The paragraph is the introduction to the Norfolk Southern Fourth Quarter 2024 Earnings Conference Call. The operator begins the call by introducing Luke Nichols, the Senior Director of Investor Relations, who then provides a disclaimer about forward-looking statements and refers listeners to their reports for risks and uncertainties. Nichols also mentions the availability of presentation slides and notes about non-GAAP measures on their website. Mark R. George, the President and CEO, is introduced next and expresses satisfaction with the company's strong performance in the fourth quarter of 2024. He highlights an increase in volume and revenue, along with narrowing the performance margin gap compared to their peers. Key company executives, including the COO, CMO, and CFO, are also present for the call.

The paragraph highlights Norfolk Southern's successful year, emphasizing strong service metrics, efficient operations, and positive customer responses, leading to more business. The company exceeded its cost reduction commitment, improving its adjusted operating ratio significantly. Safety metrics also improved substantially, reflecting the employees' dedication to safety as a core value. The company managed these achievements while handling a 5% increase in volume for 2024. John F. Orr is set to discuss Norfolk Southern's safety and operating performance, highlighting the commitment to safety excellence as fundamental to future success.

The paragraph discusses Norfolk Southern's improvements in safety and operational efficiency. The company saw an increase in its FRA reportable injury ratio but achieved a record low in December and made significant strides in safety and operational performance. They reported a 27% improvement in the FRA train accident rate for the year and began 2025 with over a million man-hours injury-free. Norfolk Southern attributes this success to their strategic focus on people and training through their thoroughbred academy. Their PSR 2.0 approach enhanced network performance in 2024, improving speed and reducing dwell times. This resulted in higher efficiency and capacity, with an overall 10% improvement in system speed and significant gains in train speeds across various segments. These efficiencies allowed the company to grow volumes by 5% and see substantial improvements in car miles per car day and their locomotive fleet.

The paragraph highlights the company's achievements in improving operational efficiency and productivity. It mentions a 19% improvement in GTM per available horsepower and record fuel efficiencies. The company excelled during peak season, handling 7% more parcel volume without failures. For 2024, they aim to address network underperformance and close their margin gap through teamwork. They reduced running repair and repair costs significantly, improved speed, and decreased road interruptions, leading to increased crew productivity and reduced costs. The company emphasizes that these successes result from a collaborative effort across the entire organization.

The paragraph discusses the company's strategic restructuring of capital requirements, which has enhanced operational efficiency and productivity for upcoming projects in 2025. They are developing a new operating plan to be implemented in Q1, focusing on reducing handling times, improving terminal standards, and enhancing operating processes. Emphasis for 2025 will be on fuel and mechanical infrastructure for efficiency and savings. The operating team has shown impressive results in 2024, helping close service and productivity gaps with competitors. Overall volume grew by 3% in Q4, driven by intermodal and agriculture, despite declines in total revenue due to lower fuel surcharge revenue and rate pressure. Merchandise volume had mixed results, with growth in some areas like soybean and corn but declines in automotive, metals, and energy. Notably, the company achieved record RPU less fuel metrics for industrial products and automotive.

The paragraph discusses the company's performance and outlook in different sectors. Intermodal saw a 5% increase in volume due to sales wins and demand, despite low truck prices. Coal volume decreased by 1%, with a 9% revenue decline influenced by low natural gas and seaborne coal prices. Overall, the company had 5% volume growth for the year, although revenue remained flat because of substantial fuel costs and lower coal rates. The Merchandise Business Unit reported record revenue figures. Looking ahead to 2025, the company anticipates modest volume growth supported by reliable service, impacts from lower vehicle production, improved manufacturing from reduced interest rates, and growth in chemicals markets. They acknowledge potential challenges from new tariffs but express confidence in recapturing market share. An agreement between USMX and ILA mitigates uncertainty in their intermodal markets.

The paragraph discusses the company's recent financial performance and market outlook. It notes that strong import and export demand has driven growth, though new tariffs could pose challenges. The company expects new business and empty repositioning to mitigate these issues. Truck pricing is still recovering, but excess capacity is decreasing, with some improvement in industry metrics like tender rejections. Lower coal export prices and decreased utility demand due to lower natural gas prices and high inventory levels are also noted. The company is committed to maintaining reliable service. Financial highlights include a net benefit from the Eastern Ohio incident, a gain from the Virginia Line sale, restructuring costs from ending technology projects, and advisory costs from a proxy campaign. The adjusted operating ratio was 64.9, with earnings per share at $3.04.

The paragraph summarizes the financial impacts and performance improvements for a company following an Eastern Ohio derailment. The incident has cost nearly $2.2 billion, with significant insurance recovery mitigating these expenses by bringing in $650 million this year and over $750 million in total. Despite revenue challenges, the company achieved substantial productivity gains, improving their operating ratio by 390 basis points compared to last year, resulting in high single-digit net income and earnings per share growth. Sequentially, the operating ratio improved by 150 basis points, surpassing projections due to contract recoveries. Year-over-year expenses declined by $153 million, led by improvements in labor productivity and fuel efficiency, offsetting wage inflation. Purchase services and materials expenses also decreased, contributing to overall cost improvements. For the full year, they exceeded their operating ratio improvement target with a 160 basis point enhancement, highlighting strong productivity despite slightly reduced revenue.

The paragraph discusses the company's strong performance in 2024, achieving nearly $300 million in cost savings, surpassing their $250 million target. This success has created significant momentum heading into 2025, with a planned 3% revenue growth driven by positive volume and pricing, despite challenges from fuel and coal markets. Productivity remains a major focus, with a 2025 cost reduction target of $150 million and expected margin expansion of 150 basis points. The company aims to close the margin gap with competitors and plans capital expenditures of around $2.2 billion. With robust free cash flow, they intend to complete balance sheet restoration and resume share repurchases by 2025. The section ends with the beginning of a Q&A session, starting with a question from Chris Wetherbee of Wells Fargo about the productivity target.

The paragraph discusses the company's optimism and strategic plans for improving operational efficiency and reaching ambitious targets by 2025. Mark R. George expresses confidence in exceeding previously set targets, attributing potential success to self-help opportunities and expected economic recovery. John F. Orr adds that the focus is on enhancing standards, productivity, and service reliability through a new operating model. This involves a structured approach to improve asset utilization across cars, locomotives, and vehicle fleets.

The paragraph details the efforts of a company to enhance efficiency across various departments, focusing on optimizing IT and network infrastructure, aligning workforce with business goals, and reducing costs. Mark R. George discusses expected improvements in the profit and loss statement through efficiency measures such as reduced overtime and better resource management, including headcount reductions in 2024 with full benefits in 2025. Further savings are expected in materials, fuel, and services. Chris Wetherbee then queries about revenue growth and labor productivity, to which Claude E. Elkins responds, noting expected revenue growth in most markets except for coal and mentions a lingering fuel headwind.

The paragraph discusses the company's strategies and expectations for growth despite challenges such as coal prices. They anticipate a 3% growth in volume and pricing to counter these challenges. Jason Zampi highlights improvements in labor productivity, particularly in T&E, with prospects for further productivity gains across operations by 2025. John F. Orr agrees, noting significant reductions in overtime and improved discipline at terminals. They focus on empowering local supervisors and improving engagement with employees. The conversation shifts to a Q&A with Ken Hoexter from Bank of America, who seeks clarity on growth being driven by volume and asks about share buyback plans into 2025. John humorously invites Ken to their "Need for Speed" war room, indicating a dynamic working environment.

The paragraph discusses the company's financial strategy and outlook. Jason Zampi highlights that the company is focusing on rebuilding its balance sheet through improved profitability, insurance recoveries, and line sales. The capital distribution strategy remains the same, prioritizing business investment, dividends, and then share buybacks. Share repurchases were paused in 2023 and 2024, but the company plans to resume them gradually as part of its value creation framework. Mark R. George forecasts modest volume growth and solid core pricing, despite challenges with fuel and coal pricing. The company anticipates a 3% revenue growth, factoring in current tariff considerations.

In response to a question from Brian Ossenbeck about pricing and market share, Ed (Claude E. Elkins) explains that the company is focused on expanding its wallet share with customers by improving service consistency. They are interested in both reclaiming market share and capturing new opportunities where goods have not previously moved by rail. The company has been successful in pricing according to the value provided, especially in Merchandise markets, and plans to continue this approach as they improve service reliability and resilience. Mark R. George confirms that both market share gain and pricing strategies will be key areas of focus.

The paragraph discusses the company's focus on enhancing its service quality to regain market share and improve pricing leverage, particularly in the chemicals sector. This strategy involves identifying specific areas where service has historically been lacking and making targeted improvements to deliver more consistent value to customers. Claude E. Elkins highlights the internal discussions and actions being taken to be more specific and targeted in capturing a larger share of customers' business, especially in the Merchandise markets.

The paragraph discusses a company's strategy for improving service and agility within its network to better respond to market opportunities. Success in agricultural markets is highlighted as an example, and intermodal growth is expected due to a strong consumer base and resilient economy. The potential return of chemical business and market growth is confirmed, with specific opportunities being targeted. Changes to the operating plan are mentioned as part of continuous improvement efforts.

The paragraph discusses the company's efforts to improve its operations, focusing on enhancing terminal efficiency, on-time performance, and over-the-road speed. The next step involves tightening standards, improving yield on train weights, and customizing services to be more competitive. They aim to optimize the service plan to align with speed improvements, offering flexibility in trip management to boost productivity. This strategy will help optimize the fleet and operations. Mark R. George and John F. Orr emphasize extending train lengths to keep locomotives active longer, reducing dwell time, demand, and fuel consumption. After nine months of effort, the team is ready to implement these improvements, with more enhancements expected in the future. Walter Spracklin from RBC Capital Markets then prepares to ask a question.

The paragraph discusses John F. Orr's commitment to improving operational efficiency, specifically targeting a 100 to 150 basis point improvement in operating ratio (OR). Despite some gaps relative to peers, Orr emphasizes that no effort is being spared to enhance performance. He mentions various strategies, such as increasing car miles per day and improving fuel efficiency, as well as leveraging locomotive productivity. Orr praises his team for significant cost reduction and highlights their focus on addressing issues through a proactive "war room mentality" for continuous improvement. He asserts that there are no structural barriers impeding their progress and attributes the strategic efforts to strong leadership and collaboration within the organization.

The paragraph discusses a commitment to continuous improvement and customer service, highlighting a strategic approach called PSR 2.0 led by John F. Orr and his team. They emphasize that progress is achieved without compromising on service quality, despite increased volume. Walter Spracklin and Jason Seidl commend the team for their performance, particularly in intermodal operations and merchandise trip plan compliance. The conversation notes a potential seasonal dip in the fourth quarter but acknowledges strong overall results. John F. Orr takes responsibility for delivering successful trip plans and expresses pride in the team's efforts.

The paragraph discusses a company's resilience and performance despite facing environmental and operational challenges like hurricanes, port strikes, and a polar vortex. The speakers highlight the company's quick recovery and robust communication with customers, resulting in solid outcomes. They describe the industry's responsiveness to unexpected disruptions, emphasizing the importance of resilience, and note improvements in operational metrics such as velocity and unit train performance. Additionally, future optimization efforts related to mechanical infrastructure and fuel efficiency gains are mentioned.

John F. Orr discusses efforts to improve fuel efficiency, highlighting achievements and strategies for future savings. In 2024, they reduced fuel use significantly through measures like improving train and locomotive efficiency, optimizing power distribution, and minimizing operational disruptions. These actions enhanced fuel productivity, reduced resource usage, and improved asset utilization. The company is also focusing on refining fuel distribution processes and vendor relationships to further cut costs. While currently managed manually, they anticipate increasing automation as the year progresses to sustain these efficiency gains.

The paragraph discusses the positive outcomes from recently implemented energy management systems and improvements in managing mechanical assets like car and locomotive fleets. These efforts are expected to significantly enhance performance throughout the year. Jason Zampi agrees these areas will be crucial for productivity improvements moving into 2025, aiming for a $150 million commitment. Following this, Bascome Majors asks CEO Mark R. George about Board dynamics after his first few months in the role. George praises the Board's unity and engagement, noting many new members, and highlights their primary objective after a recent Board meeting.

The paragraph discusses the management's confidence in their strategy and team, expressing satisfaction with the board's support and guidance. Ravi Shanker from Morgan Stanley asks for clarification on tariff impacts on volumes. Mark R. George responds by acknowledging the uncertainty around tariffs and suggests that their effects may vary for different businesses. He emphasizes the rail transportation business's flexibility and readiness to adapt to changes, whether through imports or domestic production, suggesting that the overall impact on volume might balance out over time.

The paragraph discusses the flexibility and readiness of a network to adapt to changes in supply sources, whether domestic or international. Claude E. Elkins agrees with Mark R. George on the network's nimbleness and their capability to handle changes in the economy or trade policy due to the strong operational and sales capabilities. The discussion highlights that most of their business is tied to the domestic economy, with a smaller portion linked to international trade. The conversation then shifts to a question from Daniel Imbro regarding a bearish outlook on coal compared to previous expectations, seeking clarity on the factors affecting this outlook and any updates on contracts coming online.

The paragraph discusses a financial discussion centered around coal. Mark R. George notes ongoing pressure on coal prices in international markets and the potential downside risk, with current domestic demand facing challenges despite recent weather conditions increasing burn rates. Utilities still have large stockpiles, and natural gas prices are crucial in determining future demand. John F. Orr mentions potential upside if natural gas prices rise, although current curves do not indicate such a trend. Claude E. Elkins confirms that volumes from a new customer are expected to increase starting in the second quarter. David Vernon then asks about how to model the average revenue per unit (RPU) for coal moving forward.

The paragraph discusses anticipated year-over-year operational ratio (OR) improvements of 150 basis points despite several headwinds, including inflation, fuel prices, and depreciation, which exert approximately 200 basis points of pressure on OR. Claude E. Elkins expresses concerns that the seaborne coal prices are currently low and expected to remain so in the near to medium term, potentially impacting revenues. Despite these challenges, Jason Zampi expresses confidence in delivering the projected annual OR improvement, supported by strong service and operational progress. Additionally, there are various factors influencing OR across different quarters, such as incentive compensation, volume seasonality, and wage adjustments.

The paragraph is a discussion among several participants about the impact of port stoppages on volume flows and intermodal results. Ariel Rosa from Citigroup asks about the pull-forward of volume in the fourth quarter due to these stoppages and whether additional costs or resources were needed to handle the changes. Claude E. Elkins responds by acknowledging an increase in volume towards both the West and East Coasts but notes that they managed this without significant additional resources or disruptions. The primary challenge was ensuring customer service on the East Coast during the potential work stoppage, which ultimately did not occur. John F. Orr agrees, mentioning effective communication, though noting some minor issues with car supply.

The paragraph is from a conference call where Jordan Alliger from Goldman Sachs asks about industrial development and its impact on the company's network, specifically regarding timing and future growth potential. Mark R. George responds, highlighting a strong pipeline for industrial development, with eight new locations and four expansions completed in the fourth quarter. He mentions the 2025 pipeline remains strong, and the projects will contribute to long-term growth. The session concludes with the operator ending the call and thanking participants.

This summary was generated with AI and may contain some inaccuracies.