mandate to length are impacts lower from Benchmark the with that increasing than natural the to expect along the

our in Turning an to The be from be to rates, Revenue on truck WTI now the XX% diesel will we pricing also market, our prices remain extent tied XXXX expect expected we our our our year. challenged pricing price surcharge in gains truck contract of our focused decline. environment, expected diesel in We surcharge strength revenue continued on-highway Pricing benefit will remaining with overall approximately per on-highway revenue. to fuel of coal as fuel limited increase that prices structure, XX% raise are export by be and an will base in renegotiated and will pricing competitive our of program. to unit this in business. higher have approximately business benchmark with

value collaboration industry initiatives partners. We our continue our proposition to enhance through our with and customers

business the are to chain. We manage their transparency and to and greater improve give customer ability with them of tools efficiency their the more developing supply us

highly in confident are XXXX plan We our the achievable. is marketplace that

to lean will the opportunities. balances cost foundation approach and growth productivity control Our service providing to and

and Norfolk where are analytical invest. at As we Southern, how we demonstrated have in and deliberative we

We allow shareholder to businesses will pass not that bye. value us yield

it saying update market a I'll And We turn look operations. will customers, hear stay Mike what on for over with forward proactively an close opportunities. manage prosperous and to XXXX. We to our to that, they're

Michael Joseph Wheeler

Alan, Thank good you, and morning.

in by Our generated competitive to providing operational while product our our service simultaneously initiatives. us productivity leverage driving to customers, a business XXXX grow allowed

in XX, XXXX. significant we on achieved shown As milestones Slide

Our helped reduction our to productivity drive key combined initiatives operating our in with ratio. accidents, improvement record train in

top of key on to our continues we the Turning and our drivers serve to Slide The be employees our safety the of priority. XX. communities success

satisfied serious meeting on year's and continuous We without stable, are achieved not frequency in injury accident train are although, record lowest area. improvement this reportable ratios low. record our last Our we

locomotives. a X customers of with our customers. hurricanes began where toward service fully quality, fourth we XXX fleet which of product, routes record our down to a service removed. historic we as With last shut snow days these the deploying service, we we of work still and for for our respect consistent For quarter We volumes competitive trees We expectations temporarily over experienced the challenges by X North working be a product. are October in overall macro Georgia, ended handle need recognize for our in to service our storm that as and the were through challenges most in with critical one

are As Jim objectives. has mentioned, network stability our and resiliency

key of to some on Slide we initiatives XX, improvement to in productivity continuing areas. drive our Moving all are

they provide locomotive fleet's record optimizing in grow into the we in reliability. has the and for result our for a our our rationalization year's savings lower in while a fuel by these year. an record. balance train and time was quarterly record Not shareholders. same as with well, our have to we at do improvements to which These productivity cost, fleet, But that continue the search initiatives resulted only and plan prior which train again good our year, year's productivity of driven locomotives beating that measures efficiency, closing, these full improving returns the Our length, our benefit locomotive a are confident added also flow service. enhance in sustainable will annual product In competitive beating customers driving we the our superior of These will the must fleet resulted for maintenance prior service which been record record. business, improvements the

and turn cover to accomplishments benefit additional drive achievements. to opportunities will We financial are it NS our over Cindy, continue proud our who the of now efficiencies to identify I for of shareholders. will

Cynthia Earhart

good and morning. you, Mike, Thank

Turning to Slide XX.

a results continuation which annual of the slide. the sustained the from on comparisons of Our reform, will fourth successful of The I quarter and our fourth show exclude execution strategic plan. effects next detail and tax benefits quarter the

This year. lower efficiency. each fell our the and delivered producing drove operating you revenue see, more growth, record earnings our diluted gains bottom income importantly, line, impressive As for in can operating improving the quarter, delivered while operating ratio to per we that share

tax The our Let's represent enactment XXXX operating our the at quarter take presentation the this see income adjustment results. next in closer On less Slide the for results, you'll fourth on a XX, summarized GAAP look adjusted the of amounts slide. reform.

For results. non-GAAP on a on to website. I will focus our our reconciliation, refer Today, these detailed posted reconciliation adjusted

XXX efficiency our on Our growth point and basis income. cost operating in and revenue when fourth XX% in growth described, focus control, quarter resulted reflects operating Alan a which coupled OR improvement the with continued in

changes total, closer by take inflationary and due operating in adjusted increase increases. XX, the expense expenses operating volume Turning compensation the higher were benefits and In driver component $XX to of X%. Compensation operating primary million incentive look million, both to by expenses. results. let's related or reflecting is at The Slide rose strong $XX higher our a

in this the large quarter. premiums plans As million contribute union increase $XX prior on additional an quarters, in medical

We of $X million. the XXXX, about quarter reduced fourth of than Partially was XXX levels, XXXX million. Headcount also these experienced increased the which during saved will overtime employees items $XX fourth down sequentially. and quarter offsetting employee approximately less

we about in cost look experienced we XXXX. medical we As and the in X% in inflation of wage ahead, versus expect all X% XXXX

We expect compensation expense stock be will that XXXX. with XXXX consistent

first quarters will changes, evenly year. XXXX, be these of recognized prior the three the to throughout planned to However, due more compared as amounts

incentive for compensation. Finally,

you for XXXX expected Board bar expect, As our performance would on the compensation. raised

saw incentive payout. you first and the XXXX, quarter in a for the reflects accrual typically As second targeted

for $XX As primarily of to prices, half added the rose year, Fuel targets the gallon accrual only shipments. fourth this for the million. performance by $X fuel up a due X% last expense million, in per year. a $X.XX price into corporate adjust XXXX. higher on was to in in million we year move compared Consumption $XX added forecasted increase of the over which back based $X.XX which average year, will was locomotive The phase the slightly versus quarter

none ongoing were to and initiatives expect volume The continue X% and costs significant. continued or efficiency rents increased improvement. $XX metrics and XX%. record we million have materials expense fuel $XX and million other support to our decreased due increases, related we or services mentioned, of to $XX million Purchase to Mike other As higher which of category achieve miscellaneous

$XX XXXX. gains from lower. and properties quarter included This sale environmental more expenses of personal were including million $XX million the claims than and operating Casualties quarter on fourth both injury

material way Finally, $X reduce million. and equipment saved road usage also

to Slide XX. Moving

$XXX earnings per XX. XX.X%, You records can in strong on operating producing XXXX XX% bottom ratio We impact year. per delivered both Adjusted of and earnings record adjusted results the up operating compared year per for the shown earnings ratio line, were XX% $X.XX, XX% and Slide improvement million, are improvement. of set share results share the Adjusted a income see we a diluted Full to fell the to XXXX. diluted tax $X.XX, of of share reform, results. for operating our record diluted an on net

the Our full of year reform impact effective tax XX.X%. tax rate excluding was

rate discipline by a flow. $X.X depicts over to operations driven expect Free operating flow. cash from Cash increased cash We tax basis. covering $X.X XX flow in capital on and effective be billion, XX% spending. billion around Slide free results XXXX, year go-forward totaled generating spending our by full strong our and cash XX% our capital

effective drop from to XXXX approximately than expense taxes in less Looking of XXXX expect debt the exchanges. is the our than cash taxes lower accelerated deduction in cash benefited ahead, interest This the levels. largely rate, generated from two in XXXX we be XX% because

XXXX Now turning of to dividends million results. share and billion in $X through shareholders totaled billion back to $X.X Return repurchases. $XXX

Jim of over returning quarter's dividend. to remains capital shareholders share, our increase and As the dividends our or approved Board $X.XX Directors a quarterly in to noted, XX% reflecting an previous $X.XX to increase per committed

same. the remains strategy allocation capital Our

in reinvest adequate network First, the our business returns. with and

payout ratio longer to X/Xrd third, Second, of pay buyback. through solid income capital dividend, over a targeting a And return term. the shareholders net of

of also ease than supports from power. programs the and to of back I'll productivity investment budget and further continuation project and conversion attention, to and we're infrastructure systems. and AC shares rebuild cars the XXXX, to This XX. freight communication and of technology bridges replace XXXX. $X.X on our assets, the of expansion constraints, To to capacity our growth. Thank for improve it service total our years, be of and track, in capital We of higher the your will core growth investing turn Slide support and billion, and the our acquiring spend. the enhance focused locomotives our prior various you the customer to represents increased we capital assets. in reliability In volume Similar budget the Jim. spending category locomotive employees Moving to on year's our terminals We're roadway DC have

James Squires

part committed Thank let on you, now as shows to and plan. outlined update our strategic of financial Slide over Cindy. And our X me years that you XXXX, ago. provide we X-year plan an targets a little strategic XX the by

one, of our utilization, pricing. comprehensive recall, growth a asset combination through may while cost was revenue growth and you balancing As control built in disciplined on plan volume a

environment in As a been to market our economic goals. response financial remained dynamic has conditions evolved, we the our and changing have achieve to well-positioned

to in ratio we've our into per quarters results record Slide that consecutive So Achieving of an on with plan gains substantial Norfolk our basis XX% a the a the XX to and at focus continue. of for operational or operating progress we a earnings deliver investments our by commitments. we're so rail maintain X each by in accomplished accomplishments. And let's our safety and capital Much balance that invest approach Making shareholder double-digit market. far. to a made plan and last annual sooner. forward and XXXX, share Improving shareholders support as sub- awarding we the our trend inflation, by pricing improve returning a we'll of Through plan in OR XXXX network, Southern to look take forward. service, XXXX, and through our growth. rail of since disciplined translated eight substantial productivity highlights a line expect growth has efficiency revenue going way XX over upon With year Achieving its with path XX been years, XX% continue shows some of the employees top a each capital to determined balanced, to the Slide growth. inception enhance both and dividends share to remained repurchase. achieve to for has year-over-year a value its

the and a softer on on in is compound economic X% a offset intermodal basis. growth environment coal. Volume outlook our groups growth overall for annual for volume Our merchandise demand commodity in a current

a XXXX. on through revenue about expect unit basis annual per that We X% grow will compound

We are and in will to be our efficiency. open productivity commitment for unwavering opportunities and to grow we

build continue as and to leverage in to improvements on our for in our will date We to look fuel leaner. initiatives efficiency make organization technology we further investments

service, will and We Slide evolves can stewardship have core focus on of continue growth. our the workforce Southern, Norfolk the we appropriate our strategic XXXX. the effective continue resources in we know our of upon deliver the fleet. safety, of we to Wrapping invest productivity At demand as and up ensuring principles on reliability locomotive plan,

into ratio that, our for productivity I As we line optimistic Operator? XXXX, XXXX while head in sub-XX thank of over fully confident deliver you the operating and economic we current we'll million your by ability savings. and about $XXX open environment remain With the or are attention, to delivering an now sooner, in for Q&A.

Operator

question Reustle the you. proceed comes Instructions] Our Sachs. with Please [Operator of your line with Thank question. Goldman Matt first from

Matt Reustle

question for taking here. my Thanks

story? another there we remaining OR a between Just includes you varying and talk in contract, in putting improvements stall business, should regarding the is the lot competitive is it year you the the like the sounds 'XX improves know, expectations together, mix. Can where for where terms - trends of of there is about short-term XXXX it OR it longer-term all possibility or truck outlook expect further

James Squires

by initiatives you full do environment year be combination line? don't lower will a driven and opportunities growth. bit we a and see XXXX, the on operating of on a little ratio productivity and the talk why We the top growth about that for the Alan, expect truck for

Alan Shaw

that operating about in increasingly facing. which environment are we the macro competitive Matt, we're environment optimistic in we're the

to that days. of truck XX us. You for economic know, over tighten their to upwards economists markets are have last many expectations important are the revising XX continued The to outlook the

this they very our export network, we're which one So confident outline that those the the into our in and as particularly within coal I we ability to is, indices The head coal market or month. and were secure in price growth. too have we first backward-dated, have, although tried into half risen cause XXXX, to of

natural uncertainty then export some delivery, in And prices, curve relatively they off for there's although the high February the drops sharply pretty market. coal are So that. forward gas after

our on pressure added utility put could that market. coal So

Matt Reustle

Understood.

just business rates there X% we I that if rolling small discuss higher? at merchandise anything there that the rolling are and to a percentage business that it do should about than at isolate are intermodal or can much it that those over over is think in business higher longer rates So x growth something shelling you of is the RPU fuel, or and to that? X% Or range with you're look mix that's haul

Alan Shaw

truck Well, include Matt, And business in one there's will increases we lot and merchandise of that is will great get we plan business have some certainly, things geographic a - our that's strong great competitive. a truck That's is also intermodal, the strategic franchise our about that footprint. of competitive. rate but

business within Our off environment. strategic economic pull to the highway this is plan underscored

Operator

you. Thank

with your question. line proceed Our Allison Suisse. next of with the question comes Credit Landry Please from

Allison Landry

respect I Good that. levels guys the I morning. talked you you service know, to question. either of corner they've with the weeks XXXX ago, talk my X to wanted deteriorated turning just metrics, about for just Thanks taking think about and basically the sort

obviously, absolute to of productivity of I for a in from the levels and drove we melt currently sort thinking So broader that was difficult just period the know don't wanted sort reflect any down. And perspective, understand the network the terms, then about what results December? of sort time and deterioration a of XXXX

and differences now that train help well speed, metrics you as the could if and translates between So that into how currently to through as we're the walk then in.

James Squires

Sure.

that want general, to our over emphasizing we steadfast to that specifics. bit Let Mike deliver coming remain turn and turn me in a quality the I'll in to I begin value. little to service But more it our about start customers by a

- the So necessary did to presence ever to that's in place did but Norfolk now meet last our at the demand, and to goal. service decline, believe in we of expectations, metrics Last our resources all year We so the commitment and live is have year, Southern. composite up not late do future. we customer's the there and

So have whether believe cruise resources, and both resources the that its shortages or on other service we will locomotives be And or systemic recovers, and network no we recovers we hand. driving growth adequate and as able to continue productivity.

Michael Joseph Wheeler

That's of the fluid. say, road line Allison, I exactly and terminals will right, From service, Jim. our are a the

been, metrics don't confident, However, we're are and back both those have used metrics the we cars. got right customer-facing to and is to any locomotives freight We lag get metrics where had longer we our Jim do And and taking it. going and correct, the network to the we these from standpoint TNE resources its resources. and but from

over we're is where about that going that's this about our year going. where it, we're comfortable feel all and charge we confident So and - we're we're

Allison Landry

about growth assume and within in components are and Okay. X% includes the talk intermodal. of then And props the outside you yields that from the XXXX, could negative through mix embedded CAGR fuel, it that, terms I

of So would mark? different about within buckets the up should make helpful. think around the this, in that core sort if Any we we to price the X% would components X% is different be color assume

James Squires

one? that take you why Alan, don't

Alan Shaw

growth X% I'm to Allison, the X% analogous that not good brought growth. pricing is up. you and question The Happy glad too. RPU

the export of the within is is very least we RPU. now some of that year last market, you a this export had coal mix we've as in run noted and than the updated for intermodal look our similar plan. which negative declines in export up year we average the that we know strength volumes difference XXXX frankly, in average terms huge point export. had, them to higher And volumes what The for at got You as at XXXX

So for pulls back us. that that creates mix some pullback, industry's and negative as the

price opportunity the is a We've in great going very to market us. for lean market. This are a to We to and to strong price. we're got truck price according

Allison Landry

you Great. the Thank Okay. time. for

Operator

the question. Seidl Cowen Company. your Our comes with from and next proceed of question Jason with line Please

Jason Seidl

morning, are to is the sounds bit more still in on least It out Good wanted operator. year reading I concern tea looking as favorable near going everyone. you're to Thanks, the be like you the of seems my on at own? on the a back coal. term. half for I focus because leaves industry comments Am little the pointed the it right

James Squires

Yes, the think our to have in continued export strength we million tons X within to an quarter with I've first million Jason, the guided exceed I X to Last million the year for opportunity market. that. in bit X.X moved million year X export we quarter. fourth little it up the had and then progressed, tons as in first tons of quarter a

and natural concerned So and I think am market. about there's I gas dispatch utility continued prices strength the in market. the our export the

utility XX guided we've quarter. a to tons for million million So XX in the

Jason Seidl

confirm should focus Eastern Can fair late That little the sounds your some of last counterpart business year, enough. a of least of business gone has you that contract. up and over of that year about bulk are lost that we confident that When roll how see lot the those one you we a picked you at they've retaining the bit took? that business too sort in

James Squires

service that and me providing creating emphasize confident again. competitive we and business. first to by do Jason, over focused that proposition value value that turn Alan customers that enhancing NSC. our I on will that then our we're I'll And can want let to grow to it that at product we're our take one

also So primary form it's all truck. about view And the of competition product, the service customers. that to we our can our we provide

means that is will Alan? provide like go our And service. rail. And and customer attractive truck by so proposition is more perhaps find our today value is goal who to trucking will that the

Alan Shaw

the bring growth to from clear for were our service into be we are and looking us. we're year be would Yes. last And customers customers Jason, network looking those buying we're that, pretty to who opportunities. valued capacity we business continue weren't long-term clear that and ones who

the there. the XXXX reflective that continue in to Highway. approach and We're ability into strengthening looking So move as truck the long we in will And market noted, primary economy, and long-term and Jim our our key XXXX. the as think for and And our pull customer we gains in business growth confident our of relationship. word is that term off will continue is primary a are

Jason Seidl

color. the Appreciate

Operator

Our Morgan from of the line proceed question with Please your question. comes Shanker next with Ravi Stanley.

Ravi Shanker

Thanks.

mix coal? Just do How the make to was earlier, does targets. on to you that get that it And a at looking be the on OR drag something may long-term the touched intermodal offset follow-up targets? versus growing from XXXX harder the

James Squires

So here, is dynamic plan last delivered with and performance and years. flexible. plan let's its for strong And the that dynamism has consistently flexibility the start X

went I year-over-year, ratios lower EPS double-digit As X growth. quarters straight of operating through

So the clearly continue grow we're balanced where push. the got approach to to going to working. to a market. definitely we We've plan can. And is We're trying

We we're With XXXX can productivity a sooner. operating drivers, are confident as or that by get drivers, ratio emphasizing earnings that OR sub-XX and of well. balance we into

Ravi Shanker

for follow-up just Okay, it. for intermodal And XXXX. a side got

do XX% of that year. in? something half said negotiated benefit You shows in you clearly for that the second the in for about benefits? first trucking tightness do you to and left a the the start you or wait start contract expect half to see Is to as that up that When highlighted flow have You to catalyst. the see

Alan Shaw

opportunity that see of year, market improvement as to started bid offer continued in into will move August the through we is of support. And It to continue accelerated we quarter. fourth last We move this year. in year. an March-April have as pricing season, move will which through the It that to

Ravi Shanker

Thank you. Got it.

Operator

Please from proceed Our Deutsche with the Mehrotra of line from next Bank. your question Amit question. comes

Amit Mehrotra

Hey, lot. morning, thanks Good everybody. a

budget wanted up even look I of infrastructure. just ask on CapEx XX XXXX. the like within year significant. I question in the If increase So excluding to there's that It terms the in CapEx for PTC one looks million actually not declines and initial that, a spends the you really so or ago were, is know, spending

is risk need and some there be a So doesn't be the what's even that be revisions that, can specifically XXXX to service metrics think about CapEx declines help higher may may us lot. you the in given higher? Thanks why

James Squires

variety through plan. We're well. growth. $X.X locomotives, in invest a investing this If went we spread and so open basic Cindy infrastructure, XXXX economy, our billion as are on. customers categories, technology for across the will of So

shown the cut past, not in and business prepared well. as capital meet additional expectations, be growing there we our amounts the So We we've a did with would returns in were the budget. spend conditions economy if flexibility where to

Amit Mehrotra

Okay.

on to if Let we've in could reform, form may talk mean, guess. be me I seen of the follow-up a some ask companies of just tax bonuses. onetime of employees I lot passing about on that obviously X I

reform the us something over think the about this dividend tax are with any of then much you about uses proceeds expect cash from the in any actually how the expectations activity? Thank to cash announcement. or you. or in repurchase that wages If above increase the changes guess And the thinking the from I year. we help just acceleration that accrued can will earnings like line be share bottom earnings through drop that, we to what of just Should of flow will inflation the in related that, flow you should some

James Squires

spent to plan. open for spend me her what of I'll year with the capital is allocation spent over maybe we allocation and priorities we're So spending balance which go going turn investments. capital But XXXX We're start above in in to Cindy, above to the it general, what through some plan - let of she specifics, and growth a covered you then presentation. we talk our about capital ours in

in our Directors our as repurchase program share through well. why are in Cindy, reflecting and some its confidence of line? reform robust will our of the Board we our of impact dividend have our go don't significantly. on bottom you future, increased XXXX company a And specifics their tax We and

Cynthia Earhart

sorry, which that XXXX impact have enough there on in exchanges. primarily I've less about they Sure. XXXX the that our said, going as - were than about also debt you expect Yes, that and in tax some like that forward rate not XX%. cash XX% taxes were will I going XXXX, cash mentioned expect XXXX, a on things the should flow effective positive that seem for be be we around was may will should quite and

So moving the...

Amit Mehrotra

understand will dollar absolute amounts, are expect be rates, of or XXX% the some the the you drop will rates. the really the absolute base employee related dollar mean, understand or I that But amount I going amount to do way question? completed to dollars their to the line bottom was some of question the actually that accrued the to as well, is but those really savings I savings,

Cynthia Earhart

wage that's see changes question. necessarily We expect a of that as this, don't your result we'll

James Squires

and the compensation best at brightest. benefit in interested the us looking as and the stay well. attracting the always to at We're in our enable We retaining competitive approach in that to plans, will future our constantly be scales, our market, and

Amit Mehrotra

quarter, Congrats Got good I it. it. a appreciate helpful. Thanks. That's on

Operator

The of proceed comes UBS. the line with question Tom your Please from Wadewitz next question. with

Tom Wadewitz

I Jim, morning. year XXXX. a know be these congratulations you to give strong expenses good wanted of just on I about, ask but on kind I the Cindy some you well. a bit in specific a Yes, of on may to directionally. on - parts and things, or the guidance wanted little as moving don't for

comp, as should that's modeling in to rise we I flat. a those or modeling comp pressure. when sales headwind. think full XXXX, we guess, if you of So that questions? think would just flat of year as in something model wanted property that cost think a of - or obviously, likely 'XX be potentially that's incentive million will the a benefit it a you year also broader in incentive bit a I potentially X down of and next basis, terms see kind $XX tailwind would fourth in year-over-year is that On quarter, Operating

James Squires

Cindy. ahead Go

Cynthia Earhart

yes. Okay,

comp zero. incentive in XXXX, of had In mentioned higher we've XXXX, comments. a had incentive and was Certainly, lower. this mean, probably that terms about it I obviously, talk XXXX, comp last In average we my it years. than I over was few the

incentive first operating we incentive comp won't our throughout us depend growing. the what The see be when at the doing performance, in in are accruals So you'll the the and I they have And exceeding if are back you'll really that we raise targets results target comp, accruing set, our not, to year has about bar if said, the growing. see And half board year. think as results. you operating will two actually of quarters, look be we'll been on

So that's hard to predict. But it will very much results. depend on our operating

Tom Wadewitz

Outlook for wage inflation.

Cynthia Earhart

X% to wage I of overall all in and [ph] also health in XXXX. guided inflation

so. we're give not for operations year it. very, the that we're and I properties we the on to predict. going we're also returns hard really very in getting Now will had quarter. and you And see the million to to to the Those our quarter. did have last have at going continue certainly we're increases not we of are good If properties. last been looking in year been of we get of rid in we're quarter, additional we do really in next an I - into terms the And that operating by that necessarily look that and you And or continue had gains sales sales. property, guidance for, going quarter very using fourth and $XX you tell can't not But operating to hard we've

James Squires

lower incomes productivity higher of Long-term, excess state through Monetizing ratios and will drive improvements we expenses. rail and is and our real strategy. revenue part operating in

Tom Wadewitz

Okay.

second XX%, the if tighter. looking you're business, think that a be little rates at markets the way indicated contract XX%. is focused to market, could spot Jim, it's - they dramatically tight, that XX%, up XX% up you you truck And about clearly How For I that translation your focus question, the at tight, potentially brokers right? rate be year-over-year not so could up for I look competition mean your very would on truck pricing? truck truck

trucking a truck how your rate are, unusual and to in increases a you of Is is you terms seen for - could comments dynamic the versus does quite that you while? how the bigger it? do volume reason magnitude see increases, seem you'd given unusually your strong see and look market unusually about focused you that think what of than be historical seems would about tight at because strong intermodal. it say, in that rate market be the way unusually increase Or maybe may we've it truck So could and truck Or growth.

James Squires

that Well, by me the revenue let with combining sense line. price saying increases ours balanced that where make growth, to bottom for volume approach is growth start

and the and Alan out on So opportunity we'll there conditions for increases talk tomorrow the about truck business. rate competitive

Alan Shaw

doesn't RPU channel And this intermodal. the reflecting the about growth just their pricing our encouraged Tom, partners to But we similarly of earlier, except quarter the X% first I a into quarter we're opportunity had as of stop in of really at encouraged our all noted are into as about through and X% it We coal, And move quarter. opportunities market. price. frankly, lot to fourth broad the pricing the for growths strength. fourth in accelerated

about macro competitive from from we're opportunities a front both the are encouraged standpoint So a standpoint. us, and of that in

Tom Wadewitz

for Thanks time. great. the Okay,

Operator

Our the your with from proceed Please next line Chris comes Wetherbee Citi. questions. question with of

Chris Wetherbee

XXXX ask back where can sort XXX to And maybe to about relative of this being you about behind step might? is wanted I towards thought in targets, made, ahead in morning. Good perspective thanks. schedule, are of of you you progress? and Hey, XXXX. thinking how where we productivity progress to think how about that XXXX, the just you trying feel on a get schedule, we the to are Jim, do Just you

James Squires

X-year Okay. of as plan for focus first performance improvement. XXXX a great this in of Well, and out million intense on our the X $XXX years has flexibility productivity driver demonstrating productivity the right been gate of the of plan. our

couple forth. we so years. $XXX a goal our that labor, additional in of confident $XXX next materials, $XXX million we and We're through far, million fuel thus $XXX of drivers that combination in we're XXXX, so had million Another can of get toward million seen productivity the

part full a years, key the to plan. operating we're we that next going a We've of couple of we're or at That's on our ratio confident and So million far sooner. that. $XXX demonstrated stay our of the over by XXXX get focus along can sub-XX the growth that's big enabler thus results

Chris Wetherbee

for you're now. is right specific no But saying Okay. number what 'XX,

James Squires

additional the to by to operating sub-XX going said, on we're or we're get the ratio million confident $XXX sooner. I've that very way As XXXX

Chris Wetherbee

business. Okay, follow-up, And intermodal just on be may that's helpful. a the

tight you capacity how opportunity to about be may just lot I a think obviously there's and of market allocation there So a like the seems network. understand so there. to the want of guess,

So search probably expectations. some have and you beyond above we've issues service seen -

how about too you How a put out As shorter you consideration? to to don't XXXX, cycle about way term a think in go much is do appeared have cap on spend far Do you look that? into you that and allocate that do think into you want business. money truck and much actually to in want there competitive capacity too because

James Squires

I the I of plan. can, balance back go the into -

growth drive to productivity productivity. is that investments so means hard working all and order That a budget forward, to capture year. sense the going capital those targeted make of combination shareholder on both are through smart - returns network. this and We makes and that's about investments, where growth making what's In the

into take every returns network forward. and time, the the growth and it we'll could going investments we'll that you each for we see open we'll we're the we dollar said, there, sure from do I've if returns As maximize additional make our are right, put

Chris Wetherbee

the time. for Thanks right. All

Operator

is Barry question. from with Please with your Oglenski line question Next proceed Barclays. the of

Barry Oglenski

good morning, thanks everyone questions. and my taking for Hey,

land sale then alluded I think, and expectations on looking wanted I gains headcount get swing And might And to Tom have asked because So that land only does back, to did expected the get to just we on that. in I also circle we any or guidance XXXX? model sale can forward? some

James Squires

you to for to then with the land talk Cindy, over headcount want respect Sure, go guidance about sales and XXXX? back

Cynthia Earhart

Sure, Brandon.

them no them on longer we've very them of make where a monetize we use they're need need very, trying as our to where to, in at we're looking going are program and we we terms sure continue for there's In do properties returns getting operations. to our to business land that and and where before, said sales, closely

predict we So had. strong it's I program to in but that continue say terms difficult of quarter-to-quarter, going rate, very the that, we're annual that, to will

productivity headcount we out XXXX to XXXX. of will to In to get our we be expect into do we expect compared continue terms going headcount, Obviously, that. stable of to workforce and

overall, employees T&E the like see headcount You season. quarter-to-quarter because the may peak vary of will the you headcount remain be see in stable. should terms ahead we But year, entire from of hiring

James Squires

human growth. slight labor So headcount, and platform for volumes growing resources productivity equals

Barry Oglenski

That's helpful. I and quite the metrics, And maybe velocity. looking wrong Jim, all focused then service guess, are at we're dwell because just actually we Okay. all on

up we came - earlier would this on or things they bad Are the not on says call. think would I be at from it ground least as quite as those may perceive metrics?

James Squires

when late no we no did the in itself, slows network South, doubt is customers were and schools the work and about those that winter there's we in slows dwell not fourth Look down because people conditions. has question there there our in it The slowed velocity work, can't closed of our get down terminal deliver and it. expect to quarter or the

on year, for ripples the up. other have flat resources means get first believe and for to that so our resilience. network we have platform quarter, through focused just and have any systemic think people. for our that, the the well we we'll as resource very for are and And we customers Cindy outlook we have headcount. enough as enough growth the service networks we went through back That pulled our We headcount restoring don't move We stability is that ourselves. goal, once we

Barry Oglenski

it. Got

Jim. Thanks, year. good a like Sounds

Operator

proceed from with Our next Please of Ken question question. Hoexter, the Lynch. Merrill comes your line

Ken Hoexter

Hey, great. morning. Good

a volume you at following of discussions well, you just So may X% for X%, did as XXXX of CAGR, Alan targets. the if the side look growth But of be may on yield Jim, CAGR on volume your your focus in intermodal. lot be

the term ramp market, you the do X% economic about only and intermodal up cost even accelerating looking on merchandise But the But bit? a as I outlook be behind cost tight guess, intermodal is the do given merchandise guess, guess, X%. how targets, like I counter Chris well, at before the in Given about Alan that? to economy, was falling on near that how I accelerated at you talking think the side. target focused may

James Squires

up cost in I there's big don't ramp any think involved.

We place volume believe as growth to you on ground focus to resources said, And handle are the we the on need network. process also volume growth, business the foreseeable to in I've in We're working productivity. constantly level. merchandise at going have

we on working service will things while. local the and take to customer of some consistency are forward. We efficiency going think that improve a That's going

have want intermodal did are to to up, of in collaboration and your doing Alan, side on it the do anything add capacity roll yield grow. We the - customers. we you all it that? our But out we with

Alan Shaw

opportunity for Ken, us. that's good a

We with remind quarter decline quarter. bid business that, in price and over play period in early first yields up. in will you or push with will a ramp I'll of mid-third starting the to season out XXXX, continue transactional moved It second that truck time, pricing And yet, quarter. overall will our late - up

Ken Hoexter

given more have you've I I doubt pricing volume. us, no about the focused and side was what on the

you're volume Just accelerating your about in on the near target That focus the if in that. merchandise X% talking you looking to at X% term, economy? more ability the was CAGR your accelerating and an volumes given yet handle

Alan Shaw

past and network Ken, scheduled on adding you're we're is into the tail add merchandise of intermodal our what in putting the into focused it fits to business the And running business end into about network. as that network, you're you the talked trains. generally, we've -

us it opportunity expenses. a adding the creates lot business to And without that compensatory gives us. for So add leverage of

James Squires

It works very well.

Ken Hoexter

Yes.

bigger for OR your of you So given the especially But obviously follow-up Cindy, Canadians. go pension question, any that targets? just ratio a top rating forward a to the as accounting impact shift much

Cynthia Earhart

Yes, good question, Ken.

The the pension If in line. expense the we'll change - able cost impact service be in the you to now Obviously, geography the pension look at that in XXXX. keep benefits would compensation make. or

impact that So another and down would $XX have net. had million a on favorable compensation for benefits and unfavorable XXXX

of you So that. that gives kind a for feel

Ken Hoexter

Perfect. from Appreciate me. you. Thank all That's it.

Operator

line Please comes of Long proceed Justin with question question. from Stephen's. next Our with the your

Justin Long

good morning. and Thanks

with western the in seems to a are question little like wanted implementation. So further the on I start along PTC. It a rails bit

that could you out plays And service technology. train to and over out risk see you plans I speeds on do just your the this during So roll this rollout? few update to next as if was years, us wondering

Michael Joseph Wheeler

this Yes, is Mike.

also We're very running in on are as which And - as confident installed have the railroad. over we've goal. locomotives extension will XX% We going equipment at XXXX. were That to do. end ground the track the feel well said we that our our legislated all to on XXXX, XX% signal-type be by of equipped the so of to of today, always meeting us we give equipment

So on track we're with that.

You impacts know what operation? the are the they Obviously, to are.

do, Some take several and down of over hour we is that. of the time shut railroad things these cut X there and thousands the the these all over X signals that to to do cut of and

So significant once we reliably, Long-term, get see don't there related some that. is issues it all to we impact. any installed, service working

Justin Long

year? the think you of And I mentioned you'd competition gave you're anything great. concerns Alan, quarter gas secondly, guidance Okay, it to over remainder be the relates as cadence first the quarterly is to coal, there but you for with willing share and coal. expecting export natural

the wanted So put tonnage of year. see the to and around that over numbers just could course some potentially moderation we the

Alan Shaw

Good morning, Justin.

gas. tons year. coal XX first million the move compared at going and tons be to compared upon is we're to million we dependent With of million quarter, first XX.X XX highly to to of forward natural looking last utility quarter weather patterns How

year. - in There's the last fact, thermal and And coal. we're that met at strength very similarly lot export a of fourth was split looking of export both our in in in that's coal. thermal XX-XX with closely, and between met export So quarter

As weighted towards you're heavily more aware, it's typically, coal. metallurgical

in conversations are are been to handle a our the those the we factors market dated business. All at. we got It that but you and has backward to they've place, do for Now point indices that looking customers, can to have the ensure is that continuing for while legs. with we're to resources I same

Justin Long

Okay. Thanks, time. Appreciate Alan. the

Operator

next proceed question your Please of Group the Scott a from Our with Research. comes with question. line Wolfe

Scott Group

thanks. Morning. Hey,

I you - just of the stock know OR the timing say. year-over-year of for much, You said, for the don't sure incentive on I the ups talk tailwind, for I that's half I the first is not target incentive just year. pension? that, much? for when made year in about moving couple just a first you're on of OR, a about the of that want points, accruing follow the the inclusive that comp the comp, think for improvement, labor I half I the your a what means sure a is, know picture big Cindy, of XX wasn't to of comment comp make followed headwind, to how just line. headwind And basis that inclusive trying but and you're that you its the headwind. So

Cynthia Earhart

Yes, Okay. Scott.

on for I So our comp. obviously, was said, year the a the bar comp, incentive And performance. the incentive like raise Board XXXX, on going into XXXX, strong

a quarters. so level for typically, will And X accruing we target be first the

year, Going really results operating whether half forward back on exceedingly depend we are, of into or going what not. are to our it's the the targets

was. what that's compensation the incentive So

quarter. back see - is the of than to expense and look been quarter the our our a at There vesting will changes stock has was change and the for typically plan first certainly fourth the that second XX-Q's, terms the you if you'll period. third In higher stock compensation, that much that compensation we made

I So to XXXX fourth now have quarter similarly to X going the first expense. you'll spread quarters across and be recognized, course, a of guess similar, expense the is more

the stock So was. what that's compensation

question with will - the a adjustment. very what and impact asked our the We that year-over-year, we're also still confident to about going we're You be. OR pension OR pension and improve even

James Squires

So of reclassification. inclusive that is our guidance OR

Scott Group

like are guidance on year, you half that I'm not does $XX the. you accruing - was. given to in still going it you've when of a the the quarters headwind, of which last get than to comp back it's the then can anything 'XX? give or a us million tell Can But And lower first to going the be incentive couple swing. a to is target in half of clear quarters incentive what that you're first very comp what of Meaning, be did on Okay. you us higher because helpful mean for that say meaningful to trying you're first of year-over-year help say

Cynthia Earhart

second the you and second look - accruing think will quarter 'XX in and we're see you'll it quarter. you in would should there. the - of the quarter give expect the I on to 'XX, first you idea give target for and Q's, If of back what you that first And - an

Scott Group

guys. you, Thank right. all Okay,

Operator

with your comes Ossenbeck Our the of Please JPMorgan. next from question question. proceed Brian with line

Brian Ossenbeck

Hi, thanks. Appreciate Good morning, taking question. my

quick two ones. so And

First Cindy, like revenue but pricing Seems WTI, you little to fuel you're bit where one, from a tied Alan, to reminder the perhaps that's you give can mentioned. that surcharge more us a WTI, the away the of tied shifting see the couple now. in you of quarters? us be update come that an much, that Can give we right we helpful. there We'll rough become on in and ideas next meaningful a that see how should would contribution when

Alan Shaw

of which WTI is The tied within revenue an our now are program. data effectively program, pricing. in Brian, of program. surcharge the that, different public as will there base I've contract WTI triggers. fuel a noted, And under be X/X And is base the OHD about remainder to on

base primary on is we revenue our million and OHD reflecting increase $XX fuel surcharge the just in a fourth the saw in focus program So the quarter, that.

Brian Ossenbeck

And is for trigger because WTI, and right long? that barrel that $XX the sitting how then Okay. about for in number still now? we're a right

Alan Shaw

triggers are. there noted, program. we And Brian, within different are base I've as WTI Yes, the

surcharge within less is X/X make Does our fuel a within one but sense? $XX OHD, predominant of OR it's well WTI, As the that program. than

Brian Ossenbeck

well as X% were fuel you expectations. but of volume follow-up, noted, a above just RPU's coal, up, the about can quick on I if And and down as Yes. export Alan

like it's exports are I'm I mix a you that is well. coal rather a a shift perhaps, - looks might as been thought only been so there's if bit this the sure like thermal export volumes line looks or there's on for with that big and year, the over back to price driving have really seen the more Looking a full little the but been if more not trend year, it strong.

year? the pretty other change structural or there first looks a supportive that's the going it on it of what pace last shift on this was early part same backdrop is like given mix is the for So year, for we're

Alan Shaw

glad you that brought I'm Brian, up.

that. clarify to time take me Let

So we've utility haul quarter. fourth things And our year-over-year had longer that the the length the two are haul that in going actually south we've noted, on, as declined in business. decline you'll our in significant the quarter, coal see overall fourth within

Utility a is North. volume XX% as and South, XX% we quarter That Utility fourth - that result, we North Now South Utility more in in to than franchise Utility typically bit, the did fourth of business our have in about XX% XX% quarter. North was utility a the XXXX, little mix about had flipped our XX% to the in we

RPU. drag in that and itself out So is a on in

between and mix talked volume we in volume we Secondly, export that and you the those have about, XX% quarter quarter to up our particularly XX%, talked significant our XXXX I about volume started rate increases we XXXX, and within was throughout export fourth And of within in with export see about as quarter our increases metallurgical of fourth the steam. fourth steam. of to XXXX. of that Contrast met was steam. secured got We've XX%

got market-based and and South, lower North more of a dealing we're is haul. in less length we than which Utility mix, North steam which more drives rate coal, Utility with just Utility So shift rated, is typically increases, typically lower

Brian Ossenbeck

Alan. Thanks, Great. Okay.

Operator

Bascome comes question up Majors Please of with question. next line Susquehanna. Our with from your proceed the

Bascome Majors

taking million for I the the XXXX. Thanks question. incentive my that year in from year above headwind was just on to like you one looks follow-up It this $XXX well disclosed want what over more with comp. full

target what some if you for put levels would earlier go of Just to XXXX, point back finer be? the that tailwind on quantify to a can questions, we

James Squires

in accruals. you And year incentive has or ultimately think of incentive favorability depending results year results first on stated, out. Cindy? I compensation some accruals and mark then in the depend I see the up results. And year, will expense the the least. on the the think half But compensation how we down need it play to Cindy on comp at let the will the we'll later see trend. should the drive That as

Bascome Majors

But you're it 'XX was quantify like how to level. much sounds unable the above target

James Squires

to incentive give shareholder well, on benefit incentive that's I'd XXXX. and on then And way the year-on-year it design. the increases work is do comp we it's is as that. varies comp that's Well, the supposed When performance, you saw you volatile, way depending operationally,

bonus XXXX, didn't results to In accruals above reflected that XXXX incentive pay throughout nowhere bonus were you a well. company was our because see comp year a And back expectations. in Going XXXX. lower the near as

the you that X a that accruals incentive will what I expense give pattern compensation suggest in of be that So of target would is balance examine you what amount. some those and would where lies sense years, the

Cynthia Earhart

Yes.

I right. think that's

Just I X quarters. the first - one them. that talked other thing We emphasize make sure about

proxy, I soon. announce think will you're good comp, of 'XX payout look very similar to of X coming out see a incentive - our first actual percentage And also, quarters to the which we'll 'XX. quarters the our the X in the first of be will

better you as it think well. get sense can So I a than of

Bascome Majors

for you that Thank color.

we're externally, investment comfortable can How and my up I But backdrop where signpost we do what you shareholders cycle got ago. on a rising today's service memories or of follow-up, watch on a could horse in As the cost some capacity. saw headcount resource levels a should what want and investors' be can volumes challenges see back be progress of recent minds. years to flat just the you metrics not I like service what think 'XX and is in to multi-quarter with be couple XXXX of for? bring And catch get dead that and we of

James Squires

are You public obviously, to only important network velocity metrics and and see decline. valid the should Those and up not metrics, should monitor but are metrics. performance, see manage those improvement used pick intermodal to you the in we service,

improvements So those watch areas. in for

to we that resources We have on resilient seeing. will confident that need We remain get more stable, service that we're pattern. keep other updated to improvements service the you we

Bascome Majors

the you Thank for time.

Operator

Spracklin, for the Our Spracklin Markets. question. open Mr. is of line from questions. next your with with RBC Capital proceed line your is Walter question Please

Walter Spracklin

you I you lived segments that that lines seeing customers that the to any, Sorry service? have able if not our about and movement have expectations about part away capacity in wondering service we're the tightest together. of talk on hardest hit some seen all seen mentioned the the you've it be any and Yes, might mixing you your customer that. of customers those might seeing up from metrics and to the have lines and lower were you're product was the capacity

James Squires

is the tighter in the is in our part of The network capacity southern than northern part. it

trains attended We to the in most facing today. that's of double have conditions In track, down lots double made operating back we have where north, the we've less years. South, northern of region track a slow and the in less siding the couple the capacity capacity quite capacity, going we're double fluid, track, challenging improvements a

we're hard it's customers have our to in challenge. the work in resources at that believe We're we service that provide So the do south we the the term, long where facing as note, facing expect.

Michael Joseph Wheeler

traffic holding really we're where that. where in from Yes, the That's south. the feel hurricanes, for we came it that's

Walter Spracklin

any it you're looking to or there double build impediments either capacity increases achieve out some stacking will the of to that structural harder double that to through Is geography tracking? make the

James Squires

not really and the concern, in North. core stack our in completely the is we're almost stacking routes double South Double a in

really targeted the which getting for we're sighting and is all balance that's the sure is road we But So that do that this so. over investments, to making about process It's in will good with we makes not historically have double capacity trains available. sense really the capacity, we the Where South, it lack. little track shift a issue. bit its the that

Walter Spracklin

is can - a is that also to you the your different over you noting competitor sell - to Are you base. new seeing landscape provide any, Okay. side into And got as - a how that of your person approach how customers your in obviously, he your initiatives brings who in over that a Or out? be you've how sells the in the or competitive they any changes or then - result, magnitude of major at in are disruptive to flip customer network or customer to how would customer question, any playing sales helpful? any

James Squires

Yes, Walter.

will at that service grow. are allow focus is to enhancing our by we to value them we a Southern. confident As do that Norfolk And I've can that customers providing said, competitive our

like our service trucks about So form customers. to that's and as working do hard our our so we service. primary we to all it's Moreover, provide truck-like view customers competition, of are our

Walter Spracklin

very Okay. Thank you much for the color.

Operator

you. Thank

line of proceed next TD from your comes with Cherilyn Our Securities. the questions. Radbourne question Please with

Cherilyn Radbourne

very Thanks at would you seasonal conditions. If morning. continue much I year-to-date that operating experience look difficult and they care your loads good to XXXX suggest

So what target implies to I and you color levels? some on that could just service relative that if returning to wondered give

James Squires

start network tough In know to southern first I the will get when believe we've little becomes we and conditions. into service weather of the of performance it. network just in more we operating see we a work quarter. And we It restoration of think weather terms fair, particularly and difficult that's a all as the levels year of on the we have we had the had. see that in the we've what a to further kind existence, the hard do, part

for bright. are are, So now see opportunities but outlook the The the economic volumes are what growth. conditions right is they of very and we excellent lots

Cherilyn Radbourne

entering phase? What understand their early with next think that the could move you've into of on focus a engagement customers XXXX do a to I defined anything that meet to and service terms customer strategy you XXXX, needs. you in plan in have they separately, better XXXX introduced then and Okay, had in dialogues how if how better you

James Squires

is service on focused are as we customer thing first the Well, a defined service.

network standpoint, forth really customer a we dwelling of performance But and and metrics, we performance. our important things morning monitor this as those consistency, terminal So from network talked the matters, so velocity about do lot what indications the line delivering customer that it. to order by service they of satisfaction they customer availability, drive more our the depending on want metrics That's define ultimate and business, goal metric. service earn grounded field, as tailored is those much

Cherilyn Radbourne

time. Great. Thanks the for

Operator

Vernon Bernstein. Our question. line of next the David your with question with is Please proceed from

David Vernon

inflation, growth attributable question give with got buying has profit, coal broader be guys operations, understand that morning, any coal Norfolk? global the would about tighter market? how we how additional income the team. growth can stronger we this the are you earnings much a market is commodity would Is that from of good you Hey, here operating is around railroad to us could to us lot look very much color this anything and or railway for export impacted helpful? of what and there When guidance help We at of that questions that XX% give or us

James Squires

in XXXX. that excellent the results in of saw the We and difficult I the that Well, about coal XXXX, market, of record volume. XXXX. might we some did delivered in Sure. in and you ratio operating yet of remind you that in very export in increase face our contribute talked And terms coal condition record we drivers to a results. definitely a results

phase plan market is conditions. So in of the of Alan? the hallmark changing of flexibility our

Alan Shaw

point. a of David, valid We're X% Export it our good us. important a to although it's it's point, volume. on it's recognized focus is

David Vernon

is the a Western that can it's of of done the that's have was on it expect totally several to on how an I we 'XXs impactful OR. It's not it, job of really smaller understand rail guys commodity can what XX of hundred basis 'XXs question, OR, looking back Point go much awesome you and the - based commodity earnings next any help us sense lot like this for I'm to but could use you volume you how X% to - I help just the is understand Norfolk short we for additional mean relatively a that get mean it a have a and does understand to just see points, parts line the haul data is I'm a Lamberts it to down trying where there. point. basis use markets to the year. a could points inflation. trying question - I headwind

Alan Shaw

quarters said in had and year, of ratio of Jim David, market read posted very a recognized Highway the coal the positive. pretty the is our yet the to in economic X in the it's XXXX year difficult take our beauty plan. of of in truck each we off operating year-over-year that that's a plan Ultimately, is trucks tape the improvements designed now our conditions right and

our we intermodal merchandise and in are and volume, in for looking so our price both And growth markets. in

James Squires

you're your would and sensitize assumptions if portfolio. commodities, projections a I just David, on broad-based very is ours finally, looking to add, based And

line top Our diversified. is highly

and Yes, diverse. the lines commodity a of have it's We customer-facing lot but a broad business. portfolio, is of part of

David Vernon

Okay. And question maybe XX% the just on tax a on follow-up rate.

You're expecting.

a in discount an If to and in you're that are number I think that going the low as depreciation, expensed but be expect rate? we on drive tax should in be use number. to relation would range book effective what's rate to the should about know How excessive the right XX%, other rate you tax were tax there yields we to to guide cash that CapEx that XX% that of modeling? that

Cynthia Earhart

taxes think what for and I some forward, about should that's cash helped debt the on however And XXXX. expect Well, going we cash than exchanges. look was the said at that, cash for we in taxes if had be XXXX, you XXXX, the to primarily for them XX% things you less taxes, around going that reason

at for that been taxes number and look beyond And taxes the be high-teens of that mid-XX%. number net beyond think closer as probably XXXX, current if going income, a proxy has in I percentage So for if cash you as pretax you cash you historically, tax. will to a for use us look at XXXX, the that

to it. way our that's approximate So

David Vernon

Great. Thank for you added that very much color.

Operator

W. of Ben Please line comes from Our Robert Baird. proceed Hartford next with with question. the question your

Ben Hartford

the migrate follow-ups, taking And that to we by program, to revenue? Any expect arrangements a the in fuel for now be target $XX on as in programs the Hi. the change a surcharge diesel? we're end Couple of guess, of above percent year toward programs quick Highway question. I that the you emphasis percent is on thing, that fuel the of of diesel of there the same accrued. revenue to the Thanks continuing surcharge over on-highway

Alan Shaw

And is that focus and that, customer the target volume focus primary we'll pricing of our driving surcharge a the the service. our is with growth. our of value pricing value cannot because market, and our on reflecting conditions through negotiate through primary target on shareholder that, offer one our on base fuel I is primary terms Ben,

James Squires

to done migrating Alan and set WTI of price. his of out OHD. we team points great as couple a has That's ago. field from our But out, years to Alan job ultimate do surcharge is program something the a goal

Ben Hartford

it the northern or what discussion, NAFTA your border? then of relates And percent Okay. as either interchanges southern to traffic

Alan Shaw

a amount. Its' modest

modest approximates international But tell international business business itself overall, for us of for a the NAFTA is you the kind I'll States. that United Although, is amount.

Ben Hartford

Thank you. Okay.

Operator

with this question comes the Raymond final from with Please Our morning your of proceed Tyler line Brown James. questions.

Tyler Brown

Hi, good morning.

Alan Shaw

Good morning, Tyler.

Tyler Brown

drayage markets capacity dray mute of intermodal a dray but long company, could market. issues, are And you heard in haul opportunity year. kind we've watermark? the second, of anecdotes conversion do any in the realize dray about Jim, XXX-mile your capacity this intermodal think Obviously, particularly that I

James Squires

length the haul truck a is in generally. factor? sentiment - the of specifics Alan, tightness on without is drayage in capacity Certainly tightness the

Alan Shaw

We've of population touch manufacturing energy network. and the XX% consumption. the XX% XX% on the over our got in of over We

of to our we're the up business pick will it is very population truck close confident things centers. plan to Highway the our from about That's why One as great as us network that allow capacity tightens.

aspects in our within in fourth that the have markets We impacted seen tightness the some drayage his And committee. in growth volume quarter.

Tyler Brown

that's in maybe Okay, growth? the plan, to great. your support partners to would contemplation the any pool investments? those fleet EMP capacity adding into or Or capital is there And just make chassis channel the of expect

Alan Shaw

that We XXXX. are chassis But in our today. the capital went we capacity XXXX will we projecting add our fleet through that's budget, in already in included one

going supply additional helpful forward. chain So the would in chassis be yes,

Tyler Brown

EMP?

Alan Shaw

taking We're truck at We're Right revisiting in a market. now evolving anything there. the we have don't that. look

James Squires

know, you have channels we a intermodal we well. As of is one multi-channel are our and provider EMP number as and the of a others

Tyler Brown

And real cash can't wait you can I give 'XX instantly paid the tax Right. Cindy, Cindy, was? quick, just on what the.

Cynthia Earhart

second. around, $XXX million. X on It hold It's was around

James Squires

out. we just That's footnoted in the analyst put book that

Cynthia Earhart

Yes.

Tyler Brown

you. Thank Perfect.

Operator

Squires Jim you. the Mr. floor At closing time, over for Thank comments. back turn I'll this to

James Squires

excellent feedback. lots to look talking everyone, throughout to you, thank the forward year. for We questions right, and of you All

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