Q3 2021 Norfolk Southern Corp Earnings Call
Greetings and welcome to the Norfolk Southern Corporation third 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.
It is now my pleasure to introduce Megan I can Massey senior director of Investor Relations. Thank you. Mr. <unk>. Please go ahead.
Thank you and good morning, everyone. Please note that during today's call. We will make certain forward looking statements, which are subject to risks and uncertainties and may differ materially.
Kelly from actual results. Please refer to our annual and quarterly reports filed with the SEC for a full discussion of those risks and uncertainties. We view as most important are.
Our presentation slides are available at an S Corp dot com in the investors section.
Along with a reconciliation of non-GAAP measures used today to the comparable GAAP measures.
Along those lines recorded in the third quarter of 'twenty 'twenty, we recorded an impairment charge of 99 million related to an equity method investment. So we will speak to the quarterly results excluding that charge a full transcript and downloads will be posted after the call. It is now my pleasure to introduce Norfolk Southern's Chairman.
<unk>, President and CEO, Jim Squires.
Good morning, everyone and welcome to Norfolk, Southern's third quarter 2021 earnings call.
Joining me today are Cindy Sanborn, Chief operating Officer, Alan Shaw, Chief Marketing Officer, and Mark George Chief Financial Officer.
Our third quarter results reflect a strong performance from the team as we delivered third quarter Records for operating ratio net income income from railway operations and earnings per share.
While volume held steady with last year revenue grew an impressive 14%.
And our 62% operating ratio reflects a 230 point improvement on a year over year adjusted basis, our second best or performance ever outpaced only by last quarter's 58, 3% Mark.
In the midst of significant supply chain disruptions and labor shortages across the country, we're delivering upon our commitments.
And we could not have achieved those milestones without the tireless work of our employees, who day in and day out keep our customers' goods moving safely and efficiently.
To our employees. Thank you for your efforts to keep our economy moving now.
Now, let's turn to Cindy to go through our operations Cindy.
Thanks, Jim and good morning in the quarter, we continued to successfully drive productivity improvement throughout the network, we work to be as efficient as possible as we adjusted to accommodate demand shifts in many of our markets. This.
This quarter shows continued progress as we attack our cost structure, while positioning ourselves for further improvement in both cost and service levels. The.
Quarterly operating metrics on slide six clearly show that once again, we generated positive operating leverage on flat unit volumes and G. T. M is that were up 5%.
While we are proactively hiring trained crews efficiency in all areas of our operation, including engineering, mechanical and communications and signals enabled us to run the network with 7% fewer people in the quarter compared to a year ago.
Because assets drive activity, reducing the number of active locomotives was an important lever in managing the size of the workforce.
Train weight and train length continue to improve driven by our focus on improving the productivity in our bulk network.
Coal grain and other single commodity unit trains offer real opportunity for gains throughout through collaborating with our customers on operating trains with more cars per set and by doubling up existing trains over portions of their route.
I expect we will show continued progress in the fourth quarter as we see the fruits of our efforts.
While strong coal traffic helped drive train weight more than links train length continue to improve and set another quarterly record.
After seven consecutive quarters of fuel efficiency improvements, we saw a modest deterioration this quarter. Despite the increase in train size as our horsepower leverage was challenged at times due to volatile traffic flows and we had modestly fewer of the very heavy highly fuel efficient trains I am pushing the team to respond more quickly in the face.
A change and we are committed to closing the gap with our peers over time and are redoubling our efforts in this critical area.
As you can see on slide seven train speed and terminal dwell were generally flat versus second quarter and do not reflect performance at desired levels. While there were some effects from hurricane Ida those impacts were localized and I'm extremely proud of how the team, especially engineering in our signal forces helped US return our routes in Louisiana.
To operation and reopened the New Orleans Gateway very quickly.
As I mentioned last quarter, we are experiencing hiring and retention conditions that are increasingly challenging, especially in some of our more critical locations and it is having an impact on our network.
Fight hiring all year long attrition has been accelerating in each of the last two quarters and several of those critical areas.
And many of these locations, we've been able to absorb the impact by executing upon productivity initiatives and this will be very much a part of the equation going forward as we grow capacity, which I'll talk about more in a moment.
Where we have more than tripled our conductor trainee ranks since the first quarter. So that we can effectively backfill in critical areas.
We've implemented tools, such as perfect attendance bonuses referral bonuses and signing incentives to improve the stickiness of our current and future workforce.
And we continue to leverage the valuable go teams to quickly respond to business opportunities where needed.
People over the backbone of the railroad and we need to make progress on these initiatives to better manage the effects of a tight labor market.
We are committed to having the right amount of resources in the right place at the right time, which will drive both cost control and service quality.
As our business mix continues to evolve creating capacity across our market segments has become an even more significant area of focus as highlighted on slide eight.
Some shippers are looking to take advantage of unexpected market opportunities by shipping extra volume.
Others are looking for us to help them adjust to volatility coming from other parts of their supply chains and of course, all place a high value service predictability.
We're adjusting our network and operations to generate the various types of capacity that customers are looking for for example increases in both train sizes give shippers extra lift without further demands on our crew base.
Train size increases often require connecting railroads customers and Norfolk southern to change processes and we have found those process changes are worthy effort, because they improve asset turns and capacity.
We also continue to focus on terminal efficiency, where they're helping to drive dwell at our biggest hump yard elkhart to very low levels or tactically redirecting trains to intermodal terminals that have the capacity to unload quickly.
Moving to slide nine I want to show how we can use these capacity efforts to drive productivity we've.
We've had great success over the past two years driving train size and in doing so have addressed a handful of infrastructure bottlenecks.
We're fast tracking a set of siding improvements the first of which went into service at the end of the third quarter. So we can keep making progress.
Bigger trains unlocked by siding extensions helped drive locomotive utilization because it allows us to fully match train side to available pulling power.
And because locomotives are at their most efficient when pulling hard this is a key lever to our fuel efficiency improvement.
While I've used locomotives in fuel as my primary example capacity additions have a similar effect on our crew productivity more cars per crew asset turns keeping trains moving with greater train capacity and also helps our customers with improved train and car performance.
On slide 10, we are complementing our investment in physical capacity with a comprehensive technology strategy that makes our crews more efficient and our assets more productive.
Virtually all of our routine signal and track maintenance is now scheduled by the mobile track authority App a process that used to be measured in minutes can now be accomplished in seconds. It.
It is inherently more efficient than the radio process of the past and most importantly safer because it reduces transcription errors in the words of our chief engineer. The App has been a game changer for the productivity of his forces.
We're doing the same with our mobile train reporting App, which enables our train crews to quickly report completed work and to receive updated customer work requests while en route.
This takes a lot of hands out of the process, including significant re typing and delay and enables our crews to be more productive.
We're still early in the deployment of this application with rollout to the local trains that do the preponderance of pickups and set off just beginning.
The use cases for this technology in the field are numerous and driving adoption and innovation around this platform is a focal point that will allow us to capture additional benefit.
The common use threat in these apps is that better information allows people to plan our track Supervisors can better plan their schedule, knowing the availability of track time, and our customers can better plan their plan operations and product pipeline with up to date shipment information now I will turn it over to Alan.
Thank you Cindy and good morning, everyone.
In the third quarter, we continued to execute on our growth plan.
Yielding double digit revenue gains in each of our three markets.
Further demonstrating our ability to deliver value for our customers and shareholders.
Beginning on slide 12, I will highlight our results for the third quarter.
We achieved total revenue of $2 9 billion.
Representing a 14% increase from the same period last year, despite flat volumes.
Our revenue performance this quarter was driven by significant gains in revenue per unit and revenue per unit less fuel.
Both reaching record levels with double digit year over year growth.
This reflects the success of our ongoing efforts to yield up and improve revenue quality.
A strategy that enhances our long term potential for revenue and margin growth as conditions improve.
Revenue in our merchandise segment improved 10% year over year.
While volume increased 5%.
Growth was led by our chemicals franchise that benefited from recovering energy demand that drove higher shipments of crude oil and natural gas liquids.
Also contributing to merchandise growth was sustained strength steel markets due to record high commodity prices and growth in manufacturing activity.
Steel shipments were up an impressive 34% from the same period a year ago.
Partially offsetting these gains were declines in shipments of finished vehicles and vehicle part due to the ongoing semiconductor shortage.
This limited automotive production activity and further depleted finished vehicle inventories to new lows.
Both revenue per unit and revenue per unit less fuel improved year over year due to price increases.
Our intermodal franchise experienced several headwinds related to supply chain disruptions that negatively impacted volume in our domestic and international business lines.
And both segments unprecedented demand from inventory restocking and consumer spending outpaced available capacity in the supply chain ecosystem.
The combination of drayage shortages.
Warehouse productivity equipment availability Labor force participation and rail network fluidity pressured intermodal volume throughout the quarter.
Resulting in a 4% year over year decline.
Overcoming these headwinds we delivered revenue growth of 16% in the third quarter due to higher revenue from storage services increased fuel surcharge revenue and price strength.
Coal revenue increased 32% in the third quarter as both domestic and global economies continue to recover from the pandemic and drive demand for electric power X.
Export coal shipments increased significantly as strong demand and record high seaborne prices increased opportunities for U S producers, Utah.
Utility volumes decline in the third quarter as coal supply was limited as some crossover tonnes moved into the higher rated export market.
The mix shift from utility to export coupled with price gains led to a 20% increase in revenue per unit less fuel for coal in the third quarter, a new record for the franchise.
Moving to our outlook on slide 13, we expect the third quarter environment to continue through the end of the year.
Strong consumer demand will continue.
While pressures from material shortages in labor issues remain challenging global supply chains.
Inventory levels remain at historic lows. Despite the continued push to replenish stock.
Adding a boost to transportation demand.
We remain confident in our ability to leverage our strengths in these market conditions and deliver robust revenue growth for the full year.
We expect merchandise business will continue to benefit from recovering economic activity as conditions that limited business and recreational activities in the fourth quarter of last year have been much less impactful in the fourth quarter of 2021.
We anticipate our market for crude oil natural gas liquids and waste to experience higher volume as a result.
Ongoing demand for steel will also be a growth driver with forecast for industrial production up more than 5% year over year in the fourth quarter and steel prices currently above 900 Bucks a tonne.
A projected 4% year over year fourth quarter decline in U S light vehicle production will remain a headwind as the industry remains challenged by the chip shortage.
Within intermodal, we continued to see strong demand from consumer spending and tightness in the truck sector.
These favorable conditions are offset by constraints from supply chain congestion and equipment availability.
We are working closely with our customers and our channel partners to mitigate these challenges.
However, we do not see meaningful improvement in these headwinds before the end of the year.
Coal demand is expected to remain strong with extremely favorable market conditions, although coal supply will be the governor on year over year growth.
Natural gas prices continue to climb and declining inventory levels, leading into the winter months are the current focus of utility customers.
Seaborne prices are a decade long highs in the export market, creating demand beyond capacity and supply abilities.
Overall, we are optimistic about the opportunities in the fourth quarter and confident in our ability to execute our plan to generate value and grow our business.
Turning to slide 14, there are several factors impacting the supply chain in which we participate.
This includes external factors such as the chip shortage and intensifying congestion in the intermodal supply chain.
Coal supply availability continues to be a constraint to meet the higher demand in every market as both thermal and met production remain tight.
<unk> has taken action to mitigate some of these factors and effectively position us for revenue growth.
As drayage challenges affected international intermodal, we provided an alternative storage solution to our customers.
We're working diligently to add chassis capacity to support demand and alleviate shortages across the supply chain.
Last quarter, we outlined our plan to repay a portion of our chassis fleet that was impacted by a manufacturing defect.
I appreciate the quick action and effort from our team and I'm pleased to report that this issue is effectively behind us as we have repaired and returned approximately 95% of the recalled chassis back to service.
We are also in the process of taking delivery of leaf chassis to augment our fleet.
We've added terminal capacity to support growth driven by e-commerce in a recovering economy as well as reduced terminal congestion and improved network fluidity.
We remain focused on growth opportunities across our network, we're continuously innovating to compete in the $800 billion plus trucking logistics market.
Shown by our Thoroughbred freight transfer or TMT service launched earlier this year.
CFT is one of our initiatives to drive growth by targeting opportunities for highway conversions to rail.
This service combines the efficiency of our intermodal trains the capacity of our boxcar assets and the last mile flexibility of trucks to provide an innovative door to door service.
We are also leveraging our sustainability advantage to propel long term growth.
The choice of transportation mode is one of the most powerful levers any shipper has to reduce the size of its carbon footprint and we are working closely with our customers to deliver additional value through sustainability, we have proven our ability to deliver results despite challenging market conditions by provider.
<unk> innovative solutions that our customers value and position us for future market demands I will now turn it over to Mark who will cover our financial results.
On slide 16, as Alan just detailed revenues were up 14% on flat volumes with operating expenses up 10%, we delivered strong incremental margins, leading to 230 basis points of operating ratio improvement driving us to a Q3 record of 62%.
The improvement Alan detailed and <unk>, coupled with strong productivity led to record Q3 operating income with growth of 21% or nearly $200 million.
And our free cash flow is also at record levels, a 33% increase during these nine months compared to last year.
Moving to slide 17 lets drill down into the change in operating expenses.
While operating expenses grew $149 million or 10%, it's up only 4% or $67 million apart from fuel cost increases.
The fuel cost increase of $82 million, driven mainly by price, but the 5% increase in GTS also drove more consumption.
You'll see purchase services up $35 million with the majority of the year over year increase in three areas.
We have an increase in technology spend which is consistent with our technology strategy.
And you heard a couple of project examples in Cindy's remarks.
There are also headwinds from Conrail operating expenses.
And there are increases in intermodal costs more specifically, we had trucking costs associated with shuttling longer dwell containers to satellite parking lots in order to reduce congestion at our terminals and keep the freight moving.
<unk> expenses were actually up in the quarter, despite fewer lifts and that is primarily because of inflation, we absorbed on lift rates associated with contractor labor availability.
This is an area, we do expect to see continued inflationary pressure going forward.
And we also absorbed costs in the quarter related to our chassis repairs.
Moving on to the compensation and benefits it is up 5%, but youll note the $40 million in savings from 7% lower head count that more than offsets increases in pay rates and overtime.
Meanwhile.
Incentive compensation comparisons in the quarter or a headwind of $43 million similar to what we reported in the second quarter, reflecting our strong 2021 financial outlook compared to lower accrual rates last year.
Materials claims and other expenses were all down year over year.
Turning now to slide 18.
And looking at the rest of the P&L below operating income you will see that other income of $14 million is $25 million unfavorable year over year and that is due almost entirely to lower net returns from company owned life insurance.
Our effective tax rate in the quarter was 23, 6% close to our federal and state statutory rates, but unlike Q3 last year, where the rate was 21, 9%.
And benefited from tax advantages related to both coli investment gains and higher stock based compensation.
Net income increased by 17% while earnings per share grew by 22% supported by $3 6 million shares we repurchased in the quarter.
Wrapping up with our free cash flow on slide 19.
As I had mentioned free cash flow is a record through nine months of 2021 at $2 $3 billion buoyed by very strong operating cash generation and that translates into a 102% free cash flow conversion.
While property additions are trending a bit lower than run rate for our $1 6 billion guidance number capital spend is never linear and we expect fourth quarter property additions will get us close to the $1 6 billion.
Shareholder distributions through nine months exceeds $3 2 billion, an increase of over $1 5 billion versus prior year, thanks to a higher dividend and a meaningful increase in our share repurchase activity.
And with that I'll turn it back over to Jim.
Thank you Mark.
We first demonstrated our commitment to sustainability with our visionary appointment of a chief sustainability officer back in 2007, the first in the industry.
And our efforts to support our low carbon supply chain have greatly accelerated since then.
Building upon the momentum earlier this year with the approval of our science based targets for greenhouse gas emissions reduction and our launch of $500 million in green bonds in the second quarter. We're excited to report another set of milestones on our sustainability journey.
In August we released our 2021 ESG report our 14th annual report on corporate responsibility highlighting the transformational role sustainability is having on our business as we further integrate sustainable practices into daily operations.
We celebrated our 500 modernized locomotive unit in partnership with web check in August and announced our collaboration with progress rail in September on a first of its kind tier four locomotive prototype for yard and terminal operations.
And just earlier this month, we announced our decision to purchase 100% renewable energy to power company operations in Altoona, and Redding, Pennsylvania.
Our commercial and sustainability teams work hand in hand to provide demonstrable low carbon solutions to a wide variety of current and prospective customers, providing a compelling value proposition as we convert more freight from truck to rail simultaneously benefiting our customers our communities and our shareholders.
Before we open the call to Q&A I'll take a moment to provide an update to our outlook based on the current economic environment.
As shared previously we expect to achieve an operating ratio improvement above 400 basis points for the full year versus our adjusted 2020 result.
And theres likely upside to the 12% year over year revenue growth and strengthen our consumer oriented and manufacturing markets drives the majority of the growth.
Near term upside and coal markets provides a boost for the balance of the year as well the coal remains challenged in the long term.
We are delivering on our financial commitments and remain focused on creating long term sustainable value for our customers and shareholders.
So with that we'll open the call to your questions operator.
Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question Kim.
You May press star two if you'd like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Due to the number of analysts joining us on the call today, we will be eliminating everyone to one question to accommodate as many participants as possible.
Our first question comes from the line of Jason Seidl with Cowen. Please proceed with your question.
Thank you operator, good morning, everybody.
Wanted to talk a little bit.
The pricing side several of your peers have mentioned.
Sort of rising cost, if you will and the need to take pricing up another notch wanted to sort of get your opinion on that and what Norfolk Southern's plans are for 'twenty two.
Thanks, Jason Alan Hi.
Hey, Jason Good morning, as you know, Jason we price to the market and right now the market opportunities for for our ability to price are pretty strong and you've seen that with respect to our yields you saw it in the composition of our top line.
Earlier this year, we were very confident in our ability to deliver 9% revenue growth as the demand environment the pricing environment strengthen.
We bumped that up to at least 12%. Our primary competitor is truck and you saw that spot rates in the truck market were up 21% year over year in the third quarter.
As we have an opportunity to revisit our contracts and the relative value of our product.
We're going to price to the market as we've always done which is why we've delivered our <unk> ex fuel increases in intermodal for 19 consecutive quarters and in merchandise 25 of the last 26 as commodity prices go up Jason and it also means more demand for that product as well. So we feel good about the demand and the pricing environment.
So maybe can you remind us the percentage of your business that rolls over in <unk> and <unk>.
It is.
It's a majority of the business rolls over in those two quarters Jason.
And as you know about 50% of it rolls over every year.
Right.
It's a good environment for us to revisit our price plan.
It seems to be well listen I appreciate the time as always nice quarter.
Thank you. Our next question comes from the line of Jordan <unk> with Goldman Sachs. Please proceed with your question yes.
Yeah, Hi, you talked a little bit about need to hire crews in the tough environment can you maybe.
One question of course is whereas head count go from here, but maybe the right question is in an optimal environment how much head count do you think you need are you, okay, where you're at or would you like a 1000 more people 500 more people. Thanks.
Yes, good morning, Jordan.
Thanks for the question.
I think broadly let me just put a broad perspective on it we're really managing through a very disruptive labor market.
And it's been a challenge from the beginning of this year.
But we've been able to really continue to find productivity improvements up to this point that the team I think has done a great job of Ann and really youre seeing it flowing through are flowing through our financial results.
So when I think about where head count should be it's really a function of volume that we have on the network as well as our productivity initiatives, which we have quite a few.
With longer trains.
Other other opportunities other opportunities for productivity. So I think for where we are right now wed like to see head count up maybe a little bit.
To take out some of the Lumpiness of what we're seeing.
But longer term.
We're going to be focusing on using technology and other other things focusing on continuing to bring that down but at this point with where we are we'd like to see come up.
Thank you.
Thank you. Our next question comes from the line of Tom <unk> with UBS. Please proceed with your question.
Yes, good morning.
Wanted to get your thoughts on capacity expansion.
I guess, we can talk about intermodal or if you want to talk about broader network.
And how that would translate to your view on volume growth in 2022, it seems to me that Theres certainly.
Areas, where.
If you had more capacity or the system add more capacity you would have stronger volume in intermodal is obviously on that but what how do you think about capacity additions in the network capacity and is it reasonable to expect volume growth in 2022 supported by more capacity.
Cindy why don't you take the the network side of that the line of road side of the capacity question, then and Alan talk about terminal capacity intermodal terminal capacity a little bit.
From a line of road perspective, as you know Tom we have had a.
Our discussion on these calls around siding extensions, we've gotten our first siding extension.
Service in the third quarter I mentioned that in my.
Prepared remarks, and we have about four or five more.
That are underway and then studying some others to make sure we have good capability and our single track locations predominantly in the southern part of our network to be able to drive longer trains.
And improve the capacity overall network by taking total number of trains down because we can run longer trains.
The technology of distributed power has been an enabler for that.
And also as you know, we're doing AC to DC to AC conversions that increase the fleet size up.
The capability of our fleet to do more of that so.
We really see some good opportunities to continue to allow for a great throughput on our network.
Tom with respect to the intermodal terminals, we absolutely need to improve the throughput through the terminals.
Self help there that's that's running trains on time, that's making sure that we've got the right amount of labor in the terminals with our terminal contractors, it's the chassis issue.
That was a headwind for us in the third quarter with the safety recall, we've addressed that however, we're still short chassis.
And so we're taking delivery of 1100 leased chassis in the fourth quarter of this year, our customers aren't short chassis too and so our so as the international community as well and that's really driven by the dislocation in the drayage and in the warehousing community.
You look at our record there's a record number of job openings and warehousing and trucking for each of the last three months.
So that has put a lot of pressure on throughput through the intermodal terminals.
Working on things, we can fix ourselves as I talked about our own mitigation efforts, whether thats reopening in a couple of terminals leasing chassis offering dual mission incentives to make the drayage network more productive and we're also working with our customers and see how we can help mitigate some of their own issues.
So I guess to bring that to a point, though are you optimistic about intermodal volume growth given what you see on the capacity side in 2010 is yes, because we've taken some very concrete steps to address what is under our control.
And we're hopeful that at some point the drayage community gets a little healthier in the warehouse and it gets healthier as well.
Great. Thank you.
Thank you. Our next question comes from the line of Jon Chappell with Evercore ISI. Please proceed with your question.
Thank you good morning.
Alan sticking with you you mentioned improving revenue quality, which I know has been a big focus for you guys over the years and capacity is clearly at a premium not just in the rails, but in every part of the transport supply chain right now.
Being increasingly more selective in the freight that you're willing to move right now an attempt to maximize your capacity in the mix and margin associated with that and if so how does that kind of play into your long term volume outlook sacrificing yield potentially for volume.
John part of yield up is.
It really is the heart of it is allocating resources to the market signals that we get which are which would indicate where the best.
Home for those resources so.
So that's that involves making sure that.
That we're onboarding.
The right type of business onto our network to make sure that we're not adding complexity.
It involves making sure that we are being compensated for the value of the product that we're delivering and as you've noted.
Our primary competitor is extremely stressed and truck just does not have the overflow capacity that rail does.
Add into that environment.
More interest from our customer base on sustainability I was talking to a customer the other day about it effectively cut me off mid sentence and said, yes. We all know that rail is much more sustainable than truck and we're doing everything we can to shift more towards rail. So I think there is.
There is a.
A prolonged opportunity too.
To make sure that we continue to post improvements in our yields I will tell you that one area in which I'm a little concerned is within the coal network at with.
Export prices.
At record highs.
It would be irresponsible for us.
To feel like they're going to continue to rise in the next year, so that might be an area in which you see a decline in yields mhm, okay that makes sense. Thanks Alan.
Youre welcome.
Thank you. Our next question comes from the line of Ravi Shanker with Morgan Stanley. Please proceed with your question.
Good morning, everyone I apologize if I missed this but can you unpack the the yield growth you saw in the quarter.
Core price versus <unk>.
Are there any charges versus mix.
Ravi certainly the.
This storage.
<unk> that we provided and the international community was a was a driver of <unk> growth as was fuel surcharge.
I also saw much better pricing environment in the third quarter than in the second which is of no surprise and we've got a lot of momentum with respect to the <unk>.
Price.
Okay.
Maybe as a follow up just switching gears a little bit.
How do you see the that the regulatory environment next year, particularly around price and maybe it's the last question.
And all the other rails have been.
Cutting head count a fair band over the last several years, what would you say to like shippers and other folks in the industry, who would say that you cut too deep.
And now that you're like you and everybody else is going on.
Struggling to hire again that you maybe shouldn't have been in this situation to begin with obviously.
By 2020, like who knew how the recovery you would work out and such but just again trying to figure out from a regulatory perspective. Thanks.
Well, let me take the second part of that first and the first part second we've been hiring aggressively since the beginning of the year and we've ramped that program up throughout the year. So we are putting a lot of people into the pipeline through the pipeline and into the field, even as we speak and we will continue to do so recognizing that at least.
Some locations, we are short of people and we did more health.
The in terms of the regulatory environments I think it's worth emphasizing that there is a good deal of overlap.
Between what we do and what the administration and Congress are seeking that.
That overlap is in the area of sustainability, it's widely recognized in Washington today on both sides of the aisle that rails are these sustainable ground transportation.
And so we see eye to eye with the administration on that.
We're all about economic development and creating good jobs for people and helping the American economy growth that lines up very well with what the administration and Congress are trying to do as well.
We don't see eye to eye on everything.
Where we disagree with policymakers, we maintain a very active dialogue and we make sure that that our point of view that our needs that our importance to the American economy are widely understood.
Very helpful. Thank you.
Thank you. Our next question comes from the line of Brandon <unk> with Barclays. Please proceed with your question.
Hey, good morning, everyone and thanks for taking my question, Jim I guess following up from that given that you guys are hiring I guess that speaks to a pretty.
Positive economic outlook heading into 2022, if I'm hearing that correctly and I guess as you guys talk about improve.
Improving to industry level of profitability is that still a lot of leverage on the labor line looking forward as a fuel efficiency I guess, where do you guys see the biggest opportunity there. Thank you.
Sure well, let me, let me say first that we're proud of the progress our employees have achieved so far this year, we still have a quarter ago, but we are definitely on pace to hit our goals.
Ah 60 or run rate for the full year.
Now the work isn't done we recognize that we have more room to run and we're very excited about the.
The margin opportunities the topline growth we see ahead.
We will continue to drive the or lower over time and continues to narrow the gap we will do that.
With a combination of revenue growth and continuing emphasis on productivity and sustainability throughout throughout our company that includes fixed costs that includes employee productivity that includes fuel efficiency and so on and so forth Cindy anything to add and I would add brands.
Put it in my prepared remarks technology is really very helpful to us whether it's mobile applications that allow placed.
In the field as opposed to managing the input of information through a traditional keyboard and computer whether it's predictive analytics or weather.
It's pure automation. So there is there is plenty of opportunity out there. In addition to train length and on some of the other items that I've already talked about.
Thank you.
Thank you. Our next question comes from the line of Chris Wetherbee with Citi. Please proceed with your question.
Yeah, Hey, thanks, good morning.
Maybe a question about sort of service on the broad supply chain dynamics, Cindy you talked about some of the efforts that you guys are undertaking to improve service and kind of bounce back a little bit here, obviously the quarter you saw some pretty decent metrics as well, but maybe mixed with what Alan sort of talking about in terms of the supply chain I guess.
When do we see sort of Norfolk service improve in a meaningful way, which may be sort of a precursor to a broader improvement in the supply chain I think Alan you talked about maybe nothing before the end of the year, but maybe what are some early indicators that that sort of the process is turning and maybe some of this congestion can clear we can kind of improved fluidity, a little bit more.
Which could be like I said, the precursor to a broader.
Justin alleviation.
Yes, so as far as where we are with service levels.
That are public that I talked through I really see the big launch and obviously being equal.
Up about this.
Fairly disrupted labor environment.
Hiring people as Jim has noted.
But bringing on people is a long lead time.
We have streamlined our process of hiring and also our training process, taking advantage of technology to do so obviously, we're not going to compromise safety and anything that we do with that regard.
And we doubled our class size since July.
Other type issues, but.
That is going to be what is helps us to see our service levels improve.
But this is this is a national issue.
And.
As you know it's at the heart of the supply chain overall.
And it's been building for a while and it'll it'll for months and will probably take a few months for us to clear through.
I don't know if you have anything you want.
With respect to the.
The entire supply chain ecosystem, Chris warehouses are full and that's what we're hearing from the BCS and I think you need about 25% more warehouse capacity.
And what's available right now.
There's just not enough labor and frankly, the a lot of the E. Commerce Giants are just now in the process of starting to hire for the holiday season.
No I think that's going to further stress.
Going forward, we've actually seen in.
In Chicago a degradation in.
St well on international chassis over the last couple of weeks, which would indicate more stress in that first mile last mile component.
The ecosystem.
Okay now when you talk to your customers it sort of maybe next year is what theyre, telling me any indication from them in terms of timing and what they feel a little bit better.
We're not because it's it's reliant on so many different components and frankly, they are asking about the same question is that.
Cindy address two we got to improve our our piece of it we're having those discussions with them but.
They also recognize there are a lot of things out there that are well outside of our control.
That.
I, just don't have a timeline as to when the drayage community and the.
Warehouse community start to get healthy.
Of the top 20 drayage markets most of them are in our footprint. That's a great thing that does Australia. Our intermodal franchise is it also indicates that when the drayage community is stressed it puts stress on our network.
Got it that's helpful. Thank you.
Thank you. Our next question comes from the line of Brian Aten back with Jpmorgan. Please proceed with your question.
Okay.
Thank you good morning.
I wanted to follow up on that last question with you Allen just thinking about the pace of truckload conversion industrial development project wins, clearly there is a ton of demand, but challenging across the board as you've been talking about can you go into the <unk> product you mentioned, a little bit more or is it something you feel like you need to expand to get more of a door to door service longer longer term.
And to make some of this these wins really sticky and do you think you have to.
To do any more investment there.
Maybe looking at some more non rail assets.
Yes, Brian Yes.
CFT for us as a as a pilot program.
We're in our early stages, but it.
It seems to be working pretty well, we're testing it with a number of customers who have been displaced out of the LTE market uses a lot of the principles.
<unk> I E, you're putting boxcars on intermodal trains.
And then we are using a partnership with a drayage company to provide first mile last mile. It's all.
Part of kind of our our core competency.
Innovating to provide.
Solutions that will drive highway to rail conversions in that $800 billion, plus on truck and logistics market.
The regulatory agency over us.
Notice of it and is complimentary of our efforts to do.
Try and drive.
Truck conversion so.
We're happy with the way, it's going so far we're testing in a number of markets.
And it is indicative of our overall strategy.
And is this something you think could could scale pretty rapidly and in 'twenty two or is this more of a pilot borne sort of out of necessity of the current market.
I think long term, there's going to be opportunity for this because e-commerce isn't going away.
And it's an e-commerce itself is a boon to us as well because it's highly intermodal intense so it's it's something that we're going to continue to.
They look to add dots on the map and a low risk manner.
To drive incremental margins.
Alright Thats helpful. Thanks, Alan.
Welcome.
Thank you. Our next question comes from the line of Scott Group with Wolfe Research. Please proceed with your question.
Hey, Thanks, good morning, guys.
Mark maybe can you give us some thoughts on an operating ratio sequentially in the fourth quarter and any thoughts on specific cost items cost items in the fourth quarter heading into next year and then Jim It sounds like we haven't heard anything from the rails this earning season with respect to.
Vaccine mandates and just curious your thoughts there and what you guys are doing there.
Okay. Thanks, Thanks, Scott I'll tell you what why don't I take that one first and then we'll turn it over to Mark for some some color around the expense trends.
With respect to the vaccine mandate I want to say first that we sincerely hope we won't lose a single Norfolk Southern employee as a result of that government mandate.
That our employees will consider vaccination, those who aren't vaccinated or we'll seek and accommodation to which they are entitled to under the law.
And we didn't this was not our idea. This was not our initiative. This is a mandate we reviewed it we study that we went over with a fine tooth comb. We determined that we are federal contractors subject to the executive order because of the business. We do for the department of defense.
Principally so.
We're now in the process of implementing it.
Tough tough decision that's being imposed on some of our employees as a result.
And we do regret that however, we will follow the law.
It clearly applies to us and we must comply.
The next so what's next alright, well, we we get the information out there we owe to our employees to be clear about where we stand and what happens next.
Adding up to the December its deadline for compliance and people have time to go out because just because we announced we would.
We would comply with along with giving people time to get vaccinated Zika combinations.
We're keeping a very close eye on the on the impact as.
As I said I hope, we don't lose a single person, we will probably lose some employees as a result of this and we will work very hard to retain them first but second if not backfill the positions.
With all of the measures that Cindy went through.
So mark talk a little bit about the expense trends, Okay. Scott well first I think your question was on sequential or as we look to Q4.
Q3, we did see pretty much.
Stable or from Q2, when you back out the land size. The outsized land sale that we had last quarter. I think we were about 10 basis points better in Q3, and then we expect to see basically more of the same here in Q4, some of that will depend on the volume outlook.
As we navigate through Q4 I do expect I do expect that the expense side of the equation should also be roughly consistent with what we've experienced here this quarter.
It just feels like more of the same as we close out the year and that will stay on this run rate like we talked about earlier in the year.
That's helpful. Jim If I can just follow up on the vaccine for one second and it feels like everyone in the supply chain thinks that this is a bad idea and or at least a big risk to further supply chain disruptions.
Do you is there any sense that maybe some of this could get pushed out or.
Getting rid of altogether and just everyone seems to think it's a big risk.
Well our strategy there is to communicate clearly with policymakers about the risks associated with this mandate and we're doing that actively making sure that those who are in a position to shift policy understand what the consequences could be so whether we agree with the policy.
Not <unk>.
We are implementing it as we are required to do.
Although we are being very vocal about the possible consequences to the to the supply chain into the economy.
Okay. Thank you guys appreciate it.
Thank you.
Thank you. Our next question comes from the line of Walter Bachman with RBC capital markets. Please proceed with your question.
Thanks, very much good morning, everyone.
I'd like to go back to the regulatory question, just wondering if theres a bit of a silver lining here with.
With supply chain issues and.
And the very delicate capacity environment that this has proven our entire transportation network has in.
My question I guess for Jim here is things like reciprocal switching.
Which which eat up capacity.
With a different objective in mind, but the consequence being that it it eats up capacity do you think do you think white house. The White House is aware of this do you think the regulator.
Recognizes that.
Messing around with <unk>.
Regulated <unk>.
That have one intended consequence could have a very detrimental one when it comes to capacity and some of the indications that we've seen.
With where our capacity is.
It puts that at significant risk do you think that that's lost on on.
On regulators or is it something that they become acutely aware of now and we will rethink when when when potentially designing new new forms of regulation for the railroad industry.
I think you summarized it pretty well and there is growing sensitivity and awareness on the part of regulators and policymakers.
Regarding the state of affairs in the supply chain and the risks associated with with policy changes at this stage. So my message is at the very least.
Consider.
Gathering additional facts and evidence the supply chain is clearly in flux right now.
It's.
It's in the process of reorganizing itself and we don't know exactly what future freight supply chains will look like so given that the the record in.
In the relevant STB proceedings predates all of that.
Well, let's at least take a look at the current state of play and understand how freight is moving in today's economy and may move in the future before we make any any significant policy changes and just on that Jim as the supply chain Reorganizes do you think that railroads will either play in.
Increasing role outside of there.
They're they're railroad focus in other words if.
Despite your best efforts to.
And successful efforts to manage your own house, if there's problems outside of your control outside of your rail network that you could address if you had ownership of that those pieces further up or down the supply chain would that be something.
Norfolk Southern would consider would you would you be willing to or interested in going outside of your rail focus if it means addressing some of these items that are outside of your control.
Yes.
Well I would put it this way we see so many opportunities within our core business today, so many opportunities for organic growth by converting freight from road to rail within our existing franchise that we don't see a need to pursue businesses or approaches outside our core.
Because there are always risks associated with that M&A risks.
And we've tried that before if you look back in history as a company, we have own trucking companies and it didn't it didn't end well so our approach will be to stick to what we know best and what we can execute best in light of all of the growth opportunities we have there.
Great I appreciate the time thank you.
Thank you. Our next question comes from the line of Amit.
<unk> with Deutsche Bank. Please proceed with your questions.
Thanks, Operator, hi, everybody.
Thanks for squeezing me in here.
Just wanted to follow up on the intermodal growth questions.
Obviously, we fully appreciate the challenges around capacity and labor warehouses, but just looking from the outside in.
Pretty clear that there have been some market share shifts and intermodal would your direct competitor I mean, the chassis issue explains some of it but and we've seen a little bit of an uptick in weekly intermodal carloads, but.
There seems to be some market share shifts I don't know if you think that's a fair characterization.
If it is what the root causes and you can address it but if you can just talk about that and then.
My second question Mark.
You used to provide this great slide that talked about fixed versus variable cost structures that spoke to the underlying operating leverage in the business.
The cost structure is very different today, given all the good work that Cindy and her team have done and the whole team have done. So I was wondering if you can kind of baseline where do you think incrementals for the business are given maybe a more volume variable cost structure than maybe you had a couple of years ago. Thanks a lot.
Yes.
Yes.
Amit I'll cover the first part.
The third quarter there were some.
International customer specific actions with respect that.
Inland positioning of containers.
That impacted our volumes.
That's starting to unwind itself and so we should see a lift there although ultimately international volumes are going to be limited by.
Hi.
By the Drayage community in the warehouse community.
Look we've got the most powerful intermodal franchise in the east is a key component of our plan going forward to lever that and to grow.
We've proven we can do it over time in 2017, our revenue was up 11% 2018, it was up 18% 2000.
<unk> 19, it was only down 2%, a freight recession and it pivoted back to growth.
And.
In the fourth quarter of 2019. This ER revenue in intermodal is up 21%.
And compared to 2016, our revenue in intermodal is up 43%. So we know it's a it's a growth driver for us we've done a lot to improve the productivity there just in the third quarter, our train weight and intermodal was up 4% and yet our train length was down 3%.
So.
We've got some things that we need to do to provide our customers with a better service product. They deserve that we also have some things that we need to do SBA interface with our customers to help make the.
To collaborate with them on making the whole supply chain efficient.
Amit I'll talk to you about the Incrementals, we had 57% incremental this quarter.
I wanted to point out that would be about 70% if not for the headwind that higher fuel cost and surcharge gave.
<unk> to us this quarter, so I think 70% core incremental margins are pretty good I think we've done a very good job of absorbing.
A lot of the volume growth that we've seen this year without adding on the resource side.
In some areas like you mentioned.
Incremental costs have risen in some lines and other lines they've held flat.
We have changed our cost structure quite a bit in the past year and so some of those drivers.
Have have varied, but I do think net net if we can continue our goal here is to continue holding costs.
We absorb.
Incremental volume and certainly the drop through from other revenue contributors were going to be in a good place to help drive us down on the or side.
Got it okay very helpful. Thank you very much.
Thank you.
Thank you. Our next question comes from the line of Ken Head start with Bank of America. Please proceed with your question.
Thanks, Good morning, Jim and team great job on the improvement.
Just to follow on the you gave before the fourth quarter outlook on operating ratio I want to make it maybe just a little bit bigger your initial thoughts on 2022, just given your 400.
At this point at least the improvement in the or.
Maybe the scale of gains and I know youre not necessarily going to give a number and you don't typically but maybe Cindy can you talk about the additional cost programs that youre looking at Alan maybe your thoughts on growth off of this higher base in the sustainability just maybe some general thoughts to put a picture on to 'twenty two as we close out 'twenty one sure.
Sure Okay. Okay, Ken Thanks, Let me take the first part of that.
Hi.
As we look look ahead to 2022 and beyond as I said, we are committed to driving the or lower and we will we will do that with a combination of emphasis on productivity and efficiency measures that topline growth and theres a lot of opportunity for us there.
We will get more specific with our 2022 guidance in January when we come back to you with our fourth quarter results in terms of a new set of goals for the longer term look for an investor day on our part sometime next year, we'll we'll get get more specific with regard to dates in the new.
In the near future, but it's clearly time for us to update our longer range goals as well.
Yeah, Ken so.
I don't want to be a broken record, but we do have opportunities for train size.
Train linked with our siding extensions, but also with growth being able to.
Adding to the existing trends, we see great opportunity there to continue.
Activity in great drop through on that revenue.
<unk> got extra board consolidations redistricting crude segments those types of activities continued improvement in our processes and I can't Underemphasize technology made some remarks about that earlier, so I won't repeat those but the technological advances that will help us be much more efficient in how we go about our business. So there's a great pipeline and more.
Excited about excited about getting it on the railroad.
Ken with respect to the macro environment.
It's unique it's uniquely strong.
You take a look at inventory sales ratios historic lows.
<unk>.
And the consumer has a healthy balance sheet and the retail sales are continuing to increase and so that inventory replenishment cycle is going to be a boost to your transportation demand into well into 2020.
Just wanted to PMI is at $61, one, which is well and to expansionary phase right now.
Demand is really everything that indicates that the only thing holding back our supply chain challenges, which which we need to help solve for our customers.
Steel prices are at record highs and are really weak auto environment. So think about what happens when auto starts a rebound next year and then potentially you sprinkle on a little bit of an infrastructure package before the mid terms and we expect to have a robust environment for our product are consumer facing.
Franchise.
Next year as well.
Really helpful. I appreciate the insight Jim just can I just have one quick clarification. The the impact on case, yet CPR on the Meridian Speedway I presume there is no impact to your your network and your ability to broaden and everything I just wanted to.
Any quick thought on that.
Let me say this we will be active participants in that STB proceeding, making sure that our customers' interests and our shareholders' interests are protected throughout that.
We expect to continue to utilize the Meridian speedway as part of our joint venture.
And to grow traffic on that line its a great route the best the best in the business from L. A long beach to the southeast So we think that the transaction.
You mentioned gives us every opportunity to grow our business over that line.
Alright.
Thank you very much.
Thank you. Our next question comes from the line of Justin Long with Stephens. Please proceed with your question.
Thanks, Good morning.
Mark I wanted to clarify a statement you made earlier about volumes in the fourth quarter were you, saying your expectation is for fourth quarter volumes to be relatively flat sequentially and then on the head count topic, Cindy you mentioned that you'd like to see head count up a little bit so.
Similar clarification question is the expectation that head count will be up slightly in the fourth quarter on a sequential basis and thinking about next year is the view that.
Hypothetically, we see volume growth in the low to mid single digits head counted is probably up a little but not it's not up as much as volumes.
Yes, Justin I'll tackle your volume question first I mean, if you do look at the weekly trends on volumes, you'll see it's kind of going sideways and we expect that trend to see.
Carry out for the full quarter.
On head count.
What I would basically say is that we're still seeing attrition and replenishment is our challenge. So we will probably see head count come down a little bit more I would like to see it stabilize and come up because we are replenishing for attrition.
That's what that's what my.
My comments earlier, what that what that meant.
Our still our long term opportunities again on train size.
Our process improvements in our terminals and the other things I mentioned are very very beneficial to us to operating head count down longer term.
Okay. So headed into 2022, just hypothetically if you saw low to mid single digit volume growth do you feel like you could keep head count relatively flat sequentially given the productivity opportunity.
I think it would be along those lines, maybe up slightly but yes, along those lines.
Great one for us.
Not one for one just I guess, that's what I'm, what I'm getting at.
Understood.
For the time.
Thank you. Our next question comes from the line of Ben Nolan with Stifel. Please proceed with your question.
Hey, thanks.
I wanted to circle back a little bit on the coal front in appreciating that.
Each year could be very different in the market is at the moment, but.
If if natural gas prices were to stay high internationally and there is good demand.
Just curious if you could maybe frame and sort of what your potential to grow is within the coal franchise, if the market conditions persist as they.
Our currently.
Frankly, and anything that generates beat to use over the last 18 months.
The export market prices are at record highs China. The indication early indications are that China will need to import more coal next year than it did this year.
It's China's trade tensions with Australia are certainly driving some of the demand and higher prices, but China does this hasnt shown any indication to unwind that and with steel prices. So high China can afford to pay the higher.
The higher input prices. So we're watching it very closely we're continuing to talk to our customers about it.
We're hopeful that production improves and we would certainly be a beneficiary of that just you take a look at and the utility market coal burn is up 73 million tonnes. This year, our coal shipments are up 16 million tonnes.
So that kind of tells you what's going on there stockpiles at least in our region are down 55% year over year. So theyre just theyre just is not enough production to satisfy that demand with all.
All the geopolitical issues that are going on and then as the substitute fuels being so.
Price So high right now as you noted.
Alright, perfect I appreciate the color thanks, guys.
Thank you. Our next question comes from the line of Bascom majors with Susquehanna. Please proceed with your question.
Yeah. Thanks for taking my questions. One point of clarification can you share the current sense of vaccination rate across the network.
Well, we're gathering that information as we speak and but it's really too soon to.
Hotel.
We will have a better sense of that in the next month or so.
And we will be better positioned to understand what the impact could be what the attrition as a result of the government mandate might be so we're keeping a very close eye on that.
Thanks for that Jim.
I wanted to clarify some of the labor situation more broadly Cindy could you.
Is there any way you could frame how the attrition is picking up.
Focus on any regions or functions, where it's been most acute.
And any feedback you're getting as to why people are leaving your where theyre going just to kind of understand the problem you're dealing with thank you.
Divestments coming in a couple of buckets, one bucket is where we have a very very tight labor market broadly in the region.
And that is affecting both tenured employees finding alternative places to work as well as being very difficult to find new conductor trainees.
And there's a couple there's a corridor too that it's affecting us more broadly in the Midwest part of our network in that particular scenario.
And then there is the scenario where.
We're able to generate trainees and bring them in the not quite the numbers that we like.
And we have some attrition of those trainees little higher than our historical norm.
And that has affected us being able to.
<unk> that replenishment type pipeline like we'd like so.
So we saw this.
Starting in the third quarter and an.
Increase the number of people in our pipeline in those locations, where we're able to attract folks too.
A really good company here by about 240%.
And we've also seen a conductor trainees increased by about actual training on the property increased by about 22.
Sorry, 53%. So so that's a different kind of bucket now we are we have doubled the class size.
<unk>.
I'll begin and we expect to also add additional class size and classes by the end of the year too again attract folks in the door and allow for that training process to occur, but theres a lag time here, what I'm really telling you and so.
We see that persisting into the first part of 2022.
Thank you.
Thank you. Our next question comes from the line of David Vernon with Bernstein. Please proceed with your question Hi. Thanks.
Thanks, operator, and good morning team.
Mark I'd like to talk a little bit about intermodal profitability I want to make sure I understand kind of what the drop through is on some of the fee revenue should we be thinking that as cost neutral right. Now and then if you think about where rates are sort of ex fuel ex surcharges are you getting enough to cover some of those cost call outs, you mentioned around terminal costs.
And things like that.
I'm really trying to get at here is if we think about contribution from intermodal today should we be expecting that to be a limited by some of these supply chain disruptions and fee issues and that it will accelerate from here or are we already starting to see some of that improvement sort of and contribution from intermodal in the <unk> development.
During despite the fact that we have the supply chain disruptions.
Thanks, David So look I think one thing one way to think about intermodal as we've increased our profitability considerably over the past decade.
As we've grown volumes and we've been able to demonstrate value to our customers.
And <unk>.
Basically.
Bring our pricing up to where it should be.
I would say that incremental.
Incremental intermodal business brings to it brings with it accretive or.
So and we feel like that will continue it will continue to accrete to the business as we grow our intermodal business.
We are providing more and more solutions to our customers, including the storage service solutions that we've.
It really built up during this period of intense supply chain congestion.
So we are finding new ways to make that business even more profitable.
And should we expect that to accelerate as things start to loosen up across the.
The supply chain into 'twenty, two and 'twenty three.
Yes, I think as we get more fluidity in that network and we can take on more volume because I think the volume is out there we just need the entire ecosystem to start moving again and loosen up and I think we have the capacity, we can start moving more and more volume.
There'll be changes, perhaps between you might not have quite as much storage.
Storage revenue, but youll have more on the volume side.
So overall, we feel good about our intermodal.
<unk> for the future, it's a great franchise.
We've got the capacity, we've got terminals in the right locations and we've got great partners on the channel partners on the intermodal side. So we're feeling good about our position.
Alright, thanks for the time guys.
Thank you.
Thank you ladies and gentlemen, our final question. This morning comes from the line of Cherilyn Radbourne with TD Securities. Please proceed with your question.
Thank you very much and good morning.
On the international intermodal could you talk about whether youre seeing volumes start to divert to the east coast to avoid the congestion on L. A long beach currently whether customers are planning to do more on the union contract negotiation on the West coast get closer in and just the thought create different capacity challenges when you've got the volume directly.
On the east coast versus interchange with the western railroads.
Yes, Sharon as you noted customers are seeking optionality.
Both short term and long term on there.
On their supply chain and port diversity is an approach that retailers are employed.
We've seen we've seen a prolonged shift from west coast to East coast over the last 10 15 years.
That a majority of our international business, either originates or terminally terminates on a.
East Coast Port. These guys ports right now are fair and much better than La long Beach I saw something the other day, where la long Beach had 96 vessels stacked up outside.
So yes.
Yes, we will see some more business move over to the east coast, we've proven the ability to handle that and handle that well and one of our.
Take a look at our inland port up at Greer, and we've pulled 760000 trucks off the highway since that opened in 2013 and one of our highest volume corridor has.
Between Atlanta, and Savannah, So two short haul moves however, with that added revenue density and the incremental volume on existing train service that market Cindy talked about earlier, it's proven successful for us and for our customers.
Okay.
So for me.
Thank you, ladies and gentlemen that concludes our question and answer session I will turn the floor back to Mr. Squires for any final comments.
Thank you everyone for your questions today, we look forward to talking to you again to you again next quarter.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.