Good afternoon, everyone, and welcome to Norfolk Southern's Earnings Conference Call for the third quarter of 2025. I will now hand the call over to Luke Nichols, Senior Director of Investor Relations. Please proceed.

Good afternoon, everyone. Please note that during today's call, we will make certain forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or future performance of Norfolk Southern Corporation, which are subject to risks and uncertainties and may differ materially from actual results. Please refer to our annual and quarterly reports filed with the SEC for a full discussion of those risks and uncertainties we view as most important. Our presentation slides are available at norfolksouthern.com in the Investors section, along with a reconciliation of any non-GAAP measures used today to the comparable GAAP measures, including adjusted or non-GAAP operating ratio. Please note that all references to our prospective operating ratio during today's call are being provided on an adjusted basis. Turning to Slide 3. I'll now turn the call over to Norfolk Southern's President and Chief Executive Officer, Mark George.

Good afternoon, and thank you for joining us. With me today are John Orr, our Chief Operating Officer; Ed Elkins, our Chief Commercial Officer; and Jason Zampi, our Chief Financial Officer. We delivered another quarter that demonstrates the team's ability to deliver a quality railroad. Throughout the year, we have highlighted our continued commitment to focus on what we can control, running a safe, efficient network, improving processes, delivering solutions for our customers' most pressing needs and supporting our people. That remains the approach today of our 20,000 Thoroughbreds who deserve thanks and credit for our performance. On safety, our train accident and employee injury rates continue to improve. That's the result of disciplined execution and continued emphasis on training. Safety is a core value, and we will never compromise on it. On service, our network is running well. Terminal dwell and car velocity remain stable, and we once again saw fuel efficiency gains, attaining a new quarterly record. These improvements are integral to delivering reliable, high-quality service for our customers, and they position us to sustain performance over the long term. Safety and service together form the foundation of our ability to serve customers at the highest level. And what truly powers this progress is our people. Across the railroad, the Thoroughbred team shows up every day with focus and determination. We are committed to building the next generation of railroaders because careers in rail continue to be among the best in the country. As we noted at recent conferences, the third quarter volume surges forecasted by partners didn't materialize as expected, and the truck market remains oversupplied. Ed will detail this. So while revenues were short of where we expected, the continued success on productivity was evident in the quarter. We also had a large land sale at the end of the quarter that helped neutralize other adverse impacts that Jason will cover. While not big in Q3, we started to see some of the revenue erosion from competitor reactions to the merger announcement. We expect the impact to grow in the fourth quarter and continue to be a challenge over the near and medium term. As we make progress towards getting approval for the proposed merger with Union Pacific, our focus remains squarely on ensuring momentum on safety and service while executing on our strategy and delivering for our customers. We've got a lot to be optimistic about. We're on a good path, and we're doing what we can on the controllable side to prepare for growth. I'm proud of the progress we've made, and I'm even more excited about what's ahead. With that, I'll turn it over to John and the rest of our leadership team to walk through the quarter in more detail. John?

Thanks, Mark, and good afternoon, everyone. Turning to Slide 5. I want to recognize the deliberate transformation Norfolk Southern has delivered in safety, service, and cost structure from 2024 and throughout 2025. This progress reflects a culture of accountability and disciplined execution, powered by generational leadership investments that position us for long-term success. We're creating a network that is safer, more reliable, and more efficient, shaping the future of rail and setting the standard for what rail service can and should be. Our PSR 2.0 transformation is delivering measurable outcomes that matter to every customer and stakeholder. For example, Amtrak host delays across Norfolk Southern improved 26% year-over-year, underscoring our progress and unwavering commitment to precision, reliability, and the standards that define Norfolk Southern. In Q4, we're going live with clarity camps, the next cornerstone of the Thoroughbred Academy. The curriculum elevates PSR 2.0 business excellence. And importantly, as we transform safety and service standards, we're simultaneously delivering productivity gains, creating a clear and steady direction across the organization. All these efforts are aligned to our broader commitment to deliver meaningful expense controls while operating a reliable and more resilient railroad. Relative to 2024's full year results, our year-to-date safety figures demonstrate FRA personal injury ratio has improved 7.8%, and our train accident ratio has improved 27.7%. Our team will never be satisfied with our safety results. We always strive to improve on our best performance. That's why my team and I are spending more time in the field this quarter, staying close to the work, staying close to our people, and staying focused on what drives results. Turning to Slide 6. We achieved stronger service and volume growth this quarter while operating with fewer assets and resources. That discipline is clearly reflected in our financial outcomes. GTMs increased 4% year-over-year, which were accurately delivered with 6% fewer qualified T&E. Our revolving zero-based train service plan continues to drive cost control, precision, and productivity. Key highlights include a 19% reduction in recrews, a 12% decrease in intermodal train starts since the beginning of the year, alongside a sequential improvement in intermodal service composite and a 5.5% merchandise carload growth. Turning to Slide 7. These results reflect decisive actions to balance quality service and efficiency. We're on track to exceed our expense reduction and broader financial commitments. And we're not stopping there. The team is stretching for more, raising our efficiency targets to a 2026 cumulative goal in the range of $600 million. Operational metrics confirm the effectiveness of our fuel management strategy, which delivered an all-time quarterly record of 1.01, a 5% year-over-year gain. This reflects both immediate savings and a durable path to greater efficiencies. Sequentially, train speed rose 3%, allowing us to store more locomotives while running a leaner, more reliable fleet. Turning to Slide 8. Rapid deployment of next-level field technology is part of a broader strategy to transform inspection, reliability, and overall performance. In the photos, you can see a new state-of-the-art wheel integrity system being installed near Burns Harbor, one of our busiest corridors. We're advancing machine vision at speed across our network. In the quarter, we deployed a new inspection portal in Virginia, bringing the total now to 8. We positively identified over 40 wheel integrity defects, and we've launched 6 new algorithms with 9 more already in development. The data from these field technologies feed our war room that is staffed with craft employees, managers, and senior executives, facilitating real-time problem solving and cross-functional collaboration. We're leveraging digital tools, operational analytics, and ecosystem level coordination to elevate our capabilities and operations and safety excellence. Wayside stops are down 6.7% year-over-year and 36% year-to-date, even as we expect 5% more axles daily. This quarter reflects that our operational fundamentals are sound and are supporting a strong service offering. This is made possible by the commitment and resilience of our railroaders across the entire enterprise. At Norfolk Southern, results matter, and our people continue to deliver with confidence and momentum. With that, I'll turn it to you, Ed.

Thanks so much, John. Now let's go to Slide 10, where you'll see that we achieved 2% year-over-year growth in both revenue and RPU in the quarter. We see several dynamics at play in the business portfolio. We have strength within our merchandise markets, partially offset by meaningful declines in export coal markets. We see reduced fuel surcharge revenue and softer-than-expected intermodal volumes. Overall, our volume for the third quarter finished flat despite gross ton-mile growth of 4%. Let's look inside of merchandise. Volume grew 6% from a year ago, driven by our auto, chemical, and metals and construction markets. Revenue less fuel grew 7%, which underscores our pricing discipline and our volume performance. However, we had mix headwinds from growth in commodities such as natural gas liquids, sand, and scrap metal, which diluted our overall RPU performance. In Intermodal, we're navigating the complexity of ongoing trade and tariff uncertainty, persistently abundant highway truck capacity, and outside factors, including competitor responses to our merger announcement, which caused volumes to decrease 2%. Intermodal revenue less fuel and RPU less fuel both grew, reflecting the overall stable pricing environment right now. Now here, I have to note that year-over-year RPU comparisons benefited from an abnormally high volume of empty shipments ahead of the East Coast port disruptions last year. Let's turn to coal, where weakening seaborne coal prices drove RPU less fuel lower by 7%, and this was the most significant revenue headwind for the quarter. We enjoyed stronger demand in our Utility segment, but it didn't offset the sustained weakness in export. This interaction has been playing out throughout the year, and we expect it to persist. Let's go to Slide 11 and talk about the market outlook. Like the third quarter, we continue to navigate a dynamic economic environment, along with competitive cross currents. For our merchandise markets, we forecast vehicle production will be challenged in part due to recent disruptions at a key material supplier to our customers. We expect this will have a meaningful impact on production at several NS-served automotive plants in the fourth quarter. At the same time, overall manufacturing activity remains mixed with output expected to grow despite the backdrop of trade and tariff uncertainty. Strong fracking activity in the Marcellus/Utica Basin is supporting demand in NGLs and sand in our merchandise markets. Looking into our intermodal markets, we expect softer import demand in the near term. This reflects the impact of tariff volatility and growing trade pressures. Warehousing capacity remains tight as inventory levels expanded at the beginning of the year ahead of tariffs and truck capacity remains oversupplied. Coal prices have remained pressured with significant uncertainty surrounding export trade. And at the same time, we're expecting utility demand to see continued support from growing electricity demand and lower existing coal stockpiles. Now these dynamics should be considered against the backdrop of our recently announced merger, which has intensified competitor activity across the industry. And as a result, we anticipate volume pressure, particularly in our Intermodal segment. And so we're maintaining a cautious outlook for the remainder of 2025. Lastly, as always, we want to thank our customers for their continued partnership and business. The entire NS team is aligned around delivering the service that our customers need every day, building trust as a vital partner in their supply chains. Now with that, I'll hand it over to Jason to review our financial results.

Thanks, Ed. I'll start with the reconciliation of our GAAP results to the adjusted numbers that I will speak to today on Slide 13. Total costs attributable to the Eastern Ohio incident were $13 million, which included $16 million of recoveries under our property insurance policies. In addition, we recognized a $12 million restructuring charge in the quarter as we continue to rationalize our technology projects. Finally, we also recorded $15 million in merger-related costs, consisting primarily of legal and professional services as well as employee retention accruals. Adjusting for these items, the operating ratio for the quarter was 63.3%. And from a bottom line perspective, we earned $3.30 per share. Moving to Slide 14, you'll find the comparison of our adjusted results versus last year and last quarter, both comparisons reflecting a 10 basis point improvement in the operating ratio and the sequential comparison basically even with the current quarter. On a year-over-year basis, revenue was up, as I just discussed, but we were expecting approximately $75 million more revenue as we had guided to within the second quarter materials. Continued macro headwinds, a surge that never materialized, and competitor responses from the merger announcement that started to really ramp up at the end of the quarter, all were barriers to the attainment of that expectation. Expenses were up 2% on a 4% increase in GTMs, but there are a lot of puts and takes within OpEx, and those year-over-year expense drivers are laid out on Slide 15. You'll note that the quarter benefited from higher land sales, which were $65 million more than last year. In fact, the entire variance was driven by one large sale that closed at the very end of the quarter. Another quarter of strong productivity gains also helped to mitigate both inflationary and volumetric pressures in addition to the absence of benefits recorded last year in the form of cancellation of stock awards and fuel recoveries. I'd also point out that claims expense was elevated in the quarter despite the outstanding progress we're delivering on our safety initiatives as we react to unfavorable developments on claims from several years ago in addition to claims inflation on a few incidents that we have experienced this year. So as I think about our 63.3% operating ratio for the quarter, clearly, that was aided by outsized land sales. However, we were short on revenue from our latest guidance, and we dealt with higher claims expense than what we had been experiencing. And as we move into the fourth quarter, revenue will continue to be challenged, but we are focused on what we can control, and we expect to maintain our cost structure in the $2 billion to $2.1 billion range. I'll hand it back to Mark to wrap it up.

Thanks, Jason. As you can see, there were a lot of moving parts in the quarter, but as a Thoroughbred team, we are successfully controlling the controllables. Looking ahead, the macro environment remains uncertain, and we acknowledge that over the next several quarters, unpredictable demand and unique competitive dynamics will create some abnormal fluctuations in our top line. We are not standing still. Our recent Louisville announcement will create attractive volume growth as it builds out. Additionally, once the merger closes, we can provide attractive solutions for our customers, unlocking faster, more reliable service, streamlined shipping experiences, and expanded access across a unified coast-to-coast rail network. These improvements will strengthen our value proposition and help drive long-term growth in our combined railroad through highway conversion. While the regulatory review process is ongoing, we remain laser-focused on maintaining strong safety performance while running a fast and resilient network. That is delivering great service that our customers have now come to expect from us. Meanwhile, we will continue to maintain a sharp focus on optimizing our cost structure. As you saw in John's section, we are making excellent progress on the productivity front and are raising our 2025 efficiency target to roughly $200 million, and this follows the nearly $300 million we achieved in 2024. I am really proud of our team for the work they've done on this. And while revenue in this environment is proving difficult to guide, you can expect that our fourth quarter cost in absolute dollars will be in the $2.0 billion to $2.1 billion range. So with that, let's open the call to questions.

First, we will hear from Scott Group at Wolfe Research.

So Ed, if I heard right, I think you said a 2-point drag in Q3 from some business losses related to the merger. And it sounds like it gets worse going forward. Is this just intermodal? Are you seeing it in any other places? And ultimately, how much business do you think is at risk until we see merger closing?

Thanks for the question, Scott. We observed a noticeable impact toward the end of the quarter, around September. This situation will continue to unfold until we see a year-over-year comparison. It represents a small portion of the business, primarily concentrated in the Southeast region. We are diligently focusing on two main objectives. First, we aim to provide exceptional service to all our customers. Second, we are actively utilizing our network, route structure, and terminal setup to reclaim freight that may have departed for various reasons. While I acknowledge that this will be a challenge for some time, I am confident that over the next few bidding cycles, we will see a positive shift back toward what I would describe as a high-value, low-cost solution, which is what Norfolk Southern offers to beneficial cargo owners.

And that's independent of a merger, Scott, yes.

Could you provide more insight into the $2 billion to $2.1 billion cost range for Q4? It's quite broad on a quarterly basis. Excluding the gains, we had a 65.5% operating ratio in Q3. Do you anticipate that number worsening in Q4? Any thoughts on that?

Yes. Thanks, Scott. So when I think about the expense profile going from third quarter to fourth quarter, as you mentioned, you've got to kind of normalize for those outsized land sales that we had in the third quarter. And then historically, as we move from third to fourth quarter, if you look at the 5-year average expenses are up about 1.5%. And that's kind of really what brings us into that $2 billion to $2.1 billion range, so kind of moving with that seasonality. A couple of drivers that I'd point you to. We've talked about headcount in the past, guided you to the fourth quarter 2024 exit rate, which was about 19,500. We're a little bit below that in third quarter. So that should step up a little bit as we move into the fourth. Depreciation expense always steps up as we move into the fourth quarter just as we get more capital work done and get those projects in service. And then finally, we talked a bit before about what we've done on the technology front, and we've really gone to that managed services model. So you'll see some higher purchase services expense in the fourth quarter that are being driven by that. Eventually, you should see that come out of comp and ben, but it will definitely be a driver in the fourth quarter.

Next question will be from Brandon Oglenski at Barclays.

Maybe this is for Mark or John, but how do you guys think about managing the cost structure in this environment where maybe there's some share loss and obviously some headwinds just given the trade environment, especially as you look out further, if the deal gets approved, then maybe you want to maintain some excess capacity as well. So how do you balance these differing needs as you look out over the near term and medium term?

Yes. Great question, Brandon. I think you're right. We've got to be really careful how we address this. I mean as you see, we have been trading down a bit and driving some productivity with regard to moving 4% more GTMs this quarter, while we saw headcount kind of drift down 3%. So that's a 7% spread, we're really happy with that outcome, and we're seeing actually better service and better safety performance while we do it. So we're going to be really careful here. And I think, John, maybe you can talk a little bit about the next step of cost reduction. But the other element I'd point you to, Brandon, we continue to focus on fuel efficiency, where we had a 5% gain year-over-year in fuel efficiency from all the initiatives that John has put in place. So we continue to get these mid-single-digit improvements in fuel efficiency. So labor productivity, fuel efficiency, we've been attacking purchase services, although we are making a deliberate shift to outsource some stuff in IT that will yield benefits in comp and ben. So that's why it's a little bit of an odd quarter because you do see zero volume growth on the carload side, but there is actually GTM growth. So that does require resources. And also, remember, 18% growth in autos this quarter year-over-year, huge growth. And that, of course, has some incremental volumetric costs that come with it that you'd see manifest in equipment rents. So those are the kind of things where it's a complex P&L, and we're going to be really mindful of really trying to drive those areas for productivity and efficiency while not undermining our ability to move volume at all. But John, chime in, please.

Yes, Mark, you provide detailed insights typical of a Chief Operating Officer, allowing me to discuss some broader aspects. I appreciate that. Let's begin with the basics. We are handling more volume with improved yield on our trains, operating slightly heavier trains with fewer crews and enhanced overall fluidity. We are leveraging the train speed we are generating to reduce our locomotive fleet, increase our car miles per day, and decrease the number of cars required for a load. All these fundamental improvements benefit our customers and enable Ed to sell aggressively in whatever market he is in. These fundamentals are strong. We have restructured several elements, including our fuel management, which is leading to sequential improvements in fuel efficiency and positively impacting our bottom line. But our efforts go beyond that. We have revamped our hiring process to improve both the speed and quality of workforce entry. This allows us to be more responsive, even to longer lead resources and assets. We are prepared for these challenges. We will continue to enhance locomotive fluidity by revamping our train service plan. Our zero-based plan version 3 has just been released. Year-to-date, we've reduced our intermodal crew starts by 14%, while shipments per crew start have improved by 11%. We have streamlined our lean offerings and reduced complexity in blocking, which has energized our service delivery with more resilience and capability. This gives me confidence that we will not only achieve significant cost reductions and financial improvements this year but also continue that momentum into 2026, targeting a cumulative takeout of around $600 million. It will require hard work, which is inherent to our approach, and we are ready for it.

Next question will be from Jonathan Chappell at Evercore ISI.

Ed, you mentioned in your prepared remarks that the coal RPU was one of the single biggest impacts on revenue. And you also said you expect the headwinds to persist. If we look at export benchmarks and even your Eastern peer last week made it seem like the coal RPU pressure would stop at least sequentially, maybe you were referring to year-over-year. Can you give us any sense to how much that may continue to step down from the third quarter level? And when you think that headwind may begin to stabilize?

I think you got that right. And thanks for the question, so I can clarify. I think the export met benchmark is something like 175 right now. And I don't necessarily anticipate any material degradation from that. So on a sequential basis, maybe you go sideways, which on a year-over-year basis is still double-digit down. Same is true on the utility side for export, probably going sideways, but still on a year-over-year basis, double-digit down. And I think that's going to persist certainly through the quarter and maybe into early next year before it hopefully starts to climb out. There's a lot of uncertainty around export coal when it comes to both the met and utility side, who's going to get it or who's going to take it and where it will come from. So we're keeping a really close eye on that. Thank you.

Great. So that revenue headwind and mostly volume, we should stop looking for RPU deterioration overall.

Well, I think persist year-over-year.

Yes. Year-over-year RPU deterioration will continue. Sequentially, it should be pretty stable. And this quarter, we did start to see volume degradation as a result of the poor pricing environment.

Next question will be from Tom Wadewitz at UBS.

I wanted to ask a little more on the topic of the competitive responses. I guess the kind of name that comes out and seems most prominent in Intermodal would be J.B. Hunt. And I just want to get a sense if you could help us think about to the extent that BN is going to exert some control here and push more business over to CSX, how much of the business do you think should be sticky to Norfolk? I recall back quite a long time ago, you had some corridor initiatives that I think are differentiated like the Crescent Corridor, just lines that maybe CSX isn't going to serve markets as well. So I just want to see if you have some high-level thoughts on what can make business with JB or Intermodal in general sticky in terms of network differences? And how much kind of risk is there of kind of BN forcing some business over to CSX?

So I think we talked about it before that more than half of our business with J.B. Hunt originates and terminates here in the East. And we continue to provide a really excellent service product to them, and we feel comfortable and confident with that, retaining that business. I think for the balance and particularly in certain geographies, perhaps in the Southeast, that's really what's at risk right now that Ed can go in and talk about. But I just want to reemphasize that one thing. About 2 decades ago, we started investing hundreds of millions of dollars to build out our intermodal franchise. We built out that premier corridor and a Crescent Corridor. We built terminals, and we have an unrivaled intermodal franchise in the East. And it's a franchise that people want to be on because it provides the fastest route for the major markets and with a terminal footprint where customers want it to be. So with time, cargo owners are going to want that business back on the NS, and we are going to work aggressively to help them get that cargo back on the NS. So Ed, please chime in.

I think you summarized it well, but I want to emphasize that Norfolk Southern has several key areas where we provide unmatched value for customers that can't be easily duplicated. From my experience, it's clear why we have the second largest intermodal franchise in North America: it's due to the superior route structure we've developed, along with a terminal network that places freight closer to the consumer than any other network. There are many ways to maneuver freight that might seem unorthodox, but over time, John and I are very confident that if we collaborate and maintain our exceptional service, which we currently have, and continue to partner with the right people, we will remain in a strong position.

One aspect of this is that CSX has been working on a significant construction project and improving efficiency with their Howard Street tunnel, which enhances their operations in the North-South direction along the East. Do you see this having a major competitive impact, or do you think it's more of a minor effect on a small part of your domestic operations?

I can't really comment on that project for them. I hope it makes them a lot more competitive with truck.

Next question will be from Brian Ossenbeck at JPMorgan.

First, I'd like to follow up with Ed. You mentioned that the business would return to the network even without the mergers. Could you clarify what changes would need to happen, whether it's better service or more competitive pricing? Additionally, John, regarding fuel efficiency, we've always understood that it would be challenging at Norfolk due to factors like haul length and weight. However, it seems you've made significant progress. Do you think you can reach best-in-class levels compared to your peers? Any further insights on this topic would be appreciated.

All right. I'll go first before I forget the question. When I think about service from the West Coast into the Southeast, I think about UP and NS utilizing the Meridian Speedway as the fastest, shortest route between those 2 regions, period. There's not a better ride out there when it comes to that kind of freight for intermodal. So that's one thing. The second thing is the exceptional amount of terminal capacity that we have and expertise to back it up, both in the Carolinas, Florida as well as in Georgia, that's just going to be a force multiplier and has been. So we're confident that over time, cargo owners are going to make the right decision about where their freight is routed. I'll hand it off to you, John.

I'm pleased to hear your recognition of the team's efforts regarding fuel. While I won't delve into past considerations, I can assure you that fuel management is central to our strategy, which encompasses our sourcing and logistics plans, including product distribution, usage, and consumption. Our current efficiency translates to considerable financial value. As we present various measures, we're focusing on balancing speed, locomotive productivity, and fuel usage. Our goal is not merely to increase speed for its own sake, but to optimize crew utilization and cost savings. As we manage fuel consumption, we ensure alignment with our train service plan, which we continually review in detail. This includes evaluating the resources needed, the fuel required for transporting cargo, and the timeline for reaching customers. On a product level, we fulfill contractual commitments while improving our service metrics. We're applying this same approach to our mechanical operations, locomotive servicing, parts inventory management, and engineering responsibilities under Ed Boyle's leadership, addressing ties, plates, rail, ballast, and more. Across all areas, including fuel and operational resources, we're implementing a focused strategy. I believe there is significant potential for improvement in our fuel management, and the opportunities for value creation in this area are just beginning to be realized as we advance our enterprise resources.

And I would just add one other thing, Brian, is when I look back 6 years ago when I came in, we had roughly high teens percent of our locomotive fleet that was AC. And through those investments that we've been making every year systematically to upgrade our locomotive fleet from DC to AC, we're now approaching 80% AC. So that is definitely helping, providing more runway for the future that John is extracting, using the method that he's talking about. So that definitely is a driver as well, right?

Yes. Looking back at 2019, which was a significant year for us both financially and in terms of service, we are currently operating with 23% less horsepower per ton year-to-date. By managing our locomotives effectively, utilizing our power and crews, reducing stops, and enhancing fluidity, we see positive impacts on fuel and various other profit and loss items. So, Mark, those strategic investments are indeed yielding positive results.

But the discipline you're bringing now for the things you're just talking about is really what's accelerating the benefits and providing more runway into the future. So congratulations on that.

Next, we will hear from Chris Wetherbee at Wells Fargo.

I guess I wanted to sort of ask about what you think is possible from an OR improvement perspective, particularly as we're thinking about 2026. So you came into this year, I think there was a revenue target around 3% with 150 basis points of productivity and then 150 basis points of OR. Obviously, the revenue side has been more challenging because of volume. We'll see how much OR you get this year. But I guess maybe the question as we go into next year, how much sort of OR opportunity do you think there is that you can control and maybe how much is more revenue dependent? So obviously, it's an uncertain environment out there. I want to get a sense of out of the $600 million of productivity, how much do you think can be translated from an operating ratio perspective as we think about next year?

Chris, thanks for the question. Look, I think what we're going to do, which is very similar to what we're doing this year is we're going to focus really hard on the controllables, in particular, those elements on the cost side. So we're going to maintain a lot of discipline on our employment levels and try to drive labor productivity for sure. We're going to focus on the fuel efficiency in every single line item in the P&L that we can control. Obviously, we get things like claims that surprise us, and Jason has talked a little bit about that and can talk to you some more about that, some of the social inflation we're seeing. But there's a lot we can control, and that's where we're going to put our focus. On the revenue, obviously, we've got some headwinds. And mathematically, that's going to probably put some short-term pressure on the OR that we're going to have to deal with. But Ed and his team are doing a great job fighting every way they can to preserve every single unit that's out there and try to grow every single unit with the value offering that we have, thanks to the great service John is providing. So we're going to do that. But I think at the end of the day, the OR is going to be an output of those 2 elements. Jason, do you want to add anything?

Yes. I would just say that if you examine our cost profile over the past few years and consider the inflation we've encountered along with volumetric expenses, we have managed to keep that cost profile stable largely due to the productivity improvements from John and the team, which amount to nearly $500 million. As we look ahead to next year, I want to touch briefly on claims, as you mentioned, Mark. John, you can elaborate on the significant progress your team is making in terms of safety. On the cost side, claims remain quite volatile and fluctuate from quarter to quarter. Currently, we are seeing the resolution of some older claims. Although the frequency is decreasing, the costs per incident to finalize those claims are rising. Recently, we’ve experienced pressure on the claims aspect due to increasing insurance rates and the social inflation trends affecting the transportation sector. John, perhaps you can share some insights on your efforts to reduce the number of incidents.

Yes. Our safety measures regarding injury and accidents are gaining significant momentum, and we are continuing to invest in our safety programs. Our Thoroughbred Academy includes a focus on safety and safety leadership, and we have trained over 2,500 leaders in that program who are now better equipped to engage with our workforce and foster the necessary environment and skills. Alongside our technology investments, we encountered a broken wheel derailment involving a train, which prompted us as a leadership team to find a better solution. Through our collaboration with Georgia Tech and our portal systems, we quickly developed a wheel detection device that monitors wheel integrity on all trains passing through those portals. Its effectiveness led us to create a mobile version, which we are now deploying in our hump yards and other busy corridors to help protect ourselves from issues mostly associated with foreign cars. So far, we estimate that we have prevented over 40 derailments thanks to these newly implemented wheel inspection devices. Our ability to generate ideas, understand business needs, and transform them into practical solutions at scale reflects our commitment to safety and our capacity to address the root causes of the challenges we encounter.

And Chris, I just want to come back to one other thing as we look to '26. So obviously, we're going to work on controlling the controllables on the cost side. But of paramount importance in 2026 is for us as an enterprise to continue this quest toward improving and preserving a very safe railroad. We cannot have a misstep. Similar to that, we have to maintain outstanding service for our customers. We cannot step back from that. Those are the 2 most important things. We're going to control costs, but those 2 things are of paramount importance. And I would say the other thing is really the preservation of employment and retention because we have to go into this merger with talent to ensure that it succeeds. So that's where our focus is. And like I said, we're going to fight like hell for every unit and every dollar that's out there, but let's not lose focus on the safety and service elements, which are high, high priorities for us.

Next question is from Richa Harnain at Deutsche Bank.

So sorry to beat a dead horse, but I also wanted to talk about the revenue erosion you expect from competitor reactions. First, I wanted to confirm that this was ring-fenced to intermodal. And then I guess, what is really hindering your ability to compete? I know you enhanced your partnerships with UNP in interim, for example. Mark, you just reminded us today about the hundreds of millions of dollars invested in Intermodal over the past 2 decades to make for a very strong product. So I guess I'm just confused on why you would be challenged just because you're pursuing a merger. And then is your competitor winning on price? Or is it something else? I mean you said it's not Howard Street. So maybe just elaborate a little bit more there.

That's a great question. Ed?

Sure. Well, let me start with your first question, which is, yes, it is confined to intermodal and specifically to domestic non-premium intermodal. And I can't talk about or address why other entities' contracts may or may not allow for certain things to occur. But I can tell you that we're competing vigorously, both from a price perspective in a market that's been down for 40 months, but also from a service perspective. And John and I are laser-focused on the route coming out of L.A. across Shreveport, Meridian Speedway and into the Southeast. And we have a great team operating our 2 terminals in Atlanta, our 1 terminal in Charlotte, our other terminal in Greensboro and the one in Jacksonville that are not only poised to handle the freight we're getting today, but can accept more frankly. So that's the landscape. And again, like I said, I think over the next couple of bid cycles, as those beneficial cargo owners look at the value that they're receiving from the service that they are getting from whoever they're getting from, we're going to offer a very compelling case for them to come back to a network that makes the most sense for them. John, do you have anything to add there?

I would just emphasize that our customer-facing composite standards are extremely high. We're committed to delivering them. And we've got resources, we've got assets, and we've got a corridor that's poised and ready for growth. And we're going to deliver regardless.

And look, again, I'll get back to the fact that when we control the relationship entirely with our customer base in our region, we're doing great. But when it's an interline arrangement and the contract may not be specifically through us, that's where we're seeing some of these challenges. So this is really kind of interline only. That's where we're seeing it.

Next question will be from David Vernon at Bernstein.

Ed, can you clarify what the quarterly run rate should look like based on our exit from the third quarter, assuming no other changes in the business? This would help us better understand the model. It seems you're indicating that you might promote that service to attract some of that traffic over time. What are the risks of this situation worsening? It appears you're planning to connect directly with the BCOs, potentially with another IMC, to regain some of the lost volume. Are you at all concerned that there could be further losses in volume?

It's somewhat similar to my golf game; it could certainly be worse. However, I want to emphasize that we are collaborating closely with all our partners, including those who might be impacted by this, to ensure we provide them with exceptional value wherever possible. I believe we offer services in certain areas of our network that no other railroad can match. While quantifying this might be challenging, you can see the effect it had on a part of a quarter. We'll assess the situation moving forward. Additionally, we aren't currently in a robust truck freight environment, which makes the overall freight landscape tough. This is just another challenge facing our portfolio, but we remain very confident in our service.

We want to emphasize that in the third quarter, the challenges in intermodal were not the primary issue, but rather marginal. As a result, we expect this situation to develop further in the fourth quarter and into the first quarter. As you mentioned, it will take a couple of bidding cycles to regain our footing. However, we anticipate experiencing some difficulties over the next several quarters.

Next question will be from Stephanie Moore at Jefferies.

Maybe talking a bit about your plans currently or your strategies to mitigate potentially any integration risks that we should see with the integration of the 2 networks. Clearly, you've made tremendous efforts from a service standpoint over the last several years and UNP, as we all saw earlier today, also at a really strong point. So I wanted to just talk, again, hear your view how to early on mitigate any of that integration risk or network disruption that could come as a result of the merger.

Yes. I think that's one thing Jim and I are very, very aligned and clear on is that we cannot afford to have any integration hiccup or challenge. So we're going to take our time and do this the right way. We're going to learn from the lessons of the past, and we're going to study that carefully. And we're going to kind of do a lot of benchmarking and leverage the talent we have on both teams to start planning when that's appropriate and observing what it is we can do from a systems perspective, and then even from a technical perspective. We're going to do this very, very deliberately. It's an ultra-high priority for us when we do bring these companies together to ensure that the integration is done right. John?

Yes. Mark, I have experience with potential mergers, and I believe the outcomes will speak for themselves. Regardless of whether a merger happens, leadership is critical from early 2004 through 2025. Our team has effectively executed the PSR 2.0 transformation, which has gained momentum and created undeniable value. We have successfully managed complexity, uncertainty, and challenges. This approach is effective in all business conditions. We will continue to invest in our future leaders and enhance our services. Our focus will remain on executing the plan, eliminating waste, and increasing volume with fewer resources, including personnel, locomotives, train cars, and fuel. Ultimately, it is about maintaining strong fundamentals. As I mentioned earlier, the fundamentals are stable, which provides a solid foundation for developing an integration plan.

Yes. I think, again, it gets back to my response to Chris. We've got to go into this merger, both of us really operating well. And that will certainly ensure a good foundation for integration. And right now, we're both in strong positions in the way our safety and our service metrics are yielding. And that is important to maintain because once we come together, we're coming together from a foundation of strength, we can integrate a lot easier.

Next question will be from Bascome Majors at Susquehanna.

As you think about the competitive response, what conviction do you have that some of what's happening in intermodal doesn't bleed into the carload side of the business? And maybe aligned with that, 3 months in post announcement, like what conversations are you having with your large industrial carload customers? And do those skew optimistic or cautious?

I appreciate the question, Bascome. I would categorize it in a couple of ways. First, we've established a solid foundation of success in our carload service, which is the primary concern for our customers. They desire a consistent operation that runs smoothly with minimal variation. John and his team have done an excellent job of restoring that reliability. Second, while it may sound self-promoting, it's true that we operate in a relationship-driven business. We have developed strong partnerships with our major industrial customers. They are familiar with us, and we understand their needs. They know the way we operate, and while they are interested in what the future holds, they feel confident that partnering with us ensures they are in capable hands. Regarding competitive pressures, it's a challenging landscape, and we are all competing for market share. We'll see how things unfold, but I believe that our strong relationships and service quality provide us with a solid defense.

Next question will be from Jordan Alliger at Goldman Sachs.

I appreciate the insights you provided about the coal yields and intermodal. However, as we look ahead to the fourth quarter, could you discuss the overall total yields or revenue per carload? It would be helpful to understand the factors at play, including core pricing and mix.

I appreciate it. I'm very pleased with where we've landed with our price plan this year so far, and I fully expect that to continue for the rest of the year. So our pricing plan is intact. And I would say that we're in good shape there, particularly versus inflation. When I look at the mix piece, we're going to see more utility. We'll probably see a little bit less on the export side, and then you've got erosion in the RPU for the coal piece because of that seaborne price. There's going to be a little bit of a mix headwind. On the merchandise side, we've already highlighted that natural gas liquids, sand, even some metals markets in terms of scrap, that's diluted the RPU some. But I will tell you that probably the biggest challenge we're going to have from where we've come from might be on the automotive side, where we've seen that one big supplier to one of our big customers have an issue. And so we expect that there'll be a little bit of wind taken out of the automotive side, so to speak, when it comes to the volume piece, and that's to go along with everything else. I hope that helps.

And at this time, ladies and gentlemen, I'd like to turn the call back over to Mark George.

Okay, everyone. Really appreciate you dialing in this evening. Just to summarize, we're running a really good railroad right now despite the uncertain macro environment that's ahead and obviously, the increasing competitive pressures. So our top line may be volatile going forward, but we are absolutely committed to safety, to service, and maintaining our cost structure. And we are going to fight like hell over every available unit and dollar, rest assured. There's a lot of opportunity on the horizon with our proposed merger with UP, and that's going to yield huge benefits to our customers as well as our country. So we thank you for your time this evening, and take care.

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