Norfolk Southern Corp (NSC) 2011 Q2 法說會逐字稿

Greetings and welcome to the second-quarter 2011 earnings call.

At this time, all participants are in a listen-only mode.

A brief question-and-answer session will follow the formal presentation.

(Operator Instructions).

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Michael Hostutler, Norfolk Southern Director of Investor Relations.

Thank you, Mister Hostutler.

You may begin.

Thank you and good afternoon.

Before we begin today's call, I would like to mention a few items.

First, the slides of the presenters are available on our website at nscorp.com website at nscorp.com in the Investors section.

Additionally, transcripts and MP3 downloads of today's call will be posted on our website for your convenience.

Please be advised that any forward-looking statements made during the course of the call represent our best good faith judgment as to what may occur in the future.

Statements that are forward-looking can be identified by the use of words such as believe, expect, anticipate, and project.

Our actual results may differ materially from those projected and will be subject to a number of risks and uncertainties, some of which may be outside of our control.

Please refer to our Annual and Quarterly Reports filed with the SEC for discussions of those risks and uncertainties we view as most important.

Additionally, keep in mind that all references to reported results, excluding certain adjustments, i.e., non-GAAP numbers have been reconciled on our website at nscorp.com in the Investors section.

Now it is my pleasure to introduce Norfolk Southern Chairman, President, and CEO Wick Moorman.

Thank you, Michael, and good afternoon, everyone.

It is my pleasure to welcome all of you to our second-quarter 2011 earnings conference call.

With me today are several members of our senior management team, including Don Seale, our Chief Marketing Officer; Mark Manion, our Chief Operating Officer; and Jim Squires, our Chief Financial Officer, all of whom you will hear from this afternoon.

I am very happy to report that building on last quarter's momentum, we produced another record-breaking quarter.

All-time highs for any quarter were achieved in net income and earnings per share.

The quarter did include the impact of nonrecurring income tax benefits totaling $63 million or $0.18 per share, but even without this benefit, net income and earnings per share were all-time highs.

We also achieved record highs for any second quarter in revenues, operating ratio, and income from operations.

These results were driven by significant growth in revenues of 18%.

Volumes rose 4% led by double-digit growth in Intermodal and Automotive.

Revenue per unit rose 14%, led by both pricing and mix in our Coal franchise, and Don will provide you with the revenue and traffic details in a few minutes.

Against the backdrop of these increased volumes, we saw a significant sequential of improvement in our service composite measure, the second-quarter composite of [76.5] represents a nearly 450 basis point improvement from the first quarter.

And we are continuing to build on our operating improvement in the third quarter.

Mark will give you all of the operations details a little later.

The record operating results and resulting strong free cash flow enabled us to continue to invest in the Company while at the same time returning cash to our shareholders.

This morning, we announced a $0.03 per share increase in our quarterly dividend which, when combined with the $0.04 added in January, represents a 2011 dividend per share increase of 19%.

In addition, during the second quarter, we repurchased 6.3 million shares for a total of $449 million.

This brings our year-to-date shares repurchase to 11.6 million and has reduced our outstanding share count to just under 348 million.

And Jim will provide you with more details of our balanced cash deployment in a few minutes as well.

With our year-over-year volume increase -- while our year-over-year volume increase in the second quarter was somewhat lower than the first, most of the economic forecasters are predicting an improving second half and we are moving forward with initiatives to drive business growth as well as increased productivity and efficiency in our operations.

We strongly believe that a robust capital program over investment in the business coupled with strong returns to our owners will continue to drive superior returns in the months and years to come.

I will now turn the program over to Don, and then Mark, and then Jim, and I will return and wrap up with some closing comments before we take your questions.

Don?

Thank you, Wick, and good afternoon to everyone.

During the second quarter, we saw continued recovery in economic activity, favorable global trade and stronger manufacturing output.

These favorable trends, coupled with ongoing new business development, produced our second highest revenue quarter ever.

Revenue reached $2.87 billion, up $436 million or 18% over the second quarter of 2010 with yield improvement across all business groups and volume growth in Intermodal, Automotive, and Coal.

Approximately 78% or $341 million of the revenue gain in the quarter was driven by higher revenue per unit, including increased fuel surcharge revenue and pricing gains.

The remaining $95 million was the result of increased volume, which was up 4% or 67,000 loads.

With respect to yield, we achieved our highest revenue per unit ever, reaching $1,604 per unit, up $191 or 14%, compared to second quarter last year.

Improved pricing based on market demand and tighter transportation capacity across all modes combined with higher fuel surcharge revenue drove this record performance.

For the quarter, we set new RPU levels in agriculture, metals, and construction, chemicals, paper, automotive and coal.

Coal RPU had the largest gain on a percentage basis, up 26% or $452 per unit, driven mostly by increased export coal and longer haul utility business to the Southeast.

In our Industrial Carload sector, higher pricing and fuel surcharges resulted in higher RPU in each of the business groups led by chemicals, up 18% or $569 per unit.

Automotive RPU was impacted by a 30% increase in lower revenue per unit bilevel traffic in the quarter as trilevel loads was off 4%, due primarily to the disruptions in the Japanese supply chain and associated production declines at both Toyota and Honda.

With respect to pricing, the market environment for continued pricing gains is solid.

And with improvement in price, we are in turn making the necessary investments to drive higher capacity and service levels ahead for all of our customers.

We remain committed to this market-based value proposition across all of our business.

Now let's turn to our volume performance.

Volume performance in the second quarter is shown on slide 4, total shipments of 1.79 million were up 67,000 units or 4% over second quarter last year.

This was our highest quarterly volume since the thirrd quarter of 2008 just prior to the recession.

These favorable results were driven by economic and project growth with overall gains in Intermodal, Automotive and Coal which more than offset declines in Industrial products.

And during the quarter, we saw our Intermodal volume reached a 52-week high load in mid June gene as well as a new 52-week high in the metals group the week ending April 30.

Transitioning to our major business sectors is shown on slide 5.

Coal revenue of $893 million was up $197 million or 28% over second-quarter 2010 and was our highest revenue quarter ever.

Volume of 403,000 loads improved by over 8,000 units or 2%, driven by increased global demand and changes in coal sourcing, as well as increased shipments to Southern utilities.

These gains more than offset volume weakness to Northern utilities at a 7% decline in domestic metallurgical coal volume due to reduced coal availability as a result of strong export demand.

We expect domestic met coal to remain in tight supply during the remainder of this year.

We also estimate there were approximately 600,000 tons of coal that we could've handled in the quarter, that will likely be made up between now and the end of the year, primarily as a result of flooding in the Midwest and related supply-chain disruptions.

Drilling down to Coal's primary market segments, export volume reached 76,000 carloads, up 14,000 or 23% over second-quarter 2010.

Export was our strongest market segment in the first quarter and sequentially we saw increased volumes in the second quarter as well as demand for high-quality US met coals to the European, Asian, and South American markets remain strong.

Tightened met coal supply around the world and a 5% increase in global steel production continues to support strong demand in this market.

At Lamberts Point, volume for the quarter reached 54,000 carloads, up 34%, while shipments over Baltimore were up 1.4%.

Concluding my discussion of coal on slide 7, our utility volume of 257,000 loads was flat compared to the same period of 2010 despite a 6% decline in coal burn in our service region through May.

Inventory replenishment and new business generated led to a 9% increase in our volume to Southern utilities, which nearly offset the 8% decline we saw in volume to Northern-based utilities.

Competition from natural gas during the quarter also impacted coal usage across our network.

Stockpiles at Norfolk Southern-served plants on average are below targeted levels and as record heat encompasses our region, we expect increased generation requirements in the third quarter and a healthy [shoulder month] coal replenishment period this fall.

Now let's turn to Intermodal on slide 8.

Intermodal revenue of $540 million was up $89 million or 20% over second quarter last year.

This gain was based primarily on increased fuel-related revenue and volume growth.

Volume reached 802,000 units, up 69,000 units or 9% with strong gains led by our domestic business.

Domestic volume growth of 15% in the quarter was driven primarily by highway conversions with tightening truck capacity in the marketplace.

Of our total domestic increase for the quarter, we estimate that 70% came from local business east of the Mississippi, which was up 18% with the remaining 30% from traditional interline business such as the Transcon market, which increased by 11%.

Premium volume which was up 10% benefited from type truck capacity as well and highway conversions in the LTL segment, in addition to other new business.

And finally, international and Triple Crown volumes were both up 3% in the quarter.

Now turning to merchandise as shown on the next slide.

We generated revenue of $1.4 billion, up $150 million or 12% over second quarter 2010 with record revenue in chemicals and agriculture.

Volume for the quarter was 582,000 carloads, down 2% with weaker results in industrial products markets, offsetting the growth we saw in our Automotive business.

Drilling down to specific market segments in our merchandise business, Auto volumes grew 17% over second quarter 2010, driven by an increase in North American light vehicle production and robust vehicle sales which were up 7% in the quarter.

Shipments for the Detroit 3 along with the majority of our international brand names saw year-over-year improvement.

However, as we expected, the aftermath of the earthquake in Japan negatively impacted our volumes with the large Japanese manufacturers, but production at those plants started to improve late in the quarter.

The new Volkswagen plant in Chattanooga, Tennessee opened during the quarter and we began handling a small number of shipments in June to various destination ramps.

This plan is expected to produce 150,000 vehicles annually and we expect our volumes of outbound vehicles to ramp up in the third quarter.

In our metals and construction market, volume declined 1% compared to second quarter last year with increases in shipments of coiled steel and frac sand offset by declines in scrap metal, aggregates, and cement.

Coil steel carloads were up 6% driven by increased domestic steel production and increased automotive production.

We also benefited from the continued ramp-up of the new Thyssen Krupp plant at Calvert, Alabama.

Miscellaneous construction carloads were up 5% primarily driven by growth again in frac sand shipments for natural gas drilling in the Marcellus Shale region, which was partially offset by lower aggregates in cement volumes as a result of continued softness in housing starts and commercial construction.

Turning to our other merchandise business groups as shown on slide 11, agricultural volume declined 2% in the second quarter with difficult year over year comps.

Corn volume was down 6% in part due to a reduction in our Midwest gathering volumes with greater local crop availability this year compared to last.

Soybean shipments on the other hand were strong, due to export demand and tighter supplies in the east and what demand for feed production was up, due to higher corn prices.

Chemical volume was down due to tougher comparisons to the second quarter 2010 that included 8,500 carloads of TBA fly ash business.

We will not clear that negative comp until December 1 of this year.

And finally, our paper and forest products business was down 8% due to large volumes last year of wood chips, kaolin clay, and finished paper products.

Now, as we look ahead, as you'll note on slide 12, we expect further revenue growth across the majority of our portfolio of business for the second half of this year.

The economic outlook is favorable for industrial sectors, including steel and North American light vehicle production.

And there is a positive outlook for international trade that bodes well for our export Coal, manufactured products, grain and Intermodal business.

We are pleased with our strong revenue performance in the second quarter and we expect to focus on new business initiatives, modal conversion opportunities, and pricing to market demand to fuel revenue growth in the second half of 2011.

In this regard, as we support our customers and their markets, we fully expect our volumes to exceed the growth of GDP and we will continue to price to market demand.

Thank you for your attention, and now Mark will present our service update.

Mark?

Thank you, Don.

Starting with safety, we ended the second quarter with a safety ratio of 0.81 compared to 0.89.

That is a 9% improvement over the same period last year.

For the first half our ratio is 0.80, a 19.2% improvement over the corresponding period last year.

Turning to the service front, our second-quarter Composite Service performance was 76.5%, even with last year, but up 6% over the first quarter of 2011.

Good improvements in both train and connection performance had driven the sequential gain, despite another quarter of extreme weather challenges.

Not only did we experience the devastating tornado outbreaks in the South, but also we were impacted by traffic backups and detours from Western flooding.

While off from the levels of the second quarter last year, train speed has increased sequentially from the first quarter of 2011.

Remember, train speed is a measure of over the road transit.

The average speed of a train from the departure at one yard to the arrival at the next.

I don't want to make a lot about the quarterly changes here, because as you can see, while train speed is below the second quarter of last year, it is not that far off.

In reality, none of these numbers show a lot of variation.

In fact, the train speed in the second quarter of 2011 was near or equal our train speed in second-quarter 2008 prior to the downturn.

Turning the page, terminal dwell, the average time cars dwell at a switching yard, stood at levels consistent with last year but improved significantly from the first quarter of this year, a nearly 9% improvement.

During the height of our service issues, connection performance and terminal dwell took a lower priority as we emphasized on-time train performance.

As the network has gotten healthier with a rising crew base, we have rebalanced priorities between train and connection performance.

The improvements seen here are the result of that rebalancing.

This is one of the areas that is really starting to gain traction and I expect to see continuing improvements, returning us to pre-downturn performance levels in a relatively short order.

This next slide illustrates our actual and projected T&E employment count by month through the end of 2011.

I am not going to go through the drivers again since we've talked about them for the last several sessions and they remain the same.

In the first quarter of 2012, our qualified T&E employment ranks will grow to around 12,000, approximately 200 below our 2008 peak.

At that point our qualified T&E count will level off with trainee hiring moderating in order to maintain a steady state workforce.

However, note that our total T&E employment peaks around September of this year.

And finally, turning to our productivity scorecard, as previously indicated, volume's up 4% with crews up an equivalent rate.

Railroad employees are up 7% as we continue to hire trainees in order to return us to employment levels commensurate with our traffic levels and the 2012 forecast.

I remind you that in the second quarter of 2010, we were just starting to react with hiring at -- with hiring to the major increase in traffic we saw in March of 2010, thus making this comparison so significant.

Due to our hiring plan which resulted in a 7% increase in railroad employees, gross ton miles per employee is down 3% compared to last year.

The 5% decrease in gross ton miles per gallon of diesel fuel is primarily being driven by two factors.

First, in the quarter there was a shift in traffic mix toward finished automobiles and intermodal, away from the more gross ton mile per gallon efficient bulk commodity unit trends.

The second reason has to do with our less fuel-efficient leased locomotive fleet.

We have 157 more leased locomotives on the property than we did last year.

However, we began turning lease power back in the second quarter as our network velocity has improved and will continue to do so, spinning these less desirable assets out of the network.

In addition, in the last half of the year, we will take delivery of an additional 25 new locomotives.

Gross ton miles per train hour has improved 1% as our train size grew in an increasingly fluid network.

And now, I'll turn it over to Jim.

Thank you, Mark.

I will now review our financial results for the second quarter.

We are pleased to report strong performance that translated to second-quarter records across the board.

Let's start with our operating results.

As Don described, our railway operating revenues for the quarter totaled $2.9 billion, up $436 million or 18% compared to the second quarter of last year, including a $162 million increase in fuel surcharge revenues.

Total railway operating expenses increased by $294 million or 17% for the quarter.

The combined operating results generated income from railway operations that totaled $875 million, a 19% increase and a 30 basis point operating ratio improvement to 69.5%.

Taking a closer look at expenses, fuel -- which was up 60% from last year -- accounted for over half of the overall increase.

Higher diesel fuel prices up 45% versus last year drove most of the increase to fuel costs.

This quarter's average diesel fuel price per gallon was $3.26.

Taking a closer look at the per gallon components of our diesel fuel price, the next slide reflects crude oil in gray and other costs in green separately.

These other costs primarily reflect crack spreads, sales tax and transportation costs.

As you can see most of the increase related to higher WTI prices which grew 32%.

Other costs were also up significantly, increasing $0.43 per gallon or 110%.

Next, compensation and benefits increased by $69 million or 10%.

Detailed on the following slide, volume-related labor was up $22 million including $9 million for trainees.

Medical benefits for our agreement labor and payroll taxes each increased by $13 million and pension costs were up $6 million.

As highlighted next, materials and other expenses increased $31 million or 16%, reflecting higher usage of locomotive, roadway, and freight car materials in addition to increased travel expenses.

Less favorable personal injury claims development also contributed to the increase.

Purchase services and rents increased $31 million or 8%.

The increase is primarily due to increased volume-related activities such as intermodal operations, equipment and roadway repairs and maintenance, equipment rents, and taxi services.

It also includes increased IT expenses, mostly for software.

Turning to our non-operating items, the majority of the net increase is due to higher returns from corporate-owned life insurance and reduced interest expense on uncertain tax positions, primarily due to some of the nonrecurring income tax related benefits I'll cover in a minute.

Similar to last quarter, coal royalties were also favorable.

Income taxes displayed next totaled $239 million and the effective tax rate decreased to 30%.

Income taxes last year were $243 million with an effective rate of 38.3%.

The lower second-quarter 2011 effective tax rate reflects $40 million in income tax benefits related to the favorable resolution of an IRS examination of NS's 2008 return and review of certain claims for refund.

We also reported $19 million of deferred tax benefits due to state law changes.

Second-quarter net income was $557 million, an increase of $165 million or 42% compared to last year.

Diluted earnings per share were $1.56 or $0.52 per share greater than 2010.

As you know, net income was favorably impacted by $63 million or $0.18 per share, due to the nonrecurring income tax-related benefits mentioned previously.

As displayed on the final slide, our recorded -- excuse me, our record first-half earnings results contributed to increased cash from operations, which easily covered our increased capital spending.

Share repurchases for the period totaled $792 million and dividends reflect our increase to $0.40 per share in 1Q 2011.

In addition, we generated almost $400 million in proceeds related to the 100 year notes we issued in May.

Cash and cash equivalents at the end of the quarter equaled $678 million and our combined cash and short-term investments totaled $906 million.

We have continued confidence in the future of rail transportation, especially with respect to our Norfolk Southern franchise.

Thank you for your attention and I will now turn the program back to Wick.

Thanks, Jim.

As you've heard, Norfolk Southern had a very strong quarter in almost every respect and we have set a firm foundation in place from which to drive even stronger performance in the future.

Now as all of you know, there has been some questions recently about the economy going forward, and we certainly did see some economic slowing in some of our business groups in the second quarter.

However, we remain optimistic as do most economists about the second half of the year in terms of the recovery and improved business conditions.

Mark outlined for you our ongoing service improvements and you saw the strengthening performance in our service delivery.

While we are still not where we or our customers ultimately want us to be, the positive improvements in our velocity are having an impact on productivity as we spin our car and locomotive fleets faster.

One example of this, as Mark mentioned, is how we are now turning in less fuel-efficient, less reliable leased locomotives that we have been utilizing while our system velocity was slower than normal.

As we have described before, we have also been investing in our car and locomotive maintenance programs, both in terms of employees and material, ensuring that we can use the assets that we own more efficiently and more effectively.

These programs, along with our aggressive hiring and training of conductor trainees, have added to our costs in the short term.

But as we approach our target employment numbers in the second half, we expect to see the incremental expenses start to decline significantly and our service metrics continue to improve.

Over the long term, we believe that offering a superior level of rail service, driven by superior assets and infrastructure, along with best in class operating systems, practices, and people, is the way to drive superior returns for our owners.

Within the context of the overall economy, we can and will continue to drive volume growth while pricing our superior service at levels that fully reflect its value in the marketplace.

Norfolk Southern has a long history of doing just that and our second-quarter results are an indication that we will continue to do it in the future.

Thanks, and I will now turn the program over to the operator for your questions.

(Operator Instructions).

Jason Seidl.

Dahlman Rose.

Good afternoon, everyone.

Thanks for taking the time.

If I could look at the export coal market, very strong growth in the quarter, obviously at 34%, but if I recall you guys had an exceptional May.

It was up, I believe you said, about 54%.

So the growth rate dipped a little bit in June, but looking at the chart you provided here, on a quarterly basis, it looks like your third-quarter comparisons at least get a little bit easier on export coal.

So should we expect that growth to be up in the 30% plus range for 3Q?

We expect our export coal market to continue to be strong for the balance of the year.

We see demand coming back in Japan, which was impacted in the quarter because of the earthquake-related disruption to industry there.

Particularly over Baltimore and somewhat over Lamberts Point.

So we expect Japan to strengthen.

China continues to be good, Korea continues to be very good, Brazil continues to be good.

So we look for more of the same in the second half.

My next follow-up question is going to be the Intermodal side.

Some of your peers have called for a late but shortened peak season.

Could you talk a little bit about any potential issues around availability for a compressed peak season this year?

Well, we have seen the domestic container fleet augmented by additional containers that have been added.

So we don't see equipment shortages as we saw somewhat last year.

So we think that we are well-positioned as an industry and we are well-positioned as a company to participate in the retail inventory replenishment in the fall.

With respect to international, we are seeing some activity right now pick up a little bit.

But I would say that the peak will not be a pronounced peak.

I appreciate the time as always.

Bill Greene with Morgan Stanley Smith Barney.

This is actually John filling in for Bill.

First the headcount trend chart that Mark put up for year end was really great and helpful.

But can you help us think about how we should translate that into the comp and benefits expense trend through year end?

Do you think it is going to fall sequentially from here?

Well, I'll let Jim comment on the economics.

If you look at the chart, as you see, we reach our total goal at least on the train and engine service side by about September.

That includes a lot of trainees and the balance will shift slowly as the year progresses as more and more people are qualified and marked up.

That has some influence on comp and benefits because we pay more to qualified employees certainly than we do to trainees.

But Jim, I don't know that that in and of itself makes for a significant change.

Right, well we obviously have hiring going on in other areas as well and other elements of compensation benefits, expense, obviously.

Looking into third and fourth quarter, we are seeing total compensation benefits expense roughly in line with second quarter, perhaps up some, down obviously from first quarter.

Great and congratulations on the great operating ratio this quarter, but can you help us think about how incremental margin should trend from here?

Assuming no big unexpected change in the macro picture, is it fair to assume they accelerate in the third and fourth quarters?

First, a comment on incremental margin in the 2nd quarter.

We reported 33% incremental margin.

There is going to be some impact there from the trend in the price component of both the FSC increase and the price component of fuel expense as well.

Looking into the second half of the year, I think we would expect incremental margin perhaps making the same adjustments depending on the fuel trend to trend basically in the same general area.

So something around the low 40s, probably [for the balance] of the year.

Chris Ceraso with Credit Suisse Group.

This is Allison Landry in for Chris.

I was wondering if you could give us a sense of how much of the 14% RPU growth came from mix?

And I know that you talked about there being some positive impact within the Coal segment.

But maybe if you could point out if there are any other commodities that saw something like that?

On the Coal side, obviously export coal and Southern utility coal being up where the favorable mix components of that, in terms of the mix overall, I will tell you that it was negative.

In terms of Intermodal volumes being up, it is one of the components of that, obviously, in the total book.

So Coal had the largest single positive mix.

Everything else was either neutral or negative.

Okay and then maybe turning to some of the economic expectations for the second half.

What gives you confidence that these forecasts are going to improve in the second half?

And maybe if you talk about your customers inventory levels and what they are telling you about their expectations for the next three to six months.

A couple of things I think that we look at.

One is that if at least in our book of business, if you look at some of the slowing or the year-over-year comps that we had, we understand the reasons that they happened.

They were obvious they were either comp issues or traffic had gone away or where we had shifted traffic in some way or another.

Clearly, we saw a fair-sized impact from the tsunami-related effects in Automotive, but Don mentioned actually in Coal as well and that is certainly easing.

There are some impacts that we have seen from the flooding in the West.

That will ease and as we talk to our customers, other than the general uncertainties that I would say are on everyone's minds these days about the debate in Washington, we are not hearing, we are not hearing a lot of concern, I would say, from our customers in terms of their order books, in terms of their visibility.

We are not hearing anything negative about the second half.

That's very helpful.

Thank you for the time.

Justin Yagerman with Deutsche Bank.

Good afternoon.

Thanks for taking my call.

I was curious, Don, your comments on makeup call and the back half of this year as the floods abate, I think you said 600,000 tons.

Can you give us a sense of how you would expect to see that come on?

Well, it was deferred tonnage, some from PRB coming in to the Southeast, some in the upper Midwest.

So we will see that coal handled over the course of the second half as we cycle trains and I am sure that we will recover the cycles and with operations improving, we will probably see those cycles improve and returns improve as well.

So --.

Is it smooth through the second half or would we expect to see most of that in Q3 from a makeup standpoint?

Well, certainly with the weather we are having with stockpiles being diminished at a faster pace, I wouldn't be surprised to see utilities attempt to replenish that in the third quarter.

Okay.

That's helpful.

And just curious on overall train length, where you guys stand right now and how you think about capacity, vis a vis the peak season and where you could go to across merchandise, coal, and other [trains]?

Well, we are in pretty good shape as far as capacity goes.

Now as far as train lengths specifically, our average if you look at our merchandise business, the average is in the 4,600 to 4,700 range feet, that is, which is certainly a lot of room to grow there.

So that's good.

Intermodal is more like 5,600, but that is an average and the averages are pretty dangerous because we've got some very big intermodal trains out there as well.

But nevertheless, we have got the capacity and when it comes down to it, you've got to look at where we are now versus where we have been.

We are 6% off of 2008.

We are 12% off of 2006.

So there's a lot of room out there and we certainly won't have any trouble with the fall season.

Okay, but if I put those into context, I know the averages are dangerous, but maybe you guys sense as you think about across your network how much you could lengthen those trains before you would have to start really ramping up train starts in that type of a scenario?

Yes, as far as the merchandise trains go, as you know we like to fill them out to the extent possible.

So there will be a mix of filling out existing trains and then where it makes sense, we will have additional train starts.

We -- I think it is a great question.

It's kind of a situation of tell us where the traffic is coming from and we will tell you how we are going to handle it.

There are places where we are running a lot of long trains and we would have to add starts, but I would say more often than not, we have capacity without adding train starts in our network.

That's fair enough and it is obviously hard to predict.

So I'd just ask a different way.

I mean when you think about incremental margins in the back half of the year, how sustainable do you feel they are?

And if anything, do you think that they can actually be improved from where we've been in the first half of this year as you think about better volumes, continued strong pricing, and obviously the opportunity to maybe mitigate some starts with length and trends?

Well, I think as Jim commented earlier incremental margins, but I would tell you that I think overall we have a network that in which velocity is improving.

Increased velocity has a lot of benefits, not the least of which is it creates capacity in the network without adding costs.

We do have the ability to add a lot of volume in a significant portion of our network without adding cost.

And our hope is and expectation is with things like the leased locomotive fleet that we are actually going to be seeing costs, some costs drop out even as we handle more traffic.

So I think we have, we are going to have a good story on incremental margin.

Great.

Thanks for much for the color.

I appreciate the time.

Tom Wadewitz with JPMorgan.

Good afternoon, and I have to say congratulations in particular to Don Seale.

I guess good results for everybody but the yields were very, very impressive.

And I'm wondering, Don, if you can provide a bit more perspective on what is behind this?

I think kind of reasonable fuel surcharge revenue doesn't account for the difference in year-over-year yield growth.

Obviously it's part of it, but is the core price quite a bit stronger across the book in second quarter, relative to first or what is it that's really behind the broad-based strength in yields?

And how would you look at that going forward?

Is it -- are those factors going to continue in the second half?

Well, Tom, it's an indicator of timing with respect to repricing.

As you know, we repriced our export coal year to year effective April 1 and that is a component of this in the second quarter.

And it is a continued impact of repricing of some contracts in coal that we repriced January 1 that will continue on for this year and I would say the same applies across the book of business.

We will continue to see the impact of the repricing of that in terms of the time that we did it.

So we feel good about the demand for pricing as I mentioned in the comments and we see that continuing to be firm.

So, is it --?

What do think it is that is allowing you to get significantly stronger core price?

I mean, it just -- I guess it's notable, relative to I don't know if it was a year ago you were talking about trying to explain weaker core price versus the group and now it looks like your core price is a lot -- is probably a bit stronger than what some others might be seeing even.

And so I'm wondering is that all -- is it just more contracts that are due this year?

Or are you taking a bit of a different approach to pricing or, I guess, any other thoughts, but obviously it is good performance.

No.

We are looking at the market.

We are looking at tightening demand in the market capacity, we've seen continued change quarter to quarter and, Tom, I would also point out that when we see our utility coal moving to the South up 9%, that is longer haul.

That impacts RPU.

Export, obviously, impacts RPU favorably as well.

So there's some moving parts with respect to length of haul as well.

But we see a favorable pricing environment and we are pricing to the market.

We haven't had any change in our philosophy on that and we plan to stay that way.

How much was length of haul up?

I don't know if maybe I missed that number.

The utility coal to the south was up 9% and it was offset by an 8% decline in our Northern utility coal, which is a shorter haul than the Southern coal.

Right, but how does that translate to length of haul in coal or is that something you don't want to get into?

Southern utility coal is about a third higher RPU than our Northern utility coal.

(multiple speakers).

Okay.

Great.

Thank you for the time.

Walter Spracklin with RBC Capital Markets.

Thanks very much.

Good afternoon, everyone.

So just on the -- I guess you've invested quite a bit in your corridor initiatives.

I was wondering, you gave us a great update in the first quarter on the growth in some of your lanes.

Can you give us sort of an update again?

Is that volume continuing -- are those expenditures you made continuing to pay off?

Are we still seeing some of those pretty significant volume increases on those routes continuing in the second quarter?

Well, we are obviously continuing to invest in those corridors.

Some of them we are still midstream or even earlier in investment like the Crescent Corridor.

Although I think Crescent the first half of the year was up 30 some percent year over year on an admittedly so smaller base.

But yes, we continue to see growth with all of the corridor initiatives and we think that they are going to be a very positive thing for our franchise on an ongoing basis.

We have got work underway on for intermodal terminals right now.

We are going to be breaking ground on another one fairly soon and as those terminals come online and give us additional capacity, we expect to be able to continue to ramp our business up.

Follow-up question here on the flooding impact.

You mentioned one of the revenue sort of a deferred coal, was there any other deferred volumes in the quarter and if you were to quantify those in addition to some of your rerouting costs or any expenses incurred due to the flooding, if you were to put that together, what would be the earnings impact if you were to add the two together?

The other impact that we had in the quarter was the Japanese supply chain that I mentioned and we estimate that the reduced business that we handle with Honda, Toyota, and others were in the range of 5,500 to 6,000 cars.

For the quarter.

It was more on the flooding per se in terms of incremental increase in expenses associated with your having to deal with the flooding in the quarter.

Is there any --?

You know the flooding obviously has been an issue with some of the traffic with our Western connections.

Mark also mentioned that we had a really kind of unusual couple of months in terms of severe weather patterns moving across our system just on a weekly basis, the worst of which was a terrible tornado that we all saw come up through Alabama, Mississippi, Alabama, Tennessee and Virginia.

We don't really, we have not tried to quantify them just because it was a long series of effects that had a general impact of slowing the network.

But very difficult to capture in dollars and cents what that cost us.

Thank you very much.

Matt Troy with Susquehanna.

Thanks.

I wanted to ask about export coal, specifically where you were running in terms of capacity utilization or throughput availability at Lamberts and Baltimore, given some of the issues you had earlier in the year?

And also you gave us updates or provided a snapshot of some new export facilities coming online in Charleston, Philadelphia.

Was wondering if you had been in talks with anyone about the new opportunities out of the Gulf and if so what kind of added capacity, if you could quantify might we see in export coal for the next two or three years?

We don't see capacity for export coal a problem.

As we mentioned at Investors Day, Lamberts Point has additional capacity.

We would bring up people, additional people there at the [pier] should we see the volume and demand continues to rise.

So we have added capacity at Lamberts Point and we have room to grow.

The same thing in Baltimore.

There is an expansion taking place there at CNX to take it up by another 2 million tons, plus we are improving the process there that we think will add another million ton capacity on the throughput at that pier.

And then with respect to steam coal opportunities, at Fairless near Philadelphia and the Charleston, South Carolina terminal, as I mentioned in May at the -- or June at the Investors Conference, we are already handling some met coal through Fairless.

That will continue to build and we are targeting steam coal through that facility out of Northern App.

And also targeting steam coal out of the Illinois Basin to Charleston for export.

And any of the Gulf projects, have you been approached about those?

Yes.

We have and we are handling business to the Gulf out of the Illinois Basin.

Okay and so ample capacity to grow for what should be a good market.

Ample capacity and, as you know, with the recent announcement on the sale of one of the terminals and the expansion plans by the buyer, that capacity will actually ramp up.

Okay.

Well, then, the follow-up question I'd have is just an easy one, but you obviously had two very big intermodal wins with J.B.

Hunt and FedEx, FedEx being more recently.

Is that business trending in line with what you would expect?

Are the volumes and your ability to handle them meeting the service requirements for what is arguably probably one of the toughest customers in that business?

We are very pleased with that business and our service is meeting the expectation of that customer and we look forward to growing with them.

Excellent.

Thank you for the time.

Cherilyn Radbourne with TD Securities.

Good afternoon.

Wanted to come back to pricing for a minute.

I guess the strength in coal was maybe not unexpected, but what did strike me in the quarter was the strength of your RPU gains in the Merchandise segment.

And it sort of looked like length of haul might have had an impact there.

I don't know whether there was some timing impacts like you mentioned in coal.

So was wondering if you could just address the market dynamics in Merchandise specifically?

The RPU growth in merchandise as with the other businesses reflect the fuel components plus the price component.

In some cases, length of haul.

But as I'd mentioned earlier, the overall impact of mix across the entire book was negative in the quarter.

So predominantly price gain and fuel.

Okay and my second question is more of an operational nature.

In Mark's presentation you mentioned that during the quarter, you had rebalanced the priorities between train and connection performance and that that was gaining traction.

So I was wondering if you could just elaborate on what you meant by that and indicate how quickly that should have a noticeable impact on your service performance?

Sure I'd be glad to.

To the extent that we get trains to our terminals within a reasonable window so that the cars can make connection, that all works well.

And so, what we have found is we ramped our -- as we ramped our performance up, we concentrated first on the train performance so that we could get cars to the terminals within that window.

And now that we are in pretty good shape, making improvements with that train performance, we have been concentrating on getting the cars on the right trains, i.e., connection performance and so all that starts to spin up together as you do that.

Okay.

Thank you.

That's all for me.

Scott Group with Wolfe Trahan.

Good afternoon.

So just wanted to ask another follow-up on the coal pricing.

If we look at revenue per car, it was $1,700 two quarters ago, $2,000 a car last quarter and now it's $2,200.

Based on what you're seeing in the market, is there an opportunity to materially increase those yields further over the next couple of quarters or, just given the timing of contracts and the export repricing, should we expect that to finally level off going forward?

Well, with respect to export, as you know our contracts are year-to-year with an anniversary date of April 1.

So that will be steady-state until April 1 of 2012.

I will tell you that we have other activities that are just based on the rate calendar in terms of when renegotiations will take place.

But that -- we see those quarter to quarter and it is nothing unusual coming.

And maybe just one other way to ask that, so if we go from -- if we went from $2,000 a car last quarter to $2,200 this quarter, it kind of suggests that they've been sequentially getting better and better throughout the quarter.

Is there any way to think about where revenue per car and coal finished at the end of the quarter kind of entering third quarter?

I'm guessing it's a fair amount higher than $2,200 a car.

In terms of the quarter, I don't have the numbers in terms of the monthly numbers as it aggregated for the quarter.

Is that a fair assumption though that it ended a fair amount higher than $2,200?

No.

What's that?

No.

Okay, and then just the second question, if I think about historically, chemicals has been a pretty good leading indicator for your volumes overall.

Chemical volumes down 10% in the quarter, does that concern you about the rest of the business going forward or is there something you'd think unique about the weakness in chemicals this quarter?

Well as I mentioned, we have a large negative comp in the quarter and we will have back, up through December 1 of this year.

As you'll recall, we had Project Cargo hauling fly ash for disposal out of the Tennessee Valley Authority plant at Kingston, Tennessee.

For the quarter that was 8,500 cars last year that we didn't handle this year.

So fundamentally, we are seeing chemical traffic continue to improve as far as the overall economic output goes, reflecting Automotive -- increased Automotive production.

So we're optimistic about chemicals, but you have to take the comp into effect at least up through December 1 of this year.

Got it.

That's very helpful, Don.

Appreciate the time.

Gary Chase, Barclays Capital.

Good afternoon, everybody.

I wanted to just ask a question of Mark and I apologize, because I am just eyeballing this with out the benefit of the exact numbers.

But your manpower chart that you showed during your prepared remarks looks a bit different than the one you showed on the last quarter.

I would say favorably so.

Just curious if there is a volume assumption component to the lower headcounts and you also kind of peak earlier and at a lower level is the way I would sort of read the difference between the charts.

Or if there is some efficiency gain versus your expectations that explains that?

Well, this isn't -- this is not too much different than what we had originally projected.

And like we say, we are going to -- come first quarter next year, we think we are going to be leveling out at that 12,000 person mark.

And as we have put people into training, the training is coming along as scheduled.

So we are not far off of what we projected we would be doing.

With -- when you say without looking, we -- going back and looking at the numbers, the other thing to remember is that this is a dynamic model and so we project out our hiring and training results for the next three months and what you are seeing may be just that reflects that we did slightly better or slightly worse.

I don't know which, if either.

During the second quarter then the numbers we indicated we expect it.

You know, these are moved -- these numbers are always going to move a little bit as time goes on depending on how well we do compared to our targets.

Okay, but I guess one of the other components would be at the level of activity you're planning on and I guess what you're saying is that component of it hasn't changed, right?

I don't think it's changed in any material way, no.

Okay and then maybe, Jim, if I could, when you were going over some of the expenses, you mentioned a less favorable PI development.

Is that something that you are just talking about a comp issue in the prior year or was there a negative adjustment this year that affect the results?

It was a comp issue.

Last year's reserve adjustment was $8 million favorable and this year we had less than $1 million.

So it's really the comp

But the favorability in the reserve adjustments has been tapering off as you've seen and that's sort of the trend we expect to see.

Thanks very much.

Ken Hoexter with Bank of America Merrill Lynch.

Good afternoon.

If I could just follow up on Gary's question real quick there on the employees.

Why do you have it peaking out in September, Mark?

What was the -- could you kind of explain why the tail off there after that?

Well, in September, that's when our trainee count will -- that is about when it peaks.

And after that, that the number of people in training begin to level off.

And more and more we wind up with trainees going into the qualified ranks, and we get closer and closer to hitting a steady state of trainees that are pretty much matching the attrition.

So does this indicate that the long kind of talked about attrition, you could always pull the attrition trigger when you need it, when we have a soft spot?

Does that indicate that that is now deteriorating?

That you've got the revised workforce that that is not such an easy trigger anymore?

No.

Not at all.

It's just saying that as we get into the third quarter, we are no longer going to have this big bubble of trainees that we have had.

The number of trainees will begin to reduce in number and we will just have more of a steady-state trainee group out there that is matching the attrition, plus a little bit for whatever the growth is that we project coming up.

And like always, if we see a downturn in the business, I mean if that happens to happen, we can always throttle back and use attrition to our advantage like we always have.

Great.

And, Don, the new cross state air pollution rules that kind of are a bit more aggressive than some had anticipated on some of the coal burning.

What is your thoughts on the impact to some of the utilities in your region in terms of coal demand?

Well, in the short run, I think we are watching stockpiles go down quicker than we felt they would this summer with the cooling degree days.

So I am watching that closer than I am the EPA requirement right now.

I think I don't see any immediate impact in that.

Obviously we have got it on our radar and we are watching it closely.

But in a more immediate sense, we see an opportunity in the second half for higher demand for utility coal.

Just a quick question for Jim.

You said that there was a $40 million tax benefit, a $19 million tax benefit, but then throughout that the total was $63 million.

Is there a -- can you just throw out what the difference is there?

Sure.

The difference is the after-tax effect of the $6 million in interest reserves release up above in opera -- in nonoperating items.

So it is $40 million plus $19 million plus the $4 million which is the after-tax of the $6 million up there and other income.

Great.

Thanks for the time.

Appreciate it.

Chris Wetherbee with Citigroup.

Good afternoon.

Maybe quickly on the coal side.

When you think about, Don, just on your comments on the last question, when you think about the coal stockpiles and as they're coming in, Southern versus Northern just to give us a little bit of clarity on how the utility stockpiles look between the two of them going forward?

We see our Southern utilities having lower effective stockpiles than the North.

But we also see -- that is not to say that we don't see some of the large utilities in the North being below target.

Okay.

And when you think about that 600,000 tons of makeup, where is that going specifically?

Is that going predominantly down South or is it a mix of where it is headed?

It's a mix between the upper Midwest and the Southeast.

Okay, that's helpful.

And then if I can switch peers if I could just to the headcount side or maybe better yet the comp per employee side.

As you start to see those trainees come back into the workforce and you have the attrition get you over that September hump, how do you think about the cost for employee?

Is it fair to say that you might see some decline in the absolute cost per employee as you move forward?

Does it skew the normal seasonal -- seasonal pattern that you would expect as you go through the rest of the year here?

I'll have to think through that.

But my -- the first reaction I have is whatever the impact is small.

The second is that as we get through this bubble, if you will, of trainees where we have finally caught up in some sense with our trainee hiring and we bring more people on.

As I said earlier, the good news is as those folks get marked up their productive and we are able to run more trains and improve our service.

They are paid at a higher level.

So -- but net net, I think one other thing is we are not really -- it is not big enough that we are very focused on the net effect of that.

Okay.

So they are marked up from a paper perspective, but still it is a fair assumption to assume that they are coming in on a lower basis relative to the attrition you guys are losing?

Yes.

That's true.

Okay.

That's helpful.

And then just one final one, maybe for you, Jim.

Just on the repurchase of shares as you go forward, obviously you did a decent amount in the second quarter.

Just trying to get a sense of kind of how you think about the rest of the year when you are trying to balance that capital allocation to shares specifically?

Sure.

Well, we are going to stay at it on the share repurchase front, provided the free cash flow we expect materializes.

And in addition, we have in mind incremental borrowing in the second half to keep our credit metrics stable and in the zone where there are now.

So we would expect significant share repurchases right now.

Significant share repurchases in the second half of the year as well.

And just on that point of layering in some incremental debt issuances, when you think about it, obviously you did the 100-year issuance this year.

When you think about what the best window is as far as opportunity and maturity going forward, how do you think -- how do you those opportunities?

Well, it's -- we'll just have to test the market when the time comes.

And so, it's tough to call in advance really, but we are probably thinking in terms of some shorter duration out at this point.

I mean we'll see what the market looks like.

What the yield curve is like and (multiple speakers) and make the call.

But probably shorter than 100 (multiple speakers).

Shorter than 100.

A big turnout.

Thank you for your time.

Peter Nesvold with Jefferies & Company.

Thanks for taking the call.

Last quarter I think you said that 68% of the 2011 book of business had been priced.

Can you give me an update on what that percentage looks like to date?

We're at 86% priced for the year.

Okay.

And my only other follow-up question, you cited several times the strength in Southern utility coal for the quarter.

Was there any measurable market share shifts, do you believe, in that market for you during the quarter?

The only true shift was business that we mentioned last month at the Investors Day conference and also perhaps previously.

We have a new piece of business into the Carolinas that was secured effective January 1 on the utility side.

Okay, great.

Thank you.

Jon Langenfeld with R.W.

Baird.

Good afternoon.

This is Ben Hartford in for John.

Just a follow-on on the service side.

When we look at Dwell, Dwell hours have hung around 2010 levels, still elevated relative to five-year averages.

So when you think about absorbing some of the new headcount and getting beyond some of the floods and other related disruptions in the first half of the year, and some of the incremental productivity initiatives that you have in place to help drive asset turns, how should we think about that Dwell as a measure of service?

Where should that track over the course of the next six months and over the course of the next two to three years?

Is the five-year average in the mid-to-late 2000s a realistic level?

Well, our -- we have not been satisfied with our Dwell.

It's been hanging out there in the 24 to even upwards at 25 and more.

But, more recently, is coming down quite nicely.

It's coming down in the latter part of the second quarter and then now, more noticeably in the third quarter.

So as velocity goes up, I am confident we will continue to see Dwell move in the right direction and we're even now approaching the 22-hour range.

So it's dropping nicely and I think we will continue to see that.

Yes, Mark, what do you think the driver of that in recent weeks has been and what you think the key is over the next call it quarter or two to driving that lower?

It's been a combination of a couple things.

One is the crew base, we are not all the way there yet.

The crew base has come on pretty nicely over the last several months, and we have reached a point where you know it is more spotty here and there around the system where additional crews are going to make really a significant difference.

So we have just come a long way with the crews and if you combine that with some of the lighter seasonality, July is historically a bit lighter month and that helps us get more traction and spin that velocity up even better.

And then typically as we go into August, we are able to sustain that momentum.

And these crews are coming on at the rate of -- and they have been for months now coming on at the rate of about 150 a month.

So you add all that up, and it will continue.

I think it will continue to help us with the velocity.

And just to finalize, it's what you were averaging from college 2004 to 2008, is that a realistic level to be targeting this upcoming cycle?

Is there something different about it that would allow you or not allow you to get back to those levels?

Well there's, you know, if you look at the period between 2004 and 2008, there has been a lot of variability in performance during that time frame.

2008 was a pretty good performance and we are actually reaching those kind of levels now.

So I'm hopeful that we'll be able to either maintain 2008 or more likely even exceed it from a performance standpoint.

Great.

Thanks for the time.

Dave Vernon with Bernstein.

Good afternoon.

This is [Stephen Walker] in place for Dave this afternoon.

I guess this question is for Don.

I'm curious if you can give us a little bit of detail on the long-term nature of the export coal business particularly as the Australian coal mines recovered from flooding that's happened earlier this year.

Are you hearing anything from your customers?

Do you have volume commitments for April?

How do you think about that?

We are hearing definitively from customers that they are looking to the stability of US met coal as a part of the mix going forward as opposed to a swing supply, more of a baseload supply based on dependability.

So our customers are telling us to plan on continued movement of US coals into the world market.

And frankly with consumption being what it is, and the quality of the coal that we are shipping into the world market, we feel pretty good based on those discussions with the customers that we'll see longer term sustained demand.

I appreciate it.

That's all for me.

Great job, guys.

Anthony Gallo with Wells Fargo.

Thank you.

I'll try to keep it brief.

Just along those lines.

The end market mix right now, you mentioned China, Brazil, Korea.

Roughly what is that and how has that changed over the last couple of years?

Well certainly China has ramped up significantly.

Korea has ramped up as well.

And the Japanese have come back into the US market as well.

And they had moved away from the US predominantly to Australia and other closer proximity world coals.

So I think if you look at those three, there have been some fairly pronounced changes.

Of course, Western Europe has been an ongoing taker of coal from the US.

But the more pronounced change that we have seen is the Asian market.

Are they roughly equal right now or how should we think about that?

I will tell you I don't want to get into the relative sizes of it, but we have seen China, Korea, Japan, and I don't want to leave out South America.

Brazil is substantial as well.

Okay.

And then just back to the velocity question if I can.

We talked in the past about the rollout of certain technologies that it should improve velocity and that velocity in turn should create both cost savings and incremental capacity.

You are not anywhere near where you used to be on velocity and yet we still have excess capacity and we have cost savings.

So I guess my question is, how much better can it get as these technologies are rolled out?

Is there a number that we should think about in terms of velocity improvement?

And I think you used the tag dollar cost savings to [one mile in proven] velocity.

So if you could just refresh us on that?

Right.

And keep in mind, we are getting that close to 2008 levels from a -- from the standpoint of our train speed and you hear me that Dwell is coming down nicely as well.

So we're not that far off the mark from a velocity standpoint.

We do see that there is continued upside.

So, better things to come.

Stand by on that.

And the other thing that will help feed that is just what you say.

The technologies that are coming out will continue to advance it and it's going to happen over a period of years.

GE's rail edge, what we call movement planner.

That will be one of the principal drivers of that and it's going to take -- we'll be another year and a half getting that rolled out.

And it appears to us, even though it is early, it appears to us that it bumps us anywhere from two to four miles an hour.

That is 10% to 20% improvement in velocity.

And that's a pretty good bump.

And we will -- it's early in the game.

We will wait to see what actually happens.

But that's what the early indications are.

Very helpful.

Thank you.

Keith Schoonmaker with MorningStar.

I'd like to learn a little bit more about your domestic intermodal market gains.

Wondering what portion of this growth is truck conversion versus more organic growth at existing intermodal shippers.

And is length of haul declining as you grow the truck conversions?

Well, as I mentioned, our domestic business was the stronger component of growth of intermodal in the quarter was up 15%.

That business was up 18% East of the Mississippi.

Our local East of the Mississippi business was up 18% and was 70% of the overall 15% gain in domestic.

Some of that traffic is shorter haul.

Some of it is longer haul, depending upon the [OD point pair] that we are securing it in.

But we are seeing continued good traction with the Corridor projects as Wick mentioned.

And certainly the Corridor year-over-year improvement is contained in that 15% increase in domestic business.

Yes and on that same slide, I think it's slide 8, you identified truck capacity constraints as one driver of truck load convergent intermodal.

Do you perceive that LTL rate increases are driving clients to more attractive intermodal rates or do you credit high diesel prices, material factors.

And I realize this varies by lane.

But on average, what is the order of magnitude of the gradient between truck and intermodal costs for Eastern target shipments?

Is it 15% or 20%?

Well, certainly on the -- first question first, certainly we are seeing diesel fuel prices, tighter truck capacity, lower Class A tractor sales and equipment availability.

Driver impacts, the coming hours of service and some of the customers' positioning out to get an intermodal position.

In advance of that, all of those things are coming together to help drive conversion.

In terms of the relative differential of truck pricing versus intermodal pricing, it all depends upon the Corridor, the lane, the market.

But I would say a good rule of thumb is somewhere between 10% to 12% right now in terms of the Delta between truck load pricing and intermodal.

Thank you very much.

Mister Moorman, there are no further questions at this time.

I would like to turn the floor back over to you for closing comments.

Thanks, everyone, for your patience and your good questions.

And we look forward to talking to all of you in the weeks and months to come.

Thanks.

This concludes today's teleconference.

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Thank you for your participation.