Norfolk Southern Corporation

Greetings and welcome to the Norfolk Southern Corporation's first quarter 2020 earnings conference 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 Pete Sharble, Director of Investor Relations. Thank you. Mr. Sharble, you may begin.

Thank you, and good morning, everyone. Please note that during today's call, we may 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 SEC for a full discussion of those risks and uncertainties we view as most important. Our presentation slides are available at NorfolkSouthern.com in the investor section, along with our non-GAAP reconciliation. Additionally, a transcript and downloads will be posted after the call. It is now my pleasure to introduce Norfolk Southern's Chairman, President, and CEO, Jim Squires.

Good morning, everyone, and welcome to Norfolk Southern's first quarter 2020 earnings call. Joining me today are Alan Shaw, Chief Marketing Officer, Mike Wheeler, Chief Operating Officer, and Mark George, Chief Financial Officer. Before we discuss our financial results, I'd first like to thank our employees for their dedication during these unprecedented times. Norfolk Southern employees are proud to be delivering an essential service. In a video message to employees, dispatcher Misty Braden expressed the sentiment well when she said, We supply America with the goods that they are short of right now, and I hope everybody that works for Norfolk Southern feels essential after this. It is truly inspirational to watch our employees rise to the challenge. In response to the COVID-19 pandemic, we established three simple goals early on. Protect our employees, serve our customers, and exercise strong financial discipline. I'll talk briefly about the steps we're taking in each area. Our first responsibility is to protect our people. We acted quickly based on CDC guidelines and took extensive measures to keep employees safe. We transitioned most of our office employees to remote work in a matter of days. For employees whose jobs require them to work on site, we implemented social distancing and established rigorous cleaning protocols for their work environments. Our preventive measures, combined with the diligence of our employees, have kept the number of confirmed COVID-19 cases at Norfolk Southern low. I'm also pleased to report that our employees are working safely through the many potential distractions. Our thoughts are with all those whose lives have been impacted by the virus. Our second goal is to continue providing an excellent service product for our customers, and that's exactly what we're doing. Our customers are making rapid adjustments to their operations due to the impacts of the coronavirus, and we are right there with them every day as a valued partner. They count on us for reliable service, close collaboration and nimble operational adjustments, and we're delivering. We'll address our third goal, which is to exercise strong financial discipline throughout the balance of this call. The work we've done to implement our strategic plan has made us an even more resilient business putting us in a good position to navigate the current market disruptions. I'll now turn to our financial results for the quarter. Allow me to first remind everyone of our announcement on April 16th of a non-cash charge of $385 million related to the ongoing disposition of 703 locomotives. Thanks to the excellent execution of our strategic plan, our fleet today is more efficient and we're able to operate with significantly fewer locomotives. Mark will provide additional color, but as you can see on slide five, we've provided an adjusted view of our financials to exclude this charge. This is what I will reference in the rest of my comments this morning. Adjusted EPS for the quarter was $2.58, and the adjusted operating ratio was 63.7%. These numbers improved upon last year's record results by 3% and 230 basis points, respectively. Within the context of an 11% volume decline, they are remarkable achievements that demonstrate this team's urgency to transform our company. We also set records and metrics such as train performance, terminal dwell, and shipment consistency, among others, and accelerated crew start reductions in excess of declining volumes for a third straight quarter. When coupled with the ongoing realignment of resources around our new operating model, we reduced operating expenses by $202 million in the first quarter when excluding the non-cash locomotive charge. Our team is committed to driving improvements across the network and significantly and consistently lowering our operating ratio. We're focused on the factors within our control and confident that by continuing to adjust and successfully execute our strategic plan, we are building a stronger, more resilient, and a more profitable Norfolk Southern. I'll now turn the call over to Alan and the team to begin detailing our first quarter results and our progress executing the strategic plan. Alan? Thank you, Jim.