Katie U. Cook - Director-Investor Relations James A.

Squires - Chairman, President, and Chief Executive Officer Alan H. Shaw - Chief Marketing Officer & Executive Vice President Mark D.

Manion - Chief Operating Officer & Executive Vice President Marta R. Stewart - Chief Financial Officer & Executive Vice President Finance

Tom Kim - Goldman Sachs & Co. Allison M.

Landry - Credit Suisse Securities (USA) LLC (Broker) John Barnes - RBC Capital Markets LLC Jason H. Seidl - Cowen and Company, LLC Thomas Wadewitz - UBS Securities LLC Robert H.

Salmon - Deutsche Bank Securities, Inc. Matt Troy - Nomura Securities International, Inc.

Chris Wetherbee - Citigroup Global Markets, Inc. (Broker) Scott H.

Group - Wolfe Research LLC Alexander Vecchio - Morgan Stanley & Co. LLC Kenneth Scott Hoexter - Bank of America Merrill Lynch Justin Long - Stephens, Inc.

Brandon Robert Oglenski - Barclays Capital, Inc. Brian P.

Ossenbeck - JPMorgan Securities LLC Ben J. Hartford - Robert W.

Baird & Co., Inc. (Broker) Jeffrey Kauffman - The Buckingham Research Group, Inc.

J. David Scott Vernon - Sanford C.

Bernstein & Co. LLC Cleo Zagrean - Macquarie Capital (USA), Inc.

Thank you, Rob, and good morning. Before we begin today's call, I would like to mention a few items.

First, slides of the presenters are available on our website at norfolksouthern.com in the Investors section. Additionally, transcripts and downloads of today's call will be posted on our website.

Please be advised that during this call, we may make certain forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, and our actual results may differ materially from those projected.

Please refer to our Annual and Quarterly Reports filed with the SEC for a full discussion of those risks and uncertainties we view as most important. Additionally, keep in mind that all references to reported results excluding certain adjustments, that is non-GAAP numbers, have been reconciled on our website in the Investors section.

Now, it is my pleasure to introduce Norfolk Southern, Chairman, President and CEO, Jim Squires.

Thank you, Katie. Good morning, everyone and welcome to Norfolk Southern's third quarter 2015 earnings conference call.

With me today are our Chief Marketing Officer, Alan Shaw; our Chief Operating Officer, Mark Manion; and our Chief Financial Officer, Marta Stewart. Earnings for the quarter were $1.49 per share, which was 17% lower than last year's record of $1.79 per share and included $0.08 per share of expenses related to restructuring initiatives.

The results also reflect softness in the commodities markets, most significantly in coal, where our revenues were down 23% in the quarter. Alan, Mark and Marta will cover the various moving parts of the quarterly results momentarily, but before delving into that, let me highlight the progress we made on some longer-term initiatives during the third quarter.

First, we began restructuring our Triple Crown Services subsidiary. With the restructuring, Triple Crown will focus on transporting automobile parts while NS will work with other supply chain partners to bring non-auto parts business into our conventional intermodal network.

Second, our headquarters consolidation initiative is mostly complete with employees formerly in Roanoke, Virginia now working in Atlanta or Norfolk. This initiative allowed us to combine some functions while reducing management head count and G&A expenses from having three back office locations.

It will give us a more cohesive and focused approach. For example, in sales and marketing where all managers not in the field are now co-located.

Third, we completed the acquisition of the Delaware and Hudson Railway Company's line between Sunbury, Pennsylvania and Schenectady, New York from Canadian Pacific on September 18. This relatively small scale but highly complementary transaction gives us full operational control of an important network segment and greatly enhances our ability to serve markets in the Northeast.

Implementation has gone very smoothly. These three long-term initiatives are in addition to our ongoing and continual efforts to improve service, asset utilization and returns.

In that regard, I'm pleased to report that service improved in the third quarter and we are in good shape moving into the fall season this year with the onset of winter weather just a few months away. As you will hear from Mark, key resources like crews and locomotives are reasonably well-balanced with demand right now, while at the same time we are looking hard at underutilized assets in some parts of our network.

Now without further ado, I'll turn the program over to Alan, Mark and Marta, and will return with some closing comments before taking your questions. Alan?

Thank you, Jim, and good morning to everyone. We appreciate you taking the time to join us today.

There are four significant factors influencing our 2015 revenue. First, fuel surcharges are the primary driver of the revenue decline we have been discussing since the first quarter.

The third quarter marks our largest expected quarterly drop in fuel surcharge revenue with a $255 million decrease. Second, low commodity prices and the strength of the U.S.

dollar adversely impacted volumes of coal, steel, frac sand, crude oil and export traffic. We estimate that almost 50% of our revenue base is tied to commodity pricing or foreign exchange rates.

Additionally, inventory builds have softened freight shipments since the second quarter. Despite these challenges, international intermodal, automotive and natural gas products all had large gains in the quarter.

Third, increased truck capacity, low diesel prices and service levels reduced the pace of highway conversions in 2015. We expect truck capacity to tighten, which coupled with continued improvement in rail service and Norfolk Southern's network reach, will allow us to secure additional demand moving to rail.

Fourth, we've employed solid pricing as demonstrated by gains in our revenue per unit excluding fuel overall and for all three primary business groups. We achieved these positive results despite negative mix associated with declines of several commodities previously referenced and increased international intermodal.

Our continued focus on pricing has allowed us to improve total revenue per unit excluding fuel each quarter this year despite continued negative mix. During contract negotiations, we focus on both price and the fuel surcharge program for the best overall long-term result for Norfolk Southern recognizing that the average duration of our contracts is in excess of three years.

We have emphasized market-based price increases and will continue with this focus reflective of the long-term benefit of rail transportation. The strength of our diverse network including our intermodal and automotive system, transfer terminals and alignment with our short-line partners and the customers they reach gives us the opportunity to continue to provide ripe opportunities for growth.

Our service continues to improve and as it does, and as aggregate demand strengthens, thereby negatively impacting trucking availability, we anticipate a return to strong domestic intermodal conversion in tandem with pricing strategies that are sustainable. As our business mix changes, we continue our focus on the bottom line by evaluating our network for opportunities to increase earnings per share.

A good example of these strategic structuring efforts is our recently completed acquisition of the D&H South Line, streamlining operations in the Northeast and offering a more service competitive product. Similarly, we recently announced the restructuring of our Triple Crown subsidiary which will reduce revenue beginning in the fourth quarter but is expected to be accretive to our bottom line next year and allows a more efficient use of capital.

Turning to the third quarter results on slide three, our revenue declined $310 million primarily due to a combined $342 million decrease in coal and fuel surcharge revenue. Focusing on our coal franchise, revenue declined by 23% due to a decrease in fuel surcharge revenue followed by lower export and utility coal volumes.

Utility reductions were driven by materially lower natural gas prices that impacted the dispatch position of coal plants on our network. This, combined with stockpiles above target levels, led to a 10% decline in our utility market to 22 million tons, above our previous guidance of 20 million tons per quarter.

Export coal tonnage of 3.5 million tons was challenged by weak macroeconomic conditions, low benchmark prices and the strong U.S. dollar.

While risk in this market exceeds that of utility, we continue to guide to 3 million tons per quarter through 2016. Our domestic intermodal volume declined 5% due to network service challenges, lower fuel prices and increased truck capacity.

Domestic intermodal pricing remains strong and despite short-term truck capacity increases and softer truck spot pricing, we maintain a long-term projection of continued pricing gains and conversions to rail due to the value of the intermodal product as service improves. Driver availability, hours of service and electronic logging devices have positively influenced pricing, leading shippers to lock in capacity for next year.

Our international intermodal volume grew by 9% due to growth at both East and West Coast ports as well as freight shifting from the West to East Coast ports, taking advantage of our network reach and alignment with shipping partners. Closing with our merchandise markets, the strong dollar and low commodity price environment negatively impacted steel, frac sand, crude oil and export grain.

Conversely, strong consumer spending assisted with gains in automotive, ethanol, construction materials and plastics. Lastly, volumes of natural gas liquids improved due to increased fractionator activity on our network and domestic grain shipments grew due to regional crop opportunities.

Moving into the fourth quarter, we anticipate volume declines in our commodity and export markets. Sequentially, most of these markets will remain flat compared to the third quarter, although steel has the potential for further decline and export coal will likely be closer to our guidance of 3 million tons.

These continued declines in commodity prices and the Triple Crown restructuring will lower fourth-quarter volumes compared to last year with the year-over-year rate of decline expected to be similar to that of the third quarter. Next year, we will clear the negative comps in the utility franchise which was influenced by significantly higher natural gas prices and stockpile replenishments in 2014.

We continue with our guidance of 20 million tons of utility coal per quarter. As stated earlier, the Triple Crown restructuring will allow Triple Crown to focus on its auto parts business with NS working with our shippers and channel partners to convert as much of their business as possible to the conventional intermodal network although the footprint of Triple Crown differs from our conventional network.

As Triple Crown provides a door-to-door retail service, the restructure is expected to negatively impact intermodal revenue per unit although be modestly accretive to earnings next year. Reduced fuel surcharge revenue will continue to be a headwind in the fourth quarter although we will lap this comp after the first quarter of next year.

Long-term, we will continue to focus on market-based pricing gains while better aligning our fuel programs with expenses. Despite the headwinds mentioned, our customers understand the value of rail transportation and as service continues to improve, we have the opportunity for market-based price increases and to grow our franchise.

We expect growth opportunities in our consumer base markets that include intermodal and automotive as well as housing and construction-related commodities, ethanol and basic chemicals. We also expect the impact of inventory builds which will have a dampening effect in the fourth quarter will lessen by the first quarter of 2016.

Norfolk Southern sits at both ends of the economic spectrum, production and consumption. This diversity has helped us during economic downturns and is a continuing strength of our franchise.

Today, we are seeing growth particularly in automotive and the international side of intermodal. The strong dollar is a challenge as is macroeconomic weakness overseas which contributes to lower aggregate demand.

Regardless, we are well positioned in multiple strategic markets for growth. As we move forward through the fourth quarter and into 2016, we will continue to partner with our customers to pursue strategic solutions that capitalize on market opportunities that create efficiencies and improve network productivity, while generating growth beneficial to the bottom line.

Thank you for your attention and I will now turn the presentation over to Mark.

Thank you, Alan, and good morning, everyone. This morning I will update everyone on our operation which continues to trend positively.

Specifically, we've seen year-over-year as well as sequential improvements in our service composite, speed and terminal dwell. While we still have work to do, we are encouraged by these results.

But first, let's take a look at our safety. Our reportable injury ratio was 1.05 for the first nine months of 2015 as compared to 1.19 for the same period last year.

The train incidents for the first three quarters of this year were 143 versus 154 over the same period last year. Grade crossing accidents through September 2015 were 255, down from 286 over the same period in 2014.

Turning to our service composite performance, we see services returning at a steady pace. We are optimistic we will continue to experience improvement as our resources are largely in place.

With regard to manpower, we have a sufficient crew base. In the third quarter, we added about 200 T&E employees.

We have modulated our hiring based on volume and we now expect our T&E count in the fourth quarter to be flat with the third quarter. With regard to locomotives, we have a sufficient number of locomotives to handle our business and furthermore, our locomotive availability continues to improve due to improved velocity.

Lastly, our operating plan in connection with our new yard expansion in Bellevue, Ohio is fully implemented and is benefiting us across the system. Turning to the next slide, we see train speed and terminal dwell are improving as well.

Our speed for the quarter improved 3% year-over-year and our dwell has improved 6%. These system improvements are important, and it's also important to note we have seen solid improvement on our Chicago to Harrisburg line.

This line handles the highest volumes on our system with a heavy concentration of intermodal. Our third quarter premium intermodal speed for this route is nearly what it was in 2013, and recently that speed has actually exceeded 2013 levels.

In addition to the efficiencies we're seeing with our improving operation, we're continuing to make strategic reductions associated with our decrease in coal volumes. We have made manpower reductions at our Lamberts Point Coal Pier as well as in the Central Appalachian and Northern Appalachian region which encompass all of operations not just transportation.

Furthermore, we continue to make changes to some of our coal routes with the most recent affected lines highlighted on this map. We have also reduced capital spending on branch lines where we've seen lower coal mine production.

These contractions to our employee counts and infrastructure have been a result of our continual efforts to match our level of investment to a changing marketplace. With that, I will now turn it over to you, Marta.

Thank you, Mark, and good morning, everyone. Slide 2 summarizes our operating results for the third quarter.

As Alan has already discussed, the 10% decrease in revenues was largely related to lower fuel surcharge and to lower coal volume. Operating expenses in total declined by $134 million or 7%.

Expenses benefited from significantly lower fuel prices but were unfavorably impacted by restructuring costs. The net result was an 18% reduction in income from railway operations and a 69.7 operating ratio for the quarter.

The next slide shows the major components of the $134 million or 7% decrease in expenses. As I just mentioned, fuel was the primary driver of the overall reduction, and favorability in the compensation and benefits category also contributed to the decline.

Before we get into the detail of the operating expenses, let's take a look at the effect of the restructuring costs on slide 4. The first column shows the Triple Crown related charges.

As Alan described, our Triple Crown Services subsidiary will, beginning in mid-November, be refocused exclusively on its auto parts business. Therefore, the bulk of the road rail equipment used by Triple Crown will be surplus at that time.

The $26 million shown as accelerated depreciation is the third-quarter charge for Triple Crown equipment. Turning to the Roanoke closure costs, they totaled $10 million in the quarter and consisted primarily of moving and office space expenses, which are reflected in the materials and other and in the purchased services line item.

These costs added $37 million to the quarter and impacted the bottom line by $23 million or $0.08 per share. Going forward, we expect these two items to total $45 million in the fourth quarter with Triple Crown restructuring costs of $36 million and Roanoke office closure costs of approximately $9 million.

Now let's take a look at the major expense line items. As shown on slide five, fuel expense decreased by $166 million or 43%, the majority of which was driven by lower fuel prices.

Slide 6 details the $26 million or 4% decrease in compensation costs. Bonus and stock-based compensation expenses were lower by $51 million resulting from the decline in financial results.

We expect fourth-quarter incentive compensation will be about $20 million lower than last year. Pay rate and payroll tax increases, as we discussed in the second quarter earnings call, began to moderate after July 1 and they were up $17 million and $9 million respectively.

And lastly, we continue to run with a somewhat higher level of training and that expense was up $6 million. Next, materials and other cost decreased $3 million or 1%.

Material usage, primarily associated with locomotive and freight cars, declined by $10 million. We also had lower derailment expenses.

However, these items were partially offset by the aforementioned restructuring costs. As shown on slide 8, depreciation expense increased by $39 million or 17% due largely to the effect of accelerated depreciation of Triple Crown assets and also as a result of our larger capital base.

As Jim mentioned, we completed the acquisition of the D&H line during the quarter and this increased our capital base by $215 million. Turning to slide 9, purchased services and rents were up $22 million or 5%, reflecting higher costs associated with equipment rent, engineering expenses and the Roanoke closure.

As noted by Mark, velocity and terminal dwell have continued to improve, and we expect these expenses decline sequentially in the fourth quarter. Other income reflected on slide 10 rose by $7 million or 22% aided by $19 million in higher gains from sales of property offset in part by decreased returns from corporate-owned life insurance and lower coal royalty.

Slide 11 depicts our income tax accruals and effective rate. The 37.6% third quarter rate is in line with our full-year guidance of 37.5%.

Wrapping up our financial overview on slide 12, net income decreased by $107 million or 19%, and earnings per share was down $0.30 or 17% inclusive of the $0.08 of restructuring cost. Thank you and I'll now turn the program back to Jim.

Thank you, Marta. As you've heard this morning, further softening in the commodities markets weighed on our third-quarter results and it has tempered our fourth-quarter outlook as well.

We now expect fourth quarter volumes will decline versus last year at a rate similar to our third quarter results. This year obviously has been a challenging one.

We didn't deliver the kind of improvements you and we expect. But looking to 2016, we are confident that with a reasonably stable economy and our own intense focus on service, returns and growth, we are poised for better results.

Thank you for your attention, and we are now happy to take your questions.

Good morning and thanks for your time here. Obviously this is an encouraging set of results and we're certainly pleased to see the improvements on the cost side.

I wanted to ask just a first-off question with regard to some of your cautious comments around the nearer-term demand outlook. How do we reconcile that with some of the increased training costs and your head count expectations nearer-term?

Tom, let me answer that first. Obviously we have some short-term headwinds in terms of the trend in commodities and business conditions generally, offset by continuing strength in some of our consumer markets.

But our strategy is designed to carry us through economic cycles because it focuses on fundamentals. First, service; excellent service will allow us to increase prices and reduce cost.

And second, return on capital because we are a very capital intensive business and every dollar that we spend must have revenue and profit generation potential. And third, growth.

We do want to grow our topline and see opportunities to do so even in a so-so economy. We'll do that first through price increases; second through volume growth, utilizing existing assets; and third and only as necessary, growth through capacity additions.

So that in a nutshell is our strategy. We think that will carry us through changing business conditions.

Now let's talk about the short-term resource picture. As I mentioned, we view key resources, crews and locomotives as essentially in balance with demand as we see it today.

With that said, we are going to be nimble with resources and if business conditions change so will our resource strategy. Now, Marta, why don't you talk a little bit about the specifics around head count trends and other efficiency-related spending?

All right, sure. So Tom, we had earlier guided that we thought we would increase head count about 1,000 for the full year.

But as Mark said, we're now up about 800 from the fourth quarter of last year to the third quarter of this year. As Mark said, we now do not think we're going to add that additional 200 for the end of the year so we think we're going to stay flat through this year.

And looking into 2016 as Jim just described, we think that's the right level for the company.

And just on that point if I could ask maybe a bit of a longer-term question. As we've looked through your head count and overall productivity, we've seen volumes effectively peak around 2006 and volumes even against last year's levels are still below that prior peak.

But your overall head count levels are still at the 2006 levels. And I guess I'm wondering is there something structurally that's changed in your book of business that requires more head count per carload or does this present perhaps an opportunity to improve productivity?

And you kind of alluded to the fact that as velocity increases, you potentially have room to be actually driving productivity further. So if you could just maybe elaborate a little bit more about the longer-term outlook for us because as we think about your OR, we certainly think and hope that there is opportunity to continue to drive that down.

But one of the areas I've been looking at is just on the labor productivity side and it looks like you have room there to improve. And I just wanted to get your perspective on how do I think about the longer-term opportunity there, carload to employee head count?

Thank you.

Sure. Great line of questioning and we are absolutely focused on productivity and as the network velocity continues to increase, we will have opportunities to reduce head count relative to the volume trend.

Now, Mark, why don't you comment on that?

Yeah, I'd be glad to and we actually started modulating our hiring on the T&E side particularly back last summer. So we've been hiring more to attrition levels ever since mid-summer and anticipate that will continue to go on, again, based on – dependent on the business volumes.

But as our velocity continues to increase, there are just great things that happen with that. And aside from the customer service side which is favorably impacted as well, but those velocity increases really help us on the cost side and it helps us reduce our employment, it helps us reduce our overall asset base.

We will have the advantage of picking up more locomotives as a result of that. Our expenses decrease as our asset turns increase.

And another thing that we see is re-crews go down and in fact they have been going down. Even third quarter, they were down – re-crews were down 6% and we'll continue to see that trend.

Our overtime was down on the T&E side, not overall, but I think we'll continue to see favorable trend on the overtime piece as well. So we'll see that in fourth quarter.

We will continue to see that going into next quarter and even things like our engineering department. As our fluidity improves, as our velocity improves, we can be more scheduled with our engineering department.

They get more track time. They get out on the track when they need to be.

They don't accumulate the overtime they otherwise would. So in short, improved velocity just drives a lot of good things when it comes to cost reduction.

I appreciate that detail. Thanks a lot.

Good morning. Thanks for taking my question.

First, I was wondering if you could talk about the decline in domestic intermodal and particularly relative to your main competitor which saw a 15% increase in the business. So, what I was wondering is if you could quantify or help to frame any potential share losses there and whether you expect to fully recapture those volumes and over what period of time?

Sure. Alan, why don't you take Allison's question on that?

Okay. Allison, the story for our domestic intermodal franchise is one that I highlighted earlier.

It's been fuel, it's been truck capacity and it's been a service product that is not conducive to shifts to rail. That's going to get fixed and we're already seeing improvements in our velocity in our intermodal and we're starting to see an uptick in our intermodal volumes.

And on the domestic side, certainly on the international side, we've seen great strength this year with more volume through the East Coast and our alliance with our shipping partners who are adding more capacity from the Far East to the East Coast and we expect the same next year. So we feel very good about our intermodal franchise going forward both domestically and internationally.

Okay. And my follow-up question on coal, thinking about the RPU on an ex-fuel basis being up slightly year-over-year, could you talk about some of the dynamics there that pushed that to the positive side of the ledger?

Was it mix, was it the lapping of rate cuts on the export side or a shift to fixed/variable contracts?

Sure Allison. Actually we've experienced negative mix within our coal franchise as we had a 37% decline in export, which as you know tends to be longer haul which is effectively a proxy for RPU.

So despite that we've gotten increases and it's – increases in our RPU. Although very slight, it is a positive and we're going to hold onto that.

But it's a function of our long-term pricing strategy in the coal markets and we feel very good next year because we're not going to have that negative comp in coal with respect to the utility franchise that we did this year.

Okay, thank you.

Hey. A follow-up question on the domestic intermodal side.

In terms of the service that you're providing and I think I'm hearing you say that you're not in a position yet where you're offering a truck-like product. Is that harming you more on the length of haul?

I mean, are you still very competitive on the longer stuff but it's putting pressure on the shorter length of haul where at higher diesel fuel rates you were becoming more competitive?

John, let me comment on our domestic intermodal strategy briefly and then I'll let Alan address the specifics of your question. We certainly do want to grow our domestic intermodal business and we have a service product that allows us to do that today.

Can we be even better and attract even more freight from the highway? Absolutely and that's our goal.

Now with that said, our growth strategy in domestic intermodal is a combination of volume growth and pricing. Pricing is absolutely critical in that franchise as it is elsewhere.

And so our strategy is to grow that business as with our other businesses through price increases, through volume growth using existing assets to the maximum extent possible and last, through increases in capacity but only where necessary. Alan, what about the specifics of John's question?

John, to your question with respect to if there's a difference between length of haul and our ability to retain business or grow business through fuel, we have not seen that.

Okay, all right, no worries. And in terms of network realignment, I guess just from the standpoint of you own more of your – I'm thinking more on the coal export side, you own more of your assets there, whether it's the coal loading facilities and things like that.

If we are now looking at a more permanently impaired export market, how aggressive can you be on realigning the cost around the export side of the business? And are there assets to shed, things along those lines that maybe better align those resources with the current volumes and then maybe even a little bit longer outlook which again looks to be maybe a bit more impaired?

Thank you.

I'll get Mark to comment on some of the specific moves we've made in our coal franchise following up on his commentary. But let me just say we have fixed assets in our coal network as we do throughout our company and we are looking hard at which of those is underutilized and we will continue to do so.

We have substantial fixed assets devoted to our coal franchise in the form of tracks and freight cars. One thing we can do and have done already is to begin working down the size of our coal car fleet and we can redeploy locomotives.

So that's a fungible asset. This is a notoriously volatile market.

We don't believe that we've seen the best days of export coal. We think that the commodity cycle eventually will turn and those assets will be fully deployed again.

Mark, talk a little bit more about what we're doing in the coal fields.

Yes, more current day, we are actually – we've furloughed or are in the process of furloughing about 150 people and that is across all the departments and operations including transportation, mechanical, engineering. We have, as I mentioned in the remarks, we've got lines that we have more recently either taken out of service or have pulled back on the investment for those lines.

We continue to scrub Central App as well as other areas in our coal franchise. But let's also keep in mind that we've got areas in our coal business where we've had some nice activity going on and continue to have promise for the Illinois Basin coal.

So it's a bit of a mixed bag but we will continue to scrub that Central App in order to ensure that we are reducing our cost commensurate with the level of activity out there.

Thanks for your time.

Thank you. I wanted to focus a little bit on intermodal.

Clearly, you've admitted you needed to get the service levels back up but it seems like that's happening. So that should be a good thing for freight as we head into 2016.

However, longer-term, how do you think about investments in that network profitability of that division as it takes over a larger percentage of the business hauled?

It's good business, it's a growth opportunity and it has been the volume growth engine of the company for years and that's likely to continue given secular trends in trucking. With that said, we're going to be very judicious with our investments and make sure that they are revenue and profit maximizing which is one of the foundations of our strategy.

That applies to the domestic intermodal business as it does to all other businesses we operate. We should talk a little bit about international intermodal.

That's a real bright spot right now. So Alan, why don't you expand on that a little bit?

So as we discussed, it's grown in the upper mid-single digits for the year. We anticipate a continued growth along that level in the near-term future as more volume matriculates over to the East Coast from the West Coast and folks with whom we've aligned are adding capacity into the East Coast and it allows us to build a lot of revenue density in our trains and so it makes for very efficient movement.

And so it's – we're excited about that and the growth opportunities and the returns that that provides.

Is there any way to quantify how much of that freight that moved over to the East Coast is sticky and how much either went back or will go back after this year?

Yes, some of it has definitely gone back. There is absolutely no doubt about that but still East Coast volumes are up.

And as the Panama Canal widens, we're going to see even more larger ships hitting the East Coast which are going to need to make multiple ports of call to discharge their cargoes. And so that's going to have a benefit for the ports that we serve all up and down the East Coast.

Are we going to see more on dock rail at some of the ports do you think as that business comes in?

At least one of the ports has announced that, an infrastructure plan for that.

Okay. Gentlemen, thank you for your time.

Yeah. Good morning.

I wanted to see if – Mark, I think in the past you have talked about productivity targets and I know with big change in volumes that it's an operating leverage effect. But what do you think the kind of productivity number is that you might achieve this year and how would you frame that opportunity for next year in terms of how you would define productivity?

I think in the past you've said something around $100 million. So, I wonder if you could offer some thoughts on that topic?

I'll take that one, Tom. We absolutely have productivity opportunities as we've been through this morning and as the network picks up speed, we will start to throw off a lot of productivity.

And we're also working on a number of business process initiatives and capital utilization initiatives that should lead to productivity benefits. All of that should add up to a sizable offset to volumetric and inflationary pressure on our expenses particularly next year when operations are really humming.

Okay. Let's see, and then, in terms of coal, how do we think about the – I think you commented, Alan, that coal stockpiles are above target.

I don't know if you could comment on maybe how far above target and whether that's a source of risk to your 20 million tons per quarter view that it's possible a couple quarters you run below that to get the stockpiles down and then you get back to that 20 million tons a quarter. But just some thoughts on coal related to stockpiles.

Yeah, that's a good question, Tom. We've actually seen stockpiles decrease in this quarter even though we exceeded our guidance by about 10%.

So while stockpiles do have an impact, it so far has not negatively impacted our ability to hit our targets. Right now, Tom, we're estimating that stockpiles are about 15 days above target.

I would say about five days in the South and about 25 days in the North.

Okay, great. Thanks for the time.

Hey, thanks. Another one here on coal.

It looks like the tons per car increased significantly in the third quarter up to about 112. Can you give us a sense what's driving that?

Has this been the result of changes in the network or is this merely business mix because we haven't been at this level for a long time.

We are always focused on tons per car because we – in the coal network, we are paid by tons. And so any time you can improve the revenue density on a coal train, it's very beneficial for us.

One of the factors that impacted the improvement in tons per car immediately in the third quarter was a continued decline in export volume. Metallurgical volume to the ports typically has a lower tons per car than utility volume.

Got it. I guess we should be thinking about something around these levels looking forward given some of the challenges that are impacting the export book of business?

To the extent that mix stays the same, yes. To the extent that we're continuing to work with our producers to get the optimum load level on the number of cars per train, then we'll improve the profitability of the individual trains.

Thanks, that's really helpful. I guess turning it over back to intermodal as well as the pricing, we've been hearing a lot about truck capacity having loosened up which has negatively impacted the overall spot market from a pricing perspective.

Obviously with Norfolk, we are seeing better service across the network with the velocity having ticked up here as well as the service composite improved, but how confident are you that we can see kind of further improvement in pricing or just maintaining the level of pricing looking out to next year given a tough volume environment outside of the coal franchise as well as some weaker truck pricing that we're seeing in the marketplace?

Can you clarify? Are you asking about pricing in intermodal or overall?

Just overall pricing just given what we're seeing in the trucking marketplace with capacity having loosened up, somewhat offset by service improvement. How are you guys thinking about the ability to maintain current pricing or potentially improve it as we look forward?

We feel good about it and we feel good about what we've accomplished so far, recognizing we have room to grow. Our RPU ex-fuel has grown each quarter of this year, and our customers are taking a long-term view of this and they are recognizing the long-term value of rail transportation, and frankly, when service is back to where we want it to be, and we're making great strides to get there, then intermodal is a very easy sell even with a tightening between the truck market and intermodal pricing.

And lastly, I'll add that we're taking a long-term view of this. And as Jim talked about, we're going to grow via price and we're going to grow via utilizing existing capacity.

And any additional investment that would require is going to have to generate an acceptable level of return.

Service led price increases are a key component of our strategy, and that applies to our domestic intermodal segment as well as all other segments of our business.

Yeah. Rob, as you know, spot pricing has gone down in the trucking industry but contract pricing is still up year-over-year.

Now it's moderated but it's still up because shippers are concerned about long-term truck capacity. So that certainly plays into the thesis for the value of rail transportation.

Thanks. Appreciate the thoughts.

Yeah. Thanks and good morning, everybody.

I just wanted to ask about coal, specifically related to your 20 million ton per quarter run rate going forward guidance. It would imply something flattish with what you saw in 2015, a little bit more optimistic than the other railroads.

Just wondering if you could help us maybe from a bottoms-up perspective how you get there, how much of that might be under contract, because I am contrasting it with some pretty dire commentary from CONSOL and Peabody and other coal companies yesterday and earlier in the week about the outlook for domestic coal. So I'm just wondering, be it mix shift, be it certain contracts you've secured, how you're confident that the coal volumes at 20 million tons per quarter will be flattish in 2016.

Some help there would be great.

Okay. So we've – if you think about the current natural gas environment, most of the conversions from coal to gas have already occurred – would have already occurred.

So natural gas I know right now is close to $2 per million BTU, but the futures curve for next year is about $2.65 on average, which is pretty similar to where we were in 2012. So we can model our volumes at the plants and the units that we serve versus 2012.

We also know that most of the near-term environmental headwinds associated with MATS, we've already been impacted by that and so that's not going to be a headwind going forward. Now longer term, the clean coal plant will potentially have an impact, and we are working with our customers to try to completely understand that and run scenarios within our own planning horizon.

But through 2016, based on our conversations with our customers and modeling how their plants performed in 2012, we feel good about our volumes of 20 million tons per quarter.

Understood. I guess my follow-up would be just if you could provide – Triple Crown has had an interesting evolution under the Norfolk umbrella.

If you could just refresh us in terms of the rationale for the restructuring, the focus on auto parts and your commentary was interesting on how it would be mildly accretive next year. Can you just help us get from where the thought process was on Triple Crown say a year or two ago to why this restructuring makes sense and tactically what's going to drive that accretion or efficiency or productivity relative to those assets?

Thanks.

The strategy involves focusing Triple Crown on what Triple Crown does best, and that's transport auto parts and re-channeling with other supply chain partners non-auto parts business into the conventional intermodal network where those customers and that volume can enjoy maximum efficiencies.

Matt, you'll recall Triple Crown was originally an auto parts network.

Right. So this is just after a little bit of scope creep, it's just doubling down on the core competency of the business...

It's going to improve our capital utilization by re-channeling as much of the other business, the freight all kinds, into our existing intermodal network where we already have the capacity.

Understood. Thank you for the time.

Hey, thanks. Good morning.

Wanted to – I think in the past you have recently talked about potentially volume increases in 2016. I guess I just wanted to get a sense in light of what your view is on the fourth quarter and some of the challenges shorter-term in the business, how should we think about that?

Is your thinking changing at all? Obviously you've given us the view on coal.

I just want to get a sense the rest of the business how you think about it for 2016 as the setup is right now?

Yeah. Absolutely.

We still feel very good about 2016. Our volumes year-to-date are down 1.2% in an environment where we've had 20% declines in our utility coal franchise, 35% declines in our export coal franchise and we haven't been able to attract highway conversions to our intermodal network.

We're going to clear all of that next year. There is some underlying growth in international intermodal.

We've talked about the automotive franchise is doing very well for us. Consumer goods are doing well.

So once we clear some of these very visible comps or headwinds into next year, then you are going to see, we are all going to see the benefits of the underlying growth in some of these other markets.

Okay, that's helpful. As a follow-up, just switching to the pricing side, you mentioned earlier the focus on fuel surcharge adjustments and having to work through the book of business as it comes up for renewal.

If you could just give us an update on how that process has been playing out, receptivity of customers, which I'm guessing is never great to a rate increase and potentially a surcharge in there. But I want to get a sense what are the puts and takes and do you have to give it all in pricing in order to get the fuel surcharge and how you prioritize those?

Chris, you bring up a great point. We prioritize price first and we always will.

So we are not going to give up on price just to shift to another fuel surcharge program. Over time we're going to be working with our customers to align our fuel surcharge program more closely with expenses and also importantly take the volatility out of it.

It's a lot more difficult to do in this environment where the WTI-based fuel surcharge, which is on about 50% of our business, is out of the money.

Okay. And the progress to that, it's sort of a multi-year effort is my guess?

Correct, and it would certainly be benefited as oil prices increase.

All right. Fair enough.

Thanks for the time. Appreciate it.

Yep.

Hey, thanks. Morning, guys.

Morning, Scott.

Just first thing real quick, Marta or Alan, did you guys give like a composite mix number on the quarter?

Scott, are you referring to the trend in mix in overall RPU?

Yes.

Or are – okay, so what is the change attributable to mix in total RPU?

It's a slight negative overall.

Okay.

Just a slight – and that's because the export coal went down a little bit, so slight negative. It's almost flat.

Okay. Thank you.

In terms of coal again, there was a pretty nice sequential increase in coal yields. Can you help us explain that, Alan?

I'm not sure if there's any liquidated damages in there or if that's mix and then just how to think about that going forward on a sequential basis, the coal yields?

We – certainly we've had negative mix associated with export, so that has been an impact. We've had more utility South volume which tends to be a longer haul for us and so that has propped up the utility yield.

And with your comments about stockpiles in the South being closer to target than the North, would you expect that mix to Southern utilities to continue?

We feel good about our Southern utility franchise going forward. The North is sitting frankly right on the Marcellus natural gas play, so spot natural gas prices are very low, even below the Henry Hub published numbers.

So the opportunity exists for a greater percentage of new South than new North going forward than we've had in the past.

Okay. And then just last thing, I want to go back to the head count question from earlier.

So we have seen all the other rails implement some pretty meaningful head count reductions and your head count was up sequentially. I certainly understand your service metrics weren't and didn't improve as quickly as some of the others.

But now that the service is improving, I guess I'm just not sure why you don't have an opportunity to take out a good amount of head count like we've seen all the other rails do as their services caught up.

Well, as Mark mentioned, we have a small opportunity – maybe the size you're talking about, a big opportunity, we had a small opportunity and we took it incrementally. In the fourth quarter, we think we are going to be flat.

And really, Scott, what we're looking at in 2016 in terms of productivity is not so much because as we said we've guided towards level head count next year, so it's not so much the head count but it's the cost of those individuals. So he pointed to the fact that we have costs now such as re-crews and overtime, things like that, lack of track time because of the system velocity.

So it's the price per hour if you will that we think is where we're going to get the most productivity next year. As we've said a couple of times, we believe absent a significant decline in volume which we do not foresee now, that we think that the head count level where we're at now in the third quarter is a good run rate for 2016.

And, Marta, you think that you can see savings on a per employee basis even with higher incentive comp next year?

Yeah. Well, higher incentive comp, I'm looking at separately.

So this year's incentive comp is down. Assuming financial results are better next year, that will be up.

So absent the things that are stand-alone like incentive comp and pension and post-retirement, that sort of thing, the actual cash cost to the employees per person we think will go down next year.

Okay. All right.

Thank you.

Hey, there. Thanks for the time.

I hate to beat a dead horse but just back to the resource topic, specifically for the fourth quarter you guys are expecting total volumes to be down about 3%, in line with the third quarter which would imply sequentially about down 4% yet you are not expecting to reduce the head count. Can you just speak a little bit more specifically to the fourth quarter itself and why the carloads are going to come down but the head count you don't expect to?

Listen, we're going to be nimble with our resource strategy and I said that earlier. And if we see volumes deteriorate beyond where we think they are headed, then we certainly will begin addressing the labor side of the resource equation.

But we're also focused on maintaining and improving service and that requires a certain level of employment. Moreover, we think that we came into this a little bit leaner than others and therefore we have a little bit less to shift.

Okay.

Alex, I'll also add that there is always a sequential fourth quarter decline in volume associated with holidays. So while that doesn't impact the year-over-year comps, you are preparing a sequential and so that does have an impact.

Okay, that's helpful. And, Jim, back to the service levels, I think a few quarters ago you were talking about expecting them to get back to "normal" by the end of the year and they certainly have shown improvement recently here.

But it looks a little bit still a ways away from the 2012, 2013 levels in terms of the metrics we see on the train speed and dwell. Can you maybe talk to – do you still expect the service to get to the normalized levels by the end of this year or maybe it might take a little bit longer into next year at this point?

You're right. We haven't made the kind of progress we said we would make on service as measured by network velocity and dwell, the metrics you see or internally.

But we have made substantial progress and we are in a lot better condition now than we were a year ago. Using our internal metrics, our composite metric is more than 10 percentage points above where it was last year at this time and trending well versus a downward trend last year.

So we feel very good about where we are in terms of our service and our intermodal premium trains are running extremely well. The network is in overall much better shape.

We still have a ways to go and we will continue to push on that composite metric and get velocity up too. So that's our strategy.

It's taking a little bit longer for us to get there than we had thought but we are well on our way.

Okay. That makes sense.

And just lastly a housekeeping question here for Marta. I think you had mentioned earlier in the call you expected purchased services and rent expense to be down sequentially in the fourth quarter.

I was wondering maybe if you could maybe give us a little bit more quantification of how much you expect that bucket to be down sequentially?

Well, we don't give guidance on specific dollar amounts but what I will say is we had a little – two things mentioned there is we had some service related costs in purchased services because we didn't quite get the velocity we had hoped for the quarter. So we had that in purchased services and in equipment rent to the tune probably of about $6 million, $5 million or $6 million in addition to the service related costs we had in compensation and benefits.

And the other item is after the November 15 or November 18 Triple Crown changeover, the Triple Crown dray costs are in that line item. So they will, as the business transitions over to intermodal, the dray part costs will be in purchased services.

Okay, that's helpful. Thank you for the time.

Great. Good morning.

I know it's been a long call. Jim, congrats on the Chairmanship and Mark, good luck in your upcoming retirement.

Just maybe some clarification on a couple of coal comments. Alan, you talked about clearing the deck.

I just wanted to clarify to your answer before, do you have any more MATS or CSAPR closings that are mandated in 2016? And then is the 3 million tons run rate what you are looking for on the export side?

Is that – I know you kept mentioning the 20 million tons on the domestic. Are you looking at the 3 million tons to hold through 2016 on the export side?

Ken, we've got about one or two plants, smaller plants that will be impacted by MATS so it's not going to have that much of material impact on what we're doing in our coal franchise next year. On the export side, yes, we are continuing to guide to 3 million tons a quarter, although I'll tell you that has more risk associated with it than utility guidance.

And we're, as I know you are, we're watching the worldwide indices and the spot market for Queensland (1:02:23) coking coal is now down in the low $80s per metric ton.

Okay. So even with the prices which doesn't really make sense to ship, you are still – thoughts are that it kind of holds at these levels?

Just are there contracts that lock that in? I just want to get some idea of what level of confidence you have in that or is that just an aggressive or conservative view?

To which are you speaking?

To the 3 million ton outlook on the export side?

Yeah. I think that has downside risk to it.

Okay. And then, lastly, Jim, just stepping back and there have been a lot of questions on employee and head count and efficiency.

Your last sentence there, you kind of noted that you came into this a bit leaner than others in the downturn. Maybe just get your thoughts internally on the operating ratio at 69.7, finally moving below 70 but now the industry has moved far ahead, your peers are now over 500 basis points better in the third quarter.

You now have three carriers at or below 60. Do you step back and kind of think about maybe something needs to be overhauled or completely changed in the way you've been operating to adjust that operating ratio?

Just as the peers are moving, it looks like farther away on that metric, just what do you think needs to be done?

Well, I think we're going to make a lot of progress on the operating ratio and we have the ability to lower the operating ratio significantly and we're confident that we can do that. Do I think we're going to post a 53 operating ratio next year?

Probably not. Hats off to those who are at that point already.

But with that said, we have a lot of progress that we can make on our operating ratio. We are keenly aware of where we stand in the peer comparisons and we are determined to improve our performance both in terms of a lower operating ratio and higher earnings.

Okay. So you don't step back as now in the Chairman/CEO role and say wow, we need to either gut programs or overhaul something?

I mean I see the stuff on Triple Crown but there's nothing that you see as needs to be overhauled to really make fundamental changes to get that lower?

Nothing is off the table and we are having far-ranging strategic discussions inside the company right now. So we could certainly entertain different approaches to sizing our asset base relative to our revenue and income generation potential.

That's a strategy that takes a while to deploy and deserves careful consideration because any strategy that starts hiving off significant portions of the asset base entails the risk of revenue loss. So we need to be very thoughtful about that but certainly we are open internally and talking about different ways to run this company and are determined as I said to reduce the operating ratio and grow our profits.

Is there a certain level of OR if the industry approaches that you fear more regulatory insight or overhang?

Well, I think the – look, the industry's view and I think it's the right view, is we need to generate substantial profits and returns in order to justify reinvestment. We are a very capital intensive business.

We have major reinvestment needs and the only way that's going to happen is if we generate adequate returns. So that's our focus.

I think it's a compelling argument in the regulatory arena. Don't cap our returns otherwise you will see reinvestment decline and I don't think anybody wants that.

Jim, Appreciate the time and insight. Thank you, guys.

Thanks and good morning. I wanted to start maybe following up on that last question.

I wanted to ask about CapEx. It sounds like there are several areas where you are improving capital efficiency.

So with that in mind, how do you expect your CapEx to trend next year, is there an opportunity on an absolute dollar basis for CapEx to be down in 2016?

Absolutely. Now bear in mind that CapEx in 2015 includes the D&H acquisition at or around $200 million.

So barring a similar transaction next year, that would come off CapEx and we do believe we have room to bring CapEx down beyond even that component. So yes, look for somewhat lower capital spending next year from us.

Any initial kind of order of magnitude that you are thinking about or is it still too early?

Well, I'll say this, it is early and we haven't completed our capital budget for 2016 yet. But in my view the kinds of capital spending that we've been putting up relative to revenue or cash flow is not something we want to continue to do and we do see a need to bring CapEx down relative to sales and relative to cash flow.

And that's our plan starting next year.

Okay, great. And maybe as my second one, I wanted to ask another one on pricing.

So as we look into 2016, do you think the magnitude of core price increases will look similar to what you've experienced this year or with uncertainty in the industrial economy, do you see downside risk to the current pricing environment?

Price increases are a key component of our strategy. We absolutely intend to increase our pricing commensurate with the value of the product that we are offering in the marketplace.

So there will be no letup in terms of our emphasis on price increases as a driver of revenue and profit growth.

Okay. I'll leave it at that.

Thanks for the time.

Well, good morning, everyone. I know it's been a very long call, so I'm just going to keep it to one.

But, Jim, it's kind of along the lines of what Ken was just discussing with you here. I mean, I know you're talking about OR improvement but it just feels like maybe your franchise is a little bit more levered to higher commodity prices.

I mean, previously you booked some profits in your fuel revenue which have obviously gone away. You've historically made a lot of money in the coal markets.

I mean, coal has gone from 30% of your revenue now down to 17%. And I know you think that things are going to be stable but natural gas prices are even lower this year.

So how do we just put all this together? I mean, if natural gas stays here, if we don't get a rebound in fuel prices, how do you aggressively attack the OR with some of those headwinds?

And speaking to the CapEx side or even the asset side or restructuring, why not get more aggressive on restructuring the coal network? I mean, again, it is down significantly from where it was even three years or four years ago.

Well, you're right. We're a commodities hauler.

So, you heard Alan say 50% of our loads are commodities based and so it definitely is more challenging in this sort of commodities environment. But that doesn't mean we don't have any opportunities.

We are going to continue to push on revenue growth as Alan went through. Fortunately, we have a pretty diversified franchise levered to commodities as it is.

We still have other opportunities to grow. We're going to push on those.

We're going to be very judicious with our spending. We're going to watch our capital very, very carefully and focus on again service improvements, return on capital and good growth.

Okay. Thank you.

Hey, good morning and thanks for making some time here at the end. I know it's been a pretty long call.

So my question is basically just on the coal network rationalization. If you can just give a little bit more context of – obviously it's been going on for 18 months or so.

300 miles have been taken out of service or restricted. Can you just give us a sense of how much of the network has been analyzed at this point?

You mentioned the labor savings obviously taking some assets, but you're still abandoning them. So I'm assuming you're going to have to have some maintenance expense with that.

So, if you can try to quantify that for us, that would be helpful and also how you approach that in general? Is this a proactive type of analysis where you get out ahead of volume cuts or you just take it as the mines start to slow down?

It is a proactive approach. And I would characterize what we have done as a good start.

There are maybe other opportunities as well. We are very actively analyzing all opportunities to rationalize our asset base, particularly in the coal network.

And there may be other rationalization opportunities ahead. But by the same token, we do want to retain the ability to handle coal volume which we think we will garner in the future.

So we're not throwing in the towel on our coal business. We are going to continue to be a coal hauler now and in the future, and we want to make sure we have the assets on hand to do that.

Okay. And just a quick follow-up.

Is there any sense you can give us in terms of how much the network has been looked at, at this point in time and any savings rule of thumb per mile taken out that you're able to realize?

We've focused up to this point on the Central App network in particular, as Mark went through. The savings will be meaningful, and we'll see those both in terms of expense savings and capital avoidance.

Okay. Thanks for your time.

Good morning. Real quick on the Triple Crown transition, can you give an update on the transition of the non-auto business?

I know that we're coming up toward the November 15 service cut first. And then second, what was the logic in keeping the auto parts business intact?

Well, I'll take the last part of that because that goes to the strategic rationale for the transaction. I'll let Alan talk about what's happening in terms of the re-channeling.

Triple Crown started out as an auto parts hauler and that is where they really excel. And the technology that we will continue to deploy in that service works really, really well in the lanes where they will continue to haul the auto parts.

So that's their forte, and we made the decision to keep them going in that area while looking to rechannel the other freight. Alan?

We are working with our channel partners. I'll reiterate what I said before because I don't want expectations to get too high, is that almost on purpose the Triple Crown network did not overlay the conventional network.

So it doesn't necessarily operate in the same lanes. So it's going to be difficult to matriculate a bunch of the business over to our conventional network, but it's still accretive to earnings and it still represents an improvement in capital utilization.

Appreciate the time.

Sorry about that. Hey, guys.

Congratulations in a tough environment. Most of my questions have been answered, but let me come back to Marta on capital spend and free cash.

I think it was you, Jim, that said you could see CapEx lower next year. You want to get back to a more normalized spend.

Including D&H, kind of what are we looking at in terms of CapEx this year and how do you think about CapEx say over a two-year, three-year period longer-term? Where do you think it should be?

I'd like to respond to your free cash flow point first, and I'll let Marta talk about the trend in capital spending. Our free cash flow has been somewhat subdued this year, and we're going to turn that around next year as well.

The formula for that obviously involves higher net income, bonus depreciation if that occurs. It's the absence of the D&H transaction affecting capital expenditures and it's a somewhat lower non-D&H related CapEx.

So all of that gives you much more robust free cash flow we believe next year.

Okay, Marta?

Yes. Jeff, so with regard to our capital program, at the beginning of the year we announced a $2.4 billion capital program.

When the volumes didn't come in exactly with what we had been forecasting, we lowered it by about 5% or $130 million. And then – and of course this year we have the $215 million that Jim described.

So going forward you should think about levels more like the original $2.4 billion minus the $130 million, and as Jim said, we think the absolute number in 2016 will be lower than that normalized level this year.

All right. And just to follow up on that, you have increased the share buyback this year.

With the stock down at these levels, is there a better use of free cash after capital spending than shares right now?

We certainly have deployed both borrowing capacity, cash on hand, and free cash flow for share buybacks this year, and we see good value in our shares. We'll continue to use excess free cash flow over and above our dividend and available borrowing capacity for that purpose in the future.

All right. Well, congratulations, guys.

Thank you.

Hey, good morning, guys. And thanks for making time here.

Just kind of thinking broad brush here with the headwinds that might be with the Triple Crown business migrating off and obviously the export coal decline next year, would you expect volume overall to be positive or negative coming into 2016 off of 2015?

Hey, David, it's – we still have the potential for growth next year. I think it's going to be more targeted towards the second half of the year.

So, more flattish, maybe up a little?

Yes.

In aggregate. And then, I guess, Marta, as a question for you, in terms of that lower rate of volume growth next year, do you think that lack of volume driven productivity may offset some of your ability to recover the efficiency-led costs or the inefficiency added costs of the last couple quarters and some of the things around Triple Crown?

Well, we'll definitely be pushing on efficiency next year. And Triple Crown is going to be one of the reasons how.

As Alan said, those – the moves that move on the intermodal network should be more efficient than the shorter road rail trains we were running some of this year.

I mean, it just seems like the operating income decline relative to the 3% decline in RTMs is pretty significant from a volume leverage standpoint, which would seem to indicate that if you've got a flatter volume year next year it may be tougher to get some of that leverage to fall through or some of those efficiency savings to fall through. Am I thinking about that right or is there – or do you think there is going to be a strong prospect for organic earnings growth in a flat volume year?

Well, one thing to remember for next year is this year thus far we've had, all three quarters so far this year we've had service-related expenses and some weather-related expenses in the first quarter, but they cumulatively total about $82 million. So, year-over-year, we don't expect those to recur in 2016.

So that will begin our productivity improvements and we expect to increase on that.

Okay. Thanks.

Good morning and thank you for your time. My first question relates to coal royalties.

We've seen them contribute about $0.04 this quarter. When are they up for renewal and please remind us whether they relate mostly to domestic utility coal or other areas as well?

Thank you.

It varies by contract with respect to the duration, but much of our coal royalties is associated with metallurgical coal.

I'm sorry?

Much of our coal royalties is associated with metallurgical coal.

Metallurgical, okay. All right.

And then my second question comes back to fuel surcharges versus coal price. You've commented on this call and recent other calls that your customers have been unwilling to give up fuel savings without a value exchange in terms of core price, and on your end you said you are unwilling to do that.

So, is it best for us to model core price increases offset by some negative mix and then leave surcharges unchanged into 2017 as the forward curve suggests? Thank you.

Model – can you say that point about – did you mention 2017?

Yes, in the sense that on the current forward curves your surcharge programs are out of the money for some years out. And so, if right now that change is not occurring and you're saying you are needing fuel prices to go higher for that to happen, should we assume that there is no change on the fuel surcharge and just model core price increases?

Okay, I get your point. Yeah, it will be easier to accomplish this as or if WTI prices go up but it also gives us the opportunity to push price.

Okay. And your feedback from customers so far, can you tell us a little bit about that?

Which?

What your customers...

Can you help me understand, Cleo...?

Yes. It's about how discussions are going in terms of getting core price because in my understanding that conversation is still tough as you are trying to get core but they don't want to give up the fuel.

So how is that all netting out?

That's a good point. Negotiations with customers with respect to price are always tough but they do recognize the long-term value of rail transportation.

There is a pause right now in demand in some commodity markets. Jim talked about how 50% of our revenues are tied to commodity or foreign exchange.

That's a short-term pause. Inventory drawdowns we believe will be complete by the end of this year and shippers are trying to line up capacity for 2016 and 2017 which is why you see in the trucking market spot prices declining but contract prices still moving up although moderating.

Okay. And is it true that at this time of year you are already starting to discuss the book for intermodal for next year?

How is that going given your improvement in service in terms of setting up prices for next year? Thank you very much for your time.

In terms of filling up what, Cleo?

The book.

The book...

In terms of...

Our intermodal contracts aren't necessarily at the end of the year so we always have a mix of contracts, whether it's commodity or customer base, that are up throughout the year. And so certainly we are discussing contracts for the remainder of this year and next year and we are pushing price and the long-term value of rail transportation.

Thank you. Appreciate your time.

And Cleo, if I could mention one more thing on the fuel surcharge revenue you asked about for modeling for next year, don't forget that in the first quarter of this year we still had a somewhat elevated level because the month of January benefited from the lag when oil prices were higher. So each quarter of this year you've seen declining absolute numbers of fuel surcharge revenue.

We expect that to continue and have declining fuel surcharge revenue in the fourth quarter. So I just wanted to put that out there for when you're modeling 2016.

Thank you, Marta.

Well, thank you, everyone. We appreciate all your excellent questions and we will talk to you again next quarter.