Norfolk Southern Corporation

Greetings and welcome to the Norfolk Southern Corporation fourth quarter 2023 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's now my pleasure to introduce Luke Nichols, Senior Director, Investor Relations. Thank you, Mr. Nichols. You may begin.

Thank you, and 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 filed with the SEC for a full disclosure of those risks and uncertainties we view as the most important. Our presentation slides are available at NorfolkSouthern.com in the investor section, along with the reconciliation of any non-GAAP measures used today to comparable GAAP measures. Turning to slide three, it's now my pleasure to introduce Norfolk Southern's president and chief executive officer, Alan Shaw.

Good morning, everyone, and thank you for joining Norfolk Southern's fourth quarter 2023 earnings call. Here with me today are Mark George, our Chief Financial Officer, Paul Duncan, our Chief Operating Officer, and Ed Elkins, our Chief Marketing Officer. Last year was historically challenging, with a major derailment to start off the year, followed by network disruptions, and compounded by a stubbornly weak freight market. The Eastern Ohio incident tested our resolve. I'm proud that our team responded decisively and responsibly, to protect this great franchise and our shareholders, and to address the community's concerns. With an unwavering commitment, we have strengthened our safety and service. We have kept and will continue to keep our promises to make things right in Ohio, to improve our service to our customers, and to make a safe railroad even safer. A crisis allows you to accelerate change, and we acted. This includes a number of positive changes to how we design the network and assemble trains with measurable results. As we show on slide four, our improvement in safety is already being highlighted by a dramatic 42% reduction in our mainline accident rate in 2023. 2023 was also historically important for Norfolk Southern because we began to implement and advance our new strategy to position our business for sustainable growth and success. The intermodal service composite chart on the right side of slide four tells an important story that speaks to the clear gains we have made in both resiliency and service following significant strides in service in 2022. With our investments in resiliency through leadership plan and resources, we demonstrated the ability to execute our strategy to run a safer railroad that delivers a compelling service product to our customers and handles increased business. A balanced approach to safely delivering service, productivity, and growth. We overcame multiple significant network disruptions in 2023 and exited the year with the best intermodal service we have delivered in over three years, all while intermodal volume grew 5%. Entering 2024 with a safer and more fluid network that is attracting growth, we have the platform to narrow our focus to specific areas to drive increased productivity, and we are building positive momentum by executing on our strategic vision. Part of that strategic vision is our commitment to industry competitive margins, and we are determined to deliver on that promise just as we have delivered on promises on service and safety as volumes grew. We will leverage our PSR operating plan with our current resource base to meaningfully improve velocity and resilience within our merchandise network, which accounts for two-thirds of our train starts. As we achieve a high degree of compliance to the plan and merchandise, we will reduce variability, complexity, and costs. We are driving that forward now with the results already seen in December and January. It will drive asset velocity that will lead to productivity gains and cost savings. And in 2024, we are targeting a double-digit percentage improvement in terminal dwell, which is a good barometer of the health and fluidity of our merchandise network. Paul will go into more detail about how we are planning to build on our success in Intermodal Deploying changes to accelerate our merchandise network, which I have noted will be a major source of productivity for Norfolk Southern in 2024 and beyond. To further describe what we are doing to improve profitability and drive smart growth in 2024, Ed will talk about how his team is winning business and pushing hard to negotiate price in excess of inflation. Importantly, We are streamlining our cost structure and eliminating inefficiencies. We invested in 2023 to enhance safety and service. We will see the benefits of this in our cost structure in 2024. We will take actions this year to reduce costs in other areas. This includes a program to reduce management headcount by roughly 7% to help offset increases in critical operating areas. Our groundbreaking transformation will take time. We recognize the necessary investments in resiliency and service have temporarily increased our cost structure, particularly visible during the trough in this freight cycle. On slide five, you'll see we laid out the scenario where during a down cycle, we may modestly underperform in order to be coiled to secure volume and incremental margin when the freight cycle recovers. While we didn't expect 2023 to be a continuation of a soft rate market, coupled with numerous disruptions, we are optimistic that recovery is on the horizon and our investments will yield returns. We will deliver near-term margin improvement as we implement our strategic vision, a balance between safe service, productivity, and smart growth. We are on the path to achieve that balance. In the aftermath of the derailment and network disruptions, we have improved safety and service in a responsible manner and are securing new business. With a stabilized network and a high degree of compliance to the plan, we will continue to iterate the plan, reducing complexity and enhancing executability and balance. All of this will unlock productivity and fluidity, which, in line with our strategy, will allow us to attract more volume at accretive incremental margins and deliver top-tier revenue and earnings growth at industry competitive margins. With strong franchise advantages that will serve us well as we move through this economic cycle, we are poised for a bright future as we balance safe service, productivity, and growth. I'll turn it over to Mark and the rest of the team, who will add some context around the timing and magnitude of our planned improvements in performance and profitability.