NSC - Earnings call transcript Q1 2021 | Norfolk Southern Corporation

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Operator

Greetings and welcome to the Norfolk Southern Corporation first quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star, zero on your telephone keypad.

As a reminder, this conference is being recorded. to Relations host, for pleasure Director Achimasi, my Investor of Norfolk now introduce Meghan your Senior It’s Southern Corporation. may you you, begin. Thank

Meghan Achimasi

uncertainties Thank those Please forward-looking with a Please view we you important. and reports may we to morning. filed during from uncertainties risks our and call, actual full annual materially today’s quarterly results. risks note and for will to most which discussion the statements that certain and SEC differ of are refer subject as make good and

It presentation resulted will nscorp.com units, rationalization the Our non-cash a in of speak in Investors transcript the our of and section, Along quarterly so of to slides A used the measures. Southern’s Chairman, by posted a that measures excluding recall million, be CEO, and first to after reconciliation now locomotive to President fleet our Jim $XXX full quarter in the which those are Squires. charge. call. my available that pleasure lines, is results introduce GAAP comparable of at download along XXXX XXX Norfolk non-GAAP we today launched will charge with we the

James Squires

quarter and Good Norfolk morning XXXX welcome earnings Southern’s everyone first call. to

Cindy XXXX. Officer; George, Marketing Officer; Chief Joining Sanborn, and Chief me in Alan today Mark started Southern Financial are Operating Shaw, strong Chief Officer. Norfolk

translated solid results. financial into railroading scheduled precision of implementation successful Our

severe achieved flow despite weather operating by team quarter operating income. Our cash this disruptions employees and for and Southern accomplished February. chain in significant brought first for earnings delivered all-time share Northern records records nationwide free supply per on and ratio

continued million the year-over-year. and streamline declined or resources quarter asset in X% time, volume gains quarter, XXXX. adjusted quarter, revenue the impressive resulting increased For our to expenses to we workforce due the primarily Throughout same productivity. compared in of fuel first to growth X% up At X% $XX

and bottom create these to me to technology the in of through Cindy. in shareholder call and critical, we detail, on let and examples review team results strong Looking the revenue be the more value. sustainability over quarterly some But with quarter. line starting intent the ahead, first, go we after the provide recent propel turn growth will Investments efficiencies achieving to remain I’ll and

Cindy Sanborn

I our and to morning. excited we Good hopper quarter in share achievements looking am the what first have ahead.

an a team on quickly are to and with on who capability service is efficiency team flat productivity experience indicators. initiatives members operational restoring terminals. ground its and introduced inside proving move Our few alongside These switching increase X the Slide and PSR actions advancing shareholders hump reliability. our We’ve our motivation new leading also are for our team our our field major shows to and having immediate customers. impact

enabled initiatives distributed fuel our how additional to us usage efficient able to substantial scheduled resources within While compared to train optimization By and volumes year key to such gains the as existing Execution additional train were the consistent. those length quarter, plan were absorbing during efficiency of realize varied horsepower more Productivity quarter, gains weight locomotive train the volumes fewer network, volumes despite efficiency. power of and in railroading and variable we improve with handle were in ago. freight success. our a were

more some add me length. Let color train on

parts productivity involves of that We investments trains, and our are targeted improving accomplishing longer network. committed running to by certain within

aid assessment initiative. that we incremental long of During will our infrastructure initial an the completed quarter, train

complete corridor on peak this and begun result, extension this construction will As we will have the in season, year’s construction that be of siding ahead we identified two that a long a year. we’ve on others Chicago-Atlanta begin

to opportunities consolidation address deploy efficiently to support and train capital identify growth. both and quickly will We organic

holiday snow quickly both both and carload weather our hardest X, Slide coming This severe were with extreme and quarter. affected several rose in of running until operations story arrived shippers, last higher year, new Volumes winter an the year’s than being important cold. weekly the by hit railroad points February. and percentage the tell fluctuations to out Moving of Chicago

lines through to terminals. is to our traffic teams NS cold overall safe and Their While for of main would success supply into despite our operation customers. chain signals we recognize critical operations, congestion fluid, our especially ensuring and efficient the kept and slowed like deep engineering network. a field I work historic

increases yard network weather the during to Beyond we continued volume expected year. the to episodes, our adjust handle

to dividend efficiency are on at overall both reliability We which creates enables volume our us absorb variability focusing improved and terminals, that capacity and driving growth. turn a key in

the yard comparable condensed to snarled are February our a was year, our shows XXXX We the fluidity and X Slide to winter continuing second terminal general. and but in in impacted followed and network that in supply terminal that levels, velocity quarter. dwell chains start focus

the to further by see progress to we reliability service get network performance past want to are and committed it you where to As improvement be. the seven to continue we trends our over weeks,

at support to to Additional progress These we including enhanced our are Southern’s resources. trains up longer leads initiatives flat car on the as improvements drive undertaken fewer Norfolk terminals, operating allowing humps efficiently during the it a transformation and the I’ll and turn by series operate which well major heavier and capacity and in customers. current we shareholders fluidity dwell with of in Slide our improve benefits as how rail running, operations. quarter switching focused continued creating finish down We’ve us X showed consistent to results. velocity, explaining how

we efficiency Alan. has team I’ll you continue over and the leveraging volumes. very the with extend on the These trends mid-XXXX, in show but rising and that Finally, QX results accelerate able to has we Thank for these been your positioned Top implemented and weather in it well are XX trends, to effective our both reinforced The passed. initiatives improvement are productivity turn asset interline benefits time, usage. to though both the have of since been improving we winter and cooperation, and even building

Alan Shaw

individual reached by as this Beginning disrupted record X% year of exceeding were with high. rate, volume in volume good experienced delivered sales Thank Slide last everyone. as significant difficult of levels XXXX. our revenue driven country. improved winter consecutive We year, XX-year states each U.S. commitment second you record the the excluding on a gains March, This in March the and X% grew to weather vehicle Merchandise supply XXXX morning adjusted to first Volume fluidity ecommerce. of for while to in Intermodal reflecting January consumer on decline. Partially shifts the May these into we XXXX. revenue part chain excluding declines delivering start due revenue a environment. quarter, fuel volume Cindy, in of X% per the Intermodal while quarter to low. I we started sales units long-term volatility this quarter, a are were that XXth quarter per per and volume. a was events the business since by light was the first excluding shipments. the mix strategy, unit replenishment revenue Despite continuation billion as of merchandise February improvement revenue in challenged excluding total X%. at driven in per in highest inventories strength in first retail of with the unit in the a our dynamic steel for metric our high yield ever, supply activity rebounded year-over-year surged Merchandise increased our slightly the XX, to year with with quarter. consecutive fell this to highlighting shutdowns. growth and quarters and the to truck strong now improved marks to a largest intermodal freight though market in sector. adjusted performance volume market sequential and X.X% March when the as improved grow pre-COVID comps million chains Revenue to $X.X volume XX.X in conditions, from energy Slide and revenue improved initially levels segment cross and LTL March, improvement operating cycle declines supported grew XX, X% by year-over-year volume of the unit difficult recover per quarter Progressing growth while offsetting will turn revenue annual unit fuel prior growth down volume overall automotive and inventory unit combined sales the continued business both faced of from in market. fuel a fuel tight soybean, XX increase strength This year-over-year the seasonally revenue compared reopened unit year-over-year,

shipments thermal to as demand finished tailwinds Volume incremental for of trade pressured continued met gain product revenue growth recovery X% Our tensions. volume down year-over-year, were to be by coal $X Revenue it demand economic in coke business improved China-Australia improve the driven gains well quarter. inclusive export from million mostly substitution from revenue. continued volumes a the and continued, per load. global as lower and as from unit industrial Domestic delivered product shortfall Utility accelerated. as X% was as

unrivalled customers consumer-oriented franchise an throughout and the continued to our benefit that quarter. We have shareholders

business franchise prices. the rising gains particularly industrial saw and Although in we manufacturing levels severe February, impacted diverse weather improving certainly from economy our serves commodity

franchise strategy and to our capitalize revenue value-added provide solutions growth marketplace. sustainable in We our on long the are delivering with of in the strength term line

driven growth our will uncertainty strong. customers automotive hitting manufacturing volume steel to production expected for for production value XX, markets the high rose where the will by while the demand, in Moving shareholders. volume another Elevated the drive GDP XXXX. the the as be That driving and U.S. both levels creates growth the U.S. along highest expected growth be production to growth our this timing March, to that expansion is return poised pre-pandemic are robust factors years. current shortage gains; will year semiconductor we pre-pandemic chip vehicle highest capitalize as in achieve the last which low. on outlook X%, of levels the drive level demand exceed year for that key digits however, low our drive Merchandise market sector. activity These segment continued in to We XXXX. generate north XX levels remainder dealer growth franchise is with of XX.X to rest since remain expect growth inventories the year in our and recovery. in the remain is PMI XXXX, progresses. Consensus is will confident industrial Slide of the in to inventories single volume coupled the economic currently the is light will our for of total to of to the expected with

from benefit economy in return will We merchandise travel fully sector of reopens. gasoline consumer the as demand also energy the anticipate our markets within the

for energy grow well build spending, will goods is rise intermodal source Our franchise tightness durable An generate and renewal stockpile International XX% on recovery. XXXX with by XXXX, gas near franchise continue consumption remain lower factors conditions conversions in in as utility summer challenged economic continue our we levels, and In is prices. to Natural global in levels impact coke key line growth will and Spending than boosting weather correlated growth the economic activity. to in RPU low summary, trucking term bodes on the and inventory momentum are domestic associated export will consumer which improve. markets. a to with be sector with of the markets. continued the intermodal met expected as economic to ongoing all will will in thermal on continues expected resumption recovery. a intermodal Domestic business benefit expected with revenue in gas opportunities. to determined closely improve continue U.S. trade from strength, The Coal that to is the although negatively the expect Decisions volume average. XXXX. market

As of transportation remain the diligent to our needs solutions valuable the customers marketplace. in delivering we constantly evolve,

focus product. drive growth, margin initiatives service on and to strong continue We improvement, to a

results. our value grow our and secure leverage who to to We customers’ the growth new in turn now marketplace to our over I financial our support will Mark, are it in confident our to margins. ability will opportunities cover

Mark George

Alan. Thanks

As adjusted Slide the On of volume handling XXXX, records EPS compared achieved Jim conditions. the mentioned, operating a OR in EPS an our of while the quarter challenging XXX quarter OR was income disciplined the equated a you through through from XX.X%, gain we summarized walking control earnings we in improvement, which was so absence recognized an the an in cost to a midst with EPS of results point will core XX, additional and pretty reported came improvement $X.XX. per quarter refund dampened was $X.XX, basis $X.XX. improvement the and last in share of XXXX improvement by note $X.XX I tax that that year first

XX, million Moving as million, volume volume down grew At we $XX ratio primarily coal record, X% than XX% XX operating more we of the record, year-over-year, another QX. the and quarter quarter or a flow revenue in declines XXX first generated productivity billion, growth to basis or to with time, XXXX. first improving versus year-over-year, down XX.X%, in due offsetting sequentially asset points harvested a and the $XXX from to $X operating operating same This increase record workforce Slide free X% drove quarter the of we the low and up with drove points productivity. merchandise. benefits $XXX by The income up in X% intermodal produced coupled X% cash additional the expenses year-over-year also and versus basis growth in million of

progress with of the X% Moving from from more collectively $XX in since of smaller to or volume and you’ll another quarter compensation. committed to the lower benefits all were see Material Comp are $XX were million headwinds a expense point other X% $XX up of employment $XX see tailwinds or reduced fewer investments continued building we Slide million reduced the declined our this thanks higher as in to costs than on X% a with stock-based operating provides between X% car as down that per a equipment of matched with higher drill was associated decline services largely year the efficiency. the or productive made last workforce down a a opex improvement on and done expense X% improvement operating X% a or and XX. in freight volumes. employee comes to consumption, related year intermodal Partially ratio. intensely work that X% over drive Fuel quarters, Purchase the and rationalization year. collectively improvements workforce several here in the our more plan, in XX price as evenly down we additional thanks increased lower to expenses down basis categories. the to our on was fourth million benefits with From quarter. offset technology productivity nearly rents spend launched ago X% Top of quarter and we’ve $XX reduction we Slide million GTMs than operating have further and XX% productivity, smaller expense million split quarter and with and When improvement increase, We XXXX associated XX% XXX improvements. remain meaningful spend fuel offsetting and these third focused than locomotives but to XX, past

income, of our million see Turning remainder income that unfavorable XX $XX is XX% to the company-owned primarily investments. $X on million net of due operating for returns other net year-over-year below you’ll Slide life P&L the to lower insurance of

tax Our the that quarter in the a recall last XX%, refund just rate. effective tax and over effective QX XXXX was lower tax we resulted rate in had

X%. of our that, back million was run our our flow rose $XXX that million, the Earnings million. $XXX dividend it to of in a by at million issues, free shares spend. weather quarter, of now cash versus increased quarter by to $XXX cash which X%, relatively As in repurchase over strong our earnings by turn the to X% operating property in Shareholder cash year for price capital a due at nearly year recently and in Slide prior and repurchased annual delays $XXX up activity to With share by Wrapping was flow additions timing Jim. on million thanks X.X supported targeted rate free million pre-tax $XXX. modest an an per with increase below conversion increased buoyed to a XX, growth and including average meaningful $XXX income result, the related compared increase net I’ll totaled share distributions we

James Squire

you Mark. Thank

morning about of PSR. stemming You’ve our all productivity this adoption heard the improvements from

middle also digital is in company transformation. the Our a of

are intelligence, of customer to mobile improvements expect rail The We real growth, already time next technology customers redesign of new service and a portal headway. a of user-friendly and Norfolk in examples. the emissions. shows investments introduction phase more our truck shipment apps at and sustainability and experience, we’re recent XX and a in reducing to facility few conversions, drive truck-like giving efficiency delivering making great Southern, Slide

We’re internal improving workflow easy-to-use mobile an train the visibility and of shipment for application hands our putting in conductors, customers. streamlining

platform, We’re digitizing better, communications and making. external faster decision new our CRM through a internal enabling

using We’re terminals. intermodal information promote and to utilization systems our new equipment intermodal efficiency at

plan predictive for track our failures using since, manifold to inspections been with the On proactively. Machine show has over XXXX decade. delivering footprint, been in NS ever creating we automated benefits XX, a Years and to car We’re program. efficiency. results vision ago, and to reporting technology freight analytics on established path that is a locomotive a our set on goals we We’ve forth. environment reduce our maintenance leader and safety the of beginning we sustainability we recognized reducing sustainability when first importance Slide

and do recently the key In the of as stakeholders. summary, on Companies. all we show which for by Journal our Sustainably Here of to sustainability business leadership milestones and good of named Managed have including a right Street we a for record few Wall being examples few also highlight one is track recognition, the a external thing Most XXX

extreme a the guidance, for drive global given wrap our that expectation disruption, will let cold February’s in full consumer-oriented Although the me up XXXX and X% markets market we with restating supply strength first and in circumstances to the unusual year-over-year. update quarter our confidence chain in with revenue ability meet growth don’t generally the year manufacturing

achieve the XXXX adjusted OR. versus our than points XXXX XXX year, rate improvement For expect we expect a full run and basis more end of with XX% OR to we result, to

won’t these once achieve As stop we before, said targets, we’ve we improving.

growth underway ahead we the about for value the initiatives our year optimistic have in sustained and shareholders. to long-term create all We’re

X transactions proposed address Before the want I to call we Class open Q&A, to the another involving quickly railroad.

We’re watching industry won’t the be generally. the closely, but situation discussing or speculation proposals we

there regulatory process further unfolds, for will be the review As opportunities discussion.

As performance With efficiency and and shareholders the remain call our look we first focused quarter enhancing operational value demonstrates, about customers, outlook. we that, open we’ll to questions. on our and results our to and addressing your for questions delivering forward Operator?

Operator

question the Chris of proceed Our instructions] from line [Operator Citi. your first with comes question. with Please Wetherbee

Chris Wetherbee

in wanted morning if Okay, thanks. the to Good I the quarter. performance so strong particularly could we operating everybody. first the with outlook, see ratio, start

If expectations? keep based in of and some rest from it Maybe you towards the you is progresses kind maybe actually XX that some potentially are of the that maybe been look exceed achieve thoughts give there in at should things there year the the perspective the what that a on cost rate or last a quarter can and now, rate, normal view year on even to years. it seems us your opportunity progress mind or as we you’ve your run on XX stands as run first able you’re through right seasonality, like to sub-XX five

James Squire

Chris. morning Good

economy some volume about bullish back In out out reopening. forecast this. so pretty by January, quarter early. January. surge economy of the were in way there got the first volume for and was to X% fourth first with we we seasonality experienced certainly a and we guidance, the some of outlook quarter the both pointing while XXXX economies ahead were in Let Also, me the growth been year, on bullish we’ve the anomalous, the and We repealed, quarter given due during bullish the hasn’t that begin business opportunity in somewhat strong it feeling

we’ve now are year. posted it’s great - start the here a quarter, good we to a first So

a optimistic during call, remain to about and running, the I’m lot we the come. optimistic and to remain and to specifics more sure off the we’ll year about going push. we but we’re talk We’re continue

January end terms be be We we we expect of OR. would where the in said this of back by year in to

Chris Wetherbee

Then of is the - the the you’re progress to highlighted it. of that’s Okay, seems XX PSR. unfolding efforts just some It to you on beyond improve the process I like you nicely, a you’re can the continue of quite the you you workforce cost helpful. making structure the making maybe maybe Slide so opportunity talk maybe picture, on business? appreciate and about follow-up other around is in sort maybe bigger for what know, XXXX productivity

Cindy Sanborn

question, this Cindy. answer I’ll your question. appreciate is Chris, and the I

about notes--slides we’re to You GTMs a saw that as the us around quarter longer trains. with record continue know, all we trains, face, even employee, this get that talked going as per Mark’s we was challenges and and we for you opportunities consolidate in see to

by places to some us it, expect. that and We then I’ve my out the train investments continuing PSR, don’t with to sidings. in few in continuing investing efficiencies it is that right-sized plan I are find remarks years, for the you it learned through getting length time as and of making your last maybe that about Part tweak called in some help

those beyond all I XXXX. see think locomotive utilization, in we’ll be fuel, improvement of able continued to headcount, areas

into and what volatile this we’ll with so very the confidence efficiency quarter we first described, going Jim up. about those good challenging, accomplished where were very, has at end when so far, feel stop we’re with XXXX year, me performance. team find the We’ll even this continue good continue of gives As of that end ’XX to we very should very with about where be we through and to not I great very thinking that opportunities, year, a

Chris Wetherbee

time. thanks Okay, the it. very well Appreciate for much

Operator

you. Thank

Stephens comes from Our with question of line Long next Please your proceed Justin question. the Inc. with

Justin Long

generally rails to the if to just and the you and I mergers opportunity I rail did proposed had know itself. you going you to Jim, from and comment further participate if KCS, thoughts present Canadian ask the your around to morning. want Thanks mergers on in consolidation willingness said any good but weren’t were

James Squire

this is that of stakeholders interests. proposed lot recognize our dominating focused shareholders’ and are our and there interested kind customers’ and we airwaves including situation right of protective NS, I Justin, of will on interests the now, the Well a be industry transaction,

knock-on will active transaction participants think We on that transpire of be for in be us deals hypothetical our focus morning what rest out the rather people’s let’s any may really would was humbly know, this it on - effects, I said, you that to STB outlook may for other submit fruitful not do, etc., With which spectacular, focus this. year. our of quarter, pretty I and but the first the

Justin Long

on follow-up, circle year, basis just Fair enough. than guidance, guidance the greater my ended. is improvement what open somewhat I’m yields for maybe has points, on headcount RPU could and anything curious for terms XXX for basis - or XXX thinking Mark, as of Maybe the the year, changed comment back this OR points to to and you you’re then of this in well. your expectation

Mark George

Sure. that With the gave, year to despite I digits of we X%. may January, flat in course single volume to to guidance would back reiterated high leading and employment expect roughly and we to Cindy down headcount, the be which revenue over that was recall would you regard this levels be that headcount

guidance that transpiring. that a and this We’re and we’re good we about Alan, that’s way you we and unfolding believe the year, actually on for now balance tracking of bit stay the right feeling RPU? want to yields about little will so talk to to that continue

Alan Shaw

expect four. Justin, quarter year-over-year had our of RPU I growth that see Yes talked per to the the a in year through year. two anticipation. and the That’s then in reduction full remainder growth expect first quarters we’ll unit we about through and revenue in still

export associated revenue for lower it so the in of with is growing the RPU price. strength We’re than reflection a with slightly. improve pretty and of market respect that increases, RPU of with our more is sticking year. will with volume Most intermodal mix rapidly X% thermal guidance to That’s

Justin Long

I Okay, time. the appreciate

Operator

Thank you.

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

Scott Group

Morning thanks. guys. Yes,

employee to lot. services Just side. costs. how model a that? up cost we’ve the couple on was Then little thoughts purchase volatility Compensation a things just a on seen per in Any

stays how Just higher. if to model trend if starts any thoughts down Thank you. that that, to year-over-year, on that

Mark George

and related headwind Thanks Scott employee question. was for XX% roughly to up half first quarter, the was and the ben really that per the comp slide there the incentive that reported quarter. the first we in of in stock-based Comp and on

the expect that that can You this of will headwind kind persist of throughout year. balance

half of really we other in the little well persist but headwind. the of be XX% points as in well little as as the balance of is tax increase It year, model There wage uptick some normal in few overtime, inflation quarter in comp saw of a than a probably it. maybe as good split the the The payroll between that the is headwind year, shouldn’t should of persist. also headwind first bit the which half of throughout the balance to will couple, that be more level some way won’t

sure. low it services, us for purchase for quarter a for Now was

where really the in were engineering--remember but IT on we the purchase I probably us going to be back think the fourth second, that so from it quarter, year, a this level, back fourth up engineering lot of that pieces that of third, kind year we to work you’ll also IT. during the good the start spend, to see services the on, going quarter. quarterly in up forward. volumetric depend hit more probably the way to half I investments of rest That’d is summer do going will A to think step of to are months, the model and continue

Scott Group

Then pricing can talk just you environment the thanks. you, you’re Alan, for and Okay, what just seeing there? about quickly underlying

Alan Shaw

improving, it’s anticipate. as Scott, would Yes you

are We’re record seeing up, commodity highs. at prices prices steel move

in seen our you’ve products, strength we’ve the the transactional plan our You’ve we’ve intermodal. grain of on seen in raised business seen and plastics, strength as strength within year, through in months lumber, couple progress first

continued seeing a of very Now, in we recognize component are strength market. our small that’s however, the trucking franchise;

point things throughout pricing pretty so capacity Some to of and a the the into good the is environment that very fact feeling are I’m for truck about as we’re we tighten the actually projected year right now, from move Scott, environment XXXX. reading, year this to of remainder robust the

Scott Group

you thank guys. Okay,

Operator

Thank you.

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

Allison Landry

morning, Good thanks.

trip tracking on for other you metric you where metrics it we that network the improved and reliability Is how load that this relevant? could implemented guys service plan rails just really where look might public of of sense metrics just outside and and you is closely, networks. metric at this looking have PSR trying intermodal has stands if that give you the car at today, provide or so, Some most see. for a can something us think understand be whatever to Just compliance

Cindy Sanborn

is color I necessarily provide really we of not what we’re we that is Allison, will What thank here, the on. you. train some measures say working you’ve on, some you we service I’ve been what and but to length seen share since with added related

in component at that car of the faster it focusing more local you. time about geographic we’ll car that’s in also so measure, we’re ability think to. SDI, come, going piece, we In that’s that velocity, we’re and to On the service that what we we’re be have share are that how as area found the moving that. than did where really What on car the really at service others, types PSR the component, car managing talk was be have headed and with and to looked going levels, we’re that managing that beyond drill created and velocity, put and about to type just to index - down we deliver also broadly wasn’t developed accountability to something for

Allison Landry

Cindy, and percent talked power your of peers gallons perfect. efficiency. Okay, the gap of Could of then us--like, BPUs, - also per to and improvement efficiency in I’m of BPUs of move the a increased drivers trains if some the of terms driver, you accelerate through terms train XXXX. expanding closing can expect length Thank as in about the fuel it in to you contributing you about the we you. them sort If with use now the improve think running when that GPM, you is and different of fuel distributed big give are improvement use you you the are obviously more could or with the equipped sure or weight? just the speak that what or and is that, to ways

Cindy Sanborn

XX% say of opportunity therefore continue continue see demand, in are all to that to the you us full that full full very to would the run talked of - calls. XX% trains district I I’ve our opportunity pen. on and basis, strong I locomotives mentioned, time including capability improve network, district levers pen locomotive fuel by this maybe at to management, Allison. call above a a on to manifest our that of for we’re see there. we at we utilization about so that earlier point energy so Okay In at some

power. distributed about talked You

distributed a us do we’re with of We’ve power and to the lot the us distributed areas good we record use work are on that first on which, that get It trains We got have--actually, didn’t quarter. power is increased distributed fuel, for on utilization we in your perspective. have the almost point, to record from so those real by XX% us, quarter, trajectory fourth a was XX%, working last and a we there. to beneficial to also is power fuel

Allison Landry

Great, thanks Cindy.

Operator

Thank you.

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

Ravi Shanker

ago? maybe on everyone. here. good years volumes about kind of at bit in where the mix is few now, maybe end the if a was your looking A questions today the it think compare or mix gap traditionally little be intermodal out trying does markets? three there will how see a trajectory you intermodal looking to Also, carload of just from intermodal, years other existed versus Just Cindy, has Thanks, not. morning growth couple do that percentage that what closing to of

Alan Shaw

Actually, years. point unrivalled I our We’ve products. intermodal to consumer-oriented for next should lead intermodal we’re Ravi, expecting to in the growth the east. franchise an got couple the

production railroad compete got in a we’re a vehicle to providing than serve more franchise North truck-like and with product also merchandise any trucks. actively there focused We America, consumer U.S. other on where we’ve oriented

our digital the then highly with efficiency very commodity trucks see the the very really from the around reliable on and the ebbs and where customers. markets of a you’re going We’re That’s with simplicity predictable to that interface for providing revolves tools service good rail, us, intent of our coupled in and product participate with flows growth we’ll within markets. and

billion of markets. had associated overall and don’t back $X.X that to was revenue about XXXX, go XX% you coal with revenue of our long the energy know, have You we -

we’ve coal markets, profile the billion about $X shift, Now, mix got as in despite and well, and revenue we’ve our energy going segments the that robust about growing very got to that we’ve despite of is We’ve our so benefit and we’re billion $X improved the economy, faces customers our of going franchise a our forward. confident plan which shareholders. fastest in U.S. got margin so that

Ravi Shanker

kind trucks Also, much might for and into us, time and update what the useful, influence your following have at years, several gave up very it, there thanks truck of was autonomous thinking Got how about if or market digital spent over the you network next on that all that that is. the the update. just just view guys wondering which you I’m come

James Squire

view certainly and of we horizon such. and a It’s and aware it’s it as is uncertain, to somewhat planning The be something time to are. threat for, but we be

ourselves. more and to so We digital path go of automate via down our efforts own through efficient the are and railroading doing investments to automation, via productive operations

Mark George

provide fashion. we’ve a a said, profile know more attractive much even trucking That our goes We an still got on that better sustainability solution. in we if automated industry, sustainability

Ravi Shanker

thanks everyone. Great,

Operator

Thank you.

line Please comes with from your question the with next Thomas of Our proceed question. UBS. Wadewitz

Thomas Wadewitz

probably see guess to we’ve you constraints wanted think if system, I morning. Cindy. across could intermodal good I there’s the for terminals. at this comment--I Yes, some of the Obviously is seen some it

it you’re a to terminals, intermodal your some How a in what of perspective probably key and lot about kind it at of think control, is your see improve? do of at that done from Some fluidity not. where is you of needs to be

James Squire

don’t that one? why take Alan, you

Alan Shaw

and permit, see the productivity warehouses, are if supply but to it Tom, our you’ll that That across what I’d network. can protocols, you they’re with labor network and having because that trouble which cover chain. seen COVID continue entire intersection our stress is you’ve with with involves customers’ be to also associated having Yes. What with trouble between like staffing.

You surcharge we intermodal improvement intermodal top see that surcharge got the a in the that, channel revenue in in up. well, of partners the increase back things the so delivered XX% quarter. We’ve on could as XX% fourth revenue ex-fuel franchise, drayage in that the got ex-fuel and in community quarter we’ve great Despite in best industry.

and some We to solve help even more. these are of them with issues grow how collaborating them on

Cindy Sanborn

I’d freight with perspective, terminals be add to we closely [indiscernible]. that coordination over network appropriately actually we from spill that Tom, folks not so terminal sure do trains to moving challenges are there’s the support--with for so offloaded, the that, intermodal can really make within good work the onto any the

Thomas Wadewitz

Right, fourth schedule volumes. schedule changes, it did you part how that to stick well, growing and of current do kind When just think then the do okay. work How and think changes, the know, do quarter. Then believe new weather of with you think against of that southeast or I you additional schedule make and changes that--you adjustments flow in had had execute also you the traffic, was and for about you’ve you a new that? sometimes are or follow-up, you network, there some implemented Cindy, the

Cindy Sanborn

November, actually part step largely induced in That kind that was The plan weather, was--and Thanks November, first then beginning and volume, in the also hit prepared came question. into you well, of adjustments, we’re certainly volatility beneficial tested the through make my the was been that’s the across the make to described almost longer I and pressure adjustments by year. some needed XX the of that the our of the some to really it’s to it some back had working in that we to the of started volume southeast implementing and how and and we for from of back so this trains very that we go describe, we as remarks that with and the Top southeast terminal and plan with trains southeast all consolidation changed, way north. I changes we footprint how to make we and plan, us,

to able had to velocity, changes. measures work Elkhart, with us taken maybe were You of productive, the really some They I sitting has that our some helped were changes pleased and we the and saw path. we’re to product, cars the up. also our starting some efficient, that we did to very, We very some we to good really and last March, worked on more us we continue they think volume really didn’t getting of with and a work over back so as the the we lot improvements volatility have continue that we point. customers particularly see good get made, but in the we jump car all the do that feel be to highly in additional this Real work I’m Bellevue we are went on service-related couple We of see I I good were train dwell and I on and where make didn’t about glide that we’ll months, network, out came tweaks. a team. service there into through was online and of effective say improve. the drag see with so weeks think quarter, a continue will pleased and place see at move, to in

Thomas Wadewitz

the Great, for you thank perspective.

Operator

you. Thank

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

Amit Mehrotra

lot growth, the have as target out provided this PSR, to second variable outsized OR incrementals year-on-year implement QX I but quarter the there just disclosure but and that’s the right past, you know past? in calibration you’ve on the that helpful, growth relative of provided you and cost in beyond of structure structure growth in on margin. versus The revenue guys what’s for hopefully structure a Mark, that the beyond. evolving cost slide for everybody. cost the implications incremental I that obviously the morning obviously is cost in you Thanks, and kind guess, there’s fixed structure,

Mark George

our generate going shrink strong our to that’s operating Amit. the and balance throughout accrete we’re to ratio. and Thanks outlook grow ratio--sorry, the operating Look, of is year, our how incrementals

and absorb the kind hold we’ve of hold on and going is items volume organization. challenge the--absorb here as mandate all the projecting. That’s goal flat line the and into Our that as improvement translate the OR to pretty the possible, to the that’s we’re and given much really to cost

some you’re bit, Purchase strong. absorb goal rents really ago, minutes like etc., services incrementals of have As started a ben, the to see when our hold some just I I is geography. items for a and at try firm the and going little so off line think other to volume, comp look cited pop to reasons to we but good of you’ll really going that just and the few rest mentioned, Probably I the year. see

Amit Mehrotra

Is course of if I’m the neighborhood going that you’re billion $X.X just in this kind the comments, year to revenue interpreting your opex the over ramps? So correct? base is of be as

Mark George

to fuel. not of the should year Amit, to will balance variables, hold lag goal, of we the we’re hundreds and we the some up there some volume. but cost of sit too. is on targeting. throughout fuel to Surcharge mitigate absorb the going - should kind that our go rounding that’s of have are projecting more one where of get that, the help yes, while to course, but we That’s some--hopefully is I’m But of millions, than precise try

Amit Mehrotra

where of Then one out coal yields, the as yields kind Alan, remainder you. terms I surprised thank through then think progress best wondering helpful, for we coal you that’s upside, in of your Okay, shake the just quick guess consistently of will follow-up the year. guess. to just The and

Alan Shaw

good than prefer downside to Yes surprise the the upside yields. I’d to morning. on Amit,

Amit Mehrotra

That’s for sure.

Alan Shaw

had of as cross shortfall We currents volume specific ahead with a respect, $X million lot out call coal did in so with our was accrual year, quarter that in to last helped. a the that yield had We well. respect that I great overall us, the of quarter, were about export that’s to that thermal we’ve a due into for in - we XX% to specifically growth very the deliver market. service lot talked product in able export coal thermal and that

positive would things what volumes utility stockpiles so caution expect which during the in but our helps north, overall of it RPU of OR; within you come it’s happy a forward, the thermal utility franchise, had frankly growth within frankly, going process have there’s shoulder accretive south lower deteriorated overall growth months. coal. export a over that stockpiles have forward see more impact utility bottom very Then to franchise. is business, and is RPU. the RPU. winter, is happens whose overall number RPU, and, out, that utility on a the plants what’s we right our then in of however, now, actually got margins, going rebuilding the on We’re pressure franchise point to to does what we’ll line, going than We’ve our few put of That’s a overall going how lot for which shakes with are as now in the driver, utility and on primarily With that’s and

Amit Mehrotra

results. the Yes, okay. sense. Makes Appreciate good it. Congrats much. Thank on very you

Operator

you. Thank

Our next question. Alliger Goldman the proceed of Jordan question comes Please Sachs. from with your with line

Jordan Alliger

morning. good Hi,

sort a pricing. from the here? to, going - yield the ex-fuel. alluded corner is number maybe the like and truck intermodal of hopefully could service on intermodal question yields, given and we getting a forward on you specifically yield-up a think this that curious real quick It yield tightness turning a seems as about Just X% just I’m core is better, number,

Alan Shaw

take international had XX-foot a generally within we that, see you Domestic has RPU. I’ll mix associated saw higher container but a volumes premium container supercharge market, with LTL year surety to very them from growth, for I cycles. over in and a and pricing is relative quarter. so is channel RPU the as XX-foot RPU. grow the positive than our that some a more the through to time, the the bid able leading so looking is intermodal quarters going went value market truck the RPU our consecutive we domestic what intermodal product X.X%. increase up forward with There strategy market. that spot intermodal intermodal benefiting valuing volumes partners We has so us yet and right and went into our which everyone we’re We our rates the really yet of our Then approach even and to course up they’re Jordan, to was--contract franchise and outpaced in they in and think a recession approach air for quality rate improvement the intermodal our last to the in shareholders. go was through down we’ve modal truck else There you RPU deliver Over market, in compete, be want our our our we’ve of and of got XXXX, of remind our channel our ex-fuel ex-fuel their partners. that ex-fuel XX market X.X%, got was year, steady in franchise. in overall RPU cycles contract and

Jordan Alliger

thank Okay, you.

Operator

Thank you.

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

Brian Ossenbeck

a - Hey, with not, how leaders few, strong for saw when sort mentioned attention bit more a maybe resources taking You at you one field, onboard? a any regions the Can see good sounded any you’re PSR like bit to expecting? Are maybe retention there of require you’re looking the or bring a from that growth headcount especially is that in more thing, one just going, little look we recall us different morning. bit of in other terms furloughs experience announced. Cindy. for up higher folks give of going, you the how there’s out it sense the if a to little is Thanks question. Maybe the you as how

Cindy Sanborn

saw--I’ll the on that mentioned this, in start with on you productivity. continuing in I you our it to Brian, we’re Yes improve Mark’s slides saw or [indiscernible], headcount side

are--and be where in is from flat to play. down All ended guiding We we to still December. we are that

to year, furloughs we hiring. some provide of make have are a locations want our we’re doing quarter do by continues it’s customers. have sure where so by attrition good are We doing offset out to spot We help are hiring. some of we product frankly furloughs, service however--we in that and quarter, we broad-based, It’s our to many recalled and We slightly. attrition year not

to, very We’re in a of lot more very integrated period need agility and we decentralized safe where still employee forecast gotten have time plan the be of time, about gives training when so actually but eight weeks, where training see we’re need going Alan’s backfill. going to much being with with we’re folks in a they’re able where to to and places they’re work, condense will, to a good team to speed our you got working what us shorter the and to spent respond lot we down to provide to like of in customers. of--I to needs to improve able on kind a do product if guess service we attrition and a the looks service. market, amount that We’ve raining it respond the of places a our We’ve

and that process about With second for improve the the us I hire, we your to productivity. the need feel will good have I that, around we ability seeing, volume and our still we’re that productivity manage to T&E forgot overall to but really question. continue

Alan Shaw

PSR talent.

Brian Ossenbeck

Yes, - PSR talent. sorry

Cindy Sanborn

have organization team. several others well we find we over them within with career I continue our There if we did Hunt integrated stops in a so and from that to will announce publicly we a different He’s and been He good had good different Cary fits Yes, UP. in need, worked for several joining real railroads. are brought on, add, in the together the have NS.

really of make experience and to part think I external be long support bring are, achieve looking it folks very, gone the places think good in where can need. it, with us feel folks where the of we we and I and additional that goals. tenured happy changes NS I can that’s for integration PSR have our that is we’ll the very about them the always and we helping help well, are

Brian Ossenbeck

Right.

impact well. fuel Okay, some specifically, of helpful guess but to as the Mark. weather Thank more you quarter, just--obviously thanks that sense to I us put the impacted quarter Cindy. quick One with or, how Can lags, as a timing can quantify into you. strong you if context for you give on be one would very

Mark George

the fuel because just break Yes, the weather. really well. we felt as We We mean, headwind so get in coming we the that the didn’t was expense an lag higher fuel really for in overtime, have I was some quarter, efficiency Brian. the certainly we of tailwind it think overall snow But think removal us form did Thanks of re-crews. you material out. provided saw did million fuel to surcharge it We side, numbers headwind higher good revenue. benefit enough have didn’t had quarter certainly here we of through had didn’t good the the quantify fuel for performance in first impact. on slide $XX it a and fuel. Look, on very costs in the I

Brian Ossenbeck

Mark. thanks Right,

Operator

you. Thank

comes question Barclays. next the with Brandon Oglenski line proceed your Please Our of with from question.

Brandon Oglenski

you to get to tight come the you January I pricing going Alan, intermodal the to that because trucking pricing, of everyone. did think lot until benefit call a morning market good from wanted weren’t back on Hey, I imply XXXX.

yields suggestion mix maybe talk or domestic international? differences year, those you be on to throughout are going and pricing explicitly mention that you the was a think that - between I did think sustainable yield impacts can in on few any I more market the but

Alan Shaw

are makes warehousing the market, trucking in you know blue tightness on night, going looking and something X% truck going pool through sense we’re this warehousing is last and seeing expect what we there, the and and environment pricing year-over-year. capacity are continues collar pulling what’s Brandon, it from rates I is The next year into same - at Yes to to was out last the up improve. year.

see rate price. talked contract of time over are forward our people that’s going relatively with that’s market. end noted, however our so we price rates. and exceed inventory overall transactional positioning component and our business, As are that updating we’re the a as customers, a you markets, to through intermodal small plan; structure I’ve spot our can In tight I our next to

noted, time. I over As it’s

to on long do have We at thing term through customers season. they We the sure phenomenal a Over as bid we surety takes go time. channel to shareholders. approach, it’s that our our their contracts, provide time, rates it our partners, and are make want we right growing, take measured who for with

Brandon Oglenski

saw in yields? it’s Okay, then so just we to that on acceleration mostly mix clarify, the

Alan Shaw

Yes.

Brandon Oglenski

then from perspective; about a just care don’t ultimately car Cindy. one which velocity, can understand last quick think your and Okay, really but for I your delivery on guys follow-up you Cindy, that I that service not I index, mentioned understanding focused or you correctly? customers are am

Cindy Sanborn

is why so Well, that any faster I think of we all local those to happy if asset medium processes, utilization break moving car and a kind issues. a you’re focusing of all that those we’re that our We customers, really for with good both agree is our solving measure so our down, processes of see but on car that. going well, as delivery in-transit that’s ultimately velocity,

that on talk general well, in our a make we serving We focus I and quite aligned sure have bit quite topic. Alan a are that and of on and bit about customers

Alan Shaw

running on to our is into every our not highly individual our focus of Cindy’s delivering the customers an we are the the that quality those customers, and we’re fluid product network, Yes, within day with efficient, shared we customers, having and index, a metrics-based that reliable have so with market. KPIs we’re on highly interactions and conversations are that the value bring

Mark George

SDI more It’s than much is. ever granular

Alan Shaw

Yes.

Brandon Oglenski

thank you. Appreciate it,

Operator

question morning of Bank proceed and Hoexter this the with of Ladies your line our Ken you. America. from final with question. gentlemen, Please Thank comes

Ken Hoexter

the this, and of hump, the estate this projects capital improvements? at, on on still gains for Do the stuff back, and function in quarter, job or major sidings. you incremental you there are step path Where in when the think for see, when is some information plans need still of me PSR any a just real gains, here you that on that at squeezing flat you done lot get in. Cindy, mentioned year? question a of the opportunity Is you it’s do of the or you - now step other the for Is look side just any incrementals? maybe improvement. thanks terms more Then the the switching? investment? Great, to solid be You the kind any implemented to the Congrats here. look

Cindy Sanborn

we that We Ken, depend or perspective a I move footprint that from size think on do, point, today, still continue to a to that’s customers way, sure where to think that well to make I we from opportunity with going need efficient, we still continuing us. have train we’ll, I efficiencies an structural be great but want I it that there. traffic and and of your tweak some the to go. volume terminal and ahead that’s and do then wants to forward some work reliable think whether beyond have we to to in done there’s so refine our see more we structural But work serve

Mark George

was and year-over-year. bookmark to was last the Ken, we’d so question We And gains real of around million course it the from happens, it in you do year quarter, of that. million versus we’d items are you and pretty over out on had your of specific had where have years we’ll we outsized answer about operating call estate. real stick sale with we million let $XX and year, bookmark There first this let that where the down $X me when of million $X we’re the shy only for guide--to though the $XX to $XX time QX, a rate run that million million for quarter. a to estate but know, tell even being $XX - Again, light actually the $XX quarter year, that in the first here million little I’d

Ken Hoexter

is like the about my Thanks follow-up, you’re answer. in sound it Cindy doesn’t to impact industry, But on Jim, technology you of would mentioned--I side, ask to but asked there the and You new going autonomous before. in on Do anything working think phase? autonomous about this as the step were one-man next to track car you inspections, that prepare? going the and Then on terms M&A Mark. is the we you’re crews love

up to interested it side maybe in--and Just a an can in seems tech follow opportunity some mentioned investments, tech you so the step-up of you making on keep like strides, lot

James Squire

when say our and attention and that Sure, put track in it gains of We’ve and happy of why the structure our into easily you more to track automating, on asset start using productivity base, and track. efficiency a lot focus time on to. protocols would we there. that it It’s part our efficiently maintain broadly our a huge asset has technology-led the Yes, inspection I been particular. comes to can would understand digitizing data so accumulating base,

other have do. of to into out We extend we begun parts what

freight working inspections car vision machine systems. automating using We’re on

that and reporting working how be duty, in do We many conductors’ crew a yard field report automated, our the automating road of our we the we handheld. room, on gets out in put are work the work online how so aspects - automated, of for hard on will

the PTC in variety to think network leveraging the train We’re network communications ways well, about of as a operations too. automating

more generation to terrific more I’ll note. Next and on presents automated safely, so close opportunity train operations for us and that operate a efficiently

James Squire

questions quarter. to I forward want this you everyone for next your talking to morning, thank and we to look

Mark George

Take care, all.

Operator

Thank concludes conference. you. This today’s

lines this time. disconnect your at participation. Thank your you for may You

Norfolk Southern (NSC) 28 Apr 212021 Q1 Earnings call transcript