All right, great. Welcome to our next session at our 29th Annual Global Transportation Airline and Industrial Conference. Next up, we've got Norfolk Southern. I'm Ken Hoexter. For those new to the room, Vivae is Airfreight and Surface Transportation and Marine Shipping Analyst. We welcome Norfolk Southern for the 18th time in the 21 years we've been hosting the event. Thank you for the commitment. From the company, we have Alan Shaw, President and CEO, having taken the CEO role May 1st. Brand new, making his first conference in his new seat, but third time participating in the conference. Also with Alan in the audience is Mark George, EVP and CFO, joining us for a second time, and Ed Elkins, EVP and Chief Marketing Officer, was in the back of the room. There we go. Also, we welcome Luke Nichols. For those who haven't met him, he's the one who gets the tough questions from investor relations. We truly appreciate the grace of participation and partnership with Norfolk Southern over the years. Thank you. Let me just throw it over to you, Alan. You know, I know you've got some intro slides. I'm just going to open it up with Carlo. It started to be second quarter. I guess we're halfway through the second quarter, down about 3% in line with our target. It's a slight improvement from down 4.5% in the fourth quarter. You're in the midst of the Next Generation Thoroughbred Operating Plan, SPG, and I believe continuing the yield-up strategy. A lot to talk about, but I know you've got a few slides, so I'll throw it over to you to go ahead and get started. Thank you for being here. It's always a pleasure, Ken. Thanks for hosting us, and thank you for hosting Mark and Ed and Luke as well. I'm going to do a little housekeeping first before we start. Our slides are going to be on the website, and I'm going to make some forward-looking statements which are subject to risks and uncertainties. Ken, I would invite your listeners to take a look at our website or take a look at our SEC filings for more details on our risk factors. Let me quickly start with setting the foundation based on our first quarter results. I need to thank our dedicated employees who are really focused on serving our customers for the results that we had in the first quarter. As you know, we delivered a first quarter record, pardon me, first quarter record in revenue and net income and in EPS. We had 10% revenue growth, double-digit EPS growth. We overcame some headwinds. We had headwinds with fuel, and we had headwinds with service, which has really slowed our network. As a result, our OR improved over the first quarter record that we had, first quarter of 2021. What we're going to talk a lot about today, I'm confident, is what we're doing to improve our service product. The way I think about it and the way our entire team thinks about it is a combination of resources and plan. We're actively hiring crews, and we are redesigning our operating plan to enhance our service recovery. You mentioned our quarter-to-date volumes. It's stressed by service. You can see that our volumes, weekly volumes, have stabilized. Frankly, I'd like them to stabilize at a much higher number. The demand environment is there for that. We see improvements in automotive. We're seeing improvements in chemicals. Chemicals, as you would expect, are really being driven by energy-related products. Coal right now is a headwind. We're comping up against two pretty tough months. I think April and May of last year were our second and third highest months for our coal volumes in 2021. That represents some pretty tough comps. Clearly, the market is pretty strong, and our outlook continues to strengthen for the year. I've turned it over to slide five for those who are listening. We're really confident that as our service starts to recover, moving into the third quarter, we increase our velocity, increase our capacity, that we're going to meet the market and start to show real volume growth, real revenue growth, and better efficiencies, better productivity. That is going to drive margin growth. Ours is a back half story as we hire crews and implement our new operating plan. Let me just quickly walk through the markets that we serve. As you look in with respect to merchandise, it's certainly going to be driven by food demand. The USDA just came out and had an outlook for increased soybean exports, increased corn demand. U.S. light vehicle production going forward is supposed to be up 19% year-over-year for the remainder of this year. As you know, we serve more U.S. light vehicle production than any other railroad. That's a strength of our franchise. That's something that we and our shareholders are going to benefit from. I look at construction and manufacturing. The ISM index is in expansion territory for 23 consecutive months. I just saw something this morning that shows that industrial production is now at an all-time high. It was in April. Capacity utilization in the factories is at the highest it's been since 2018. All that kind of supports a lot of strength for us in our merchandise network. As I think about our consumer-facing network within Intermodal, there's a lot of demand out there. Yeah, the spot market has softened a little bit, but we're still seeing an increase in contract rates in truck. We're aligned with channel partners who are investing in growth for 2022 and in 2023. As our team talks to our customers, there's a lot of confidence in the consumer and the demand for an Intermodal product as the year goes on. Right now, retail sales inventories are 1.13. That's down from where they were last year. Can you recall last year we were talking about retail inventory levels being at historic lows? There is still a lot of demand for an inventory replenishment cycle. I saw something that indicates that Moody's believes that it is going to be the end of 2023 before we see a full recovery in inventory levels. Coal has been a fantastic story for us. As I look at our coal franchise and the commodity inputs, natural gas prices and API2, which is export thermal coal, those prices have more than doubled just in the last four and a half months. Our outlook is a lot better than it was about four and a half months ago within our coal franchise. We have restructured our export coal contracts, particularly on the met side, so that we can participate more in the upside in the underlying commodity price. You will probably start to see that in the third quarter. We are starting to see some more investment in coal production on our network. We will probably start to see that in the third quarter too. If these prices stay where they are, then I think you are going to see upside in our revenue as well. Where's the disconnect? Where's the disconnect of this? You mentioned the spot rates rolling. I don't mean to interrupt you if you have a few more slides, but it seems like your commentary on spot rates rolling yet that ISM has pulled in a little bit right from its lowest level in two years, yet this demand backdrop is still so strong. Why such a disconnect, do you think, in the signals? I think that the spot rate in trucking is about 20% of the overall volume. I think you match that up against what's going on in manufacturing. You match it up against what you see in terms of inventory levels. There's a lot of rebuild that needs to be made. I think that people are out buying capacity. Our customers are. Our customers, as they talk to their customers, our channel partners talking to the end user, still sees a lot of demand for an Intermodal product. Okay. Okay. We got to meet that market that I just talked about that's really strong and has firmed up for the remainder of the year. There are two levers to really pull. One is T&E workforce. Right now, we've got about 900 conductor trainees in our pipeline. That's the highest we've had since 2018. I wish it were higher. It needs to be higher. We're adding conductors as quickly as we can. By the end of the year, we think that our overall headcount will be up about 1,000 relative to where it was at the end of 2021. The other factor that we're really pulling on is the implementation of a new operating plan. I need to be crystal clear. This is designed to enhance our service recovery. It's a part of an iterative process of our operating plan evolution that's kind of under the auspices of continual improvement. We're attempting to simplify our network, balance train flows so that our team can focus on simplification, prioritization, and then execution. We believe that once we get a really strong service product, and that's our number one priority, and that's why we're doing TOP|SPG, it will deliver productivity improvements in the form of crews, locomotives, equipment rents, and fuel. It's also going to provide our customers with a platform for growth. I'll offer an illustrative example in our Intermodal franchise. As you know, in many major markets, we have more than one terminal. Right now, the way that we operate, we might run from one major market to another, trains from two different terminals to two different destination terminals. Effectively, you got four different origin-destination point pairs. You may actually have switching between the terminals within the markets. You look at the left, that's relatively complex. Where we're headed is point pair-specific origin to destination, one terminal in the origin market to one terminal in the destination market. That allows us to build more density. That's less line-of-road congestion. That's less line-of-road switching and work events. Frankly, what it'll do is, as we see more demand and more density, we can actually launch more trains. We can offer our customers different gate cutoffs throughout the day, which will improve terminal fluidity and offer a better product to our customers. Before you go on, does that just mean massive focus on the pickup and delivery to get to yard A and B? That has to change how you're getting it from the customer to then drop off half at A and half at B so you're not bringing that freight that has to be broken down in A or B? I'm not sure I understand. We're talking about Intermodal terminals. Yeah, but the work has to be done before it gets to the original terminal, right? It only can go to point C and D, right? From the pickup point. From the warehouse, right? You've got a dray. These terminals are generally like less than 10 mi. Oh, you're talking just from the drayage right to the terminal. Okay. Yeah. These terminals are within 10 mi of each other. Okay. Okay. Okay. It's right from the origination. You're trucking it to a specific terminal. The customer is. Okay. Got it. Got it. Yeah. We made a lot of improvements in train productivity. We continue to believe there are opportunities there, both with our new plan, with opportunities to combine bulk trains from different or in similar geographic direction, and also longer term to lengthen the carrying capacity of our bulk trains through investments either in our customer's facilities or on our own line of road. This will be a continual process for us to improve train productivity. As our service improves and our network becomes more fluid, we are going to improve fuel efficiency as well. We've talked about sustainability. I'll highlight that in March, we rolled out the next generation of a Carbon Calculator for our customers. They can look at 75,000 different origins and 75,000 different destinations throughout the U.S. and calculate the savings in terms of fuel, carbon tons, trucks off the highway, gallons of diesel fuel, and frankly, acres of forest sequestered that are benefited from shifting from highway to rail. This has been a subject of increasing importance for our customers, I'd say, over the last, say, 30 months, two and a half years. Our customers are asking for it. It's the right thing to do. It's good for business, and it's good for the communities that we serve. I will close with this. When I took over as CEO, I wrote an open letter to our employees, and you may have seen it. One of the major themes of that letter is we are going to focus on being customer-centric and operations-driven. We're going to figure out what our customers are looking for from us. We are going to make it easier to do business with Norfolk Southern. The entire organization is going to support our operations team as we look to improve our service product and become more productive. There are three things that we are going to continue to lever. One is our powerful network. We serve over 60% of the consumption in the United States., more than half of the manufacturing. We serve more U.S. vehicle production than any other railroad, more integrated steel mills than any other railroad, and we have access to more short-line partnerships than any other railroad. We are going to continue to leverage that. We have a great customer base, and including within our Intermodal franchise, we have the best channel partners in the business. We have a really dedicated team that is focused on restoring our service product. We are going to lever that because those are going to provide value to Norfolk Southern, our customers, and our shareholders. Wonderful. Done. All right. Done. Let's jump on a couple of things you hit on in terms of the we'll come back to service in a second, but positive car loads in the second half, right? You're still looking for full year to be up slightly after we've had the first two quarters down negative, right? That fits with your upper single-digit revenue growth target year to year. Is that still intact? Yes, it is. There's a lot of opportunity going out there. As I noted, some of our markets have actually firmed. We feel good about where we are moving into the second half of the year across consumer markets, across manufacturing, and across commodities. As I noted, we're seeing more strength in pricing and demand within the coal franchise. Natural gas prices are, what, like $8.25 right now. If energy prices stay where they are, I think there's even more upside to that upper single-digit revenue target. Excuse me. Because of strength in coal. You got coal, you've got fuel revenue, you've got the competitive advantages of rail relative to truck in a rising fuel environment. There is a number of factors that will support revenue growth if prices, particularly commodity prices, stay where they are. You add in the food-related products as well. On the service issues that we've seen in the rail group so far, you talk about 1,000 headcount additions by year-end. That was total, right? That wasn't the T&E. Yeah, that's total, and that's over year-end of last year. Year-end. Yeah. And so with a big focus, most of them being T&E employees. Majority of them are T&E. Is that your Eastern counterpart was here earlier. It seems like that is the issue. Once you get that, then we're fixing a lot of issues. Is there other investments that need to be made to catch up the service, or is it really just a people issue? It's a people issue coupled with an operating plan issue. Right now, clearly, we've got an operating plan that we can't execute consistently and reliably. That's one of the reasons that we are re-engineering our operating plan. It's an evolution. It's not a revolution. We implemented, as you know, top 21 in the middle of 2019, and we were exceptionally successful with that implementation. As we rolled out a new operating plan, our service actually lifted in a much higher volume environment than what we've got right now. We are confident that as we roll out TOP|SPG in the latter half of this quarter, we're going to see a lift from that with respect to our service product. Think about plan and resources, and we are aggressively addressing both. How did we get here in terms of the people? Was it over-exuberance on, as Chairman Oberman noted, on cutting employees and digging too much? Was it something about the plan not being the right way structure? How did we get to this point in the network congestion? Certainly, there was a pandemic in the middle of all this, which brought in a question of what the future looked like with respect to the demand environment. Clearly, we're going to take, as we restore service and put in the new operating plan, then we're going to focus on a retrospective analysis from kind of an after-action review of kind of what signals we missed. We're going to learn some lessons from this, right? There's some things that were outside of our control. There are some things that's our responsibility to fix. We're going to take a look at this and figure out how we can become more resilient going forward. One of the things that we're working on now in our union negotiations is ground-based conductors. If we get more flexible work rules and a higher quality of life for our conductors, that will help stem attrition, and that will make us more resilient and more able to adapt to the market and the customers. Yeah. I think the more you get into TOP|SPG, the more you get into PSR kind of as that backdrop, it seems like the resiliency capabilities seem to get better in terms of finding your way back. Let's go near-term for a second. The average 1Q to 2Q improvement in operating ratio has been about 210 basis points. You target about 50-100 basis points of improvement for the full year. Should we see Norfolk, which had a 63 you mentioned in the first quarter, should we move that back to sub-60 given normal seasonality? I guess the question to you would be, is there anything that puts you above or below that in terms of normal movement? Yeah. One of the things that we'll see is that rising fuel environment as we move through the first quarter into the second quarter and fuel prices have actually increased just since our last earnings call. That will have a headwind on OR in the second quarter as it did in the first quarter. Ultimately, that levels out. Ultimately, that creates more demand for our product. Ultimately, as I noted, that drives higher pricing for us. We'll walk through it and move through it. In the near term, that creates a headwind on margin. Okay. Strong EPS growth in the second half. Do you think you hit double-digit growth? Is that your kind of near-term target? As you know, we hit double-digit EPS growth in the first quarter on 10% revenue growth. We're now targeting upper single-digit revenue growth. The combination of revenue growth as service improves, as service improves, we'll also be more productive with the number of our cost inputs, and share repurchases is going to be a good formula for us moving forward. We heard from Chairman Oberman. What was your takeaway from the STB hearings in terms of deteriorating rail metrics, the need to file additional data, the potential for more STB action? When you step back as CEO, what are your thoughts on now we're two weeks removed from the hearing? Yeah. Frankly, we and our customers and our shareholders are perfectly aligned with the STB and our goals to improve service, right? We have every economic incentive to improve our service product. The STB has chosen to appropriately exercise its oversight ability and ask for more information on service recovery plans. The first tranche of data is due tomorrow, and we'll certainly comply with that. As I think more broadly on the STB and the administration, there are a number of areas in which we've got goal-congruent behavior. We are hiring high-paying union jobs. We are putting capital back into our network in support of safety and in support of growth. We are intently focused on pulling trucks off the highway, and we have a sustainability advantage as well. There are a number of factors in which we're aligned. Yeah. Thinking about crews, I guess, is it, I'm trying to think of what else we can do. I think Cindy had talked about maybe expediting the timeframe in terms of training. Is that something you can do to get the classes on the road faster? Are there other things we can do to transition people to CSX talked about at NARS the other day, talked about lifestyle changes for employees. You talked about the conductors getting them onto the road and maybe changing the job a bit. Is there something through this round of negotiations that you're looking to achieve to get that to be an easier path to the position? As I noted, we've got 900 crews, or pardon me, 900 conductors in the training class. In training. Right. Right. That's the most we've had in about four years. Clearly, we've been able to ramp that up. Not at the level we want, but we've absolutely been able to ramp it up. What we have shrunk is our pre-employment screening. Still, it's going to take us three to four months to train crews because we're not going to cut corners on safety. That's really important for us. We have to make sure that our conductors are well-trained as they go out into the field. That gives me a lot of confidence. You think about 900 folks in training now, three to four months from now, as we move into the back half of the third quarter, we'll see a lift. Can you level set? How many T&E employees do you need to operate at? What are you operating at now? We're below where we need to be, obviously. We are going to keep hiring until we get service to where it needs to be. We are going to take a look at what the outlook is going forward. It is not like you have 10,000 and you have 9,000 right now. Is there a number that you would throw? are too many dynamics in play that have to do with our operating plan and what the markets look like as we move into 2023. Our number one priority right now is to get crews through the door, train them, hold on to the crews that we have, and implement a new operating plan to improve service. What's the hiring market like right now? Has it gotten easier to find employees the last couple of months? No, it's really tough. We're looking to hire crews in Elkhart, Indiana, and Fort Wayne, and Cincinnati and Louisville, where the unemployment rate is like 1.8%. I've got this theory that rails and warehousing and trucking and construction and manufacturing are kind of all recruiting from the same talent pool, and labor force participation is at about close to a 40-year low. It's tough. We have offered signing bonuses, referral bonuses, availability bonuses, and we're pulling every lever we can. We've advertised. We've sent letters and emails to anybody who's applied to a job at Norfolk Southern previously. It's tough, but frankly, we're not a victim here. It's our job to solve this. We're pulling out some pretty innovative solutions to attract employees. Our jobs are still really good, right? Rail jobs are among the best in manufacturing in terms of pay and benefits. In rising inflationary periods, going back to your old CMO hat, and you've been through a couple of cycles in that, what does inflation mean for the rails in terms of how the rails acted, performed, and sustained themselves through that? We will see some inflation in cost inputs, and Mark has done a really good job of explaining that. We also have, as you know, a fairly fixed cost network. As inflation goes up, it increases the demand for our product. If you take a look at our primary form of competition, it's truck, right? The two greatest cost inputs for truck are labor and fuel. Both of those are experiencing a high degree of inflation right now. Truck pricing is going up. That's an opportunity for us. Commodity price inflation gives Ed and his team an opportunity to participate in that. I've talked about that within the context of our coal franchise. What is kind of new now is the sustainability advantage of rail and the importance that plays in our customers' logistics decisions. There is a play there. As our customers are looking to, they're dealing with inflation as well. As they're looking to mitigate the effects of that, rail is generally less expensive than truck. There is an opportunity to shift from truck to rail as long as rail's got the service product and the capacity to support that. That's why we are intently focused on restoring our service product. Yeah. I mean, the gap's even widened right now, right? The advantage over, it seems like you would have a faster conversion, if not for the service issues right now. Yeah. And And as you know, because you follow us a long time, right, we take a longer-term view of markets and our approach with our customers and our relationship with our customers. That has allowed us within intermodal to post 21 consecutive quarters of RPU increase year-over-year ex-fuel. That has allowed us to do the same in merchandise 27 of the last 28 quarters, right? That is through upcycles and downcycles. Frankly, I think nothing better illustrates the value that we provide to our customers through upcycles and downcycles than those two metrics. Let's talk about, I want to come back to intermodal, but the CPKC merger for a quick second. How do you, I don't know, protect yourself? I don't know if that's the right word, but you've obviously got the Meridian Speedway Investment. Are there other crossover impacts? I guess the same, I'll throw at you with CSX and Pan Am, right? Are there things, I mean, how do you look at it in terms of as an outsider? What do we need to know about the impact or how you think about your reaction working with customers? Does it enhance it? Do you need to protect it? Maybe just from your point of view as CEO. We and our shareholders have made very positive investments in Pan Am Southern and in the Meridian Speedway. Our focus has been on protecting the interests of our shareholders, our customers, and Norfolk Southern in both of those. I think we structured a very strong deal with Pan Am on the Pan Am transaction. That is going to improve the quality of our premium services into New England and add capacity for our customers. With respect to the Meridian Speedway, we are focused on protecting our shareholders' interests there and our customers' interests because that is, as you know, part of the fastest route between the Southwest and the Southeast, which are the two fastest growing regions of the U.S. Can you just simplify what that means? Does it mean so that you still have access to it? I mean, because you obviously have a capital investment, so that does not go away. Is it the exchange points? What does it mean to protect the investment? What we have asked for is we'll certainly continue to have access to it, right? And we've asked for trackage rights in the event that there's a service meltdown that negatively impacts our customers. Okay. Okay. Intermodal growth, going back to your old, we've got congestion, we've got growth at the East Coast ports. We've actually got East Coast port up next. We've got Port of Norfolk coming up, or Virginia, Virginia Ports Authority joining us. Talk about truck pricing, right? Obviously, it's high. It's encouraging that. What can rails do to be more proactive in absorbing that volume? One of the things rails have to do is pick service, right? With intermodal, it's really focused on terminals, and it's focused on train performance. We've made a lot of improvements in our terminal performance. Included in that has been our chassis acquisition strategy, which we've noted. We're absolutely investing in our intermodal franchise. It's a great strategic strength for our shareholders. We're going to lever it going forward. I'm very confident that as service improves and our on-time performance with our trains improve, we're going to be able to put a lot more throughput through our intermodal network. Wonderful. Let me stop and see if there are any questions from the audience for now. If not, don't worry. I'll keep going. All right. So Hank Wolf, for many years, we used to come to the conference and talk about when the original Thoroughbred Operating Plan, talk about technology as such a big part of who Norfolk Southern was. And we used to call it the gold-plated railroad in terms of the execution capabilities. So technology has always been at your core. The industry now talks about autonomous track inspection, rail car inspection, autonomous rail car inspection. What are some of the things you're looking to do as CEO? What kind of investments? Where do you think you kind of see some real tech advancements for that benefit the network, the industry, the customer? I think about technology as a two-pronged approach. One is ease of doing business in customer-facing technology. We have a B2B relationship with our customers. As you know, they're consumers in real life. Their expectations of logistics and transportation are formed by their consumer experiences. You have heard us talk about NS Sites, which is kind of a Zillow-like product that leverages our best-in-class industrial development team and the sites on Norfolk Southern for investment in manufacturing and warehousing. I talked about the next generation of our Carbon Calculator. We talk about a refresh of our online tool access, NS, new mobility tools with mobile train reporting and with Tracks. There are a number of things that we're focusing on to make it easier to do business with Norfolk Southern and provide this truck-like transparency for our customers. You layer that on top of a really good, reliable service product, you can really compete with truck. We also think about it in terms of productivity. As you noted, you've got machine visioning, which offers in-motion inspections of trains and equipment that, frankly, the human eye couldn't capture. We think about automated track inspections as well. We are confident that our investment in technology as it relates to our ongoing operations are driving a safer and a more efficient railroad. Yeah. It's just such interesting things. I mean, some of these can, it's not just about the employees they remove, it's just the efficiency you can get from some of these things over time to continue to, like you said, improve the safety. Frankly, it's one of the reasons we moved to Atlanta. Because we got access to a much more tech-savvy population in Atlanta. Yeah. Do you get, I don't want to say nervous, but I don't know the right word, nervous in terms of this wall of freight that kind of wants to come to the rail network, right? Whether we've got high fuel prices, you've got China reopening. It seems like you're poised maybe before you can, and maybe the West Coast Port labor negotiations pushes more all east ahead of that before the rail is ready to kind of ramp up with the employees. Do you feel like that could maybe cause congestion in the interim to continue, or do you feel like you're making the progress that's outpacing that? I'm confident, right? I'm confident that we're pulling the right levers. We're bringing employees on. We're implementing a new operating plan. We're not just relying on one thing. It's a multifaceted approach. The entire organization is aligned around restoring our service products. That's a fantastic thing. It gives us a lot of confidence in the second half of the year and our ability to really promote and deliver for our shareholders revenue growth, productivity improvements, and margin improvement. I think if we wrap up in terms of you've got 1,000 people coming online at headquarters by year-end, I'm sorry, on the network, vast majority being T and Y employees. TOP|SPG, it's an evolution. You're re-engineering the operating plan to get more efficient. Operating ratio, it should show seasonal improvement, but you've got fuel that you're fighting against as well. Maybe a bit of impact. EPS, I think you threw in still double-digit growth with upper single-digit revenue growth and share repurchases that aid that. Anything that I missed or that you'd throw in as far as a point to take away? I think you've got it. Future's bright for us. We're pulling on the levers to become more customer-centric and operations-driven. Sounds wonderful. Alan, thank you so much for coming and joining us today. Thanks for your time, Ken. Mark and Ed, thank you very much.