Norfolk Southern Corp (NSC) 2006 Q4 法說會逐字稿

[Audio starts in progress] Steve Tobias, Chief Operating Officer, along with Don Seale our Executive Vice President and Chief Marketing Officer, we're also joined by Jim Squires, Senior Vice President, Financial Planning, and Bob Fort, Vice President Corporate Communications, Rob Kessler, Vice President Taxation, Marta Stewart, Vice President and Controller, [Leighann] [Marilley], Director of Investor Relations and in the back, [inaudible] Melvin, Hank Wolf's assistant and the person who actually runs this thing.

Well last time at this year I have to tell that I had some concerns as the new CEO of Norfolk Southern. We had just reported record results for the third straight year. And I thought that it might be difficult to improve upon that kind of performance in my first year on the job. However, I'm glad, and I will say a little relieved to say that 2006 was another record year for Norfolk Southern capped by a fourth quarter that reflects the strength of our higher value transportation products, and our strategic focus.

Throughout 2006, we continued to improve upon our financial and operating performance, sharpening our customer focus by investing in new capacity to handel our growing business, and by developing and integrating new technologies to increase reliability, efficiency, and safety. And our plan for 2007 is to continue the progress and further strengthen those initiatives in order to drive our service levels and subsequently our financial performance to new heights.

Our financial results for 2006 demonstrated a sustained healthy demand for efficient freight transportation by rail. Our railway operating revenues were the highest of any year in Norfolk Southern's history reflecting service consistency and reliability as well as our focus on value-based pricing. We posted our best-ever income from railway operations, net income, and earnings per share, we significantly improved the railway operating ratio, and stockholders benefited from a fifth consecutive year of dividend increases that together raised the dividends 38%.

As an indication of our confidence in the strategic direction of our company, as you all know, we repurchased 21.8 million shares of our common stock in 2006, for the seventh consecutive year, we lowered our debt to total capitalization ratio, which currently stands at 40.7%, excluding operating leases. Naturally, I am pleased to report these results. But more significantly, I'm proud because our performance continues to showcase the strengths and dedication of our people and our organization. We continue to handle business demands that were unimaginable only a few years ago. And do so safely, and efficiently, often in the face of considerable challenges. And we continue to produce historically good results that benefit customers and investors alike.

As illustrated, by the board's decision yesterday to increase our quarterly dividend by $0.04 a share or 22%. In the fourth quarter, we faced a slightly different set of challenges than those we have seen for a number of preceding quarters. For the first time in over three years, we saw volumes decline slightly, on a year-over-year basis, more on that in a moment, but the most important thing to recognize is that we were still able to realize significantly improved financial results on a year-over-year basis.

For the fourth quarter, net income was $385 million, or $0.95 per share, an increase of 6%, compared to the $362 million or $0.87 per share for the same period last year. For the year, net income was a record $1.5 billion for $3.57 per share, an increase of 16%, compared with the reported net income of $1.3 billion, or 3.11 per share, for 2005. And let me remind you that our 2005 results included a $96 million benefit from the effects of Ohio tax legislation, which increased diluted earnings per share by $0.23, excluding this item, net income for 2006 was 25% higher than the 1.2 billion or $2.88 per diluted share earned in 2005.

The fourth quarter operating ratio includes a 73.5 compared to 73.7 for the same period of 2005. For the year, the operating ratio improved a full 2.4 percentage points, to 72.8%, and as all of you know, and as we say consistently lowering the operating ratio on a consistent basis has always been and continues to be a primary goal for us. And we remain committed to further improvement in the operating ratio. Railway operating revenues set records for the fourth quarter and for the year.

The fourth quarter railway operating revenues of $2.3 billion were up 3% for 2006. Railway operating revenues totaled $9.4 billion, compared with 8.5 billion in 2005, an increase of 10%. Railway operating expenses were $1.7 billion for the quarter, up 3% compared to the fourth quarter of 2005, and we're up -- and we're $6.9 billion for 2006, an increase of 7% over 2005. And the increases were primarily the result of higher diesel fuel prices, compensation and benefits, and some volume-related expenses.

Income from railway operations set records for the fourth quarter and the year, increasing 3% to 614 million for the quarter, and climbing 21% to $2.6 billion for the year, compared with the same period of 2005. And you will hear all about the details of our financial results and of our revenues in just a moment from Hank and Don.

In addition, this meeting, I've asked Steve to talk with you for a few minutes about the improvements that we've made and are planning to make in service delivery. Steve, along with Mark MacMahon and the rest of the operating team, has done a great job of making what I believe is the best railroad operation in the country even better, and we have even more improvements on the way. Looking ahead, we continue to keep a close eye on the economy from where we sit.

For January, we're seeing that like in the fourth quarter, overall carloadings are experiencing some downward pressures, especially in the automotive and metal sectors. Now, over the past couple of the years, one of the ongoing questions that I have been asked is how sustainable is the so-called railroad renaissance. And my stock answer has always been that we believe that the fundamental drivers of the growth that we have seen in this business are structural and long-lived in nature. But we would know a lot more when we saw the economy get soft.

Now, we're clearly facing a somewhat softer economy, at least in terms of some of our important markets such as autos, and soft -- seeing softness in the overall surface transportation market. But still, our traffic volumes are at levels close to our all-time highs, and I think that alone provides ample evidence that the railroad renaissance is alive and well. We're working aggressively on new business development plans and as we move forward, we will continue our commitment to value-based pricing. We're confident that our service efficiency gives us a very competitive and valuable product going forward.

2007 presents hurdles very similar to those we have tackled in the last couple of years including cost pressures in the form of increased wages and health and welfare benefits for employees and continuing high diesel prices. In addition, I will tell you that we plan to continue our aggressive locomotive and car overhaul program, that we initiated last year. In order to ensure that we can continue to respond to our customers' demands. At the same time, we will obviously be seeking more cost-effective ways of doing business, while always first and foremost improving safety and service to our customers. Now, I will ask Hank to review our numbers. Don will then tell you about the specifics of our markets.

Steve will follow-up with the operations overview. And then we will all gladly take your questions. Thank you. Hank?

Thank you, Wick. And good morning. As Wick indicated, record railway operating revenues and income from railway operations reduced record net income and earnings per share in 2006. Railway operating revenues for the fourth quarter were 2.3 billion, up 62 million, or 3% compared with last year.

For the year, revenues were a record 9.4 billion, an increase of 880 million, or 10%. Fourth quarter carloads were down 3% from last year, while revenue per unit increased by 6%, yielding a 3% increase in revenues. For the year, volume increased 1%, while revenue per unit rose by 9%, resulting in the 10% increase in railway operating revenues. And Don Seale will provide you with the details of our railway operating revenues in just a moment. Railway operating expenses for the fourth quarter were 1.7 billion, up 42 million, or 3% compared to '05.

For the year, railway operating expenses were 6.9 billion, 440 million, or 7% higher than '05. The largest increase in operating expenses was for the fourth quarter, and that was in compensation and benefits, which rose 19 million, or 3%. This increase was primarily attributable to higher salaries and wages of 11 million, increased incentive and stock-based compensation of 8 million, and increased medical insurance costs for both active and retired employees, which totaled 7 million. These increases were offset in part by declines in other items, including lower life insurance and pension costs. The next largest increase in the fourth quarter was in materials, services and rents which rose 16 million, or 3%.

Materials expense increased 20 million during the quarter principally due to increased maintenance activity. Purchase services were up only 2 million, and equipment rents declined 6 million for the quarter, reflecting lower traffic volumes. Casualties and other claims were up 5 million, or 11% and that was largely as a result of higher expenses related to the derailment. Other operating expenses rose 3 million, or 5% compared with last year, primarily due to increased sales and use taxes. Diesel fuel expense for the quarter increased 3 million, or 1% over '05.

As you may recall, our fuel hedging program wound down in the second quarter of '06, and no new hedges have been put in place since that time. The absence of any hedge benefit, which reduced fourth quarter '05 expenses by 28 million, was almost entirely offset by a 10% drop in the average price per gallon, which reduced diesel fuel cost in the fourth quarter of '06 by 25 million. Depreciation expense was down 5 million, or 3% and as you will recall, last year, we conducted a required periodic depreciation study that was completed in the first quarter of '06, which indicated longer depreciable lives for some of our assets.

For the full year, railway operating expenses were up 440 million, or 7%. The largest increase in expenses for the year, was in diesel fuel expense, up 250 million, or 34%. This $250 million increase was largely due to 129 million less in fuel hedging benefits, and higher prices which increased diesel fuel costs by 113 million. A modest increase in consumption added another $8 million in fuel costs.

The next largest increase in operating expenses for the year was in compensation and benefits which rose by 144 million, or 6%. As you will recall, we implemented FAS 123-R on January 1, '06. And our expenses included 36 million related to this change in accounting. In addition to the effective FAS 123-R, the increase includes 44 million of higher salaries and wages, 29 million for increased medical insurance costs, 17 million of higher payroll taxes, 13 million related to retirement agreements and waiver agreements with two former executives in the first quarter. And 11 million for the cost of the regular annual stock-based grants to the former CEO, who retired in the first quarter.

Other miscellaneous items reduced these increases by 6 million. I would also like to remind you that under FAS 123-R, we're required to expense stock-based compensation grants to employees. In addition, we're required to front load the expensing for stock-based grants made to employees who are retirement eligible. Stock-based compensation granted to employees who are not retirement eligible are expensed on a quarterly basis over the vesting period. Norfolk Southern has traditionally made stock-based compensation awards in the first quarter of the year. Therefore, an expense will be recorded in the first quarter of '07, to reflect the grant of stock-based compensation for the current year.

Although we won't know the exact amount until we know the stock price at the end of March, we expect first quarter stock-based compensation expense, including the front end loading, to be about $0.10 per share. This reflects an increasing number of employees who will be retirement eligible in '07, rather than a change in the level of grants made. Material services and rents expense were up 86 million, or 5% over last year. Materials costs rose 39 million, reflecting increased maintenance activities and purchase services expense, was also up 39 million. And that was due to increased traffic volume earlier in the year.

Equipment rents were up 8 million, also primarily due to increased volume earlier in the year. The largest decline in expenses was in depreciation, which decreased 36 million, or 5% as a result of the depreciation study that was completed in the first quarter of '06. Casualties and other claims expense was 4 million, or 2% lower than last year. And Conrail rents and services were 3 million lower than '05.

The railway operating ratio for the fourth quarter was 73.5%, compared with a ratio of 73.7% in the fourth quarter of '05. For the year, the operating ratio was 72.8%, compared with 75.2% last year. This represents our lowest operating ratio since the Conrail merger and our third lowest operating ratio in the history of Norfolk Southern.

Fourth quarter income from railway operations was 614 million, up 20 million, or 3%, over the 594 million produced in '05. For the year, income from railway operations was a record 2.6 billion, up 440 million, or 21%. Total other income and expense for the quarter was an expense of 75 million, compared with an expense of 90 million in '05. Gains on sales of property, and investments, were 10 million below '05, which included a large partial sale -- sale of a large parcel in the fourth quarter.

Returns from corporate-owned life insurance were 8 million higher than last year, principally due to improved stock market performance. Expenses related to our is synfuel investments were 6 million lower this year reflecting the expected phase-out of a portion of the Section 29 credit. All other was an increase of 5 million. And interest expense on debt for the quarter was 6 million lower than last year, largely due to less outstanding debt.

As you will recall, I spoke last year about the volatility associated with the synthetic fuel investments. For the fourth quarter, average oil prices were quite close to the average price that we expected at the beginning of the quarter. Accordingly, the forward curve proved to be correct. And we indeed had a 35% phase-out for the year. Which resulted in a net benefit in the fourth quarter of about $7 million, and 18 million for the full year.

For the year, total other income and expense was an expense of 327 million, compared with an expense of 420 million in '05. Expenses related to our synfuel investments were 39 million lower than last year, reflecting the phase-out of the section 29 tax credit. Interest income increased 35 million, as a result of higher cash balances and interest rates. Returns from corporate-owned life insurance rose 20 million, over last year, primarily due to improved market performance for invested assets.

Equity in Conrail earnings were 12 million lower, and other miscellaneous items decreased 7 million, over last year. Interest expense on debt for the year was 18 million lower than last year. Largely due to less outstanding debt. Fourth quarter before income taxes was 539 million, compared with 504 million, a 7% increase. For the year, income before income taxes was 2.2 billion, up 533 million, or 31%, compared with 1.7 billion, in '05. The provision for income taxes for the fourth quarter was 154 million compared with 142 million last year. The effective tax rate was 28.6% compared with 28.2% in '05.

For the year, the provision for income taxes was 749 million, compared with 416 million in '05. You will remember that '05 was positively impacted by a $96 million noncash tax benefit associated with changes in the Ohio tax laws. The effective tax rate this year was 33.6%, compared with 24.5% in '05. The Ohio tax law change reduced the '05 effective rate by almost 6 percentage points.

Most of the rest of the '06 increase in the effective rate was the result of reduced section 29 credits this year. Fourth quarter net income was 385 million, up 6%, compared with the 362 million, earned last year. For the year, net income was a record 1.5 billion compared with 1.3 billion last year, an increase of 200 million, or 16%. Diluted earnings per share for the fourth quarter were $0.95. Up 9% compared with $0.87 per share earned last year.

For the year, diluted earnings per share were a record $3.57 which was 15% above $3.11 per share reported a year ago. Last year, I provided you with a comparison of our net income and earnings per share, excluding the effect of the change in the Ohio tax laws. On that same basis, this year's net income of 1.5 billion would have been 296 million, or 25% higher than '05.

Similarly, our diluted earnings per share of $3.57 would have been 24% higher than the $2.88 per share earned last year, excluding the Ohio tax law changes. This slide reconciles the net income and earnings per share for '05, excluding the impact of the Ohio tax legislation to our reported net income and earnings per share. And this reconciliation is posted on our Web site for your reference. Thank you for your attention.

And now, I will turn the program over to Don Seale who will give you an in depth report on our revenues.

Thank you, Hank. And good morning to all. My comments this morning will highlight some of the key factors that drove our markets and results during the past year. And offer some insight as to what we see ahead in 2007.

First, some general commentary about economic conditions. We all know the economy was in transition during the year. The outlook was favorable in the first quarter of 2006. Mixed in the second. And growth slowed materially in the last half of the year. Due to a weaker housing market, fourth quarter GDP growth continued to track below trend at 2.4%. But improving net exports, business investment, as well as stronger-than-expected consumer spending helped to offset some of this downward pressure. Compared to modest growth in GDP, the signals were less positive from the manufacturing sector.

With fourth quarter output produced the first quarterly decline since the second quarter of 2003. The ISM index reflected this decline by dropping below 50 in November for the first time since April of 2003. Weakness in the housing market will continue to slow growth in 2007 with annual GDP expected to be at its lowest pace since 2002. With the economy growing below its potential, we expect the manufacturing sector to be weaker in the first half of this year. But a weak dollar, continued strong corporate earnings, and low interest rates, should support continued business investment, and boost factory production in the final two quarters of 2007.

Our performance in 2006 reflected the moderating economic conditions that I've just discussed, despite new business and development projects across our network. Volume in the fourth quarter reached 1.9 million units falling 3% below 2005, and for the year, volume of 7.9 million units grew 1%. Agriculture was the only sector producing year-over-year gains throughout the year, and accordingly saw record volume despite difficult comparisons from the previous year. Intermodal, metals and construction, and coal all produced record volumes for the year as well. Automotive comparisons were consistent with four quarters of decline through the year. While our other sectors experienced some variation during the year. And most notably, after 19 consecutive quarters of gains, our intermodal sector produced its first year-over-year volume decline since the fourth quarter of 2001.

For the quarter, revenue reached 2.3 billion, increasing 62 million, or 3% over 2005. For the year, revenue of 9.4 billion, grew 880 million, or 10%. All of our business groups posted record revenues for the year, with the exception of automotive. And automotive ended the year within 2% of record revenue. Revenue per unit reached a new high of $1,203, an increase of $65, or 6% over fourth quarter 2005. Increased pricing produced all of the improvement in RPU for the quarter, as fuel and mix were both flat for the period. We continue to successfully reprice expiring business across all business sectors, as indicated in previous reports to you, we repriced about 50% of our book of business during 2006, and we estimate that about half of our book of business will again be repriced this year.

Turning to our specific markets, coal established both record volume and revenue, in 2006, volume for the quarter reached 439,000 loads, up 4%, and for the year, we handled a record 1.8 million units. Coal produced its second highest revenue quarter reaching 592 million, an increase of 68 million over the same period in 2005. For the year, record revenue of 2.3 billion, exceeded 2005, by 215 million. Revenue per car reached $1,349, up $113 for the quarter, and for the year, revenue per car, up 1324, increased $105. The higher revenue per car resulted from improved pricing across all markets, fuel surcharges, favorable mix and improvement in tons per car.

Looking at our longer-term trend, in coal, coal, coke and iron ore carloads have now increased in 10 of the past 12 quarters. For the fourth quarter, 78% of our carloadings originated on NS. And 79% originated on NS for the full year. Drilling down a little further in the coal, utility volume increased 4% in the quarter, despite a 2% decline in electric generation in our service region due to mild weather. Stockpile rebuilding, and a 37% carload increase from the western PRB coal fields contributed to these volume gains. The increase in western coal was enabled by improved train cycle time, some of which displaced barge traffic.

In addition, imported coal, carloadings by the port of Charleston, South Carolina, increased 92%, compared to fourth quarter 2005. For the year, record utility volume increased 41,000 loads or 3%. Western originated coal was up 29% for the year. While imported volume through Charleston grew 75%. In the short term, utility coal demand in the first quarter of '07 is expected to be consistent with what we saw in the fourth quarter. But the market will most likely soften in our view as a result of persistent mild temperatures in the east, and above average stockpiles.

Turning to export, export coal had its highest volume quarter of the year reaching 32,000 load, up 13%, or 3600 carloads. For much of the year, in 2006, overseas receivers completed delivery contracts for nonU.S. coal and many of these carry over deliveries were complete by the fourth quarter, which increased demand for U.S. coals in Europe. For the year we handled 119,000 car, down 14%, as shipments declined through Lambert's Point and the Port of Baltimore.

Looking ahead, projections for export coal tonnage continue to be volatile, while ocean freight rates from the U.S. versus Australia sourcing of coal favor U.S. coal into European steel markets and higher mining costs in the U.S. will likely limit gains for U.S. coals going forward. Domestic metallurgical coke, and iron ore volume reached 52,000 loads in the fourth quarter, down 3%, primarily due to a blast furnace outage. For the year, carloads reached nearly 218,000 loads, up 4%, or 8300 cars. Increases in metallurgical volumes were due to the high demand in the steel industry, which offset a 15% decline in iron ore carloadings caused by blast furnace outages.

Now, turning to our carload business, merchandise revenue reached 1.2 billion for the quarter, up 20 million, or 2% over fourth quarter 2005, despite a 6% decline in volume. For the year, revenue reached 5.1 billion, growing 520 million, or 11% over 2005. Revenue per car reached an all-time high of 1820 for the quarter. Principally driven by price increases that were slightly offset by lower fuel surcharges. For the year, revenue per car of 1770 was up $187, or 12%, driven by price increases and fuel surcharge revenue. Weakness in housing, the manufacturing sector, and the automotive industry held down volume comparisons in merchandise. Volume growth in the first half of the year cannot offset significant declines in the fourth quarter for all groups except agriculture.

Our agriculture group had the most consistent volume performance throughout the year, principally due to increased ethanol and corn shipments. And also achieved the highest growth rate in revenue of any of our business groups in 2005. Revenue reached 252 million for the quarter, and 994 million for the year. As you know, demand for ethanol has risen sharply in the U.S. and accordingly our shipments grew by 74% or 17,000 carloads last year. And we expect that growth rate to continue. Metals and construction revenue grew to 269 million in the fourth quarter and 1.2 billion for the year.

Volume rose 5% for the year despite a 7% decline in the fourth quarter. Demand was strong during most of 2006, driven by domestic steel production, commercial and highway construction projects, and new business development. Iron and steel shipments led growth with a 21% increase for the year. Followed by a 7% gain in scrap metal, and 13% gain in cement shipments. Growth from slab steel shipments was significant in the year, as we ran 616 slab trains in 2006, up 63% over the previous year.

The fourth quarter decline in steel volume reflected lower production at domestic steel mills in response to lower steel prices, and higher steel inventory levels. Looking ahead, steel production is expected to remain soft during the first quarter, with improving conditions in the second half. Our paper revenue reached 222 million for the quarter, an 891 million for the year, on volume declines of 5% and 1% respectively. We continue to see strong growth in the market for waste transportation, including municipal solid waste and construction, and demolition debris, with shipments in these categories up 39% for the quarter, and 61% for the year.

In conventional paper and forest products, printing paper led volume increases growing 9% for the quarter and 10% for the year, primarily due to continued growth in imported printing paper. Losses were mainly attributable to declines in housing starts, with lumber shipments down 15% in the fourth quarter and 4% for the year. Our chemical revenue grew to 266 million for the quarter, up 9%, and 1.1 billion for the year, up 10%. Despite volume declines of 2% and 4% respectively.

For the quarter, and year, volume declines resulted from a work stoppage in the tire industry, inventory adjustments, the slowing housing market, and some specific plant closings. The outlook for this year is one of improvement. We expect growth opportunities from plant expansions in North Carolina and Virginia, and a new thoroughbred bulk terminal facility that is opening in Somerset Kentucky. In the automotive sector, our automotive revenues reached 225 million for the quarter, falling 29 million below fourth quarter last year.

For the year, revenue of 974 million fell 23 million, or 2%. Automotive volume declined 16% for the quarter, and 9% for the year, in the face of North American vehicle production falling 8% for the quarter, with full-year production of 15.2 million units, versus 2005, and was the lowest production for automotive in North America since 1996. Looking ahead, though, we expect increased shipments for Toyota and the other new domestic manufacturers to partially offset the impact of the big three restructuring in 2007.

Now, concluding with intermodal, revenue, intermodal revenues reached 493 million for the quarter, down 26 million, or 5% versus the fourth quarter 2005. For the year, record revenue of 1.97 billion was up 145 million, or 8%. Intermodal volume continued to moderate during the fourth quarter, down 3% due to softening in housing and automotive, coupled with higher motor carrier capacity. As you can see in the Morgan Stanley truckload freight index depicted in this slide, significant variation in trucking capacity has occurred between 2005 and 2006.

In late 2005, the industry saw a trend of tight capacity, which started to reverse itself in the first half of 2006. For the remainder of 2006, slowing demand created excess trucking capacity in the marketplace, which is continuing in 2007. If you look at the 2006 line, you will notice that the index for demand versus supply is now below 2003 levels. Accordingly, our combined truckload and domestic IMC volumes declined 4% in the fourth quarter, and 2% for the year.

IMC carriers saw continued declines across the sector due to increasing truckload availability, and downward price pressure in the spot market. The expectation for our domestic and truckload business of 2007 is for continued market pressure but moderate growth. Our international volume fell 1% for the quarter, but was up 9% for the year. Our East Coast port volume was up 4.5% for the quarter, while West Coast port volumes fell 3%. This decline reflected a shift of transcontinental business, to local and short haul markets through East Coast ports, as well as a general softening of the market.

In addition, steam ship line industry consolidation, experienced earlier in 2006, continues to have an unfavorable impact on our mix of intermodal business.

In 2007, we expect growth to resume in our international segment as we have renegotiated several of our international customer's contracts in late '06, and these new contracts are expected to generate improved pricing, as well as new volume for our network this year. Premium intermodal business was down 14% in the fourth quarter and 3% for the year, primarily among LTL shippers who are currently struggling to fill capacity. And Triple Crown, expanded its business in each major segment with the exception of auto parts.

With automotive business impacted by assembly plant closures and cut backs, Triple Crown has redeployed assets to accelerate growth in consumer products, which are expected to offset the impact of lower automotive volumes in 2007.

Now, looking ahead, we expect continued moderation in our intermodal markets in early 2007. But higher levels of growth as the year progresses. Systemic factors in the trucking industry such as higher cost of operation, highway congestion, and driver availability, are not expected to materially improve. Increased long-term freight demand and a recovering economy provide a positive outlook for intermodal growth.

As such, we remain committed to investing not only to improve intermodal service levels but to advance our strategic capacity initiatives such as the heartland corridor, and the Columbus Ricken Backer logistics center. We continue to view Atlanta and the southeast as a growth market, and are moving ahead with our KCS joint venture, and enhancements at our southeastern intermodal terminals. Our announcement this week of improved Blue Streak Train service from Los Angeles to Atlanta with the Union Pacific and our plans to add new service over Shreveport later this year bode well for this market.

So in summary, to sum this up, our results reflected our balanced portfolio of business, in 2006, and in the quarter, with volume growth in four of our sectors offsetting declines, in the remaining business units. When we look ahead, our markets will be mixed. The opportunities and growth potential in intermodal are strong. Options for shippers are increasing, with all water service through the Panama Canal and new Suez service from Asia, boosting intermodal freight for eastern railroads. Predicting the performance in coal is a little more problematic. As always, utility coal demand is somewhat dependent on the weather, while export coal will be impacted by the dynamics of the international market. And our carload sector will be shaped by the manufacturing economy.

Which we will see some weakness in the short-term, particularly for housing, automotive, and steel production, with improvement as the year goes on. Despite a slowing economy, the fundamentals of the rail industry remain strong and solid. Continued infrastructure improvements to enhance both capacity and service, positions us well for further growth, and we fully expect to capitalize on the opportunities ahead.

And to that end, it gives me pleasure to have Steve come up now and review our current operations and capacity planning. Thank you very much. Steve?

Good morning. Thank you, Don. I'm pleased to report that the state of operations on Norfolk Southern is in fact very good. We entered 2007 having successfully met the dual challenge dure the last 12 months as our people handled rising traffic volumes while continuing their improvement in employee safety.

In the next few minutes, I will review that safety performance, and then I will highlight our initiatives to enhance capacity to move the freight. Safety has been and continues to be our first priority. Safety is good business and attention to the subject undoubtedly leads to efficiency.

In 2006, we further reduced the number of injuries to our employees. For the full year, reportable injuries fell 18.7%, to 317. Our preliminary reportable injury ratio in 2006 improved to one injury per 200,000 man hours compared to 1.19 the previous year. That's a 16% improvement. Even at that, however, we are still short of our goal.

For 2007, we've set an aggressive goal of .79 injuries per 200,000 man hours and as you have heard me say before, we will not be satisfied until we have worked the number of reportable injuries down to a nice round number. Zero. As the economy has expanded in the last several years, customers ask, is capacity an issue? Seeing the volumes at their doorsteps and projecting growth in some areas, they wonder if carriers will be able to move at all. They're looking for signs of congestion. And of course, they're looking for any indicators that might help them with their forecasting and with their planning.

From Norfolk Southern's view, the rising economy manifests itself through consistent carload growth that has continued each year since the mid 1990s with the exception of course of 2000 and 2001. Carload volumes have been increasing, but have shown swings in the mix of commodities, and in our own ironic fashion, fuel prices present a challenge since they drive more business to us while at the same time increasing our costs.

Fortunately, we have been about as prepared as a company could be. When we implemented our top training and operating plan five years ago, and top two, two years ago, we put into play tools that enable us to react quickly to changing conditions. We created a system that handles growing traffic volume in a methodic scheduled and realtime manner. But the system improvements are just one part of the equation. Assets are critical for addressing capacity and we have been making the investments necessary to meet the transportation needs of the marketplace.

For example, at the beginning of last year, we announced a capital expenditures program of 1.16 billion, and as a result of a 1% traffic growth and other opportunities, we increased our spending an additional 2.8%, to 1.178 billion. We plan a 1.34 billion capital budget for 2007. So correspondingly, let's look at locomotives, rail cars, personnel, and infrastructure. This chart lists our critical assets that independently and collectively affect our capacity to handle business. Over the last several years, we embarked on substantial locomotive repurchase and repair plans.

Last year we and it the trend with a purchase of 142 new diesel locomotives. And general electric and EMD. We rebuilt 52 locomotives and overhauled 420. This year, we plan to purchase 53 units and to continue with rebuilding and overhauling at about the same pace as we did last year. On the car side, we have always maintained an inventory of coal cars to match the need of coal producers, export businesses, and growing utility assets. With renewed interest in coal as an energy source, we have carefully planned our purchase and rebuild plans.

We repurchased 400 new aluminum coal cars last year and we plan to purchase 1300 coal gondolas this year and at the same time, we are extending the life of some of our aging merchandise and coal cars. This program is cost effective and we plan to continue it at a high level. We have several other car development programs under way to reflect marketplace conditions.

For example the dip in automotive market has given us an opportunity to continue our multilevel rebuild program. Let me turn now to personnel. It takes people to run a railroad. And early in the economic recovery, we started an active program to hire and train people to move the freight. People-wise, we are in great shape and our work force has become stable. We continue to calibrate the overall hiring plan on the basis of attrition forecasting and as market conditions dictate.

Last year we hired 1,318 conductors and trained 764 new engineers. This year, we plan to manage attrition and we're considering hiring 1100 conductors and training 630 new engineers. System locomotives, cars, and people can take us only so far. And if we had unlimited track and infrastructure, it would take us a long, long way. But we don't. During the first half of this decade, as we integrated our portion of the Conrail properties, our efforts centered on capacity and fluidity issues in the midwest, specifically in Ohio, Indiana, and Illinois.

It was critical that connections, routes, and yard capacities aligned with the rest of our system. That was our focus. Especially as we had a little breather courtesy of the high-tech industry and the high-tech downturn. The work we did then is paying off today, with higher business levels, customer service and train performance in the northern half of our company are excellent. Rarely if ever do we experience episodic or systemic congestion there. This is a good story. No question about it.

Now, it is time for us to expand our focus to the south. With top, it is easy and fast to review system-wide performance looking at all routings and areas for bottlenecks an congestion. Top shows us that in the southern part of our transportation system, our traffic lanes themselves are fluid, but certain locations are congested. With that in mind, we are undertaking infrastructure capacity improvements to address bottlenecks in Tennessee, Georgia, Alabama, and Mississippi.

And here are some of the '06-'07 projects. Intermodal yard and improvements at Louisville Kentucky. And in Allstel near Atlanta. Five miles of double track on the north end of the mountainless track section between Atlanta and Chattanooga. Three new long passing sightings and six track extensions to existing sightings. These infrastructure installations will help us relieve episodic congestion and choke points on our southern routes, improving transit times, and reliability. We intend to keep our capital expansion consistent on an ongoing basis.

Let me turn now to some quick metrics. As carloadings have moderated over the past several months, our operating metrics collectively show fluid operations, and favorable trend. This slide shows our daily cars online since 1999. The yellow line shows a 12-week moving average. Cars on line currently stand at 185,324 cars, 4% fewer than last year. This slide shows weekly average train speed. Current train speed stands at 22.8 miles an hour. And it has been higher in recent weeks and currently is 9.1% better than last year.

Again, the moving 12-week average is shown in yellow. This slide shows terminal dwell at 20.3 hours with which is a 14.7% improvement over the 23.8 hours reported last year. Again, the 12-week average is in yellow. Markets aren't static. And neither is our property. Every day, we work to balance our operating assets against marketplace needs. Expectations from all quarters are high, so we are thorough and aggressive and striking a balance that best serves our constituency. Our goal is to place the right assets at the right place at the right time. This is a foundation of ensuring capacity for the future needs of our customers. The current slight dip in volume gives us time to rebound on train speed and train performance, while taking advantage of opportunities to institute physical improvements.

Our people know what to do, and they are doing it. We continue to review and analyze our markets and customer needs as we are in fact getting ready for the next wave. I look forward to telling you more about our progress in the coming year. Thank you.

Thank you, Steve. You've been very patient. But I thought it was important that Steve get up and talk for a few minutes. You've heard us talk over the past few years about the investments we're making. The expenses we're incurring, as well as the capital.

We have been very, I think, prudent and systematic in terms of how we've look at our property and how we continue to look at it and invest in it and I think what the charts show and certainly what all of our internal metrics tell us is that the railroad is running very well these days, knock on wood, at volumes that quite frankly two or three years ago, we would have had a very difficult time handling efficiently, and I think we're setting the stage for further business growth and not only to handle that growth, but to handle it at even higher service levels than we have in the past. I can tell you that we look at our service levels, and a lot of different ways, and we're never satisfied with them, but yet I would tell you that our numbers today reflect a railroad that runs about as well as it probably ever has. So thank you, Steve. And thank you all of you for listening. I will say one other thing about the presentation before we open it up for questions.

Hank mentioned the FAS 123 charges, and the fact that the charge this year reflects not higher grant levels, but an aging work force. That was a euphemism for the fact that I and a number of my colleagues happened to turn 55 this year and we're retirement eligible so we have no intention of retiring, but under the accounting rules, we take the charge. So -- but he was gracious enough not to point that out. Thank you, Hank. All right, if we could take some questions I saw Scott raised his hand very quickly so.

Thanks, Wick. Two questions. Scott Flower of Banc of America Securities. Two questions if I could for Don Seale. One would be if you could give us some sense of where the fuel surcharge level is, whether it is covered and secondly some sense of where you think that might improve in '07? And then I had one follow-on.

If you want to answer, that go ahead.

Scott, we concluded 2006 with 91% coverage on our fuel surcharge program. And you will continue to see that change as time goes on, because as you know, we are in the process of rebasing business as we go forward to reflect higher fuel prices that have been around for a long time now, so -- but we're at 91% coverage. You will see -- continue to see fuel surcharge revenue decline going forward as we rebase and also as we see fluctuations in oil prices that we're seeing today.

The seconds question relates to the domestic and premium and truckload intermodal markets, that seems to be where we're seeing a little bit more of the shorter term pressures on supply, demand and balance relative to the domestic truckload industry. Is your sense that more of the pressures in the short run will be manifested by volume just coming off based on how customers are deciding and you're going to stay disciplined on price? Or will there also be some price pressures because that market may be more flexible in the short run, based on what is going on in the TL and LTL markets on pricing on that side?

As I've mentioned, it is our view that the demand that we're seeing right now in the excess capacity in trucking, as the economy firms up this year, we don't see that excess capacity being there long-term. So we don't see any real impact on our pricing model. Our pricing model that we saw in 2006, we're continuing on that basis and we saw a rather good foundation for that going forward, and so even on the IMC and domestic side, intermodal business, we see this as a short-term phenomenon that we're facing with respect to capacity right now.

Thanks.

Let me add that I think our intermodal team, as we've discussed in the past, has done a great job not only of bringing in growth, but bringing in at good margins. We don't intend to change our philosophy on that, and go out and do things in the marketplace from a pricing standpoint that would significantly alter the profitability of our intermodal traffic. Tom?

Yes, another question --

Just because you should state your name, sorry.

Yes, Thomas Wadewitz, with J.P. Morgan. Another question for you on the intermodal side. When we look at the intermodal yield in the fourth quarter they were down year-over-year, and I think that is the first time since 2003 that we've seen that. It sounded like there were probably a number of mix factors within that as well as fuel surcharge and I was wondering if you could give us a sense maybe what peer price in intermodal was like in fourth quarter, and then a few thoughts about 2007, intermodal yield, are they likely to be up? Or do these factors persist?

The fourth quarter yield, Tom, was impacted by mix, as I mentioned. We saw our international business decline from the transcontinental, it was down 3% in the fourth quarter. That is generally longer haul, gateway business, versus East Coast port business that may be shorter haul. Over time, we see some of this migrating though to the East Coast ports that will actually go back as far to the gateway. So we will see Chicago freight, we will see the gateway freight coming through the East Coast ports, if this trend continues. So it was mix.

We continue to see good pricing and yield opportunities for '07 on the international side of our business as well as the other components of intermodal. I mentioned that we concluded some new contracts late in 2006. We improved our pricing position reflecting today's market conditions in those contracts, and that included international business. So now, I will remind you that as we go forward, we will continue to convert traffic from trailers to containers. That migration continues. And when we have that migration, we have a lower RPU for containers but a higher margin.

I think we saw a fair amount of -- a fair amount of the volume decrease in the fourth quarter, actually turned out to be trailer business, which is business that over the long term we're happy to supplant with containers.

Does that trend then continue in terms of yields being down year-over-year? When we look at '07, I'm just trying to get a broad sense, yields up or down.

Tom, the conversion from trailers to containers will continue. In fact, you probably recall that we predicted that we would be out of the trailer business, much sooner than we really are. It stayed with us longer than we thought it would, but there is a very, very clear trend on going from trailers to domestic container, international containers.

And I just got two more, I will give you one for Don and one for Wick, and short questions. On the U.P. NS, the new service on intermodal, is that really primarily a change in flow of traffic from Memphis to Shreveport, so you can provide better service? Or is it really a new market opportunity that you see where you would drive additional traffic, either from CSX or from the truckload market? And then for Wick, just thoughts on share repurchase in '07. Thank you.

The answer to the first question is both. The announcement that we made, we operate the Blue Streak service today, as you know, and we've been operating that for some five years now, with U.P., over Memphis, a very depend service to Atlanta and to the southeast. We will build on that. We adjusted the schedule for availability, the train will run the same, but availability will be improved by 12 hours, to fourth afternoon service starting in February. We will also add a new train over Memphis that we will build volume on, and then about July, August, beginning of the third quarter, we plan to migrate those trains to the Shreveport gateway using the added capacity on the speedway, on a KCS speedway, a joint venture, using that added capacity that will be completed by then, and that will reduce the route, the U.P. Memphis NS route by 150 miles and it will reduce the through mileage compared to the competitive route to Atlanta, for example, by 300 miles.

The Shreveport route, as we told you before, in terms of the speedway, is the shortest, straightness, we believe best route from L.A. to the southeast. And this is service that will take advantage of that route. Share repurchase, we have an ongoing share repurchase program, we were -- I think it is fair to say probably aggressive, possibly, in terms of our share repurchases last year. We certainly, as you know, made a substantial number of share repurchases. We did that obviously on what I would describe as somewhat opportunistic basis in terms of what we saw with our share price, and how we feel about the long-term value of our stock. This year, we will continue to repurchase shares. The volumes I think at which we do that will be determined upon a number of factors, one of which will be share price, but we will also look our hand over in terms of, you know, what we're doing with our cash in general. I think the significant dividend increase that we announced yesterday is certainly part of our plan to return shareholder value, too. Hank, is that a reasonable answer? I check with Hank on my answers here. Let me go there, then there, then there, then there.

Tony Hatch. Just to follow up again on intermodal, when you migrate that business over to the Meridian Speedway, if you can make an apples-to-apples comparison will be volume be up versus what you had been doing before? In other words, are you really replacing the volume?

I don't know that we want to speculate on that right now, Tony. That is a competitive marketplace. We think it is a new service. We think it is a great service that will have a lot of appeal to customers who are in that route today, and new customers as well. But, we've got some plans and projections that I don't we want to speculate on it right now.

Another way to look at what is happening in intermodal also is what percentage of your business can move directly back to the highway and might have in the fourth quarter and what percentage of your business can move rail to rail, how much have you locked up and how much -- is it a rail to rail competitive situation going on as well as a slowing economy? Or are you really just seeing lower volumes because your customers are seeing lower volumes?

You're talking about in terms of our fourth quarter volumes?

Yes, trying to look at that for the future, but yes.

And looking at it, I would say, Don, if you correct me if I'm wrong, but what we're really seeing right now, in our opinion, is a direct result of that index that Don showed you. And all of the reading that we do from a lot of you who follow the truckload industry, in terms of what is happening to trucking volumes, and we're seeing a reflection of that, and as Don said, we think that that over the course of this year will tend to reverse itself. And we will go back, and we're not -- to the extent that you have trucking competitors that go out and when their volumes get very soft, do things in the marketplace in terms of pricing or whatever, to take some volume away, we -- as I stated earlier, we are not going to necessarily follow that, just to keep volume. That's not our business strategy. Don, is that a fair way to put it. Right here, sir.

Thank you. Jason Sandler, Credit Suisse. A question for Don. You said about half your book of business will roll over again in '07. What percent of the business has not been repriced under the rail renaissance? Can you give aus number?

We have -- Jason, we have most of our business now, rotating on about a three-year cycle. And that's -- and as we've mentioned in the past, about two-thirds of our businesses under contract, the average duration now is three years. So we have a third of that two-thirds expiring each year. And then the balance of those rate instruments are in private quotes or public quotes, and it gives us an opportunity to reprice each year. So we have some legacy contracts that are left that have not been treated. But I will tell you that that is a shrinking percentage.

And clearly, as Don has told you many times before, as we run into those longer-term legacy contracts, our intent is to generally drive them to a three-year duration, to not extend legacy contracts in that sense.

Good morning. It is Ken Hoexter from Merrill Lynch. Actually I'm going to do a quick wrap up on intermodal before I get to other questions but I just wanted to clarify, the West Coast volume, the ports were very strong. Are you saying it came from the middle of the country and then trucks increasingly got competitive and you don't expect that competition to slow down going into the first half of the year? Is that -- I'm just trying to understand. Because I think Tony's question was are you seeing more rail competition, are you seeing volumes overall, it sounded like you were saying volumes overall why slowing but West Coast ports were very strong so I'm wondering why that didn't flow over to the East Coast.

Ken, we saw our intermodal volume this past year, July, and August, really represented more of a peak, than we saw in October. So I think it was a couple of things at work there. The supply chain is elongated. We've got more retailers now taking inventory earlier in the year for the holidays. So we saw that.

The second thing is that there have been some fairly significant price increases from the West Coast coming to the East Coast. And we're seeing that convert, some maritime trade, to the East Coast ports and that East Coast port cuts both ways. We gain on that. It is an added opportunity. But the traffic that is close to the port of entry, like New York, we don't get a haul on that. So it is a two-way street on this. So we're seeing some dynamics there that that impact came to play in the second half of this past year. Now, we're also seeing the truckers a little more aggressive with respect to gateway hauls as well. We don't expect that will continue longer term. It might be four months, five months, six months, but that is not a longer-term trend in our view.

Thanks, Don. It is kind of odd, just because it seems like the West Coast ports are remaining strong but the East Coast are kind of flat, so you're saying you're seeing a little bit of the opposite. Hank, I think you've gotten off a little too easily this morning, I just want to clarify two things, you said a $0.10 stock expense in the first quarter. Is that a $0.10 expense or is that an increase of $0.10 year on year?

That is a $0.10 expense. When you add up all of the moving parts last year, it came to probably $0.09 so it is only going to be slightly higher than it was last year, and that is because so many of my colleagues are joining the club, that I have loved to belong to now for almost 10 years. And --

Back up, Hank. Back up.

I just want to -- we've had a lot of this fuel volatility on the synfuel tax credits. It looks like at the end of the year, a full year now, you had, after all of the expenses and everything, it looked like you showed an $18 million gain. If I'm right, you know, on a billion 481 of net income, you're talking about 1% of your net income for something that has fluctuated, your earnings and stock, in such a great way during this past year.

Every 18 million counts.

Okay.

That ultimately is where I was heading with this, just because we love it.

Okay. Now, explain this going into '07 then. Does it run out in '06-'07? Any chance that you would be interested in selling this? If fuel is pulling back, does that give you a better benefit now that we're at lower prices?

Right now, the provisions under section 29 will expire at the end of this year. So -- '07?

That's right.

So we have at least one more year of potential benefit. With fuel prices where they are today, one would expect that if they continued at that level, we would get a higher benefit for the year '07 than we had in '06. But until we know what the fuel prices are, we can't give you that number. What we do internally is make a projection or an estimate for the year and then each quarter we true up.

And so to the extend there were wide fluctuations in fuel prices in '06, you not only had an impact on the individual quarter, that were you accounting for, but you had a true-up for the prior part of the year. I think a good place to start in terms of your model would be to say, okay, what do you think the effective tax rate is going to be? Because the effective tax rate takes this into account. And I'm going to break a Cardinal rule that I've had all this time, and that is, I don't give you forecast numbers or budget numbers, but our budget number for effective tax rate is 34%.

Uh-oh

That's all the help I'm going to give you. We're going to have to to shoot him.

Last one I have while you're up there, is on fuel surcharges, I'm sorry, on pricing, actually, if fuel surcharge ends up coming down I think Don was talking about it and you might have some negative comps, Is there a point where Norfolk Southern considers breaking out pure pricing and fuel surcharge? Especially if we're going to see a negative comp which we could end up seeing a negative average revenue per comp.

I think I will let Don answer that quet but really and truly, at least from our perspective, quet but really and truly, at least from our perspective, we would be reluctant to break out all of that information, because that is really competitive information. We have competitors in the marketplace and to the extent they have a greater knowledge or understanding of the sensitivities of our pricing approach, that works to our disadvantage. But Don, do you want to add something to that?

And then I will add something.

As I mentioned, we are actively rebasing as we go forward with respect to pricing, market-based pricing. And we're converting to the new fuel surcharge level at $64 a barrel. We've got about 10% of our book of business already converted. We're continuing to move on that. Oil prices have dipped here recently. They went back up to 55 yesterday. I think if we have any normalized weather patterns for the rest of the winter, and demand picks back up in the spring, I'm not sure we see too many folks that feel that the forward curve is not too far off which is $63 a barrel for 2007. So we will continue to work the rebasing effort, and we think that is the right way to go. And have the new fuel surcharge set at $64 for traffic going forward.

Let me -- Ken, you asked some good questions. You did something which actually I have a very difficult time doing which is pry something out of Hank. But you also raised a point and I want to make one editorial comment about it, and that is the fact that we are in this -- the tax credits, it is in some sense a relatively modest amount of money, but it does in fact add some volatility to our earnings. The fairly wide swings in fuel prices, which we're seeing these days, can also add some volatility, particularly just on the pure revenue side, keeping in mind as well that fuel surcharges typically trail oil prices, by 60 days, so that adds even more variability into all of this.

But the fact of the matter is that we come here, and report on a quarterly basis, and tell you how we're doing, but we try and manage on a long-term basis, and any opportunity that we have to make more money, to increase shareholder value, we're going to take that opportunity, even if it somehow makes our earnings a little more volatile, in terms of breaking things out, if we see radical differences in fuel prices, and things like that, we will certainly try to explain them to you in the very best way that we can, but still keeping in mind our positions on what we do and that we think it competitive versus what we do that can be open information. But that's our general philosophy. You saw it in the fourth quarter, where we had some big material and purchase service charges. They were really the result of some timing on year-long maintenance programs that we have, but we're not going to go in and for the basis of the quarter stop a maintenance program. That doesn't make good economic sense to us. In the back.

Good morning. Sal Vitalely with Calyon Securities. I was just hoping that you could provide some more granularity on the CapEx budget for '07, of 1.34 billion on as few dimensions as possible, in terms of what is growth, versus what is CapEx, and what is maintenance, rather, and additionally, the growth CapEx, what sectors or what segments of your business is that earmarked for?

We don't break that out very well, because there is a fair amount of cCapEx that you can argue with is both. I will give you the granularity and then you can think about what -- how it breaks down. Steve mentioned one, we have obviously a base amount that is rail cross ties and ballast and programs, signal work that in order to maintain the railroad, and renew the assets on the railroad, that is a substantial number, which I want to say this year, Steve, do you recall, 500? Hank? 550, 580? That kind of number? And then we have other capital that we build on top of that, in terms of required projects. And I.T. things like that.

If you look at the growth component, we always have a fair amount of money. The break down exists, and it is in our press release for new intermodal terminals, certainly new capacity, we have budgeted this year, about 50 million for the kind of siding and capacity work that Steve talked about. A significant component of our capital budget this year, which you will see on and ongoing basis for a number of years, you saw an early piece of it last year, is renewal of our coal car fleet. We're buying 1300 coal cars this year. That is -- oh, gosh, north of -- slightly north of $100 million in CapEx just for coal. And we're doing rebuilding as well. We always kind of try to do a lot of I.T. work, which we count as capacity development, because we run the railroad better with that. What am I leaving out? We will get you the break down, but I would say that this year, if I looked at the budget, in terms of what is setting the stage for new business, and better service, and we link the two very closely, the higher our service level, the more business we're going to develop, somewhere between 25% and a third of the capital budget is oriented towards better service and new business development, versus kind of keeping the railroad in good running order. Is that a reasonable --

Sure. Thank you very much. And then in terms of that portion that is growth CapEx, I mean would you say that a fair portion of that is in coal and terminal combined rather than some of the other segments?

No, I wouldn't break it down like that, for the following reason. You know, intermodal terminals are clearly an intermodal play, coal cars are clearly -- new better coal cars are clearly coal play. But we look at the business from a network standpoint. And if you look at the maps that Steve showed you about where we're putting infrastructure, and you think about new locomotives and you think about new systems, and all of that benefits the entire network. And it improves the use of all of our assets, it may be a heavily intermodal quarter that we're investing in, but if we get the velocities up there, we're going to see positive impact on our entire locomotive fleet which helps us turn the merchandise fleet better and move more coal cars, so we don't try to in general break that out, as finely as that.

Okay. Thank you.

Tony? One more?

Sort of related to intermodal and CapEx there, can you tell us what is going on and what stage you're in for the heartland corridor building and also with Rickenbacker and what their impacts might be on business levels this year?

The ground has been broken at Rickenbacker and that move is moving ahead. All of the money there is committed and ready to go. We have actually completed now all of the paperwork and approval processes, other than environmental, on the heartland corridor on the tunnel clearance program. The FHWA, which will administer the federal funds has signed off and is on board. We expect that work to begin in mid year.

In terms of the business impact, we clearly, you know, we won't be running stacks on the short route for about three years, but I will say that [MARIS] is building a new terminal, as some of you I'm sure know in the port terminal, as some of you I'm sure know in the port of Norfolk. It is a big terminal. I think it is the largest single private investment in a U.S. port in history. We expect to see them start turning business on. We have a -- I think it is safe to say a very good business relationship with [MARIS], and so we should start to see additional traffic flowing out of that terminal maybe by the end of the year, if they get the operation cranked up and going. And see more impact out of it next year, and then by the time we finish, the Heartland corridor, we will see I think some significant new business. That sounds about right on the timetable. But I wouldn't look for it this year. Rickenbacker is not projected to open until late '07. Well, listen, thank you very much for your patience. It is good to see all of you, as usual. And we look forward to seeing you for the next report. Thanks.