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Morning, ladies and gentlemen, and welcome to the Norfolk Southern Corporation first quarter 2026 earnings conference call. At this time, note that all participant lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on Friday, April 24th, 2026. I would like to turn the conference over to Luke Nichols. Please go ahead, sir.

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 discussion 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, including adjusted or non-GAAP operating ratio. Please note that all references to our prospective operating ratio during today's call are being provided on an adjusted basis. Turning to slide three.

I'll now turn the call over to Norfolk Southern's President and Chief Executive Officer, Mark George.

Good morning, and thanks for joining us. With me today are John Orr, our Chief Operating Officer, Ed Elkins, our Chief Commercial Officer, and Jason Zampi, our Chief Financial Officer. Before we get into details, I wanted to start by recognizing our thoroughbred team. Working together, we successfully navigated another challenging winter, with weather events that affected most of our territory, putting real pressure on the network and our volumes in the month of February. As conditions normalized and our network recovered, we were able to capture the available volume in March and exited the quarter with solid momentum, all while staying focused on what matters most, operating the railroad safely. Our safety performance continues to excel, which remains our most important work. We're seeing the benefits of the investments we've made in technology, training, and standard processes, from digital inspection tools to more rigorous operating standards.

These efforts are helping us detect and address potential issues earlier and keep our employees, customers, and communities we serve safe. Our FRA reportable accident rate is down yet again, thanks to the systems we have and our leadership. I'm proud of how our people stayed disciplined and committed through all the weather challenges and other distractions. On costs, we remained disciplined. Total adjusted expenses were up just 1% year-over-year, despite inflationary pressures, storm costs, and sharply higher fuel prices. We earned new business, expanded key relationships, and saw customer confidence grow across multiple sectors, reflecting improved execution and trust in our capabilities. We're seeing strength and encouraging results across multiple parts of the business, reflecting focused investments and improved coordination across our teams. Ed will walk through some of our wins and the underlying volume drivers in more detail.

Lastly, stepping back to the broader environment, the macro remains a mix of puts and takes. Customers continue to manage dynamic and shifting supply chains, but our message is simple: Norfolk Southern is well-positioned to grow alongside of them. The strength of our network, combined with the flexibility we built into our cost structure, gives us confidence to navigate whatever the market brings. With that, I'll turn it over to John to get into the operational details. John?

Good morning, everyone, and thanks, Mark. Throughout 2025, our Norfolk Southern team was focused on growing our team's capabilities, skills, and speak-up willingness, creating the environment to deeply embed our safety and service maturity and capabilities. Now, with a full quarter behind us in 2026, we are realizing measurable gains from those successive efforts. We are advancing and layering progressive PSR 2.0 structural changes to build more resilience and efficiencies across the railway, develop generational railway leaders, and provide our customers with the best possible service plan. As Mark noted, extreme and network-wide winter weather in the first quarter tested the network. I am very proud of the entire enterprise in the way we anticipated, prepared, and responded to deliver for our customers. The extraordinary commitment of more than 19,000 railroaders across our franchise was clear in the service and volume execution coming out of the system-wide storms.

Thank you to all my fellow railroaders. The entire team delivered both daily and storm backlog demand and drove post-pandemic daily GTM volume records, made possible by our operations and commercial teams. Turning to slide five. At Norfolk Southern, safety is the core value to which all of our operating decisions are made. Our continued investment in safety is producing results while building a stronger, more durable safety culture. In the quarter, our FRA personal injury ratio was 1.10. This is consistent with full year 2025 performance. Our FRA accident ratio was 1.43. This reflects a 37% improvement year-over-year in the first quarter. Our FRA mainline accident ratio was 0.26. For the second consecutive year, Norfolk Southern continues to lead the way for Class I railroads in mainline incident reliability. This progress is not isolated.

It is also mirrored in a reduction of non-FRA reportable accidents. These improvements reflect the strategic impact of our intentional coordination of field-level technology, coupled with execution across back-office work scope, process refinement, and field conversion engagement. Combined, we are creating reliable network value by engineering out risk from operations wherever our teams work. This holistic approach to safety improvement is now embedded in how we plan, execute, and manage the railway every day. While we are all proud and encouraged by our safety improvements, we are driven by a relentless drive for continuous improvement. Our enterprise is committed to putting in the work. We know there's more work to do. We are strengthening our stop work authority, reinforcing a speak-up culture, and relentlessly addressing root cause analysis to prevent block crossing and other incidents. Turning to slide six.

Throughout the first quarter, the network demonstrated resilience in the variable demand environment we faced. Our focus remains on improving our train speed while maintaining balanced discipline around energy management and service levels, a core operational priority. While shipments were modestly lower year-over-year, we moved 1.1% more gross ton miles, reflecting stronger train productivity and better asset utilization across the network. Terminal dwell improved year-over-year, coupled with continuous focus on executions of the plan. This supports gains in car miles per day. We have been intentional about protecting service and operating the network at a lower cost structure. That discipline is reflected in 8.6% fewer recrews, improved locomotive reliability, and continued reductions in unscheduled train stops.

Improved crew scheduling and greater crew availability are supporting stronger crew productivity across the network and a better aligned, qualified T&E crew base, which is down about 6% year-over-year. We continue to strategically recruit and renew our workforce in markets where we anticipate growth. Reliability drives improved productivity in crews, locomotive, and fuel efficiency. Taken together, these results demonstrate we are controlling what we can control, managing costs, improving efficiencies, and positioning the network to respond to the evolving market conditions. Turning to slide seven. At the core of PSR 2.0 is a self-reinforcing operating system, a flywheel where disciplined execution compounds over time. At Norfolk Southern, we know when we run the plan, reduce recrews, and improve network velocity, we create stability in the operation. Stability matters to our people and to our customers.

It allows us to deliver our service and utilize assets more effectively, improve locomotive and field productivity, and operate with better energy efficiencies. Operational gains have manifested into the continued evolution of our service plan and its execution. They feed directly back into better schedules, better planning, and more consistent execution. We now have a connected system where every improvement strengthens the next. That compounding effect is how we intentionally build a more resilient railroad steadily over time. Our war rooms continue to translate this discipline into measurable results. The mechanical room has improved detection quality in our wheel integrity systems while delivering confirmed defect identification that directly improves safety and reliability. This is a clear example of technology process and field execution working together at scale. At the same time, our Need for Speed war room is embedding advanced analytics directly into daily operating decision-making.

By pairing data science with frontline execution, we are improving plan quality, accelerating decisions, and strengthening the performance across our network. Disciplined execution across the organization is delivering results. In the first quarter, we achieved a fuel efficiency record, strengthening our competitive position in a high fuel price environment while protecting margins. More importantly, it reflects the repeatability of this operating system. Taken together, our PSR 2.0 transformation and operating systems position us to continue to outperform our original cost reduction commitments and deliver sustained progress across safety, service, and financial performance. With that, I'll turn it to you, Ed.

Thanks a lot, John, and good morning, everybody. Let's move to slide nine. We closed out the first quarter with significant volume momentum, and this is offsetting a volatile February where severe winter weather impacted our customer car loadings for several weeks. Overall, volume finished down 1%, primarily due to challenging Intermodal market conditions as well as merger-related losses. However, revenue ended the quarter flat year-over-year, and RPU was up 2%, with solid core merchandise pricing and some favorable high-level mix, which were somewhat overshadowed by some puts and takes within the individual business groups, particularly within coal. Within merchandise, volume and revenue increased 1% from a year ago, and this was driven by continued share gains in our chemicals and our automotive markets.

RPU less fuel was flat year-over-year within the segment, as strong core pricing was offset by mix interactions due to sustained growth of lower-rated commodities within our chemicals franchise that we've talked about for a couple of quarters now. In our Intermodal business, volumes decreased 4%, reflecting difficult comparisons related to tariff front-running in 2025, as well as impacts from the winter storms in the quarter and ongoing merger-related losses from prior quarters. Overall, Intermodal revenue declined 1%, and revenue less fuel decreased 2% due to these volume impacts, while improved pricing and positive mix within the segment drove RPU higher by 3% and RPU less fuel higher by 2%. Looking at coal, volume increased substantially as higher electricity demand, stockpile replenishment, and a supportive regulatory environment powered our utility segment. Now, this strength was partially offset by reduced volume in domestic met coal.

While total coal volume increased 9%, revenue declined 2% as mix headwinds from utility growth and continued overhang of export pricing drove RPU down by 9%. Let's go to slide 10. Here we highlight several dynamic factors influencing our market outlook, including the conflict in Iran, which has obviously driven energy prices sharply upward in the near term. Our fuel surcharge revenue will be the most immediate impact as an offset to fuel expense. Additionally, we're aggressively pursuing volume and revenue opportunities in a variety of energy-related markets, while also monitoring potential impacts to overall consumer demand. Looking at merchandise, we have a subdued but positive outlook for vehicle production due to near-term economic uncertainty on the part of consumers. Manufacturing activity remains mixed, with output forecasted to expand modestly amid the shifting economic landscape.

Energy prices and global supply chains will be significant wild cards in the months ahead due to the conflict in Iran. Depending on the duration of supply chain disruptions, we could see near-term opportunities in markets like natural gas liquids, export plastics, and potentially even crude oil. Looking to our Intermodal markets, international volumes are going to remain soft due to continued tariff volatility and trade pressures. On the other hand, retailers have been maintaining lean inventories in response to this macro uncertainty, for which eventual restocking offers some support for baseline freight activity. The truck market has turned relatively positive, with dry van rates trending upward in the first quarter of 2026, and capacity continues to right size while demand is firming. Taken together, we have an optimistic view of Intermodal, although we're tempering that optimism somewhat due to increased competitor activity following the merger announcement.

Let's turn to coal, where a combination of global factors is supporting pricing across both metallurgical and thermal seaborne markets. Now most notably, the conflict in Iran is impacting global LNG supply chains, opening the global market to consider alternatives such as U.S.-sourced thermal coal. The utility outlook remains positive, as growing domestic electricity demand and inventory restocking should continue to support Norfolk Southern coal volumes. Okay, let's move to slide 11, where I'm excited to introduce an innovative new short line and transload partnership, which is subject to standard regulatory approval with Jaguar Transport Holdings. Unlike traditional short line transactions across the industry, which have been focused on finding efficiencies and leveraging lower density lines, our new partnership focuses on growth in a high-density switching corridor located in Doraville, Georgia.

Our new partnership, which includes operation of both an industrial short line and our transload terminal, will deliver exceptional local service and responsive capacity to customers in the growing metro Atlanta market. Now, here's what I want everyone to take away. This new partnership is just the latest example of our larger growth strategy in action. We're focused on building and executing innovative deal structures that deliver new capabilities and exceptional value for our customers. Look for more innovative solutions and new capabilities in the months ahead as we continue to execute on our strategy for growth. With that, I'm going to turn it over to Jason Zampi to review our financial results.

Thanks, Ed. I'll start with the reconciliation of our GAAP results to the adjusted numbers that I'll speak to today on slide 13. We incurred $52 million in merger-related expenses during the quarter, while total costs related to the Eastern Ohio incident were $10 million. Adjusting for these items, the operating ratio for the quarter was 68.7%, and EPS was $2.65 per share. Moving to slide 14, you'll find the comparison of our adjusted results versus last year. From a year-over-year perspective, the operating ratio increased 80 basis points. Inflation and fuel price headwinds drove an approximate 280 basis point increase. However, we were able to mitigate a large part of that increase through productivity and higher revenue per unit.

Taking a closer look at our quarter on slide 15, overall costs were up 1% as we were able to offset an estimated 5% headwind from inflationary pressures. Specifically, fuel price alone was $31 million higher than last year and over $40 million higher than our expectations, a phenomenon that really accelerated in the later part of March and has continued here into the second quarter. We have continued to deliver on our productivity initiatives with fuel efficiency and labor productivity, delivering over $30 million in savings. Partially offsetting those gains, we had some volumetric increases that drove purchase services and rents higher in the quarter. To summarize our financial results on slide 16, while first quarter costs were only up 1% and in line with our cost guidance for 2026, the lack of revenue growth combined to drive a modest EPS reduction.

While we overcame typical operating ratio seasonality in Q1, we are constantly striving to improve. We continue to refine our focus to unearth other opportunities, and you heard John talk about some of those initiatives as we work towards the $150+ million of efficiencies planned for this year, on top of the over $500 million in productivity we generated over the last two years. Fuel is obviously going to be a wild card the remainder of the year, and we anticipate it to be a headwind in the second quarter. Despite that, we expect to achieve typical margin seasonality from Q1 to Q2. We continue to move forward. John and team are continuing to drive productivity while maintaining a safe railroad with consistent and predictable service levels, and Ed and his team are pursuing high-quality growth opportunities across the entire book.

Overall, we're executing to the plan we laid out, focusing on safety and service within a reasonable cost envelope while progressing through our merger application with UP. With that, I'll turn it over to Mark to wrap it up.

Okay. Thank you, Jason. You all just heard that we are laser-focused on three fundamentals. First, safety. We continue to make progress through better tools, better processes, and a culture that treats safety as a value, not a metric. Second is service. Our customers are seeing our resilience coming out of the winter weather and getting back to consistent, reliable performance even as volumes increase. Third, costs. We're maintaining tight control, driving productivity, and aligning our expense base with demand as we fight to win volume. Overall, we see a promising story emerging where we can leverage any reasonable volume expansion the market presents with our commitment to control cost, giving us confidence in our ability to drive attractive and profitable growth. Now turning to guidance. Last quarter, we provided an adjusted operating cost envelope of $8.2 billion-$8.4 billion for 2026.

I'm proud of how the NS team has handled all the challenges in Q1 to remain on track for our guide, and I remain confident in our cost control playbook. Now while the underlying cost structure remains intact, fuel prices are obviously putting upward pressure on the cost outlook. As you heard from Jason, the price surge in March alone resulted in expenses that were $40 million higher than our expectations. While we are sensitive to the impact the conflict and inflating energy markets are having on people's lives, today it is unclear on how long fuel prices will remain inflated and by how much over the remainder of the year. In light of this, we are maintaining our current cost guidance while acknowledging the near-term volatility and uncertainty on one of our key cost inputs. Our team has worked hard to be transparent with all of you.

We will continue to monitor the situation as we progress through Q2 and gain more confidence on where fuel will settle, and we will update you accordingly. Finally, just as a brief update on the merger, we remain on track to refile the application by the end of the month. This revised application will be even stronger in articulating the benefits of creating the nation's first single-line transcontinental railroad. With that, let's open the call to questions.

Thank you, sir. Ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touchtone phone. You will then hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. If you're using a speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions. Thank you. First, we will hear from Chris Wetherbee at Wells Fargo. Please go ahead, Chris.

Yeah. Hey, thanks. Good morning, guys. Maybe one point of clarification, then a question. I guess, Jason, you mentioned normal OR seasonality, Q1 to Q2Q, just kind of curious what you see that normal seasonality as being, just to clarify. Then Ed, you talked a little bit about competitive activity, I think particularly in Intermodal as it relates to the merger. I guess as you think about that, have we seen most of that happen already? Is that something that maybe still has yet to play out, and is it more than Intermodal, or is it really more sort of contained within Intermodal? Thank you.

Hey, Chris. Jason. Let me start with the OR question. Just a reminder first about some of the headwinds that we've got in our plan. We've talked about inflation and some of those year-over-year pressures in that 4% range. We've got lower land sales. Specifically, you may recall we had a $35 million land sale in the second quarter last year that we don't expect this year. We've got to absorb those revenue losses from the competitive merger responses. Now, obviously, we have to deal with these fuel headwinds that are going to continue into the second quarter. That said, you put all those together, all those headwinds, we're really still expecting to be in that normal kind of sequential OR improvement. We think about that at about 200 basis points, and that's really due to all the productivity initiatives that we've got going on.

An uptick in revenue from first quarter to second quarter, for sure.

This is Ed. To your second question there, yeah, it's really, we think, primarily an intermodal story. It's playing out the way that we've anticipated so far. Frankly, we're doing everything we can to make sure that we're earning everything we can from both the road and from other modes.

Thanks, Chris.

Next question will be from Scott Group at Wolfe Research. Please go ahead, Scott.

Hey, thanks. Ed, I have a question. Intermodal pricing is arguably somewhat cyclical, tied to truck pricing. Coal pricing's volatile. It feels like merchandise pricing has been the constant, and I see merchandise RPU ex fuel flat, and so maybe you'll say it's mixed, but just some thoughts I would have thought or hoped we'd see some better merchandise pricing. Mark, you mentioned quickly the merger, just applications coming next week. You've had months now to gather feedback. Anything that gives you more confidence in approval? Any feedback that gives you concern? Just any high-level thoughts. Thank you, guys.

Ed, why don't you?

Sure. I'll probably disappoint you because I'm going to say it's mixed, first of all. We've had a good quarter and a very strong track record on the core price here. RPU, of course, is not price. When we see our merchandise book, frankly, I think we're close to a record this quarter for RPU less fuel. It's really about growth in some of the lower-rated chemicals commodities, stuff like frac sand and NGLs, where we've done a really good job of earning new business there. At the same time, we continue to take price very aggressively where we can. I would say that for the most part, I'm really satisfied with where we've landed on core price, and adding incremental revenues through some of those low-rated commodities has been a good thing for us.

Yeah. Thanks, Ed. Look, with regard to the merger, I think being out on the road and seeing how this has played out these past handful of months since we submitted the initial application, I'm feeling a lot better. As we talk to customers and understand the concerns, as customers are listening to the opposition and some of the scare tactics, and we get a chance to clarify with facts, I believe we have a really good story. The new application is going to confirm what we said in the original application on the logic of doing this deal and the benefits that a single line transcontinental railroad will bring to the country and to our shippers. In fact, we're going to have a much stronger set of data that actually makes the case even stronger.

We feel pretty good about it, and I think right now it's just about trying to get on the clock, and by getting that application in on the 30th, the clock will start running. I feel better, Scott, than I did even five months ago when I felt really good. Thank you.

Next question will be from Brian Ossenbeck at JPMorgan. Please go ahead, Brian.

Hey, good morning. Thanks for taking the question. Just to clarify with Jason, can you give us the fuel and weather-related costs into the quarter? I don't think we heard the specific call-out here directly. Just to add, maybe going back to the 2026 market outlook, a bunch of the different, I guess, sub-segments here moved to a bit higher vehicle manufacturing, warehouse in particular. Truck makes sense, but maybe you can give a little bit more context as to what you're seeing and feeling in there that gives you the confidence to move those up a notch on your rating scale and maybe how that's expected to play out throughout the rest of the year. Thank you.

Hey, Brian. First part of your question, thinking about fuel specifically versus prior year was up $31 million just from price. The really big impact that we're talking about is that difference compared to what we expected. Just in the month of March alone, that was up over $40 million. The price we paid per gallon in March was up 45% over last year, and we really see that same phenomenon happening again here in April. Splitting that up between prior year and then what our expectation was. I'd tell you on storm costs, and John, you can give a little color on this, but that was about $13 million-$15 million in the quarter of costs. John, you can give a little background on that.

Yeah. Let's just go to fuel for a sec, because it's not just the price story, it's the consumption story. We set a consumption record that is compounding its value in the fuel efficiency cost levers that we've been pulling through our precision fuel operations all of last year and this year.

With the help of finance, operations, IT, everybody, we've got an integrated fuel management system that is giving us value in both how we purchase it, how we distribute it, and of course, how we consume it through our energy management on board. Those are some things that are in a high-cost environment, give us those double coupon values that we can enjoy. As far as the storms are concerned, they were very concentrated. Unfortunately, they were across the whole Eastern Seaboard from North to South. Most of that we were able to work through very quickly, but in a concentrated way. The monies you see there impacted us, and the nice thing for our service is we were able to rebound and push through for the balance of the quarter.

Yeah, this is Ed. You were asking about where we have optimism or where the markets are that we think have opportunities. I'll kind of just go around the horn and repeat somewhat I said on prepared remarks and try to get in a little bit more detail. Start with Intermodal. Clearly, there's a reason to be optimistic about domestic Intermodal, domestic non-premium. We've seen growth there despite some of those competitive headwinds that we talked about. I think there's more opportunity to come. When you think about higher fuel prices and what that does to our competitors on the road, it makes Intermodal more compelling naturally. With the good service product that we're able to offer, I think we have a compelling case to make there. International side, I think there's a lot of trade uncertainty still out there.

Frankly, when you're comping against the pull forward that happened last year, that's going to be challenged. If I go to coal, we continue to be constructive on the utility side of the business. I think restocking will continue. I think electricity demand, over the medium term at least, is going to inflect upward. We feel good about that piece. Met side, or excuse me, on the export side, I think the U.S. coals are finding new opportunities overseas because of all the disruption from the conflict as well as commodity prices and constraints on sourcing from some of those things. We'll see how that plays out.

On the industrial side, I think I mentioned in the prepared remarks that we're exploring actively opportunities that are showing up in places like NGLs, export plastics, as well as possibly even some of the petroleum products that will want to move in the current environment. Generally, we feel pretty good about manufacturing. There's some real signs of life out there, whether you're looking at the economic factors or even listening to various stories. We have, gosh, 400 or so projects in our industrial development pipeline. We're actually starting to see that pipeline begin to move. Last year, it was really held pretty tight, but we've had 12 projects come online in Q1 here, and that'll be worth about 70,000 loads when they're at full ramp.

For the full year, we'd like to see a few dozen more of those come across the finish line, and we think we can.

All right. Thanks, Brian.

Next question will be from Jason Seidl at TD Cowen. Please go ahead, Jason.

Thank you, operator. Mark and team, good morning, guys. I wanted to talk a little bit on the Intermodal side. I mean, obviously, there's some competitive dynamics going on impacting the business. One of the largest trucking companies indicated that they're already having inquiries from clients about peak season planning. I wanted to know where you stood with your discussions with customers on that, and then maybe a little bit on the new short line partnership initiative. Is this a one-off, or do you see if this gets approved, replicating this in other regions, and if so, where?

I appreciate the questions. They're good ones. Again, I'm bullish on domestic non-premium intermodal for the rest of the year, at least for the foreseeable future, from a combination of factors. First one being, we've seen the supply of over-the-road drivers be constrained. I think that's going to continue to happen. I think I said it on an earlier call that we really need to see demand rather than supply be the thing that pushes us forward. I think we're starting to see that. You look at the price of on-highway diesel and what trucks are having to pay for that, Intermodal is going to be a compelling value proposition for a lot of customers. It's only compelling if we have a good service product, and that's what John and I are really focused on, is how do we deliver that value for customers.

I feel pretty good about that piece. In terms of our new partnership with Jaguar, I meant what I said. It's an innovative deal that I think is going to deliver exceptional value for customers. If we can make it work, and I am very confident that we can, we're going to look to replicate this sort of deal elsewhere.

Thank you.

All right. Thanks a lot, Jason.

Next question will be from Jonathan Chappell at Evercore ISI. Please go ahead, Jonathan.

Thank you. Good morning. John, I wanted to ask you about two specific cost items and how we think about them going from here. You mentioned the fuel consumption down 6% year-over-year, but also down sequentially. I can't find another time where your fuel consumption was down Q4 to Q1, especially given the weather. Is that the new kind of base we should think about going forward? Maybe not 6% year-over-year improvement, but continue to march lower from here. Then also on headcount, you were in this tight little range all year last year, about 19,300–19,400 employees. Stepped down about 300 employees in Q1.

What happened and why is headcount down? Again, is this going to be a tight range where we should be about down 300 every quarter for the rest of the year?

Well, thanks for your questions. On our fuel productivity, while I'd like to take all the credit for such a sequential improvement, it is improving sequentially, but there are some accounting adjustments within that fuel number that give us a small benefit. Sequentially, we're improving, and that's really driven by treating fuel as a major cost lever and precision fueling, how we're managing that and how we're driving consumption, improving locomotive reliability, and fuel efficiencies. As we said before, it's a journey, and the program will stretch over several years, and it involves integrating more tech process refinement both in the field and here at 650 West Peachtree Street. It's integral in our strategies.

While it is never going to be a straight line and the volatility in pricing is going to have its own aspect, our desire is to continue to march towards the most progressive fuel efficiencies we can get. That's aligned with our locomotive strategies, it's aligned with our conversions from DC to AC, and even found within how we restructure in our zero-based plan model and continue to have a relevant plan rather than a historic plan. As far as labor productivity is concerned, we're benefiting from fewer recrews. We've restructured our starts. Last year, our zero-based plan affected approximately 200 train starts and train revisions. This year, we have another pipeline of similar scale, and we'll continue to create predictable schedules.

That helps because as we restructure starts, while it's being driven by volume and workload and held in place by zero-based plan, it's really focused on lowering held away, better using crew accuracy, lineups for crew rests and crew cycles, and those manifest into a more productive workforce. Our qualified count is really about not chasing the curve. It's about focus on retention, the accuracy of our new hire pipeline, and our training and onboarding to better position us to absorb growth with the best existing resources. Our pipeline is always active. We're recruiting the best people we can find, being very selective and giving them the benefit of a very robust and precise training program. Lots of work to do there, but we're exercising labor productivity and workload so that we can maintain our service structure and give our customers the best experience we can.

I guess I would just add, we're really not just hiring to some aggregate number. We've got some 90 different crew bases across our network where people have to be qualified to operate in those specific districts. We have to monitor the demographics of each of those crew bases when we expect to see retirements come and get ahead of those curves, because it takes about six months to hire somebody, train somebody, qualify them, and expecting some attrition to happen during that process as well. We got to do that for 90 different crew bases. Now, some we've got cushion. Others we're in deficit because they're in locations where employment is full and very difficult place to hire.

There's a lot of work that goes in to make sure that what productivities we're going to be driving across the network, so that allows us to absorb attrition versus when will volume come. It's a real delicate balance to determine the level of hiring for which location six months in the future in a very uncertain demand environment. I think right now we're doing well, but I will tell you it's probably the single biggest debate we have internally is the level of hiring we need to do based on the market outlooks. All right. Thank you, Jonathan.

Next question is from David Vernon at Bernstein. Please go ahead, David.

All right, David.

David, we need your line.

Question?

Oh, sorry. Problem with the mute. I guess, Ed, as you think about the growth prospects for export thermal, if that were to kick in, can you kind of help us understand what the range of possible outcomes is there from a volume and also from a yield perspective? Would that be additive to RPU, negative to RPU? How do we think about the potential for a pickup in export coal affecting the revenue outlook for you guys?

Yeah. Export thermal would be helpful to our RPU mix. The first quarter got hurt by winter weather. It was hard to get out of the ground, hard to move it, and hard to dump it. I think we're going to see that rebound, particularly if the conflict in the Middle East continues, there's going to be more markets open up to U.S. coal. Yeah, I'm optimistic about it, and it will be helpful.

Thank you.

All right. Thank you, David.

Next question. Next question will be from Richa Talwar at Deutsche Bank. Please go ahead.

Hey. Thanks, gentlemen. Yeah, I wanted to talk about costs. The 1% cost increase despite 5% inflation. Maybe you can talk about initiatives that you're focused on to keep that cost trajectory going. You gave us a lot on headcount and stuff and fuel efficiency, but maybe talk about some of the other buckets where you're seeing the most success, what hasn't been done that you think there's more potential for. That's on the cost side. Ed, I would love to hear. I think you said you feel really good about manufacturing picking up, and you've heard some anecdotes from your customers. I know you talked about the success you're winning on projects and things, but I'd love to hear maybe more broadly what you're sensing from the macro backdrop and what that hands to you. Thanks.

Yeah, I'll start on the cost side. You point out I'd say pretty good cost control we had here in the first quarter, up 1% with 5% headwinds from inflation and fuel. It's really driven by a couple of things. We have a really good track record that we've shown over the last 2 years of getting about $500 million in productivity. We've got a lot of projects and initiatives in the hopper to hit that $150 million+. For the first quarter specifically, and then I'll turn it over to John to talk about what we're working on the remainder of the year. Just from fuel efficiency alone, we, last year, improved 5%, the year before that 3%. Now, first quarter, we're hitting all-time first quarter records, so really strong performance there. We will continue down that path.

Labor productivity continues to be one of our biggest components, where we've really benefited quite a bit over the last two years. As we've talked about in the past, not just T&E productivity, but really labor productivity across the board.

Yeah. Jason, you hit on that disciplined approach to this, and we're committed to it. We've adjusted our budgets accordingly. It's across all streams. Productivity, obviously, we started in T&E. Our zero-based planning through 2025 and the version three that we're undertaking in 2026 is giving us a benefit on crew starts with a focus on continuing to create our own capacity through weight and train length that give us the opportunity to really make the best use of our infrastructure. From the T&E, there are incidental costs that come out of that with running a more resilient railway, and leveraging our portals with fewer train starts, more mechanical resilience, better locomotive capability. All of those things flow through to purchased services and others.

A big focus on our next generation of purchase service and enterprise resource management and the discipline around those major purchases, and fuel is going to continue to be a big driver of that. I'm really proud of what the team is doing on safety. Significantly lower incidents and accidents, even above and below the FRA reporting threshold. That's giving us the ability to really drive the plan, have accountability where our cars are, have more accuracy on when our trains arrive and depart. That gets us lower equipment rents, that gets us into better locomotive turns, better locomotive utilization. There's significant value in those things. It is really working the fundamentals with projects that are coming online and really driving big benefits. It's small wins and big wins put together that are going to really create the flywheel that we've got that's creating the improvement.

Very good. Thanks, John. Thanks, Richa. Okay, next question.

Ladies and gentlemen, a reminder to please limit yourself to one question. Thank you. Next will be Jordan Alliger at Goldman Sachs. Please go ahead, Jordan.

Yeah. Hi. Morning. Just wanted to come back to, I know you've talked a lot about the Intermodal service, and that's a key focal point. I was looking at your network update slide, and it looks like the Intermodal service composite's been sort of 85%, which is off from the high of low 90s%. I guess, is that weather-related? Is it temporary? How do you address that? In your view, do you need to be above 90% to start getting market share back? Thanks.

Well, let's talk about market share, but if you've heard me speak on these calls, I'm never pleased about any particular metric. I am pleased that sequentially, we're pacing slightly ahead of where we were last year at this time. It's not just the average. It's really getting down to the lane, getting down into the customer, the important commitments that we've made to our customers and their product view and their sorting view and the end-to-end capability that we're building in them. Yeah, I would love to be a higher number. I'm striving to be a higher number. Sequentially, very pleased that we're seeing that improvement. My job is to give Ed every opportunity to walk into any customer with good service in his back pocket to negotiate our market share.

Yeah. Thanks, John. Look, I think we will have a better number, and I know you're working on it. Look, you nailed it, John, when you said that we focus at the lane level. There are some lanes that have a lot of potential. Some lanes have some potential. Where we have a lot of potential, and we have very good data on that, we're very focused on delivering an exceptional service product. That's what you and I talk about every single day. That doesn't necessarily manifest itself in an average. I can tell you right now that we're laser-focused on those lanes and those opportunities where we have a lot of potential to take traffic off the highway and deliver a very good service product for them. Thank you.

Thanks, Jordan.

Next is Tom Wadewitz at UBS. Please go ahead, Tom.

Yeah. Good morning. Mark, I want to refer back to the fourth quarter call. I think you were maybe somewhat fresh off the share shift in intermodal, and you had some fairly aggressive comments, I think, on just competing in the market, and you were going to compete hard in the market. What do you think the competitive dynamic is like among rails in the East? It seems like there are puts and takes. Maybe you've got a little growth in chemicals, autos, maybe a little less rail share, I'm not sure. Then they've got some Intermodal. How do you think about that? Is it pretty stable? I think on the international and domestic, is there a share shift in international?

That's just completely like for like customer and, I think, Ed, you talked about just the weakness in international being maybe just demand driven but not share shift. A couple thoughts on competitive dynamic and then just share at international Intermodal.

Sure, Tom. Thanks. Good question. Look, obviously following the merger, you saw a flurry of new alliances taking place with our eastern peer and western peer and some of the Canadian railroads, and that has obviously had some level of impact on us. It's enhanced competition, frankly, just from the mere announcement of this merger. We talked about some of the losses that we've had, and that we're going to continue to fight like heck to retain our share and fight in other areas to gain, to offset some of that. That's what the team's been doing. They've been doing a great job, I think, competing. Look, I think you have to step back. This North American rail network is running pretty damn well.

All the railroads are operating well, and they're all offering very good competitive products, which is really great because we are an integrated supply chain, and we cheer on the other roads to have good service because we all interchange with each other. Half of our volume interchanges with another railroad, so we don't want anybody to be in a bad service situation. It's not just us. We want everybody to be good, and they are all good right now. When it comes to the competitive offering, I think the product that John and the operations team has put out there has been really good. It's been really resilient. I think we're doing a good job on the commercial side as well, being more responsive and working to solve problems with our customers.

I feel really good about our competitive position right now, I do, in pretty much all the areas. I think the challenge we have on the international side, there's a lot of uncertainty going back to tariffs of last year. There's been probably some inventory depletion that's taken place, and it hasn't seemed to really fully started to restock yet. International's been relatively weak. Not sure when that's going to turn around. Domestic, on the other hand, for other dynamics, I think given the cost profile with what fuel is doing to truckers, we feel pretty good about being able to start taking some share off the highway. Ed, why don't you talk a little bit more?

Sure. I think you kind of nailed it. We believe that the product we're delivering is very competitive in the marketplace. You're right, Mark, we want all of our rail competitors to be very strong because oftentimes it's hard to get customers to discriminate between ourselves and other railroads. We're all just one big railroad, and that's true in many cases. We want strong rail competition. We're really focused on the highway. The competitive landscape continues to be very competitive. Frankly, higher fuel prices are probably helping us deliver additional value for customers across the board, particularly on the domestic Intermodal side.

Yeah.

We've seen a little bit of share shift, as you alluded to. Some of it's a competitive response, some of it's just more book diversification. We continue to work on how we can improve our position. I'm really proud of the team and what they've been able to do.

Okay, thanks a lot, Tom.

Next question will be from Walter Spracklin at RBC Capital Markets. Please go ahead, Walter.

Yeah, thanks very much, operator. Good morning, everyone. My question is for Ed. Taking a little more high level on the freight recession, we're hearing a lot of commentary from your counterparts in trucking that is outright saying, this recession's coming to an end, but your peers in railroads seem to be a little bit more conservative in terms of making that call. Is this just a supply side thing where the new regs have driven better pricing for trucks, and that's what's causing that more positive view? Or I know the trucks have talked a little bit about higher demand in some of the industrial verticals. Just curious if you're seeing any green shoots on the demand side outside of truck pricing or just your own pricing that is suggesting that the freight recession might be finally coming to a bit of an end here.

Look, real good question. I think I'm probably talking to the same folks you are when it comes to trucks on the supply side. There's a few uncertainties out there and a few parts of the equation that haven't been solved yet. The first one being, what's going on with housing and interest rates and inflation. Those are three big factors that I think really need to resolve themselves before we can declare anything over, so to speak. At the same time, we see the IPI come up. We've seen manufacturing for, I think, three straight months now be above water. We see some strength in the auto industry, both in terms of demand as well as supply.

There are some green shoots, and we are cautiously optimistic about certain segments, but I remain vigilant on those three factors that I think really need to come around before we could say we're out of the woods.

Yeah. I think to call an end to the freight recession may be a bit premature, but I think for us to be able to start taking share from highway, fuel prices are going to help that. That's a little bit of the optimism you hear. Some of the green shoots we see in industrial production, which usually has a six-month lead time, it gives us a little bit of optimism that maybe there's something there brewing. I think, Ed, you would say that when it comes to manufacturing, we're not necessarily seeing it yet.

Yet

Except for some of the components that go into manufacturing, those are areas like plastics and-

Mm-hmm

...some metal components. We're starting to see some growth there. We're not calling an end to the freight recession, but we're saying there's green shoots. We'll keep an eye on it. All right. Thank you. Last question, right?

Next is Brandon Oglenski at Barclays. Please go ahead, Brandon.

Sorry, Mark, you got one more from me.

Yeah.

I'll keep it pretty short here. Jason, can you just help us, and maybe you already addressed this, but the average sequential OR change that you guys would view it in Q2, maybe just at a higher level. You guys have been working towards more safe outcomes and everything, I get it, but the operating ratio has been moving maybe in the wrong direction. Should we be thinking, though, if that freight market is turning, that there's a lot of potential for incremental margin here, too?

Yeah. Absolutely. No doubt about that. We've got the capacity to move all this volume. John and the team have done a great job from a service perspective and making sure we're ready to handle it. We've got the resources in place. To your point, because of that capacity, when this comes through, it's at really good incrementals.

I think he just wanted to hear the sequential margin improvement. You would think a couple points.

Yeah. About 200 basis points of sequential OR benefit from first quarter to going into second quarter.

Thanks a lot, Brandon. Look, I think just to kind of recap a little bit here. We told you at the beginning of the year that we were focused on preserving safety, maintaining service, and controlling costs while we were going to fight for every dollar of quality revenue we could. We did exactly that in the first quarter. Revenue being flat was lighter than we hoped, but we are more optimistic on the top line as we enter the second quarter because there are some signs of life emerging in the market. Now, that said, this is a very dynamic world with an awful lot of crosscurrents. We've just got to keep an eye on that. Let's keep an eye on those weekly volumes, and that'll give you some indication of how things are shaping up.

We got a tight grip on costs right now and real good momentum on productivity and efficiency. We're going to carefully balance all of our resources so that we're able to move the volume when it comes, while we continue on this never-ending drive for productivity and efficiency. Regarding the merger, we're going to submit our revised application here on the 30th. Like I said before, the rationale is the same, but the depth and the quality of the data in the application considerably strengthens our case. Look, when you step back and look at it, our customers, our supply chains, they're increasingly national and global, but our U.S. freight rail network is fragmented. A single line transcontinental network is going to simplify service, reduce interchange complexity. It's going to allow freight to move more efficiently, more safely, and more reliably from origin to destination.

That's what this is about. It really is going to deliver a very compelling proposition for more customers to choose rail over highway. Ultimately, I think that's good for the country, and it's good for everybody. Thanks, all, for your participation in today's call, and stay safe out there. Thank you.

Thank you, sir. Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines. Have a good weekend.

Good morning, ladies and gentlemen, and welcome to the Norfolk Southern Corporation Fourth Quarter 2025 Earnings Conference Call. Note that at this time, all participant lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. And if at any time during this call, you require immediate assistance, please press 0 for the operator. Also note that this call is being recorded on Thursday, January 29, 2026. I would now like to turn the conference over to Luke Nichols, Senior Director, Investor Relations. Please go ahead.

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 discussion of those risks and uncertainties we view as most important. Our presentation slides are available at norfolksouthern.com in the Investors section along with a reconciliation of any non-GAAP measures used today to the comparable GAAP measures including adjusted or non-GAAP operating ratio. Please note that all references to our prospective operating ratio during today's call are being provided on an adjusted basis. Turning to slide three. I'll now turn the call over to Norfolk Southern's President and Chief Executive Officer, Mark George.

Good morning, and thanks for joining. With me today are John Orr, our Chief Operating Officer, Ed Elkins, our Chief Commercial Officer, and Jason Zampi, our Chief Financial Officer. Before we get into the numbers, I want to recognize our Thoroughbred team. 2025 was a demanding year in every sense. And our people have met it with resilience, focus, and commitment. They kept serving customers, improving our railroad, and they did it while tuning out the noise and concentrating on what matters most. Look, Q4 played out in an environment where volume was clearly softer than anyone had predicted. But even so, we controlled the controllables. Costs landed exactly in line with the guidance we provided last quarter, reflecting disciplined execution across the company. And while there's been heavy external attention around the merger, I'm really proud that the team maintained its focus on the business prioritizing safety, dependable service, and strong cost control. Now looking back at the full year, 2025 was dizzying. It started with a challenging winter, followed by persistent tariff uncertainty, and then competitive dynamics tied to the announced merger. In the back half, the macro softened further and freight flows shifted. But through it all, our operating foundation held. Safety, our most important work, continued to advance and service was consistent and reliable. We expanded our digital train inspection program, so now more than three-quarters of our traffic each month is scanned by portal technology. We had zero reportable mainline derailments in the fourth quarter. Let me repeat that. Zero reportable mainline derailments in the quarter. Our investments in our one-of-a-kind digital inspection technology, our enhanced processes, as well as investments we've made in our people are collectively paying dividends. John will share more detail, but based on current data, 2025 stands as our best year in more than a decade when it comes to train accident rates. That progress comes from better technology tools, rigorous standards, and a culture that treats safety as a value, not a statistic. A year ago, I spoke about our desire to adopt a total quality management mindset at the railroad. And in our results, we are now seeing evidence of what we call total quality railroading. On cost and productivity, we did what we said we would do. And in several areas, we did better. We moved 3% more GTMs in 2025 with 4% fewer employees. That's 7% productivity. Our network is humming, and in 2025, we delivered steady efficiency gains with improved fluidity, asset utilization, and day-to-day execution that our customers can feel. These aren't one-off wins, but they're the product of sustained discipline. And a team that knows how to execute. With that, I'll turn it over to the rest of our leadership team to walk through the quarter in more detail. John, let's start with you.

Good morning, and thanks, Mark. I want to repeat Mark's opening comments, recognizing the outstanding railroaders across all of Norfolk Southern. Today, I will highlight their resilience, discipline, and committed leadership that produced the transformational results that I'll share with you today. 2025 was a defining year for operations. We strengthened the core of the franchise. Delivered measurable improvements in safety and service and advanced the structural changes required under PSR 2.0 to build a more resilient and efficient railroad. Despite macroeconomic volatility, weather-related disruptions, and the operational transitions required by the zero-based plan, the team executed with discipline and intention. The progress achieved in 2025 reflects the maturing operational culture when grounded in accountability, transparency, and intentional leadership. And positioned us to enter 2026 with stronger fundamentals, improved cost discipline, and a more reliable network for our customers. Turning to slide five. Safety as an operating system. In 2025, we closed the year with exceptional safety performance. As we enter '26, operations strategy is clear. A relentless commitment to our core value of safety. A relentless focus on service, and decisive actions to operate with cost discipline, positioning Norfolk Southern to compete and win. The data points on this slide represent a structurally safer, more resilient railroad. Poised to deliver consistent and reliable performance. Our FRA reportable injury ratio improved 15% to 1.0. And reportable accidents improved 31% to 2.19, reflecting meaningful sustained progress that underscores the effectiveness of our transformation. We closed the year with a capstone and tremendous momentum. Delivering a quarter with zero reportable mainline derailments. Finishing the year with an industry-leading 0.43 ratio. For the quarter, our mainline accident rate dropped to 0.13. A 71% improvement year over year. Taken together, these results are balanced and intentional. We are developing generational railroaders through the Thoroughbred Academy, placing people in the right roles with the right workload and reinforcing organizational clarity. Soft Work Authority is respected and safety accountability is synchronized at every level. Turning to slide six. Disciplined scheduled operations. Our PSR 2.0 transformation has been rapid, multidimensional, and disciplined. It is an operating model designed to simultaneously deliver safety, service, and productivity. In 2025, we focused on delivering high-quality service and reducing costs in response to variability. One of our most effective productivity levers was train operations. Increasing train size while lowering the horsepower used to move those trains. Throughout this effort, we were intentional about protecting service performance and keeping the network operating at a low-cost structure. This strategy delivered meaningful results. Train load increased 4%. Horsepower per ton decreased nearly 10%. Fuel efficiency improved 4%. And GTMs per crew start rose 2.5%. War rooms have matured into a core competency. Improving over-the-road performance, tackling complex mechanical, and need for speed challenges. Year over year, unscheduled stops declined 31%. And through zero-based plan migrations, Q4 2024 versus Q4 2025, we reduced qualified T and E headcount by 76% for the full year. Let's go to the balance line for a minute. Our new wheel integrity system introduced just last quarter has already proven its value. Pinpointing a critical external vendor casting flaw on a wheel set that had been in service for less than a week. The new system, internally developed by NS, coupled with our relentless root cause investigation with stakeholders, confirmed there were seven additional brand new wheel sets across North America with the same manufacturing defect. Our findings and the collective actions of stakeholders led to an immediate industry-wide recall of these defects across North America. This is a powerful example of how Norfolk Southern's advanced digital capabilities help us solve real problems with scale, speed, and accountability. From an infrastructure point of view, mega work blocks continue to elevate productivity. In 2025, we delivered our $2.2 billion capital programs on time and on budget. Network reliability derived from our PSR 2.0 flywheel has allowed us to reduce our 2026 capital envelope by a further 14%. Bringing our 2026 capital budget down to approximately $1.9 billion, delivering a two-year $450 million planned capital reduction while supporting a safe and reliable network ready for future growth. Turning to slide seven. Continuous measurable improvement. Our team delivered a clear and compelling result. Even after raising our cost takeout commitment to $200 million during the year, we outperformed that higher target delivering $216 million in full-year savings. As we have said before, our team is never satisfied. As you can see in the chart, we exceeded our 2025 cost takeout targets. And we are once again raising our 2026 cost takeout savings commitment from $100 million to $150 million, bringing our three-year cumulative total cost takeout to approximately $650 million. This underscores the strength of our PSR 2.0 transformation. And our committed leadership to deliver. Turning to 2026. We are intensifying efforts to lower dwell for both cars and locomotives. We will apply our new zero-based terminal methodology to terminals with outsized consumption of core resources and assets. By challenging and strengthening processes, our ZBT will instill a factory management mindset. Empowering terminal teams to operate their yards like small businesses. Supporting this shift are our clarity camps. Which will equip frontline supervisors to think like owners, understanding how their decisions influence cost, how they drive profitability, and how to do so while maintaining industry-leading safety performance. They will gain a deeper appreciation for the cost of every asset. And help build a bottom-up culture of disciplined cost control. I'm proud of how our team performed in 2025. They embraced change, delivered results, and strengthened the foundation of this railroad. We have talent. We have 19,000 railroaders who deliver safety with intention. Where discipline drives performance, where accountability builds trust, and where culture fuels pride. Our people are propelling our PSR 2.0 transformation shift by shift, mile by mile, with intention and clarity. Now I will pass the mic to Ed.

Thanks, John. Let's move to Slide nine. Overall, this quarter presented challenges for both volume and for revenue. As you can see on the slide, merchandise led the way. Although our success was tempered by challenging market conditions, within Intermodal along with persistently weak export coal markets. Overall volume for the fourth quarter was down 4% driving a 2% reduction in total revenue. The volume impacts were partially offset by positive mix with RPU increasing 2% year over year. Now within merchandise, volume increased 1% from a year ago driven by auto and our chemicals markets. Merchandise revenue, less fuel, grew 2% year over year, reflecting strength in both volume and price supported by our strong service product that John mentioned. RPU less fuel grew 1% year over year within the segment, as negative mix offset core pricing most notably mix within the chemicals franchise. In our intermodal business, shifting market conditions during the quarter drove a 7% decline in volume. RP was up slightly at 1% as we continue to compete in an unexceptional pricing environment, leading to a 6% decline in revenue. Let's look at coal. Volume was up as increased electricity demand, favorable natural gas prices, and regulatory support gave strength to our utility markets, which was partially offset by reduced volume in export. So while volume was up 1%, revenue was down 11% as lower seaborne coal prices drove RPU less fuel down by 12%. If you'll turn with me now to slide 10, let's review the full year. Walking left to right on the waterfall chart, we achieved an outstanding year in our merchandise business, growing revenue less fuel by $287 million or 4% through volume growth and pricing discipline. To underscore the strength, we delivered record annual revenue and record revenue excluding fuel across each of the underlying merchandise business groups, for the full year 2025. Now I want to drill into this one just a bit. We delivered a record year for our automotive franchise. Setting a record for total revenue and revenue less fuel. And this performance was enabled by strong train performance and car order fill, thanks to our operations group. As well as focused efforts by our customer logistics group to reduce on terminal dwell. The key result of these combined efforts was a 4% year over year improvement in equipment cycle times and substantially greater terminal fluidity allowing us to take advantage of the favorable market conditions and deliver the record revenues that I just noted. A really nice job by everyone involved and our customers took note. Gaining confidence in our service throughout the year. Back to the numbers, Intermodal revenue finished flat as we weathered trade volatility throughout the year, and second half share losses due to merger-related competitor activity. Seaborne coal market weakness throughout the year drove $108 million year over year decline even as utility coal volumes increased 2025. Finally, volatile fuel surcharge revenue represented $134 million of drag for the year. These factors combined to produce a modest increase to overall volume and revenue. Moving to Slide 11, we have our market outlook. Like last quarter, we continued to navigate an uncertain economic environment. For our merchandise markets, we expect a mixed outlook for vehicle production due to affordability challenges and the fading EV incentives. Overall manufacturing activity remains mixed with output forecast to expand modestly amid ongoing economic uncertainty. Elevated natural gas fracking and drilling activity in the Marcellus, Utica is contributing to stronger demand across non-crude chemical energy sectors. Driving increased engagement and business development with both new and existing customers. Looking to our intermodal markets, import volumes are expected to remain soft due to continued tariff volatility and evolving trade pressures. Warehousing capacity is increasing, as companies deplete inventory backlogs and truck capacity remains oversupplied. All these factors plus an enhanced competitive environment in response to our merger announcement, shape our restrained view for intermodal. Seaborne coal prices have remained pressured. With significant uncertainties surrounding export trade. But we expect that utility demand to remain elevated due to continued strong demand for electricity generation in our service area along with supportive natural gas pricing. Alright. Let's quickly turn to slide 12 while we're on the topic of coal. We're proud to be partners with Warrior Met Coal in servicing their new Blue Creek facility in Alabama. Back in 2024, we noted that the mine was in development. And we're equally proud now to have attended the formal ribbon-cutting ceremony earlier this month. As the mining operations, the belts, and the rail loadout are now fully operational, we're pleased to be ramping up rail service and delivering high-quality metallurgical coal to markets around the world. As always, we want to thank all of our customers for their continued partnership and their business. The entire NS team is aligned around delivering the service that our customers need every day, building trust as a vital partner in their supply chains. And with that, I'll hand it over to Jason to review our financial results.

Thanks, Ed. I'll start with a reconciliation of our GAAP results to the adjusted numbers that I will speak to today on slide 14. Total costs attributable to the Eastern Ohio incident were $29 million which included $24 million of recoveries under our property insurance policies. In addition, we recorded $65 million in merger-related costs consisting primarily of legal and professional services and employee retention accruals. Adjusting for these items, the operating ratio for the quarter was 65.3. And from an EPS perspective, we earned $3.22 per share. Moving to Slide 15, you'll find the comparison of our adjusted results versus last year and last quarter. Both comparisons reflecting a degradation in the operating ratio due to the top-line headwinds, as Ed just discussed. The drivers of the revenue decline are similar to what we discussed last quarter, and additionally, as we previously guided, we absorbed a full quarter's worth of impact from competitor responses to the merger, in the fourth quarter. Expenses were favorable by 1% in both periods primarily due to one large land sale in the quarter that benefited operating expenses by $85 million. Those year-over-year expense variances are laid out on Slide 16. Overall, we had guided to quarterly expenses of $2 billion to $2.1 billion. And absent the large land sale that we weren't counting on closing in the quarter, we were right within that range. Notably, inflationary pressures we've experienced throughout 2025 in wages, materials, and depreciation continued to be headwinds in the quarter. That coupled with timing of certain expense activity drove increases primarily within purchase services and materials. Nonetheless, we continue to focus on the controllables. Delivering significant improvements in fuel efficiency and continued strong labor productivity. Lastly, I'd point out we did have some recoveries in the quarter associated with storm damage incurred throughout the year. All in, while there were some puts and takes in the quarter, we are pleased with how our team handled a dynamic environment. Turning to full-year results on slide 17. You'll note favorable performance across all metrics compared to last year. However, not in the way we originally intended. A year ago, we were projecting 3% revenue growth, which didn't materialize. But we did control the controllables. We had good cost discipline, and exceeded our original productivity targets, as John just discussed, by over $65 million. In addition, while the timing of large land sales are hard to predict, the actions we took to monetize these underutilized assets during the third and fourth quarters helped to mitigate the operating income shortfall from the weak macro. The fourth quarter and full year also benefited from the resolution of a state tax issue. Which increased net income and EPS by $50 million and $0.22 respectively. Overall, the bottom line grew by 5% compared to last year. Finally, moving to cash flow on slide 18. We generated $2.2 billion in free cash flow. An increase of almost $500 million over the prior year. In addition, our free cash flow conversion was very strong. With the highest conversion rate since 2021. As we had guided to, we spent $2.2 billion on our capital plan, a 7.5% decrease from 2024. Going forward, we are planning for a $1.9 billion CapEx spend in 2026. With continued focus on the safety and resiliency of our network. I'll hand it back to Mark to wrap it up.

Okay. Thanks, Jason. Before we wrap up, I want to leave you with a clear view of how we are approaching the road ahead. With the amount of change and uncertainty around us given the demand environment, and of course the pending merger, we are keeping our team focused on simple priorities for 2026. We will prioritize safety. We've got to keep our employees and our communities safe. We must continue to deliver consistent and reliable service. And we will control costs. By driving productivity across the network. All while we fight for every dollar of quality revenue that is available. While we are seeing long-awaited stabilization in truck pricing, the impacts of shifting tariff policies remain uncertain. And many customers continue to adjust to fluid conditions. The macro backdrop remains hard to read, but we are staying sharply focused on the fundamentals. For the year ahead, we expect our cost base to be in the range of $8.2 billion to $8.4 billion with an ability to accommodate a variety of volume growth scenarios within this cost envelope. We are also reducing capital spending by nearly $300 million to $1.9 billion reflecting a prudent approach in this environment while still supporting the reliability and safety of the network. Now let me close with a brief update on the merger. As you heard from Jim on Tuesday, we are working closely with UP to include the additional information requested by the STB and submit an augmented application. Taking the necessary time to ensure that it's thorough. We remain committed to working constructively with all stakeholders throughout the regulatory review. We continue to firmly believe in the benefits of creating the nation's first TransCon rail network, one that connects The United States from east to west and gives shippers a more competitive single-line rail option to ship across and within the watershed. Growth has eluded The US rails, and I strongly believe that this merger is a necessary catalyst to grow. Helping us recapture freight from the highway while supporting the reindustrialization of our country. And strengthening our supply chains while offering better opportunities for employees across a unified network. We will have a more efficient, flexible, and reliable railroad providing single-line access to more than 100 ports connecting to global markets, and 10 gateways to markets in Canada and Mexico. So to wrap as we move into 2026, the priorities for our team are clear. Focus on the preservation of safety, protect the excellent service that our customers count on, maintain tight control of our cost structure, and compete hard for quality revenue. That's how we will continue delivering value both as Norfolk Southern today and as part of a stronger future transcontinental network. So thanks for your time. And your continued confidence in our team. We'll open it up to questions.

Ladies and gentlemen, if you do have any questions at this time, please your hand has been raised. And should you wish to decline from the polling process, please press star followed by 2. And if you're using a speakerphone, you will need to lift the hands first before pressing any keys. And out of consideration to other callers on the line today and time allotted for questions, we ask that you please limit yourself to one question. Thank you. Your first question will be from Tom Wadewitz at UBS. Please go ahead, Tom.

Yes. Good morning. I wanted to ask you a bit about how you're thinking about volume. You gave us the expense guide. I just want to see if you could kind of point us to an area for volume and revenue. And also, I guess, within that, how are you thinking about, I guess, the strategy on volume? Obviously, you took a bit of a hit from the shift in some of the J. B. Hunt business over to CSX. I'm just wondering and it's a weak overall freight backdrop, right? So wondering, do you get more aggressive in your focus on growing volume? Are those efforts? Or do you kinda say, look, we'll just kinda deliver good service and we'll see what the market does, kinda take what the market, you know, brings to us? So, yeah, thank you.

Hey, Tom. Thanks a lot for the question. And you know, look, like I mentioned, it's a tough demand environment out there. Actually pretty hard to predict. As we go into 2026, just you have to understand, we're also swallowing about a point of revenue headwind from the enhanced competition that already exists out there. And some of the losses that we've had because of that new competitive environment. We feel really good coming off of '25 based on our performance in merchandise. Where, you know, we grew healthy. And we also took share. Obviously, intermodal was the battleground for us where we faced some real challenges. So it's a little bit hard to say, and I'll hand it to Ed to give you his perspective. But right now, we're really focused on just maintaining our cost within the guidance range that we gave you. We can accommodate a variety of different volume scenarios. And, you know, so we can handle growth, you know, up to several points and frankly, you know, whatever revenue we get, it's going to come with really strong incrementals. Because we've got the capacity. But Ed, why don't you build on that?

Sure. And thank you, Tom, for the question. Look. We know what we have to do in 2026. We got a great record on safety right now, and our service is where we want it to be. And that's what our customers have really come to depend on. And so we're gonna fight for revenue. For every dollar, both in terms of share as well as pricing. And frankly, I expect to continue the momentum that we've had in merchandise, particularly around our price model. Now that's gonna be offset probably by the intermodal, which still looks sluggish when you think about all trucks that are still out there on the highway. And the enhanced competition that Mark mentioned. And frankly, you know, we don't see a lot of support from coal going forward, at least in the near term, in terms of price. So '25 is a volatile year, and, you know, November and December in particular, we really had a loss of momentum across the industry, I would argue. In terms of volume and demand. So it's really hard to predict where '26 is gonna land. But again, as Mark said, we know we got a 1% headwind to start with. And we think softness is probably gonna continue in the first half at least. We're gonna wait and see what happens. We are ready. Thanks, Tom. Next.

Next question will be from Brandon Oglenski at Barclays. Please go ahead, Brandon.

Hi, good morning, and thanks for taking the question. Mark, maybe you want to reply to some of your competitors because we had a call last night where maybe the view was that this merger really doesn't enhance rail-to-rail competition. Maybe customers aren't really asking for it. So maybe you want to provide a little bit of insight from your perspective.

Sure, Brandon. You know, look, railroads came out, the competing railroads came out pretty early on opposed to this before we even filed an application. Okay? Before we could even lay out the case, there was a little bit of a panicked reaction. And let's face it, they're all taking positions that they believe will benefit their own business. I understand it. But it's not really however it's couched, it's not really positions that are based on customer interests. Or benefiting the industry. I feel when you look at it, a lot of misinformation out there. There's a lot of scare tactics that are out there. And then those are being circulated by the other railroads and we're addressing those. But when it comes to prices as an example, you know, those are based on market principles, not simply the elimination of arbitrary geographic barriers that exist like the Mississippi River. Remember, the customers aren't losing options. BASF, they're still competing in the West. With the combined railroad. CSX is still competing in the East against the combined railroad. You know, they all say alliances work just as well as a merger. But then they've you know, so they've quickly joined up with each other in various alliances, and they took business from us. It's enhancing competition. No doubt about it. So their arguments are deeply inconsistent. Ultimately they know that to compete with seamless single-line service, they've got to compete harder including likely lowering their prices. And that's what customers should be excited about. And frankly, that's what scares the other railroads. And that's why you hear such a backlash about this merger. I would argue we're on the side of nobility here because we're giving customers more options than they have today. And the customers I speak with, they know it. You know, they really, they're rolling their eyes at a lot of the noise that they're hearing from the others. They actually want deeper access into the watershed via rail to new and unserved markets or underserved markets. So they can move the freight onto the railroad from the costlier highway solutions. So that's basically it from my perspective, full stop. Thanks, Brandon.

Next question will be from Jason Seidl at TD Cowen. Please go ahead, Jason.

Thank you, operator. Mark and team, good morning. So sticking on the sort of the competitive nature, do you guys still think that there's going to be a little bit of bleed of freight to some of that competitive environment that exists in the marketplace as we move throughout the year and sort of steps are you taking to sort of stem the tide? And then maybe if as a quick follow-up, the $300 million reduction in CapEx can you talk about where it comes from? Thanks.

Sure. Yeah. I mean, more bleeding, would say, we've got to lap the impact of what happened in the you know, September time frame. And as we lap that, we're looking at like I said, a full point of headwind. Could there be more? Well, I mean, like I mentioned, we are in a new enhanced competitive environment. And you know, we're fighting back. We've offered new services. And will the other railroads compete harder? Probably. But right now, what we've got line of sight to is about 1% of revenue headwind. But you know, I've kinda told the team we're gonna fight like hell for quality revenue here. So we wanna go get attractive carloads, and we wanna try to you know, optimize our revenue line as best as we can. We're not sitting back and take body blows. So we're gonna fight like hell, and we're like I said, offering new products at the same time. So Ed, you wanna add on to that a little bit?

Yeah. Not much to add. You know, you think about products like our new Louisville service in conjunction with UP as well as what we just announced up in Air, Massachusetts. Which will enhance the competitive landscape in New England. That's just two examples of what we're doing to fight back. There's more in the pipeline, and we'll have those out as soon as we're ready. You know, frankly, Mark hit it. We of what we know, know, it's about a point of headwind. Customers as Mark said, they're gonna choose the options that make the most sense for them economically. And that's what we're focused on. Jason, you wanna talk about CapEx?

Yeah. Yeah. So, you know, Jason, thanks for the question. I think just to be clear, our capital spending as it's always been and as we will continue to as we move forward, really focused on the safety and resilience of our network that I talked about. You know, we've also done a lot of work over the last couple years to build the foundation for growth. You've heard us talk about that in strategic areas like the three b down in Alabama. To support the Warrior Coal partnership as an example. So we're now benefiting from a lot of those investments. Specific to the reduction in capital, you've seen not only over the last year, but our projection for 2026 it's really the result of, you know, asset efficiency and the gains we've made from a net fluidity perspective, it's really allowed us to pull back on some of the equipment spending as we're turning our assets more quickly. You know, John, I think maybe some color on locomotives and the capacity that we've created.

Yeah. Yush and I couldn't say it any better than you did. It starts with our productivity. We're sweating every asset creating accountability for the consumption of our resources. And the value where we've generated over the last call it, two years is really paying dividends in that. So we're able to protect all of the core investments to make the harden the network from an engineering perspective, harden and modernize our technology structure, and then take some reinvestments in our growth and our capacity so that we're able to grow be poised for growth for Ed without having to do those capacity projects. And as we've committed to, as always, as our business pipeline comes to fruition, we'll make those smart strategic and very tactical investments. From a capital perspective. Very, very specifically. So we have a no regrets approach to things. And we're gonna sweat every asset. Alright. Thank you.

Next question will be from Chris Wetherbee at Wells Fargo. Please go ahead, Chris.

Hey, thanks. Good morning, guys. I was hoping maybe you could unpack the OpEx guidance, maybe help us walk from, I guess, the roughly $8 billion in 2025 to where you see it going in 2026? And I know it's difficult to predict the top line from a volume perspective given the macro and competitive forces. But I guess, do you see a path to year-over-year earnings growth? I guess, the OpEx number gives us a little bit of context of what the potential earnings power of the business could be. I'm just kind of curious how you think about year-over-year earnings growth in that context.

Yes. Let me start with the OpEx side. So when I look at this, Chris, I'd really put the expense drivers into three buckets. So first, we've got some outsized inflation. You think about, I think the latest CPI forecast I saw was about 2.6%, 2.7%. We're expecting inflation more in the 4% range. So, you know, we've got things like our wage inflation. We had a 4% increase last July that's, you know, coming in still into the 3.75% as we move into the back half. Our health and welfare rates are up over 12%. You know, we've got insurance premium increases. So you put all those things together. In twenty five percent insurance premium increase. That's right. That's right. And so, you know, you put all that together and that's about a 4% increase in inflation. In addition, you know, from a land sale perspective, we're expecting some more normalized land sales. We had two large ones that we called out in the third and fourth quarters. But even without those, we had some smaller sales that totaled about $70 million in 2025. And next year, we're really back to that $30 million to $40 million run rate. So that's another headwind. Finally, the third bucket is productivity. So we talked about another $150 million of productivity that we're going after here, and that's, you know, that's on the back of $500 million that we've already achieved over two years. Almost hitting our full three-year guide within that two-year time frame. So you put all those three things together, and then I think, you know, when you think about the range, it's really based on a range of various volume outcomes that Mark talked about that we're really ready to handle in any scenario.

Yeah. So mean, in the end of the day, we've got higher inflation than obviously any of us want. So we've tasked ourselves with going after more productivity than we originally had in the line of sight, but there's still some you know, some leakage that throws the OpEx line. So alright. Thank you very much.

Next question will be from Scott Group at Wolfe Research. Please go ahead, Scott.

Hey. Thanks. Good morning. So Mark, anything from the STB process or rejection of the application, anything in there actually concern you as it relates to sort of ultimate merger approval odds? And then just separately, Mark, I've heard you now say fight for business five times, including, I think, one fight like hell. I haven't really heard that language before. What does this ultimately mean from a pricing standpoint? Do we need to think about what are we seeing with price right now? Do we need to think about price just differently right now given this backdrop?

Alright. I'll start with the first point. Obviously, the turn back from the STB was not what we wanted, but all the precedent and history shows that this is what typically happens. It's hard to get this right the first time around. Nobody really does. When an application is 7,000 pages and marked incomplete, you feel you know, kinda bummed about it. But we shouldn't you know, we shouldn't be too surprised. And so the beauty is they've given us the path to completeness. We know exactly what we need to do. And we're working on it. And as kinda Jim mentioned on Tuesday, we'll we're gonna get it in, and we're gonna get it in right. We're gonna we're working hard together to make sure that thorough. And at the end of the day, the STB has made it very, very clear they are not reviewing, they did not review this based on the merits. They reviewed it based on completeness. So don't read anything else into it other than it was incomplete. So they've given us the answer key to completeness, we'll get it done. So we're not we're not too worried about that. Yeah. Look. When I say fight for business, it's a rallying cry to this organization to go out and continue what we did as an example in merchandise. Where we had an excellent year last year. We grew our merchandise business. And we grew yields. So we're really proud that we had that double coupon. And it's a rallying cry. We're going to remain disciplined. We actually had very, very good yield performance in the areas under our control. Pricing core pricing was really good. And the volume growth was really good in merchandise and auto. Was kind of overwhelmed and offset by the challenges that we had in seaborne coal pricing. As well as fuel. So that kind of neutralized what you see a little bit on that great top-line performance we had in merchant auto in particular. So that's kind of what I mean, and I wouldn't read anything into it. There's you know, we need quality revenue. And you heard me say that too. So we're not we're not gonna do anything other than what we've been doing this past year, which is to fight like hell to offer new products and create a compelling environment for customers come onto our railroad. Yeah. We'll fight for every revenue dollar. Yeah. Quality revenue dollar there. Yep. Thanks a lot, Scott.

Next question will be from Bascome Majors at Susquehanna. Please go ahead, Bascome.

Yes. Thanks for taking my questions. Just to follow-up on the Fight Like Hell commentary, can you talk about where you see maybe more tactical opportunities where there are some potential wins in the merchandise portfolio that hits those quality revenue thresholds. And, you know, on the other side, the enhanced competition you know, sorta leakage from some of the competitive actions. You've talked a lot and sized up the J. B. Hunt thing. You know, is there anything else you think might be on the horizon that could move the needle in 2026 there? Thank you.

Sure. I'll start back at the beginning of your question, which was, where do we what do we think we can grow? You know, we had really good tailwind behind us in our automotive markets as well as some of our discrete chemical markets throughout the year. That includes non-petroleum chemicals as well as some of our energy markets. And waste markets. We think about automotive a couple different ways. One is we serve more direct auto origins than I think just about anybody. And because of the network and the way it's running right now, which I talked about during prepared remarks, you know, we were able to take everything that our auto partners can throw at us in terms of volume, and that's that is a real testament to fluidity of the network, and as John mentioned, sweating every asset, you know, that's what gave our partners in the industry the confidence to deliver that volume to us because they knew we can handle it. And that confidence increased throughout the year. So I look at those markets and that kind of performance as a place where we're gonna be able to continue to capitalize. We'll see what Intermodal does. You know, we're four and a half years into a freight recession. And at some point, it's gonna end if demand comes back and we're ready for that too. And frankly, you know, the utility markets, we think, for coal are gonna be strong this year like they were last year. Seaborne's gonna be a tough fight, though. Another fight. So that's where we see the opportunities. Thank you.

Next question will be from Brian Ossenbeck at JPMorgan.

Hey, good morning. Thanks for taking the question. Just a quick follow-up for Jason or Mark. How much retention expense do you have in your OpEx guide? Maybe you can give us a little bit of color on how that's going given some of the challenges you're talking about here. Then maybe for John, obviously, STB has talked about some form of reciprocal switching. You've got experience over your career in Canada. How do you think that would be applied, or how would it what would the impact be if it was applied as written in an Eastern network? You know, what would you think would be some of the challenges that could come from that? And, do you think you have to deal with this with or without M and A? Thanks for your time.

Yes, Brian. On the retention dollars, so that's in our merger-related cost line item, which is excluded from a non-GAAP perspective. So the guide we gave you of $8.2 to $8.4 billion is excluding those amounts.

Well, I think the proposed rulemaking is really indicative of customers being dissatisfied with service in general in certain locations. And the good news is that we're building the case of great service and the focus we're putting on our franchise to the commitment we've made to our customers to deliver outsized service performance and value really moots the whole argument associated with that proposed rulemaking. If they've got great service, there's no reason to wanna go somewhere else and it's a little different than in Canada where you have, you know, two transcontinental railroads that don't give the options that customers have here in The US. So I'd say it's early. It's proposed rulemaking. And I think there are two different distinct options. And from an Eastern Railway and really for the sector, our job is to perform with exceptional reliability with enough resilience to carry the planned and the emerging volumes that come with it. And to have the overall commitment to this to the ecosystem that we support. That's what PSR 2.0 does. And we're really proud of how we performed. My job is to give no customer any reason to wanna talk to Ed about going somewhere else or anything else like that. So we're really, really pleased with the competitive service product we put out there. We always wanna be better. Mark is you guys hear the word fight a few times, you get excited. We hear it every day here. And he's tenacious on safety and service. And that's what we're all about. And that's why we have 19,000 committed railroaders with absolute clarity on what makes this company work. Service and safety. Thanks, Brian.

Next question will be from David Vernon at Bernstein. Please go ahead, David.

Okay. Good question, please?

Apologies. Moving on to yes. I'm sorry. Moving on. To, Richa Harnain at Deutsche Bank. Please go ahead.

Hey. Is this working? You guys hear me okay?

Yes.

Okay. Great. Yeah. So, basically, what I wanted to talk about was, Mark, you know, you said your cost target the cost target you laid out is ready to absorb a variety of different revenue scenarios, including higher ones. Back of the envelope math for us suggests you need to grow revenues by, like, pretty significant amount, call it maybe mid-single digits to not see a deterioration in OR. Just is that correct? And is there a reasonable scenario you think that could get you there? And then just, you know, on that, if you are getting some revenue tailwinds, should we assume higher personnel expense or like you said, you know, you've been doing a really good job on productivity, I think, headcount was down 4%, volume up 3%. Should we assume headcount kind of can stay where it is if you potentially pick up extra revenue? Thanks.

Yeah. I'll let Jason talk to this. But I think, you know, when you look at the low end of our range, it's you know, I think basically a 1.10.8% growth. So in spite of all of those inflation numbers that we gave you, and other headwinds, the productivity really offsets a lot of it and leaves us with 1.8% growth. So that's where we that's where we kind of see a more moderate revenue outlook. And, you know, as you grow revenue, you might have some volumetric costs that bring you higher into that cost range. Now from a headcount perspective, I think what you're going to continue to see is us continue to trip down a bit. Especially if the volume isn't there. I mean, we have to continue hiring our trainees, our conductor trainees to replenish the pool because we do have a fair amount of attrition, but there will still be net attrition. And I think, you know, we put that model out there in 2025. You saw incredible productivity. You know, I think GTMs were up 3% and headcount was down 4%. That's 7% productivity right there. You're going to see similar type of results here in 2026. But Jason, what else do you want to add?

Yeah, no, think you hit it well Mark. I think, you know, the key here were the guide to expenses controlling what we can control. And specific to your headcount question, just a little more color there. We've held headcount relatively steady during 2025 around that 19,350 employees quarterly average. A bit lower than we were projecting for 2025. And as Mark said, know, we'll attrite down a little bit, kind of flat to down, for 2020 but really trying to maintain that trainee base. And the one thing that we've always reinforced as well is the overall productivity and decrease the overall cost associated with employee and the workload that they have. And so as we make the system work better, we reduce recrews by our technology and the implications of running a tighter network. That translates into less overall wages by less detention, less taxis, less just cost of disruption. That feeds itself into the productivity we associate with locomotives. They're not sitting idle longer. They're not wasting fuel. All of those things go hand in hand. So there one indication on productivity headcount really drives or is driven by dozens and dozens of metrics that treat on their own, a lot of small wins, some outsized wins that all come into the cost reduction program that we've got so we can manage expense to workload. Okay. Thank you.

Next question will be from Walter Spracklin at RBC Capital Markets. Please go ahead, Walter.

Yes. Thanks, operator. Good morning, everyone. Just wanted to understand the productivity gains that you flagged. I think it was $260 million in total. Land sales, that I know you did north of $150 million land sales. Was that in the productivity number? And then just following up on the truck competitive lane, truck on the pricing side, truck competitive lanes, we've heard about capacity taken out of the truck market now. On some of the regulations. And higher prices. So is it is that having any positive impact on your efforts toward truck to rail conversion? Truck prices move higher and their capacity lower?

Yeah. Thanks, Walter. This is Jason. I'll start with your, the productivity question. So we had, as you mentioned, about $150 million in kind of outsized land sales third and fourth quarter. That is excluded from the $216 million in productivity that we earned during the year.

Yeah. And, talking about you know, truck competitive lanes and, competition from the highway, look. All those factors are gonna help over time. Whether it's a reduction in the available driver pool, or the amount of trucks that are out there on the road themselves. But to be clear, in my career at least, I've never seen a recovery that was supply-side led. It has to be demand-led. And that's where that's where I think we're really gonna be looking hard to see what The US consumer does and, you know, what the market can offer. Thanks a lot, Walter. Thank you.

Next question will be from David Vernon at Bernstein. Please go ahead, David.

Hi. Thanks for getting me back in the queue. So Ed, with the coal outlook, I wonder if you can help understand kinda what's happening on the pricing side right now. Obviously, in the net side, I understand it's challenged, but are rates still declining or are they stable and we're just we just have to get through the comps? And it feels like or it actually looks like when I go and check, like, Australian benchmarks in the global market, pricing's actually recovered a little bit there. I'm wondering if you can help us understand maybe why that's decoupling from The U. S. Market a little bit? Thanks.

Sure. Well, it wouldn't be earnings call if we didn't go coal pricing question. So thank you for that. We've seen that benchmark price slide throughout the year. Pretty consistently, but you're right. We've seen a little uptick here in January in the benchmark price. And that's given us some encouragement, but when I look at the forwards, you know, it's still declining for at least the first half of the year. And we'll see what happens in the second half. In terms of decoupling, I'm not sure if the pretty thinly traded market, frankly, on a global basis. Even. And, you know, there's a lot of weakness both on domestic side for Metcold and, frankly, on the on the global side. We're ready to handle it. And as we talked about with Warrior, we got a have a fantastic new coal mine that's now pumping out coal for the global markets and that's exciting. As those markets recover, we're gonna be in a really good place. But I don't see it at least in the first half. I think there's probably some geo that have played too where Australia is largely supplying China now? Yeah. Not us. Right. So I think some of who procures from who can create a little disconnect in the markets. Thanks for the question. Yeah. Thank you. David. Hey. Look. To recap Thank you. To recap 2025, just to put it all in perspective, I think we delivered extremely solid productivity. $216 million of productivity, and that follows $292 million that we delivered in 2024. But this year in particular, we moved 3% more GTMs with 4% fewer employees that's 7% headcount productivity. T and E productivity, actually improved 9%. We drove 21% reduction in recrews. And on top of that, we delivered 5% fuel efficiency in the year, which is what we budgeted for that I thought was gonna be a stretch and probably we wouldn't get there all the way, but we did. We delivered 5%, and we pretty much got four to 5% each quarter of the year. So really great performance there. We improved our locomotive productivity by 10%. And we kept a lid on our OpEx by really offsetting inflation with this incremental productivity. And then on top of that, we grew merchandise and our merchandise share with healthy core pricing. So really pleased with that, and we did it all while delivering outstanding service throughout the year. And really excellent safety performance as John detailed in his prepared remarks earlier. You know, we've got industry-leading accident rates right now. And mainline derailment rates. So really proud of what we did. And we did this all while we negotiated a transformational merger for the industry. And began the heavy lift of a whole application process. So we didn't get distracted by that. We still delivered on that. The challenge in '25 was just simply revenue was flat. We had flat carloads, and, you know, the negative fuel and seaborne coal pricing offset that good core pricing we had in merchandise, as well as we had some favorable mix that could offset. So that's kind of 2025 in a nutshell. And again, for 2026, we aim to keep the priority on safety, service, responsible cost controls that don't compromise safety or service. And fighting for quality revenue. So we guided you to a cost envelope, the demand environment, it's the wild card. We can handle whatever demand comes our way. And I can tell you whatever revenue growth we do get, it's going to drop through at attractive incrementals. Given the capacity that we have. And I'll just leave you with this. Several of us are gonna be working quite hard through the year to try to get this merger across the finish line with the STB process. But we will protect the vast majority of our business leaders from distraction so we can continue to execute on a daily basis to bring these two well-run railroads together. So thank you very much for the participation today. And please all stay safe.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we ask that you please disconnect your lines. Enjoy the rest of your day.