Afternoon, everyone. Sorry we're a few minutes late. It's Scott Group, transport analyst from Wolfe Research, kicking off the afternoon session of our 14th annual Global Transportation Conference. It's Tuesday, May 25th. It's now 1:05 P.M. Eastern Time. Really happy to have Norfolk Southern joining us today. We've got Mark George, the CFO; Cindy Sanborn, Chief Operating Officer; and Alan Shaw, Chief Marketing Officer. Thank you, guys, for being here. I don't know if you have any opening comments you want to make or if you want to get right into questions. Scott, we'll be pretty quick here. We've just got a few slides to share with you to get our story out there. Fantastic. Thanks for the opportunity to present today. Quick reminder, presentation will include some forward-looking statements subject to risk and uncertainty, as noted in our 10-K. We'll speak to 2020 results that exclude those two non-cash charges we had last year: $385 million for 703 locomotives in the first quarter and a $99 million non-cash impairment charge related to an equity investment in the third quarter. There is a non-GAAP reconciliation posted on our website under this event. If we go to slide three, Scott, we've made tremendous progress on productivity ever since we launched our Top 21 Operating Plan in the third quarter of 2019. GTMs per employee were up 16% through the first quarter of 2021. We posted an all-time record OR of 61.5, a 340 basis point improvement over that same time span. Apart from last year's economic shutdown in Q2, we made meaningful year-over-year and sequential improvement. We are proud of the progress we have made to date. We are not finished. There are many operating initiatives at the root of this improvement, some of which Cindy will talk about in a couple of minutes. Our strategy of technology innovation and implementation is also a key driver for our productivity improvements. If you flip to slide four, you will see we are making real progress here. We are putting real-time data and mobile technology into the hands of our customers and employees. We are enhancing both our internal and external business processes. We are truly in the midst of a digital transformation with investments in technology that are really expected to drive the next phase of improvements in five key areas: service quality and experience, driving growth, improving sustainability, improving operating safety and performance, and, of course, productivity and efficiency. With that segue, Cindy, why don't you talk about our productivity trends and service metrics? All right. Thanks, Mark. We've made significant progress on a number of productivity initiatives since the launch of Top 21 in the third quarter of 2019, as you see on slide three. Train length and train weight grew an impressive 14% and 15% respectively, while workforce and locomotive counts were both down 22%. We iterated on train plan changes over the last two years while closing or converting six hump operations. That has enabled us to build out our trains longer while reducing locomotive counts and dramatically increasing workforce productivity. These are all core PSR concepts. We remain focused on driving more productivity ahead. In the meantime, we do take very seriously network performance as we contemplate and implement changes. Let's now take a look at our current network fluidity metrics on slide six. Regarding terminal dwell, we've seen a steady sequential improvement for 11 consecutive weeks, with the latest weekly reading at its best so far this year. Train speed has shown some sequential improvement as well, as we continue to focus on improving car velocity for our customers and our shareholders. There's still more work to do, and it's an absolute priority. I'd like to turn it over to Alan for a couple of slides from him. Scott, I'm going to point to slide seven just briefly. Our volume levels have been largely consistent this year, except for the dip that we had in February associated with the weather impacts on our network and the whole supply chain ecosystem. They rebounded very quickly as we exited the weather impacts and have been really fairly consistent since, despite some of the disruptions that we've seen from, say, the automotive industry and the semiconductor shortage. I'll close with slide eight. We firmly believe that we are well positioned to serve the fastest-growing segments of the U.S. economy. The economy or the recovery for us has been led by our unrivaled consumer-oriented franchise. Late last year, we started to see improvements in the industrial sector of our franchise. This year, we've gotten somewhat of an unforeseen strength in our energy markets as well. You look at GDP, Purchasing Managers' Index, housing, inventory levels, commodities markets, and a really tight truck market. It all kind of supports our growth projections for the year. While export coal is a strength for us, we continue to point to a secular decline in the domestic thermal market within our coal franchise. We are cognizant of that. Just in closing, we believe that our leadership and sustainability are resonating with our customer base and the markets we serve. Our growth numbers are validating this point. We are confident in our ability to leverage our franchise, our approach, and our sustainable low-carbon transportation alternative to help our customers compete in a global marketplace, provide them with a platform for growth, and grow our margins. With that, we will close and turn it over to you for questions, Scott. Okay. Great. Thank you, guys. Let's start near-term, and then we'll get longer-term, bigger-picture stuff. Just volumes are up 33% quarter to date. What's doing better than you expected? What's doing worse than you expected? How is overall QQ tracking relative to the plan? Yeah. What's doing better than we had forecasted, Scott, has been the export market. We've talked about thermal as a strength. We started to see some improvements in the export net market. The indices are looking a little healthier than they had been. Now, recognize that the indices are kind of based right now trading on news instead of actual trades. We'll see how that goes. There's a lot of geopolitical concerns going on there in the export market. That's some volatility that could be on the horizon for us. Where we're clearly not performing the way I thought we would and where I missed was the impact of the semiconductors. It's been greater than we had anticipated. I think volumes probably hit kind of the low level a couple of weeks ago in our automotive franchise. They had dropped like 30% sequentially over a couple of weeks. We started to see some improvements in the automotive network, but it's still pretty far away from where we think it should be. It very well could be into the fourth quarter before we hit the run rate for automotive that we had anticipated. Okay. When you add up the parts of export better, autos worse, you've guided to 9% volume growth for the year. How is or revenue growth for the year? How are you feeling about that guidance? Do you feel like there's upside potential? Are there more risks? What do you think? We're confident in it. We're delivering it. There are risks which I've identified with the thermal market, with geopolitical tensions, with equity markets. I mean, Mark, you and I talk about this quite a bit. Yeah. I mean, look, the momentum is there, Scott, in the marketplace. I mean, the volumes are there. We're seeing it. We were very early on with confidence in the top-line outlook for the year. I think we were the first ones to get out there. Yeah. We were unique. Yeah. We were unique. Very unique. Everyone has kind of come up to see the market after us. The only thing, frankly, that I think can derail this are geopolitical chasms that start to emerge. Imagine a scenario where equity markets really do tank, and that has the secondary impact of consumers tightening, businesses tightening, and suddenly the GDP contraction starts to reemerge. Barring any of those kind of events, we still feel really good about the year. We've got a great franchise that is really at the face of the consumer-oriented economy. That is the fastest-growing segment of the economy right now. We anticipate it will be into next year as well. Just a reminder for anyone listening, if you have any questions, type those in, and I'll make sure to ask those. On the yield side, we've had four straight quarters of negative yields. Should we expect that yields finally inflect positive starting in the second quarter? I know fuel is certainly going to start turning into a tailwind. How should we think about yields excluding fuel as well in the second quarter? We do expect that we're going to see improvements year over year in RPU starting in the second quarter. We highlighted some issues in the first quarter. With respect to yields and our approach to the market, as you know, we've got 24 consecutive quarters of RPU ex-fuel improvement year over year in merchandise and 17 in intermodal. That doesn't just happen, right? That's an execution of a strategy, a long-term strategy across market inclines and market declines. We're very confident in our ability to price to the value of the product that we're delivering to our customer. Alan, when you think about yields ex-fuel on a consolidated basis, do you think those would be positive as well? It looks like mix is trending positive this quarter with merchandise up 35%, coal up 40%. It would seem like we have some positive mix on top of price. Is that right? Yeah. We'll see some positive. We do have positive mix. We do believe that we'll have year-over-year RPU growth in the second quarter. I want to remind you, though, Scott, and I know you've got this modeled, is that within coal, we've got negative mix. As thermal coal export is the one that's leading the growth, that is relatively low RPU compared to export met coal. Although within intermodal, we've got positive mix just because of the superheated LTL market. There are a couple of kind of cross currents going on there. We do anticipate that we'll deliver positive RPU growth year over year in the second quarter and for the full year. Okay. Mark, on the operating ratio side, we had a strong first quarter. We typically see good sequential improvement, give or take 300 basis points from first quarter to second quarter. Is there any reason to think we should be outside of that normal seasonality, either positively or negatively? Any discreet items you want to highlight for us? I think more than discreet items, it's just the fact that normal seasonality doesn't apply anymore. I mean, since the pandemic last year, it's really upended the traditional seasonality on a year-over-year or quarter-over-quarter basis. I mean, we really entered a recovery in June of last year, and it's been kind of a linear increase since then. As Alan showed earlier on his slide, it's been kind of flat. We have been level loaded in terms of volumes here other than February. Because of that, I don't think you should be modeling perhaps the traditional seasonality profile as much as the way we're looking at things that are a little bit more sequential. Since we came out in June of this pandemic, we've really shifted our focus internally on trying to absorb that incremental volume while limiting additional incremental costs. That's the way we're trying to manage the business right now. Aside from that, getting to your specific questions, we did talk about the fact that purchase services was a low quarter for us. We can expect to see that kind of ramp a little bit more here in the second quarter for the balance of the year, driven in part by some engineering spend, but also IT in particular. A lot of those investments are kind of backloaded. Fuel will also represent a growing headwind as we exit the first quarter, with surcharge on a little bit of a lag mitigating that more in the third quarter. Okay. I asked Alan about potential upside or downside to the revenue guidance. Mark, I'll ask you about the OR guidance, 300 basis points as guidance for the year. How are we feeling there? Again, I think we feel good about the guidance. We really do. The top line, that confidence that we have in the top line, it carries right through to the OR guidance because we've got our hands on a handle on cost. We're not concerned by any adverse trends there. Okay. Let's bring Cindy into the conversation. Cindy, just give us an update on what you've done so far year to date in terms of continued implementation of PSR and what, if anything, is left for you guys to do on the network side, on the cost side? Okay, Scott. As we came out of the fourth quarter of 2020, we really had a very volatile first quarter with January kind of warmer and maybe a little bit more fluid in January, and then a really challenging winter, which took demand down, volume down, and then pivoted right back up in March. What we've been doing is pressure testing the footprint of terminals that we've laid out with our conversions that I spoke to and so forth. We're starting to see some good momentum on the dwell side. You see that, and I spoke about that. Part of what we've been doing here in the last couple of months is just working into the footprint we've got and improving our service product for our customers. Going forward, I mean, we're continuing to look at train size. That is still an opportunity for us. We see about 10% of our trains operating at 10,000 ft. We know that's not going to be everything at 10,000 ft, but we see some opportunity there. I have talked publicly about siding extensions that are underway in a couple of areas on our network that will actually also help us moving forward. As we continue to progress, I mean, we will also look at terminals. There's always opportunities there as we take advantage of the volume that we're seeing and how can we handle it most efficiently from a car velocity perspective. Locomotives, which kind of pivots back to train length and taking full advantage of our locomotive fleet and making sure we're fully utilizing it and getting fuel benefits with it as well, which has also been, from a utilization perspective, a positive story here over several consecutive quarters. We have a ways to go. It felt good to come out of the first quarter and get some consistency underneath our feet here. I guess, how do you balance that? It sounds like there's more opportunities to take things out, but you also want to get the service product better. How do you accomplish both of those at the same time? Yeah. You got to be very nimble with it. Looking at our labor productivity, we also look at the productivity that we can get in our yards and terminals and how can we continue? Some of it's tweaking in some places. Some things are going to take some investment that'll be a little bit more longer-term issues. We've really been focusing most recently on getting our service performance back because we really needed to come out strong after where we finished March. That's taken some priority here, inappropriately so. We'll continue to have it a priority, but we will work on making sure we continue labor productivity in general. There's opportunities there. I guess on that labor productivity point with headcount, do you think headcount needs to start moving higher from where we are? I guess we've got the levels through April, but do you think it needs to start moving higher, or can that continue to creep a little bit lower from where we are right now? I've talked a little bit about working on train size and also terminal efficiencies inside terminals. We have been hiring. We've just let attrition kind of help us go down, help us slowly move down where we see those opportunities. I think our biggest headwind as we go forward is we've been challenged to hire people as many others have in places where we do need it because it's not a broad-based hiring plan. We are having some difficulties there. That is my one concern as we head into the summer months. We have seen some attrition both in those that we've hired leaving earlier than we expected or finding that it's not kind of the work that they want to do and also getting people in the door to begin with. If we do this right, it's a little bit of a mix of hiring and a mix of productivity. I think I feel better about the productivity piece and a little bit more concerned about the hiring piece. I think it'll be a headwind for us going into the summer. A headwind just in terms of your inability to hire, not that we need to. Yeah. Yeah. Yeah. Absolutely. Yep. Yep. Thanks for clarification. Okay. We've got a bunch of questions coming in. Just on the service point, is there a velocity miles per hour that you're targeting that you want to get back to and a dwell time hours that you're targeting? Scott, train velocity is somewhat composition of mix. When we've seen coal run like coal's running, looking backwards is kind of hard to really set a target. I wouldn't say a target. I think we still have opportunity to improve. On dwell, we've had some moments where we've flirted below 20 hours. We need to continue to get there and stay there and improve from there. I think that's a good target for us. There's a lot of great work going on inside our terminals and our manifest terminals to get to that point. We've seen some good days around that. We just need to put that together into weeks. Okay. This is a long question that somebody asked, but I'm going to read it. Congestion has been an ongoing problem for most rail networks in the last year. One of the things we continually hear from some of your service partners is that when they provide you with information related to upcoming equipment needs and potential network challenges based on planned customer volumes, your systems and model do not lend themselves to network responsiveness. What are you going to do to become more responsive to this criticism as retail and manufacturer customers and your intermodal partners embrace digital technologies that offer predictive capabilities? Hopefully, that made sense. I don't have to reread that. Yeah. I'll talk about what we're doing with the intermodal terminal, Scott. We've seen issues where lift contractor labor force availability has been impacted by the lack of labor availability in the warehousing market, right? That's created a draw on that capacity for us. We are revisiting many of our lift contractors and putting in service level agreements in there. We've had to go out and acquire more chassis as street dwell has increased. We are digitizing our intermodal footprint with the rollout of Optix, which is an intermodal terminal optimization system for us. One of the things that's helped us do is load our intermodal trains much heavier and much longer, which allows us to handle more volume with the same amount of resources. In effect, interjecting resiliency as a shock absorber into our network without any capital. There is a number of factors that we have had to work on internally within our intermodal footprint in order to accommodate the shocks to the entire supply chain. Because as you know, the drayage network is very stressed. The warehousing network is very stressed. And the international community is pumping volume into the United States as quickly as they can because retail inventory levels are at a historic level. Okay. I think that makes sense. Now, I mean, at the end of the day, there's a lot of these questions that I think are geared towards, right, the rail industry hasn't grown volume in a long time on the U.S. rails. Do we feel confident that we can start growing and sustaining volume? Do we have the service product to do so? Maybe along those lines, another question that came in is your thoughts on CSX's acquisition of Quality Carriers. Do you feel like that's an area where you guys would look to target, of specialty trucking as a growth avenue and maybe as a means to sort of help attract some volume to the railroad? Let's talk about two of the points you made there. Number one, rail's inability to grow. If you look at it in total, that's the case. I think you have to pull it apart. You look at us compared to 2011, and our coal revenue has declined from $3.5 billion to $1 billion, right? Revenues have kind of stayed flat, right, during that time period. It would be mathematically impossible for us to lose another $2.5 billion worth of coal revenue going forward. Intermodal is a proof point for the rail industry. That's the best service that the rail industry puts forward is the intermodal product. That grows 6%-7% a year over time. At least ours does, right? We are very focused on improving the quality of our product and our merchandise network. We are focused on targeting that $800 billion truck and logistics market. One of the ways we can do that is a consistent, reliable service product. You do not need speed. You also layer on top a lot of these technology initiatives that Mark talked about, right, the ease of doing business and the customer-facing technology. That unlocks growth potential for us. With respect to your second point, you ultimately want to provide a product to your customer that we talk about the simplicity of truck coupled with the efficiency of rail. You can do that by partnering with others in the supply chain community. We have been pretty successful at doing that. That is our focus. I will just add from a capacity perspective on line of road in terms of the network, building out the trains, we still know we have some opportunity there. We can make some investment in siding capacity so that we do not have to put train starts on as a part of volume. When it is time to put train starts on, we can do that. We have, in our case right now, we have still got locomotives stored. We would have to hire up, but we can accomplish that. I feel like I am like Alan. I mean, it is a story that has a lot of detail in it that includes capacity on the line of road, which I feel really good about. You don't feel like you need to start acquiring trucking assets? No. No. No. We do not feel like we need to own the assets. We can partner. We can partner. There are plenty of folks out there who are better at first mile, last mile than we are. We can partner with them. Mark, a couple of quick ones for you. Copper employee was up, I think, 11% in the first quarter. How should we think about this cost item going forward the rest of the year? Yeah. The way I would think about it, Scott, is probably flat sequentially, the balance of the year. Kind of put it that way. I think that would probably equal growth in the high single-digit range for the balance of the year. Just think about it in dollar per employee as kind of flattish. Okay. With the focus on technology that you mentioned, is there a capital implication there? Should we think about CapEx $1.6 billion? Does that sort of stay steady the next few years from here, or does that start moving higher? I think CapEx will grow, but our goal—and we've been talking about this for the past year—is really to see revenue growth outpace the CapEx growth. We have been funding our technology investments progressively over the past few years as PTC investments have wound down. We have replaced it with projects that will actually generate a return. CapEx as a percentage of revenue should continue to fall, and cash conversion should continue to improve? That would be the goal. Yeah. I would not commit now to saying CapEx will remain flat at $1.6 billion, which was the premise of your question. Okay. No, that makes sense. Alan, what about the pricing environment? I know we talked about yield, but what about underlying pricing? The truck market is super tight. Rates are up a lot. It feels like every time we get to this level of truck rate increases, we start seeing rail pricing in that, give or take that 4% kind of range. Is that what you're seeing right now? Scott, you and I have talked about price for six years, right? My viewpoint on that is we're going to take a sustained approach to this. We're not going to introduce the chase of spot market. We're not going to introduce volatility into our top line. As you know, the average duration of our contracts is over two years. Every year, we're touching about 50% of our business. We're doing a little bit better than our rate plan so far this year. Again, it's going to be into 2022 before we really start to see it manifest itself throughout all of our deals. Okay. Someone is asking, how are you handling ESG as it relates to the coal franchise as it impacts the environment and emissions? Coal, as you know, is about 8%- 9% of our revenue base. We're focused on things that are important to our customers. I think more broadly, we're focused on ESG. That's becoming increasingly important to our investors and our customers and, frankly, our employees. Rail has a wonderful narrative relative to truck with respect to ESG. I've talked about targeting that $800 billion-plus truck and logistics market and how we have an unrivaled intermodal franchise in the East, which lends itself very easily to truck conversions. I also talked about our efforts within our merchandise network to take business off the highways as well. We have a very positive and somewhat unique ESG story in the rail industry. I want to go back to operating ratio for a second, longer term. Next step is the 60 OR. Feels like you're on track to hit that at some point this year, maybe as soon as 2Q. We'll see. Some of the rails are talking about mid-50s, even some now, low to mid-50s ORs over the next few years. Any structural reason why that's a place where you can't get to? Remember, our goal here has been to narrow the gap with the industry because we do recognize we were behind them all. Actually, I'll just point out, I think we did a damn good job there in Q1 narrowing the gap to, I think, 10 basis points maybe. We can call it a rounding error. We had a very good first quarter. I'm not saying we're done. That gap may reemerge because of dynamics that existed in the first quarter. We made really good progress. As we guided, we can and will go lower than the 60. Our goal is really just to narrow the gap at this point. We're not going out there with long-term goals. Our objective is to create tremendous shareholder value first through fixing our margin profile and then through growth. I'd rather say that it's not sequential. I'd like to be able to get growth and margin expansion at the same time. Right now, our focus is to narrow the gap while harvesting this growth opportunity and drive shareholder value that way. Okay. My last question, then we need to wrap. We should just address M&A. Just your thoughts on M&A broadly. If this CN-KSU deal now goes through, I guess, do you think that this leads to further Class I consolidation? What's it going to take for maybe you guys to change the view of, "It is now time for M&A"? I I know your view has been it's not, but what would cause you to change that view? I mean, honestly, Scott, we want to just focus on our business and focus on driving our organic operating performance. We're following the news. I mean, it's evolving daily. We don't want to get into speculating on those hypotheticals right now. We got a lot of work to do organically to get our railroad where we want it to be. There's just no sense in us commenting on other people's deals. We're going to get four or five different versions of that exact answer over the next couple of days. Yes, you are. Okay. All right. I think we got to wrap there. Sorry, we were a few minutes late. But thank you, Mark, Cindy, Alan. Really appreciate that. This This is always. Thank you, guys. Thanks a lot. Take good care. Okay, guys. We are going to get going in about two minutes with our next panel, our trucking panel with Covenant, US Express, and Estes Express. Thank you, guys.