Q1 2022 Norfolk Southern Corp Earnings Call
Greetings and welcome to the Norfolk Southern Corporation first quarter 2022 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.
Reminder, this conference is being recorded.
Now my pleasure to introduce Megan I can Massey senior director of Investor Relations. Thank you you may begin.
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 from actual results. Please refer to our annual and quarterly reports filed with the FCC for a full discussion of those risks and uncertainties, we view as most important.
A presentation slides are available at N S Corp, Dot com in the investors' section along with a reconciliation of non-GAAP measures used today to the comparable GAAP measures a full transcript and downloads will be posted after the call. It is now my pleasure to introduce Norfolk Southern's President Alan Shaw.
Good morning, everyone and welcome to Norfolk, Southern's first quarter 2022 earnings call.
Joined today by Cindy Sanborn, Chief operating Officer, Ed Elkins, Chief Marketing Officer, and Mark George Chief Financial Officer.
I would like to start by recognizing the contributions of Norfolk Southern's employees, who have worked safely and tirelessly to serve our customers in a challenging supply chain environment.
I sincerely appreciate the commitment of our employees to Norfolk, southern and our customers.
Norfolk Southern delivered solid financial performance in the first quarter with record first quarter revenue earnings per share and net income.
Our operating and marketing teams worked around the clock with our customers to address current network challenges.
And our dynamic supply chain.
We know we need to improve service and are committed to increasing network fluidity and restoring service to levels our customers deserve.
Sandy will share updates on our accelerated hiring and progress of our new operating plan top S. P. J.
Viewing the results for the quarter Youll note that revenue increased 10% as a 16% increase in revenue per unit more than offset a 5% volume decline.
Expenses grew over $200 million or 13% year over year.
Due primarily to a sharp increase in fuel price.
Our fuel costs, along with slower network velocity and reduce volume contributed to an increase in our operating ratio, which was up 130 basis points versus last year's first quarter record.
We remain confident in our ability to improve service, while simultaneously delivering productivity and growth.
Our outlook is bright.
I'll now turn the discussion to sandy for an update on operations.
Andy.
Thanks, Alan and good morning, everyone I'm going to talk to you all today about the outlook for our operations during the past quarter resource levels have challenged the fluidity of our operation yet we have continued our momentum on increasing train size.
We are in the very early days of seeing the fruits of our hiring initiatives and are working every avenue to improve service levels as quickly as possible.
I'll provide an update on our Thoroughbred operating plan initiative as well as what we're doing with technology to make the railroad safer and more productive.
First turning to slide six is a recap of our operational activity metrics in the quarter G. T. EMS were down slightly outperforming the unit volume decline as mix shifted modestly towards our heavier merchandise and coal segments.
Our crew starts were down 5% in the quarter, which is a good news bad news story right.
Resource levels prohibited us from operating some starts that we would have preferred to operate in a recovery mechanism was challenged as a result.
However on the positive side of the Ledger, we continue to drive very beneficial road train consolidations across our segments. Most pronounced in our bulk franchise as we move similar coal tonnage with 6% fewer train starts and saw train weight up across the board for intermodal merchandise and bulk.
In an effort to improve resiliency, we kept a portion of the surge locomotive fleet active yet we still achieved another quarter of fuel efficiency improvement.
Turning to network performance on slide seven.
Train speed and terminal dwell closely resembled the levels they were at in the fourth quarter.
Our qualified T any levels continued to decline throughout the quarter, culminating in what we expect to be the trough in March.
As we start to see relief in certain areas, where probably prioritizing crew starts that can have the most impact on customer service levels and we are redeploying our go teams when possible.
I want to reiterate that improving service levels as our top priority and turning to slide eight I will provide more detail on where we are with our hiring efforts.
As we progressed through 2020 , one we quickly identified the need to increase hiring within our transportation workforce.
We were met with a very challenging labor market that made our ramp up time longer than expected, but we responded with a robust plan to streamline our preemployment process deploy a variety of financial incentives and mobilize additional onboarding resources.
These efforts have paid off in a big way in 2022, and we now have over 800 conductor trainees on the property.
As a result, we now expect our qualified teeny head count to begin growing sequentially throughout the remainder of the year.
We are laser focused on utilizing these additional employees to improve service levels and provide a solid platform from which to launch top S. P G, which I will discuss on slide nine.
As we did last quarter I want to reiterate the approach of focusing on service productivity and growth as equal pillars, and our latest evolution of the top plan, which we envision launching in late second quarter.
Let's talk about service quality and resiliency first.
Several key elements of P. S R or having a simple and executable operation as well as having balance.
You heard enough to talk about some of these P. S. Our fundamentals when top 21 was rolled out and we now need to revisit a few of them with a renewed focus while ensuring they are embedded in all of our segments, including intermodal.
One of the greatest strengths of our network is the quality and positioning of our intermodal franchise and as we've performed a zero based review of how we linked together our major markets. We found opportunities to simplify how we connect those terminals, while providing more capacity than what we have today.
This will include ensuring we have assets falling across our network in a balanced fashion. So that less intervention is required for resources to be in the right place at the right time.
Let me be clear top S. P. G. As another lever, we're pulling to improve our service and represents an evolution of our current operating plan.
This pathway towards enhanced service will allow us to better plan for and execute longer trains. Additionally, going back to the idea of encompassing all business segments. While we've made great progress on enhancing both train sizes within coal there is more runway ahead.
Other facets of the bulk network such as grain, we'll see benefits as we develop the capability to run longer trains through those parts of the network such as the Midwest.
This productivity dividend is very complementary to the service pillar as it will give us more flexibility to handle commodity volatility.
These improvements in train productivity have obvious benefits of reducing labor intensity, but well also propel further fuel efficiency improvements.
Finally, these efforts will ensure that we grow capacity within our terminals and our long our main lines, including the initiatives I've discussed with you before to bolster our infrastructure with targeted siding extensions that are actively coming online.
We're going to provide the capacity our customers want to grow with us organically, while still creating the flexibility to respond quickly and effectively to new opportunities.
Moving to our safety update on slide 10, we have seen improvement in both F. R. E train accidents per ton miles moved as well as the FRE injury index Oh year over year.
However, we will not be satisfied as long as there was a single injury or accident, which is why we continue our efforts to get better in this area every day.
First on the engagement front in 2021 we conducted our first annual safety survey, which was across the entire workforce. This has provided us with insight on what and where we need to focus our engagement efforts.
We've expanded our field training program to leverage outlets, such as online training classroom training and our signature safety training events. So that we empower our workforce to actively engage in our goal of continuous improvement when it comes to safety.
Lastly, we're making great progress building momentum with technology investments that are focused on safe and efficient operations and I'll give a great example, on slide 11, with an update where we are with one of our key technology pillars automation more specifically, we are using machine vision technology to the tech component failures before they occur.
We're in the process of deploying fully automated inspection corridors, which will cover more than 90% of the cars moving across our networks using a variety of systems to the tech signs and symptoms of pending failures before they occur.
Equally as important is deploying the hardware is developing the next generation AI algorithms that detect these failures with edge computing and procedures for intervening quickly.
This is where we've made really exciting progress and we are already actively preventing incidents. We are finding that the technology is enabling us to achieve better outcomes and the humanized alone can achieve.
One reason for this is the power of seeing how these components are behaving on a train and motion versus while stationary during a manual inspection.
We're generating high success rates with very few false positives and detecting components that need to be replaced but had no outward indication to the human eye.
The close an effective working relationship between our data scientists and field team is creating a feedback loop that is accelerating our progress.
This is one of the most revolutionary technologies, we're working on and I'm extremely excited but what we are achieving with our relentless pursuit of safety first and productivity I will now turn the call over to Ed.
Thank you Cindy and good morning, everyone.
If you would let's turn to slide 13.
Our results for the first quarter.
Challenges that we experienced on the volume side with supply chain constraints and network fluidity.
These were offset by record success in revenue per unit.
Overall, our volume decreased 5% year over year in the first quarter.
Driven by declines in our intermodal automotive.
Steel franchises.
But despite these volume declines total revenue improved 10% year over year.
The $2.9 billion due to higher revenue from fuel surcharges and strong price gains.
And then merchandise.
Volume declines were led by automotive and steel.
Chip supply and equipment cycle time challenges significantly inhibited our ability to drive growth.
Partially offsetting these decreases were gains in agrifuels speed and aggregates, either increased gasoline consumption or demand for agricultural products and rising levels of construction spending.
Our fuel revenue and price improvement more than offset the headwinds from volume and mix to generate 4% revenue growth year over year, along with record level revenue per unit.
Revenue per unit less fuel was also a record for the quarter.
Total intermodal shipments declined 6% in the first quarter driven almost.
Entirely by the international market, where tight drayage capacity High Street dwell for chassis and warehouse throughput drove customers to seek alternatives to inland point intermodal right.
Domestic shipments grew modestly year over year on sustained consumer demand that outpaced supply.
However, as network velocity improves and as top S. P. G is implemented we're confident that we will provide the capacity our customers need to grow.
Higher revenues from fuel surcharges was the leading driver of intermodal revenue growth this quarter.
Followed by storage revenue price improvement and positive mix, all leading to record quarterly revenue message for the franchise.
Intermodal revenue per unit less fuel grew for the 21st.
Second quarter.
Now moving Nicole.
Total volume was down slightly year over year in the first quarter as gains in utility shipments were offset by declines in export coal.
He told the growth was driven by higher levels of demand for electric power and the need to replenish depleted inventories.
Our export franchise experienced the number of acute service disruptions that limited shipments for a period of time, resulting in a year over year decline, but despite these volume headwinds coal revenue grew 25% primarily due to price gains.
Underscoring the near term market demand opportunities, we effectively secured.
Revenue per unit and revenue per unit less fuel reach record levels this quarter.
Now, let's turn to slide 14 for our market outlook for the remainder of 2022.
In general we anticipate continued consumer driven strength in demand and improvements in our service product.
Both of these will enable us to deliver year over year volume and revenue growth in 2022.
However, we are closely monitoring pervasive uncertainty in the macro economy.
Leading inflation at levels, we haven't seen in over 40 years.
Z and interest rates and evolving post pandemic labor market.
And ongoing global geopolitical conflict.
Merchandise volume growth will be led by agriculture, whereas in consumer products, where we're seeing elevated demand for products, such as soybeans and corn as the global food supply chains face ongoing uncertainty.
The USDA recently increased their expectation for export soybeans from the U S amid declining corn availability and highlighted rising demand for corn.
Both of which create opportunities for rail transportation.
Also contributing to volume gains will be automotive for U S. Light vehicle production is expected to improved 19% year over year in the months of April through December .
On improving chip supply.
Total construction spending in the U S has been steadily increasing since mid 2020 and currently sits at the highest level on record.
The opportunities for our construction related markets.
Within intermodal, our expectation, it's where a healthy and resilient consumer in 2022 based on a strong balance sheet suggest an increased spending power from extra savings despite record high inflationary pressures.
Growth in the consumer led economy will drive demand for our domestic intermodal service, which we expect will benefit from service improvements in the second half of the year and drive growth to offset the volume declines that we experienced at the start of the year.
Sustained tightness in the truck market.
And rising diesel fuel prices are both contributing to an economic environment that encourages highway to rail conversion.
And provides a superior value proposition for our customers because of our fuel efficiency advantage, especially.
Especially when compared to the highway.
For our international franchise, we're working diligently to create the capacity our channel partners need to take advantage of the opportunities on Norfolk Southern.
Our efforts are expected to boost volume recovery and drive the year over year growth in intermodal this year.
And lastly, turning to coal record high seaborne prices continue in an already strong market that is amplified by geopolitical tensions.
This will provide opportunities in the near term.
Pricing is expected to remain a tailwind in the export markets.
Utilities shrink continues with higher natural gas prices will continue to be counteracted by higher coal prices.
Inventories are still lower than target heading into the summer season.
And our domestic met market consumer demand remains high for domestic receivers.
We'll supply availability and production remained tight in every market, which will be the determining factor and upside potential.
Overall, we're confident in the growth potential from Norfolk southern for the remainder of the year.
And we expect to deliver revenue and volume growth over last year.
I would like to thank our customers for their partnership.
And reiterate that we remain intently focused on improving service and driving value for our customers and shareholders.
I will now turn it over to Mark for an update on our financial results. Thank you.
Thank you Ed I'm on slide 16, we.
We delivered double digit revenue and EPS growth in the first quarter, both were record levels for N S.
Starting with revenues the 10% growth was despite the 5% volume decline thanks to the strong <unk> growth that Ed just detailed.
Operating expenses were up 13% driven in large part by a sharp increase in fuel prices.
Also higher costs related to our network challenges.
Despite revenue dollar growth exceeding Opex dollar growth, we experienced a 130 basis point increase in our operating ratio.
Recall that at the first quarter conferences, we previewed pressure on her or compared to our original expectation of flattish sequentially due to a lighter volumes that we were experiencing to start the year and also the rapid rise in fuel expense.
The way it landed fuel prices alone represented 100 basis points of lower headwind relative to our expectations as well as year over year.
We also booked an accrual adjustment within claims expense that created another 40 basis points of headwind.
The volume shortfall also adversely impacted or as we previewed along with incremental service related costs.
These were only partially offset by the strong <unk> improvements.
Or aside the operating income and earnings per share for both Q1 records growing 7% and 10% respectively.
Drilling into the breakdown of operating expenses in the quarter on slide 17, you'll see that 60% of the $206 million increase in the quarter was from higher fuel prices on a year over year basis.
Purchased services was up $31 million or 10% driven in large part from inflation and service related costs that more than offset benefits that would typically come from lower volumes.
Equipment rents increased $13 million or 17% driven by slower network velocity and less equity earnings from T. T X.
The $20 million increase in materials, and others is driven by a $13 million accrual adjustment in claims.
Related to the 2017 through 2020 years based on an actuarial study.
Comp and benefits were up 1% with compensation inflation offsetting savings from lower employee levels in several categories.
Qualified teeny employees were down mostly offset by conductor trainees.
The only wanted attrition of qualified TNA employees drove higher overtime costs to move the freight.
Shifting to slide 18.
And a discussion of the P&L below operating income other income was a $5 million expense in the quarter driven largely by losses on the company owned life insurance investments.
Pretax income was up 5%, while net income was up 4%.
Our effective tax rate in the quarter was 23% in line with the 23% to 24% range that we guide.
EPS was up 10% on a 4% net income growth thanks to nearly $2 2 million shares repurchased in the quarter, removing nearly 1% of the outstanding shares.
Closing with cash flow and shareholder distributions on slide 19.
Free cash flow was $605 million down 19% from last year due to property additions in Q1, this year that are $124 million higher.
Recall Q1, 2021 property additions were quite low to start the year due in part to weather.
Free cash flow conversion in the first quarter was a healthy 86%.
Despite the lower free cash flow year over year shareholder distributions were nearly 7% higher with a 19% or higher dividend payment and modestly higher share repurchases.
We will now turn back to Alan for a wrap up.
Thank you Mark turning to slide 20, we show multiple approaches on how we are building upon our record of sustainability leadership.
With the launch of our next generation carbon calculator in mid March we've made it easier for customers to do business with us incorporating carbon ended their freight decision framework with quantifiable benefits of utilizing the most efficient and least carbon intensive mode of ground transportation.
Also in March we announced the continuation of our locomotive modernization program in partnership with <unk>, which will improve our operational performance and reliability and help us achieve our science based target emission reductions of 42% by 2034.
The pace of our sustainability initiatives has increased and is recognized in the industry as evidenced by several prestigious awards received in the quarter, including named supplier engagement leader by carbon disclosure project for 2021.
Recognized with a 2022 green bond of the year award from Environmental Finance and earning the responsible care energy efficiency award for locomotive fuel efficiency from the American Chemistry Council.
We are incredibly proud of our progress in this area and we will continue to build upon our sustainability initiatives, which are good for business and the right thing to do for all of our stakeholders.
Let me close by confirming our commitment to deliver our targets this year.
Confidence at this stage is based on our assessment of economic indicators.
Which at this time remains supportive of manufacturing and consumer activity.
As well as our service recovery efforts associated with accelerated hiring and a successful implementation of top SPG.
These factors will support healthy volume growth in the back half of the year.
In fact potential upside exists to our revenue outlook and energy prices remain elevated throughout the year.
As you heard from our entire team we are disappointed with our current service levels. We are laser focused on restoring the quality of our product.
Level that allows our customers to succeed and grow we.
We are confident that our decisive actions to restore service and coding of hiring and the launch of top SPG will create long term sustained value for our customers and shareholders.
Leveraging our unique franchise strengths.
Before we open the call to questions I want to take the opportunity to thank our retiring CEO , Jim Squires for his tremendous leadership to our company over the past 30 years.
Barry Jim's tenure as CEO and has improved our operating ratio by more than 200 basis points more than doubled our market cap and returned over $17 billion to our shareholders.
He will lead our company through the challenges of a freight recession and global pandemic.
GM launched an industry, leading digital transformation strategy.
All of a sustainability to a strategic business priority and personally championed diversity and inclusion.
And Jim United Our team and a new headquarters in Midtown Atlanta last year.
On behalf of all <unk> employees retirees and stakeholders. Thank.
Thank you, Jim and we wish you and your family all the best in your well earned retirement.
We will now open the call to 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 into question Kim you.
You May press Star two if you would 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 eliminate everyone to one question to accommodate as many participants as possible.
Our first question comes from the line of Chris Wetherbee with Citi. Please proceed with your question.
Hey, great. Thanks, and good morning, everybody.
Maybe you just wanted to start on the outlook for the rest of the year, particularly on the operating ratio side. So yeah, I know fuel I think Mark you said it was 100 basis points in the first quarter and presumably it could be elevated and it can be a bit of a headwind to operating ratio and the subsequent few quarters. So wanted to get a sense of whether the fifth.
200 basis points of or improvement is excluding fuel or inclusive fuel our fuel and if it is inclusive kind of curious what's sort of the incremental productivity opportunities you see it we'll be able to sustain that 50 to 100 basis points.
Hey, Chris This is Alan Thanks for the question.
Got multiple paths to achieve that or target that we put out there and certainly improving service is first and foremost among them is it allows us to take on more volume absorbed costs and.
And as we bring more business onto the network. It comes with higher incremental margins. We did see some modest improvement in our network capacity in March and as a result, we saw sequential volume improvements in March as well, which really helped out the trajectory of our O R within the quarter.
Look at the markets in which we are serving we got a stronger coal outlook.
<unk> pricing certainly helps and we should see O our improvement sequentially throughout the year and to be clear, we're talking about or including fuel.
With that we saw in the first quarter associated with sharply rising fuel prices is something that the overhead when pardon me, it's something we don't anticipate as we move forward throughout the year.
Okay. Thank you very much.
Okay.
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 I guess can you just talk more about top S. P D or maybe this one's for Sandy too is this the new operating plan or is that like the strategy guiding the new operating plan that you guys intend to launch later this quarter and can you just give us some details on what's going to be implemented.
You know change why is that can get you to better service outcomes. Thank you.
Hi, Brendan this is Cindy I'll tell I'll take the question. Thanks for the question. So think of toughest P. G is a continuation of top 21 with a pause for a pandemic in the middle.
We worked on our manifest network in 2019.
With two very very great results from us from a service perspective.
So we are now moving from the manifest to looking at intermodal specifically the three main things that we're pulling from our analysis of where we are as well where we want to be is balancing the network.
Executability of the plan and embedded in that is train size and so those are the main initiatives around cop 21, generally and as it applies to intermodal specifically, we also have some secondary kind of thoughts around what we expect the intermodal product to look like that include outlook for outlet frequency as well as blocking dense.
So I've got a lot that we're working on I'm looking at that product and basically taking a very you know unconstrained view and then building up into what we think that's going to look like and as we noted it would be we'd probably implement that towards the second half of the back half of this quarter.
And obviously with great communication with our employees as well as our customers. So what works largely in that phase of it.
And then as we continue from there we're going to we're going to look at our bulk network. We have a we've seen some great efficiencies in the numbers and in my my prepared remarks, I'll talk about both train size inefficiencies, there and we're seeing that really in our Lamberts point Cove.
Coming out of West, Virginia, going down to support with with export coal, but we think there's opportunities both from a standpoint of doubling up trains other than those types of trains to be trains coming over Chicago interchange as well as our own grain trains and then secondly behind that owner of local service for our.
Our.
Both network Oh origin destination pair on enough, we think theres opportunity just to grow train size generally we've seen some improvement with one of our metals customers in that regard and we've got more work to do there. So I think what you'll see is as we implemented in the in this back half of the quarter it'll start with intermodal and then we'll layer in an AD.
Into that over the course of the year the bulk opportunities.
I appreciate it thank you.
Thank you. Our next question comes from the line of Jon Chapell with Evercore ISI. Please proceed with your question.
Thank you and good morning.
And when you break down the revenue variance of the different groups for intermodal and coal, especially this rate mix and other component is pretty tremendous is there any way to kind of further parse out what is pure rate and potentially stickier going forward as we think about <unk> as volumes start to inflect positively and how.
If it is maybe more temporary.
Along the lines of storage et cetera.
Sure and thank you for the question.
We have a strong environment out there for for demand for our services and that includes of course price associated with that.
You know price is little bit north of a third in terms of the total composition I would tell you that the storage is another component there layer on top of that pure price number and we expect as service improves this year and as supply chains improved throughout the year, we're going to see that storage number decline.
As you know this.
Steamship line in particular require less storage and are able to deliver more throughput capacity.
Okay. So just to be clear that one third of prices that intermodal and coal or was that just intermodal and coal maybe as a bigger.
The whole shooting match, that's that's our that's our portfolio.
Got it alright, thank you Ed.
Yes, Sir.
Thank you. Our next question comes from the line of Scott Group with Wolfe Research. Please proceed with your question.
Hey, Thanks, Good morning, and best of luck to you Jim Mark I wanted to just ask the any thoughts on the operating ratio for second quarter, just to help give us some comfort on the bridge to the full year guidance and then.
Just on the I mean, our P. You less fuel for merchandise. It was only up 3%, which just feels a little light given the pricing environment on the inflationary environment does that get incrementally better from here do you think.
You want to start with I'll start first with the last question on price. We are I think everybody is familiar with the composition of our portfolio and general maintenance every year about half of our business comes up for pricing, we've still got probably a majority of that to go.
For the year on merchandise and we are expecting to continue to deliver value in the form of yield based off the demand that we see out there and as our ability to deliver capacity for that demand continues to improve this year.
We have a.
Contract portfolio that stacked with not only long term contracts that you're all familiar with but also short term were tests in the short term.
Right now and where we're delivering what I would call very encouraging results I would also say this our customers are also delivering some encouraging results on their own that they're reporting to us in terms of their ability to attract new business and price.
And Scott with regard to the operating ratio, obviously, we've stuck to our guidance for the full year and we're going to we're going to see progressive improvement sequentially. As we go through the year with more of the improvement really in the back half as we enjoy the recovery of the service in particular in the fourth quarter.
But I don't want to get any more granular with that given the dynamics in the marketplace.
Would you still expect it to be worse year over year and to cure.
Well remember in <unk>, we had a fairly large a property gain.
That was you know really had a.
Good lowering effect on our operating ratio so well in year over year it'd be really hard to get close to that number.
But it'll be certainly better than where we are right now.
We saw within the first quarter.
Within the first quarter the operating ratio the rate of operating ratio improvement from January to February when volumes were very muted to what we saw in February and the month of March was.
Pretty nice improvement.
And I expect that in the second quarter with volumes at least holding at these levels and perhaps starting to ramp up a little bit we'll still see a nice nice jump, but Q2 is a very tough compare because of that.
Land sales that we had called out.
Okay. Thank you guys.
Thank you. Our next question comes from the line of Jason Seidl with Cowen. Please proceed with your question.
Thank you operator, you guys mentioned that there could be some upside to the numbers if fuel remains high I'm, assuming that could come in the form of intermodal and coal as well on the export or maybe even domestic side could you talk a little bit about how you're equipped to handle that business in terms of the fluidity of the network and then.
Are there any investments needed in the coal franchise, which as we all know has not been getting ramped up over the last four or five years.
Yes, sure, let's talk about coal specifically.
You know that that's been a market that's been supported by by price driven by.
Capacity tightness and.
With the courage geopolitical.
Options that are out there.
The market's got even harder.
And so we are very well equipped I believe with our franchise going to a language point to deliver value for our customers and for the marketplace on the export side and that includes a we are we are ensuring that we have the the fleet necessary to deliver that value. We know that there is some incremental.
Incremental capacity coming on later this year and so we're working right now to repair those portions of the fleet that need it. So that we have a good order fleet of coal cars that can deliver value over lamberts point as well as to the rest of our customers that rely on that fleet.
And as far as the network is concerned you mentioned intermodal as well I mean, obviously the the hiring that we're doing and you see the numbers number of qualified employees starting to tick up we expect that to continue through the quarter I'm very very optimistic about that and I think that as that as that starts to be felt.
I think in addition, the intermodal impact intermodal top SPG focus is also going to help us in the intermodal side. It really does doing not if it's it's it's completely straight line between terminal operations behind road operations to drive some of the some of the efficiencies that I described before so I think that'll give us a great plat.
[noise] form.
For being being able to meet much more of the demand that we're meeting right now and then.
To reiterate our customers wants to grow.
On the intermodal side in particular, we are we're blessed with a great portfolio of customers, who are investing for growth in 'twenty, two and we're making sure that we're gonna be able to deliver for them.
The way fuel prices are currently we have a compelling product in the marketplace, which will only become more compelling as we are able to deliver more capacity.
I guess I would add one more on calls or so.
Go ahead, I'm, sorry, Cindy very good yeah.
Yeah, Jason on coal I should have also mentioned you know we really have had a solid service product to the to the port throughout the year and.
Part of what you've heard me talk about and I referenced it in my prepared remarks around train size has been the demand that we've seen being able to double those trains up and operate the tons with with with less labor intensity has been a consistent consistent throughout the year and we expect it to continue.
Great. Let me just send my best wishes to Jim before I sign off everyone. Thanks for the time as always.
Thank you.
Thank you. Our next question comes from the line of Brian Austin back with J P. Morgan. Please proceed with your question.
Hey, good morning, Thanks for taking the question. So Cindy sticking with you obviously, the STB is having the hearing on urgent service issues. It seems like they want some improvement here in the next 30 to 60 days. So wanted to see if there's anything in particular that you had in the pipeline that could maybe accomplish that that you haven't really talked about yet here and then.
So when you think about retention, obviously a lot of the service improvement continues its contingent rather upon that inflection.
But are you at all concerned about retention of the training size staying at the way. It is a retention of the more experienced people on the line of road.
How are you feeling about that what's your level of confidence in it and there are two are there any other actions you can take to increase that retention level. Thank you.
Hey, good morning, Brian . Thanks for the question I'm going to start with that and then turn it over to Sandy just to be Crystal clear restoring service is a top priority of this entire leadership and every employee at Norfolk Southern personally I've been out in the field and I've been in and our dispatch center and I really see the pride that our employees.
Have and serving our customers and serving our or serving the U S economy, I'm really encouraged by the employee engagement and I'm very very encouraged about the steps that we're taking right now to restore our service product to where it needs to be.
And Brian Yes, I saw yesterday at the STB hearings you know the the focus of the of the committee around are around the book off the board around trying to restore service as quickly as possible. We're lockstep in line with that mindset and other I think we have brought to bear everything we can to do.
Just that I can't think of anything that I heard yesterday that helps move it forward any faster.
So we're going to work.
As Alan has noted we are we are laser focused on this so I.
I think you know top SPG will help us I mean, there's just a number of initiatives that we have already and I think those are the ones that we were gonna see what well stick with and I think they will they will they will bear fruit for us.
In terms of the retention of trainees you know that is something that we look at and make our hiring decisions based on that are in and the.
<unk> differ between some of the hiring groups that we have we have put in signing bonuses at various levels based on attracting trainees and clearly outline what the job is to trainees and makes it worked very hard to make sure that we do keep the ones that we get in that said you know one of the things that we all.
So do once they are on and training is provide the work life in terms of being on call and working different shifts.
I'm working weekends in the training program to make sure they really do understand.
What it is.
Were expecting as a as a railroad employee and to some extent that may accelerate attrition, but that attrition comes early rather than later because it but ultimately come.
So we feel like that's the best way to make sure that we manage the promoted trainee very effectively or the promoter conductor very effectively by trying to manage it on the front end, but we are we do see high attrition in training ranks, but but we plan for that.
Okay. So just to summarize it does feel like well you're communicating is you are at an inflection point in terms of getting the teenie.
The right number of people in the right place.
Well, you're you're seeing it on the call on the slide that we showed with qualified teeny, it's starting to tick up and looking at our our hiring locations and the number of trainees that we have in place you know we are in flight right now we feel really good about being seeing good anymore.
It started the second quarter and in the second quarter, we will see improvement across that timeline and acceleration from that so I'm really I'm really enthusiastic about where we stand and you couple that with the implementation of the top SBA late this quarter.
Number of other specific tactical initiatives as Cindy has every day to improve the quality of our service and our labor utilization. We've got we've got a good runway ahead of us.
Okay. Thank you for your time I appreciate it.
Thanks, Brian .
Thank you. Our next question comes from the line of Jordan <unk> with Goldman Sachs. Please proceed with your question.
Yeah, Hi, just a follow up on top S. P. G. I'm wondering I know the deployment is forthcoming how long would you see how long do you think it will take to actually fully deploy and and and and start to see the benefits is this something that you start to see the impact relatively quickly and then just as a as a fee.
Follow up.
Assuming I cant remember completely that intermodal. It planning was part of the original P. S. Our efforts you know three or so years ago. So is this just a function of three years in hey easier adjustments, we need to make because something's not working completely right. Thank you.
Yes, Jordan I would say that it's really just as I described tile unconstrained approach I mean things have changed over time post pandemic included and the original top 21.
The plan was to continue on with intermodal and you know there are certain trains that can actually carry both and that does exist today than we probably have an opportunity or two to have it in the in the new version here, but this is it's really about again, taking unconstrained approach and figuring out how to balance our network.
Make sure we have a good executed clean and and crude train size. So so those those are the main tenets of what the output should be now in terms of benefits I mean intermodal is about 20% of our crew starts.
So we will see we will see it affecting that part of our business and we will implement schedule changes and those types of things.
As we roll it out fairly quickly so I feel like that one we'll we'll see some benefits.
As we get into the third quarter, but then we'll move on to the bulk side. So I think it will be tough SPG generally will be something that allow it will be something that will take longer than just the intermodal portion that will continue on through through the year end and beyond in some cases, where we have both opportunities in places where there's some physical infrastructure constraints.
Yes, I think we think of it as a process of continual improvement yeah absolutely.
Thank you.
Okay.
Our next question comes from the line of Ken <unk> with Bank of America. Please proceed with your question.
Hey.
Good morning, and Jim again, best of luck, and Alan and Cindy I know everybody's been harping on this but maybe if I can.
Maybe come at it a different way on <unk> was all about resilience and something goes wrong.
Fixed itself, we're now in the second phase of it with top SPG. So maybe you could just dumb it down for me as it is it just employees that you need that we have as the STB said, you've kind of overdid. It now you've got to get them to get the service back is it that the plan wasn't the right fully built plan and now you kind of need to need to fix.
And you talked about kind of keeping a surge locomotive fleet. So what is it that needs to get the fluidity up and then kind of on the calendar that you've talked a lot about intermodal and the shift of freight east yet international volumes down 20% I guess is that part of this equation I'm not enough employees at the congestion is still on the network may be walk through.
What has to happen to clean that up as well thanks a lot.
Thanks, Ken.
With respect to <unk>.
How we're approaching this thing I mean to be clear our first priority is restoring our service and our entire organization is laser laser focused on delivering that objective.
Once we've gotten that near term goal, we are going to perform a retrospective analysis on how we got in this position and we're going to understand what signals. We missed you know how we can improve the process and what mitigates, we can put in place going forward.
For us we firmly believe that right now it's a combination of our employee level and our service plan, which is why we very quickly implemented decisively initiatives to increase our hiring.
And two.
Redesign our operating plan that redesign of the operating plan is going to improve our balance is going to improve the simplicity of our product and it's going to include the <unk>.
The executability of our product, which is going to help the service product and all three of our franchises that do you want to talk about specifically about international intermodal sure absolutely.
Thanks for the question.
And in terms of the Intercontinental supply chain, which delivers our products through the U S consumer from primarily from Asia, but from other players as well there has been tremendous volatility that everybody on this call already has.
Not only our supply chain stress in the U S and that includes really all the components of that supply chain, which are the ports warehouses railroads truckers retailers and other outlet venues, but it also includes the lines themselves are on the water and in at the ports of origin. So theres been a lot of.
Volatility there.
We have seen.
Steamship lines make decisions that really.
Low themselves they have more flexibility in that and part of that is because of the congestion, which which we've experience which is supply chain has experienced but we're seeing some we're seeing some very encouraging signs in terms of where that goes going forward. We believe that intermodal is still offers substantial value.
Not only from the steamship lines, but for their customers, especially in a high fuel environment, our high fuel price environment. We think there is a compelling story there that we can deliver value for over the long term and as we are as we see those supply chain start to loosen up this year as the the log downs and in <unk>.
Asia continued to ease we hope.
We're going to see we believe.
Customers look to Ipi again for a a way to add value on the inland supply chain.
But do you know whether theres a few few forward looking indicators or.
Leading indicators that we won't look at that's warehouse availability drayage capacity.
It's.
It's a dynamic situation.
Wonderful Alan I appreciate the time, thanks, guys.
Thank you Ken.
Thank you. Our next question comes from the line of Ravi Shanker with Morgan Stanley . Please proceed with your question.
Thanks, Good morning, everyone, Jim Best of luck from Us as well I had a couple of questions on on train lengths.
Just to kind of understand a little bit better kind of increasing train length at a time when obviously network fluidity is not great in the service of challenging.
Does that help or hurt at the current moment, obviously I get the long term benefits of increasing train length, but at this time just wanted to check them. It helps their hearts and as a follow up to that I know the STB is very focused on service levels as a whole, but there's also been some scrutiny on train lengths, specifically, especially at the congressional level and some.
Reason to shippers as well so I'm just wondering if.
There's a natural limit to that or if there's diminishing returns overtime.
Yeah.
Yeah, Ravi Thanks, I think train length really helps us right now it improves our lessons our labor.
Intensity now Theres, a point to which if you're unable to meet trains at multiple locations on a particular district. It could work against you to your point, but.
I think where we are finding opportunities to move.
More traffic with one crew that is really to our advantage. So I don't see it working against US both near term nor do I see it working against US long term, we want to be able to to match, our our train size to our locomotive pulling capability and as we invest in locomotives and you've heard us talk about that in our prepared remarks.
With DC to AC conversions, it's it is very.
Very helpful to us to improve train lengths.
From the standpoint of what the STB might do you.
I don't know I know that it is a topic that even that foray brings up from time to time, but.
But I truly believe that the technology, that's brought to us with distributed power capability makes it it makes it a very safe and effective operating operation.
Don't see a reason that we should expect or want or think necessary any restrictions on train length as long as we're continuing to move forward and not and not getting longer than this district that we need to run them.
Very helpful. Thank you.
Thank you. Our next question comes from the line of Amit Mehrotra with Deutsche Bank. Please proceed with your question.
Thanks, Hi, everyone Mark.
You've been helpful. In the past I'm talking about the cadence of of absolute costs. I mean, I think we're in a somewhat uncertain volume environment as we look out six to nine months I think you know it would be helpful to get your perspective on what you have visibility on which is.
The absolute cost structure. So can you talk about kind of at 181 8 billion in the first quarter, where you expect the cost structure too.
How do you expect it to move over the next few quarters and then I just had one clarifying question. When you talked about the year on year change on the second quarter or I fully understand.
Land game, bringing that down but you know it was like I think it's 63, excluding that do you expect to be better than that or worse than that year over year or sequentially kind of the right way, we should think about it for the second quarter.
Thanks, Thanks, Amit look yeah. We ended this first quarter with absolute costs of about 183 O range and.
When I look out from here you know there'll be there'll be a step up even excluding fuel I think as volumes start to rise.
You know, we'll see probably a step up in absolute cost for sure.
But I would still think inclusive of fuel we're gonna stay under that $1 9 billion level.
Throughout each of the quarters.
Going forward now with regard to the year over year change in ore in the second quarter.
Again, I don't really want to get into any more specifics than to say we could.
Good chance to be in that range ex fuel.
But I don't want to put more of a finer point on it than that I'm, sorry, not ex fuel ex the landscape for Q2 of last year I'm hopeful we can be in that range.
Okay, there's too many variables I don't really want to put a fine point on it.
Okay, well I appreciate you talking about the cost structure looks very helpful. Thank you very much.
Thank you.
Thank you. Our next question comes from the line of Justin Long with Stephens Inc. Please proceed with your question.
Thanks, and good morning.
I know the 2022 guidance for high single digit revenue growth didn't change, but is it possible to share what you're assuming for full year volume growth within that outlook and looking at the second quarter. Specifically do you think there's the opportunity for volumes to inflect positively.
Year over year.
Yeah.
For the question.
We believe that not only is the U S economy poised to continue to deliver.
Growth for transportation providers, who can add value but.
But we think that the.
Consumer demand is going to continue here at least for the foreseeable future.
You layer in some high commodity prices since geopolitical conflict and we believe that the U S is very well positioned and in the current environment. Despite some of those headwinds and we all know about in terms of.
Increases in our high fuel prices that being said, we know that as we improve our service as we deliver more capacity that our customers want to grow they are poised to grow and we're going to be able to deliver that growth. So yes, I would say, we're sticking with our with our view that we're going to be able to deliver.
Our growth for the full year in terms of in terms of volume.
Yeah second quarter in particular.
It was not necessarily going to be as an overall ramp back half right. So we're going to ramp towards the back half as service improves.
Okay got it and maybe a quick follow up on top S. P. G. I was curious if you could share how much additional capacity you think that will create in the domestic intermodal network, specifically and you know if we get into an environment, where domestic intermodal volumes.
Or.
Increasing double digits I just wanted to get some color on your ability to handle that over the remainder of the year.
Yeah.
Yeah Justin.
Al mentioned, the secondary kind of a secondary order on a business on top SPG, particularly intermodal is to look at outlet frequency.
As well as blocking density that will help us be able to be as efficient as possible in our terminals and obviously then operate trains thats that support that so that is a big component of the plan and how we're thinking about it because we want to make sure that we build it with a platform to grow.
Okay.
Okay I appreciate the time.
Thank you. Our next question comes from the line of small fish, Brooklyn with RBC capital markets. Please proceed with your question Hey, Thanks, very much good morning, everyone I'd like to come back to the regulatory question and really so some of the concerns that are raised generally about rail service and we're doing it now.
From a number of different sources, not just U S TB, but from from from other organizations.
Federal Maritime Commission Secretary of transportation, so forth and I know in Canada. They are the regulator did make efforts to to to regulate service and it was complicated and and and.
And it created a fairly high level of uncertainty as the regulator tried to step in and and and and regulate on service do you see any concern that.
And I know there was some calling for that.
Our regulator here.
In the U S. We would look to to follow suit and what form might that take and do you have any concern whether that will will affect your ultimate profitability. If they if the regular starts to move it on the unregulated service levels.
Yeah, Walter Thats part of that is a hypothetical what Florida potentially take I can tell you that we are completely aligned with our customers and our shareholders and our regulators on the intent and the focus on delivering value to our customers and we have every economic incentives.
And our self motivated to fix this problem and as a result, we are staying actively engaged with the STB you saw Ed and Cindy and any represent Norfolk southern in the industry yesterday and in that venue and I think what you heard from them is that we are entirely focused on.
Restoring our service levels, that's our commitment.
Thanks, so much for the question.
Thank you.
Thank you. Our next question comes from the line of Tom model with UBS. Please proceed with your question.
Yeah. Good morning, Thanks for the chance to ask question here at the.
I guess I mean, you've talked a lot about crew and and S. P G, adding capacity or crew additions what do you need to do one before you do the other or I guess and and how would you think like would you expect to see velocity improved before you make some of the scheduled changes I guess I'm just thinking about you know.
Related to execution risk when you make the schedule changes.
Or perhaps their incremental on the way you roll them out and and and if there's not a whole lot of execution, but one I wanted to ask about those two initiatives and just kind of how you would link them together and you know how you need to do them.
Yeah.
Yeah, Tom well I would tell you I pinned it back to a top 21, when we were coming out 2018 with a lot of real service challenges and implemented top 21.
Really really effectively and it went extremely well so we're kind of using that as his experience that we've had to implement changes in operating plans, but at the same time, we have not completely finished the plan, yes and we.
We will we will engage our employees and obviously our customers to make sure that how we implement it is the most effective way that we can implement it.
And if it is it is meant to be positive towards our service product and if we need to do it more and more sequential manner before that to support that that's how we will do it.
So do you I mean, do you think philosophy needs to be.
20 miles an hour before you implement something or.
Would you say you do know that they're not necessarily connected in terms of how well you're running before you.
Make the schedule changes.
Yes, I think that the result of the implementations should help to lift velocity and I don't think there's a gate of how fast we should be operating before we start something and Lisa will obviously be very localized changes.
So we'll get those line segments of real good book before we before we actually implement that I I don't think there's a gate at which we have to be at a certain speed or a certain.
You know.
Dwell in order to in order in order to implement but we'll be very thoughtful as we implement to make sure. It's supportive of improvement in service and not and not hurting problems associated with that there is a dual path here right at the same time, we are implementing top SPG, we're going to start getting healthier with with our crew base and I am very confident.
And the ability of our team out in the field to execute this.
I might just add Todd.
Top 21 that we did in 2019 was was really in hindsight, a revolutionary operating plan change that unlocks a tremendous amount of productivity.
That we harvested I think top SPG as more of an evolution from that now.
Where we're looking to get.
Get back into an operating plan that we can execute on a more reliable.
Manner, and also resource more reliably because that's where we're dealing with the challenges on the crew resource.
So what happened in the middle was the pandemic that really altered a lot of our traffic flows at our traffic mixes are commodity mixes I should say and that's really what necessitates us to evolve the plan a little bit and try to get back into balance. So that's one way to think of top SPG. So now as we go when we.
Released the new plan, which is being you know we're going through iterations right now.
Internally and then ultimately with our customers.
Hopefully, we'll end up with more crews on the ground and we'll be able to execute in a in a much more predictable fashion. So they are kind of happening simultaneously.
Okay.
And we see the result more than <unk> on on velocity, let's say.
Yeah, I would imagine we'll start to see it.
More pronounced in <unk>, that's not to say that we're not looking for opportunities here in to Q2 to inflect upward.
Okay. Thanks for all the time.
Thank you. Our next question comes from the line of Cherilyn Radbourne with TD Securities. Please proceed with your question.
Thank you very much and good morning.
I just had another one on top SPG and the emphasis on train five to drive productivity just can be I wonder if you could give us some perspective on where train size to date.
And what you think the upside is as you leverage distributed power and make siding extensions and how you drink that remaining opportunity for train five improvement in bulk merchandise and intermodal Inc.
Sure well I think thanks for the question you know I think that you've seen train size incrementally improve over many quarters. Some of that is bringing volume onto existing trains and that's just absorbing volume coming to us. So as we came out of the pandemic and we had more volume coming through.
This week, we just added to existing trains and then there's a piece of it that's a little bit more structural and that structural piece can be in the bulk network, where we can double trains up or where we can actually increase train size by 20 cars lets say in our grain network or so forth because that matches the pulling power of our locomotives.
And as you see mixed changes happen within intermodal or bulk are manifest that will impact sort of what the high end of our opportunity set is but what we're really doing is matching the train two to locomotive pulling power and capability and as and I don't we really don't think of it as.
This is the output we're trying to get to we more think about it incrementally and structurally how we can change it to improve it but the distributed power is the is what is unlocking that opportunity the technology associated with distributed power is what's unlocking that opportunity and you're seeing us invest in our locomotives.
The rebuild locomotives I'll come equipped with distributed power is helping us continue to do that the the the locomotive fleet over the years from 2016. We started this process of DC to AC conversions has incrementally added to our ability to take on train size. So so that's how we think about it.
Thank you. Our next question comes from the line of Ben Nolan with Stifel. Please proceed with your question.
Yeah, Hi.
Cindy I wanted to follow up on that a little bit you talked about I think specifically in the intermodal part of the business that there was some positive mix in there in the first quarter and I assume that obviously, that's the the effort going forward, but how do you balance out trying to just just to add volume on an absolute basis versus also trying to add.
That premium volume that did generate better margins.
I have two.
It's got to be a little a little challenging to do both at the same time right.
Yeah.
Yeah. So you know we think about in terms of balance.
We think about in terms of Executability and I talked a little bit about outlet frequency in some cases, we're running this you know certain several trains between two different cities, but theyre going to two different ramps. So how do we think about taking those two trains and getting outlets for our customers more frequently.
To be able to get to the destination cities and not think so hard about specifically what ramp were going to so that's some of what is embedded in our thinking.
And then how simplify how can we simplify the building of the train with blocking density and being able to make blocks that are bigger. So there's a lot that goes into the inputs of of how we balance.
Train size and the internal components of how we operate the trains and the turn in the terminals between which we operate them.
Cindy I would add that as as we strike balance restrike simplicity, and we add crews our train performance is going to improve try and speed is going to improve the quality of our product is going to improve and that's going to add more business to existing trades. So just from that standpoint, even without a design change we're going to add train length of train weight.
That's exactly right and I would say that.
Just add one other thing you know the structure of our network is such that we are blessed with a lot of optionality here both in terms of the <unk>.
City that we serve the major metropolitan areas, but also multiple robust facilities within those.
Metro areas, which we will leverage to.
To deliver a simplified did effective train plan for our customers.
Alright, I appreciate it thanks.
Yeah.
Thank you. Our next question comes from the line of David Vernon with Bernstein. Please proceed with your question.
Hey, Good morning, I had a question for you on them.
Somewhat related to the service issues, but if you think about the volume and pricing in the back half of the year and adding some congestion in the network.
Do you do you worry at all that the it.
That might delay the recovery at least in the metrics themselves and and do you have any timeframe for when we should be expecting service to kind of normalize and return to a better level I know, we're talking about inflection here in the second and third quarter, but when you think about getting fully restored do you have a timeframe for when and what that might look like.
Yeah. So I think what we've talked about is we're really confident that the pace of improvement this.
This quarter and into the future quarters, a very dynamic environment, we're dealing with so it's hard to say when will quote unquote be back, but it's a very positive trajectory that we expect.
And from a congestion standpoint, as we speed by definition congestion will ease so as we bring week it'll be much easier to bring on volume because we are less congested. So really the idea is to start with with crew resources and plan changes to a lesser extent, but still is.
Supportive supportive to the idea of being able to operate the railroad in a much less congested manner than we see which will which will be reflected in our train speed going out.
Okay. Thanks for that and then just as a quick follow up.
Terminal capacity.
For your third party contractors that are running some intermodal terminals.
<unk> certainly heard a lot about service issues there as well.
Think about the Resourcing that you're doing can you comment at all around the Resourcing is happening at some of the terminal operations and end and when some of those problems.
Also stepped up.
They get better.
Sure I'll comment on that you know, we've we've taken a very hard look at our effectiveness in terms of throughput efficiency and our ability to deliver capacity for the market through our terminals and in many cases, you know there's a lot of inflation working its way through the entire U S economy.
Manifests itself of course at the terminal level as well, but what we're focused on is ensuring number one that we have the capability at the terminal level to handle the volumes that top SPG is going to deliver for us going forward. We are we are reconfiguring some of those contracts.
As we speak to both make sure that we have that capacity for the future as well as ensure that the.
The type of operation that we have is the one that we need so we're working on that as we speak and we're confident that as top SPG rolls out here, we're going to we're going to see it manifest itself as additional capacity for our customers and improved execute ability.
For the service we deliver.
The physical capacity of our intermodal footprint has allowed us to handle much higher intermodal volumes just as recently as 2018, absolutely. So the physical capacity is there we're working on.
Our engagement with our lift contractors with shared service metrics and we're working on how we can improve our own performance with the trades and I think that's a recipe for success for our customers.
Thank you that's helpful.
Thank you. Our next question comes from the line of Bascom majors with Susquehanna. Please proceed with your question.
Oh, Yes apologies was on mute there. So your largest domestic intermodal Chapman partner recently renews its barrels with their western railroad a partner committed to a really big capital investment you're going to drive midterm growth and share gain from highway could you talk a little bit about what your appetite for that type of.
Of commitment in customer visibility it might provide us at Norfolk, and you know whether a firmed up our expanded channel partner deal would be more or less likely after you get through some of the operating plan changes that you're currently undergoing for intermodal. Thank you.
Yeah.
Well, there's probably very little I can talk about.
But I'll, let me say this we are blessed with a fantastic portfolio of customers the customer you're talking about is a very valued partner of ours, including some others.
And they are positioning themselves for growth our customers want to grow they are poised to grow they're investing for growth and we are too.
So you put that you put the combination of very powerful intermodal franchise, we would argue the best.
Certainly in the eastern United States.
Put that together with a robust portfolio of partners, who are delivering value for their customers in the marketplace and I think it's already a great combination can only get stronger.
Thank you.
Thank you, ladies and gentlemen that concludes our question and answer session I will turn the floor back to Mr. Schall for any final comments.
Thank you for your time and your questions and I appreciate you joining our call. This morning.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.