Norfolk Southern Corporation

Greetings. Welcome to the Norfolk Southern Corporation's third quarter 2023 earnings call. At this time, all participants are in 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 from your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Luke Nichols, Senior Director of Investor Relations. Thank you, Mr. Nichols. You may now begin.

Thank you. Good morning, everyone. Please note that during today's call, we will make certain forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or future performance of Norfolk Southern Corporation which are subject to risks and uncertainties and may differ materially from actual results. Please refer to our annual and quarterly reports file with the SEC for a full disclosure of those risks and uncertainties we view as most important. Our presentation slides are available at NorfolkSouthern.com in the Investors section, along with our reconciliation of any non-GAAP measures used today to the comparable GAAP measures. Turning to slide three, it's now my distinct honor to introduce Norfolk Southern's President and Chief Executive Officer, Alan Shaw.

Good morning and welcome to our discussion of third quarter earnings. Here with me are Mark George, our Chief Financial Officer, Paul Duncan, our Chief Operating Officer, and Ed Elkins, our Chief Marketing Officer. I want to begin by thanking my Norfolk Southern colleagues for working safely, serving our customers, and driving our strategic plan forward. When we charted a new course in the industry, we understood unlocking the full potential of our powerful franchise would require an enhanced focus on resilience and operational excellence across every aspect of our business. Our transformation into a more customer-centric, operations-driven service organization reveals opportunities to strengthen our franchise. We saw some of that in the third quarter with two technology outages. The first on August 28th was caused by a defect in the vendor's software. The second, on September 29th, involved a firmware maintenance issue. These incidents were unrelated and were not cybersecurity issues. We are taking measures to prevent a reoccurrence, and importantly, we are not stopping there. We have launched a top-to-bottom review of our technology infrastructure with the assistance of leading third-party experts. Operations-driven means pursuing operational excellence in every aspect of our business, and that includes IT. Demonstrating our progress in building resiliency, our strengthened operations leadership, enhanced operating plan, and greater crew capacity enabled us to manage the technology incidents with limited disruption to our customers and grow volume through the service recovery. Throughout the third quarter, we continued to do exactly what we said we'd do when we announced our strategy. We are making smart investments in safe, reliable, and resilient service. Although the macroeconomic environment of abnormally low volumes is an unwelcome headwind, it has not changed our approach or diminished our confidence that our strategy is a better way forward. The market will recover, and we will be poised and leveraged to capture growth with strong incremental margins. Mark will provide detail on other cost drivers in the quarter, including fuel prices and higher labor costs as a result of last year's historic wage increase for our craft colleagues. These costs, combined with investments in our strategy and the backdrop of historically low volumes in the quarter, contributed to significant pressure on our operating ratio, which deteriorated year over year and sequentially. We are clearly not satisfied with these results. We will recover from these short-term impacts to our operating ratio. As we articulated when we launched our strategy, continuous productivity improvement is a core element of our balanced approach. We are committed to achieving and maintaining industry competitive margins over the long term. Our focus on productivity is unrelenting. Under the strong leadership of Paul and his team in operations, we have an increasingly stable network with a high degree of plan compliance, allowing us to iterate the plan for service and productivity. And as Paul will describe, we are reducing our pipeline of conductor trainees through year end to more normal levels, among other steps. Balanced against the challenges of the quarter, there were several encouraging developments that demonstrate progress on our strategy and point to growth and profit improvement in the quarters ahead. Notably, service in the third quarter improved both year-over-year and sequentially, allowing us to onboard more business. Volume improved as well and appears to have turned a corner with each of the last four weeks running above 136,000 carlets. That's a level we haven't seen consistently since the second quarter of 2022. In part, This was a function of customers awarding us new business. Our customers see the commitment we are making to deliver more consistent, reliable service, and our marketing team is creating innovative solutions to amplify the value of that service, even in a weak freight environment. Ed will talk more about this later. In addition to service and volume gains, we delivered improvements in safety as well. Our mainline train accident rate is down more than 40% year over year, as we strengthen our safety culture and performance. In East Palestine and the surrounding communities, we continue to deliver on our commitments. Mark will provide an update on costs associated with our ongoing efforts to make things right. I visit regularly as we make significant progress cleaning the site and investing in the community's future. I'll now turn it over to Mark.