Norfolk Southern Corporation (NSC) Q4 2013 Earnings Report, Transcript and Summary

Greetings. Welcome to the Norfolk Southern Corporation Fourth Quarter 2013 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Michael Hostutler, Director of Investor Relations for Norfolk Southern. Thank you. You may now begin.

Thank you, and good morning. Before we begin today's call, I would like to mention a few items. First, the slides of the presenters are available on our website in the Investors section. Additionally, transcripts and MP3 downloads of today's call will be posted on our website for your convenience. Please be advised that any forward-looking statements made during the course of the call represent our best good-faith judgment as to what may occur in the future. Statements that are forward-looking can be identified by the use of words such as believe, expect, anticipate and project. Our actual results may differ materially from those projected and will be subject to a number of risks and uncertainties, some of which may be outside of our control. Please refer to our annual and quarterly reports filed with the SEC for discussions of those risks and uncertainties we view as most important. Additionally, keep in mind that all references to reported results, excluding certain adjustments, 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 and CEO, Wick Moorman.

Thank you, Michael, and good morning, everyone. It is my pleasure to welcome you to our fourth quarter 2013 Earnings Conference Call. With me today are several members of our senior team, including our President, Jim Squires; our Chief Marketing Officer, Don Seale; our Chief Operating Officer, Mark Manion; and Marta Stewart, our Chief Financial Officer. I am pleased to announce that Norfolk Southern had an excellent fourth quarter. We achieved fourth quarter record highs in revenues, income from operations, net income and earnings per share. As you know, these fourth quarter results capped an outstanding 2013 performance and led to record results for the full year including all-time highs for revenues, operating ratio, income from operations and earnings per share. Looking at our top line. Revenues for the fourth quarter were $2.9 billion, an increase of $197 million or 7%. Overall volumes rose 4% as a decline in coal volumes was more than offset by growth in merchandise and Intermodal traffic. For the full year revenues were $11.2 billion, a 2% increase over 2012 despite a 12% decline in coal revenue. And as usual, Don will provide you with all of the revenue details in a few minutes. The combination of volume increases coupled with our continued focus on expense control resulted in net income for the quarter of $513 million, up 24% year-over-year and diluted earnings per share of $1.64, up 26%. For the full year net income and earnings per share increased 9% and 12%, respectively. Marta will provide you with all of the financial details. The railroad ran extremely well in the fourth quarter. This was a continuation of the superior service levels we maintained for all of 2013 with sustained high metrics in network velocity and terminal dwell throughout the year. These metrics were, in turn, were important drivers in our ability to maintain a high average composite service index. And as we have said many times before, an efficiently run network helps in our efforts to keep expenses under control. Mark will give you all of the fourth quarter operating results. In 2014, we will continue our focus on improving customer service and running our network efficiently. Part of that plan is strong capital investment and Marta will provide you some details of our planned $2.2 billion capital program. At this point, I'll turn the program over to Don and the rest of the team, and I'll return with some closing remarks before we take questions. Don?

Thank you, Wick, and good morning. Revenue during the fourth quarter was $2.9 billion, up $197 million or 7% versus 2012. We set new quarterly records in Intermodal of $618 million, up 6%, and merchandise with $1.6 billion, up 12%. These favorable results were partially offset by a 2% decline in Coal revenue due to lower volumes of utility and domestic metallurgical coal. With respect to the components of revenue growth, higher volumes across the business accounted for increased revenue of $105 million. Favorable price and mix accounted for $41 million of the overall gain, while higher fuel surcharge revenue accounted for $51 million year-over-year. Total volume for the quarter increased by nearly 70,000 units or 4%, with revenue per unit of $1,547, up $49 or 3%. Turning to revenue per unit on the next slide. Coal RPU in the quarter was up 7%, driven primarily by favorable export coal mix and a $15 million volume shortfall settlement with one of our utility customers. Merchandise RPU was up 4%, and Intermodal RPU was down 1% as compared to last year. Total revenue per unit was up 3% based on improved pricing, increased fuel surcharge revenue and a favorable mix and contract settlement that I just mentioned in our utility coal market. Turning to the next slide in volume. With respect to volume as shown on Slide 4, total shipments for the quarter were up 4% with robust growth in Intermodal and Merchandise, offsetting an 8% decline in coal volume. Strong volume growth within Merchandise during the quarter was driven by gains in all 5 commodity groups. Drilling down into our major markets, starting with Coal. Revenue for the quarter was $641 million, down $16 million or 2% for the quarter. Weaker demand across nearly all markets resulted in an overall volume decline of 8%. Utility coal, which was the largest driver of the decline, was down nearly 20,000 carloads or 9%. Volumes in the North were up an estimated 1% versus last year, while Southern Utility volumes were down 18%. That was driven by continuing competition from natural gas and excess stockpiles at Southern Utilities. Export shipments were down 8%, largely due to declines in steam coal at the Port of Baltimore, partially offset by higher fourth quarter volumes at Lamberts Point in Norfolk, which increased by 13%. In the Domestic Metallurgical Coal segment, volume was down 14% for the quarter as a result of reduced demand from our steel customers. But on a positive note, industrial coal increased 11% due to business gains. Turning to our Intermodal business. Revenue in the quarter reached an all-time high of $618 million, up $34 million or 6% over fourth quarter 2012, driven by 6% higher volumes. Revenue per unit declined by 1% due to positive pricing being offset by decreases in the fuel surcharge. Volume gains in Intermodal came from both our domestic and international markets. Domestic volume was up 7% due to continued highway conversions, while organic growth across our international accounts boosted international volume by 6%. Much of this growth moved in our expanded and enhanced Intermodal corridors, running an efficient double-stack train service. Our highest performing sector in the fourth quarter was our merchandise group, which set a new revenue record of $1.6 billion, up $179 million or 12% over the last year driven by an 8% increase in volume combined with a 4% higher revenue per unit. Metals & Construction, our largest market segment, experienced a 1% increase in volume due primarily to increased shipments of iron, steel, and higher shipments of frac sand and miscellaneous construction materials. These gains were somewhat tempered by lower aggregates volumes. Moving to the agriculture market, which was up 6% in volume, increased corn and soybean volumes offset declines in our feed markets. Corn shipments were up 23% driven by increases in short haul movements to Midwestern processors, and longer haul volume to ethanol producers. A favorable export market also drove increased shipments of soybeans over Gulf and Atlantic ports. Our Chemicals volume was up 22% for the quarter, continuing the benefit from strong growth in crude oil. Increased shipments of natural gas liquids, industrial intermediates and plastics also boosted growth in this group. Turning to Automotive. Volume was up 10%, more than double the projected North American vehicle production increase for the quarter as a result of new business and increased production at plants we serve. And finally, Paper volumes were up 2% with a 16% increase in lumber and a 13% increase in pulp volumes offset by declines in waste and scrap materials. Now concluding with our outlook for 2014. We see growth opportunities ahead in our Intermodal and Merchandise markets, while the Coal market continues to present challenges and headwinds. While demand for electricity was up 2% in the fourth quarter, 2014 demand is still expected to be sluggish, particularly in the South. In the export market, we continue to expect a challenging environment with strong competition in the Atlantic metallurgical coal market and soft demand and oversupply of thermal coal. On the upside, our outlook for Intermodal remains bright as we continue to add attractive freight to our new Corridors and Terminals. The South Carolina Inland Port opened in the fourth quarter, and our new Charlotte Terminal officially opened December 9. Highway conversions and growth with our international shipping partners represent ongoing opportunities, and we will remain strongly focused on delivering superior Intermodal service and efficiencies across our double stack network. In our Merchandise markets, we anticipate continued strength in crude by rail, as well as shale related liquid petroleum gases. Frac sand shipments into the shale production regions should continue to grow as hydraulic fracturing technology evolves and requires higher volumes of sand. Within our Metals markets, U.S. steel production is projected to expand by 5% during 2014 due to increased steel usage in the auto sector and the recovery in construction market. Automotive production will continue to see solid growth as North American light vehicle production is projected to increase 3% in 2014. And we expect growth opportunities ahead in both agriculture and forest products as the larger crop in housing recoveries spur increased shipping activity throughout the year. In summary, our market-based diversity, high-quality service and ongoing network investments continued to support steady growth despite headwinds in the coal market. With respect to the overall value of our service product, we will continue to employ market-based pricing that equals or exceed rail inflation to support ongoing investment both in our infrastructure and service delivery capabilities. We'll also continue to focus on developing new markets and providing the safest and most cost-efficient service possible to all of our customers. Thank you for your attention, and I'll turn it over to Mark.

Thank you, Don. Starting with safety performance, our personal injury performance for the fourth quarter stands at 1.28, and for the full year, 1.15. 2013 marked an important shift in our approach to safety improvements at Norfolk Southern. Our operations, managers and workforce have all attended behavior-based leadership training and we've implemented a new approach in behavior-based safety. We like the fact that we are seeing a more engaged workforce and while we haven't reduced the number of overall injuries, we've seen an 11% drop in serious injuries. Looking at our train accidents, we've seen a slight uptick in incidents to 2.4 per million train miles. These have been related primarily to switching and storm-related occurrences earlier in the year. Crossing accidents for 2013 was down slightly from the prior year at 3.5 per million train miles. Moving on to service performance. Our composite service metric reflects a consistently high performance through the year. For 2013, the service composite was a best ever 83.3%. In the fourth quarter, our service composite was 82.4% and reflects typical seasonal patterns with operations around the Thanksgiving and Christmas holidays, as well as strong Intermodal and unit train volumes. We continue to see very solid performance in fluid operations through the period. Turning to the next slide. Continued high service performance is also reflected in train speed, a primary component of network velocity. Train speed over the last couple of years, has remained consistently at historically high levels. In the fourth quarter, train speed averaged 23.8 miles an hour, and for the full year, 23.9 miles an hour. Moving on to Terminal Dwell, the second major component of network velocity, there again we've sustained have very high levels of performance over the last couple of years. Terminal Dwell in 2013 averaged 21.6 hours. The fourth quarter was 21.9 hours reflecting the normal seasonal variation due to curtailment of operations around the Christmas holiday period. In the fourth quarter, we saw efficiency gains in many of the same areas where we saw improvement throughout the year. With volume increases, we were still able to reduce crew starts by 1% in the fourth quarter and 3% for the full year. In the fourth quarter, merchandise shipments increased 8% while crew starts increased only 2%. In Intermodal, shipments increased 7% while crew starts increased only 1%. In coal, both shipments and crew starts declined 8%. T&E overtime hours increased only 1% against a volume increase of 4% in the fourth quarter and for the full year, where the volume increase of 3%, we were able to reduce overtime hours by 10%. We continued to reduce re-crews by 5% in the fourth quarter versus the same time period last year, and we saw a reduction of 9% for the full year. Taking advantage of existing train capacity for new volume growth, carloads per locomotive improved 4% in the fourth quarter consistent with the patterns we've seen most of the year. Fuel efficiency in the fourth quarter was negatively impacted by a colder December, but the general trend has been improving as reflected in the 1% improvement for the full year. That's a trend we expect to continue going forward. With strong network performance, combined with a number of ongoing productivity initiatives, we fully expect to see in excess of $100 million in productivity and leverage gains in 2014. Thank you. And now, Marta, I'll turn it over to you.

All right. Thank you, Mark. I'll now review our fourth quarter financial results, which as Wick mentioned rammed out a year of record performance. I'll close with an overview of the full year financials and discuss our capital spending plan for 2014. Slide 2 summarizes our quarterly operating results. Don reviewed the 7% revenue increase in detail and recall that it was largely driven by a 4% improvement in volume. On the 4% unit growth, expenses rose only $30 million or 2%. That leverage translated into record fourth quarter income from operations of $881 million, up 23%. The resulting 69.4 operating ratio improved 400 basis points. The next slide shows the major components of the $30 million net increase in expenses. Compensation and benefits drove most of the increase and fuel costs were also higher. However, lower expenses for purchase services partly offset the increases. Now let's take a closer look at each of these categories. Compensation costs rose by $35 million or 5%. The first couple of items continued the trends seen in the prior 3 quarters of the year. Higher pay rates increased expenses by $14 million, while reduced employee activity levels lowered cost by $10 million. Much of this is directly related to the crew start to volume relationship that Mark discussed with you. The third item, higher incentive compensation reflects a $22 million increase in the bonus accrual driven by the strong fourth quarter results. For 2014, we expect the wage rate and labor hour trends to continue. Additionally, we expect lower accruals for pension and postretirement medical liability. This is largely due to a combination of strong equity returns, which increased the planned assets; and a higher discount rate, which reduced the plan liabilities. This will result in approximately $25 million of lower quarterly accruals in 2014 versus 2013. Moving on to fuel expense. It rose by a net of $8 million or 2%. As Mark mentioned, the increase in consumption exceeded our traffic volume increase and was largely due to the colder weather. Offsetting the unfavorable consumption was a lower price. The average price paid per gallon was $3.02 this fourth quarter versus $3.24 in the fourth quarter of 2012. Depreciation expense was flat for the quarter as lower equipment rates resulting from our depreciation study completed in 2013 offset the effects of a higher capital base. Going forward, we expect depreciation in 2014 to return to a more normalized increase of about $10 million a quarter. Side 7 addresses the $12 million or 3% decline in purchased services and rent. Most of the reduction was due to last year's $15 million charge for an accident that occurred on Conrail in November of 2012. The remaining variances in this category were small with increases in volume related costs, but decreases in roadway repair costs and legal and consulting fees. The materials and other categories shown on the next slide was basically flat. Higher mechanical materials expenses and smaller miscellaneous expenses were more than offset by $22 million of favorable development in the accruals for prior year injury claims. As you know, we have experienced a net favorable development in recent quarters in our actuarially determined casualty claims expenses. While we may see additional favorable development in the coming quarters, we do not expect it to the extent seen in the past several quarters. As a result, total expenses for casualties and other claims in 2014 will likely be closer to the levels we saw in 2012. Turning to our non-operating items. Increased returns from corporate-owned life insurance were largely offset by reduced coal royalties, a result of lower coal production. Interest expense on debt was up $8 million due to the increased borrowings. Next, income taxes totaled $270 million and the effective tax rate was 34.5%, compared to 33.5% in 2012. 2012 included a $6 million benefit related to the completion of an IRS examination. Additionally, both periods benefited from state tax adjustments that we do not expect to recur. Therefore, looking forward, the effective rate in 2014 will likely be close to the combined federal and state statutory rates of about 37.5%. Wrapping up our quarterly overview, net income and EPS comparisons are displayed on Slide 11. Both measures set fourth quarter records. Net income was $513 million, an increase of $100 million or 24%. Diluted earnings per share were $1.64, up $0.34 per share or 26%. Focusing next on the full year results. Revenues were up 2%, while operating expenses rose only 1%. This resulted in income from railway operations of $3.3 billion, a 4% increase, which generated a 70-basis-point improvement in the operating ratio to an all-time annual record of 71.0%. Net income for the year, shown on Slide 13, was $1.91 billion. Excluding the large land sale in the first quarter, net income would have been about $1.85 billion, up 6%, and earnings per share would have been $5.85, an increase of 9%. As shown on the next slide, cash from operations covered capital spending and produced $1.1 billion in free cash flow. We distributed $637 million in dividends and applied $627 million towards the repurchase of 8.3 million shares. Cash and short-term investments totaled $1.6 billion at year end. We have concluded a record year with a strong balance sheet and full confidence in our outlook, which is a great segue into our 2014 capital spending highlights. Here we show historical and budgeted capital expenditures. The 2014 total of $2.2 billion is a 12% increase over 2013, and about even with 2012 and 2011. As reflected on the following slide, and similar to previous years, the majority of our capital expenditures, roughly 2/3, will be invested in replacement and core projects. This includes improving the condition of the ride away, rebuilding locomotive, and replacing freight cars and other equipment. A quarter of the budget reflected here in green, supports traffic growth or productivity projects, including additional locomotive, as well as the yard and siding expansion. The remaining 10% of the budget will be spent on positive train control. A more detailed listing of the categories is shown on Slide 17. Our capital plan was constructed to maintain the safety and quality of the network to improve service and operational efficiency and to support business growth. Thank you, and I'll now turn the program back to Wick.

Thanks, Marta. As you've heard, Norfolk Southern punctuated 2013 with an excellent fourth quarter, with strong volume and revenue increases even in the face of continuing declines in our coal franchise. So real story of 2013 was the ability of our team to run the railroad at a sustained high velocity, providing superior service for our customers, and at the same time delivering continued operating efficiencies. While the extreme weather conditions we've seen in January have slowed the entire North American rail network, we are confident in our ability to drive further productivity and service improvements in the months ahead. Looking ahead, it certainly seems like the economy may be improving at a somewhat faster pace than we saw in 2013. As Don told you, the outlook for most of our business segments is good, but coal still remains the wildcard. Regardless of the near term forecast for any of the markets we serve, we do remain very confident that the strength of our franchise and our long-term strategy of providing excellent service at rates that enable us to reinvest in the business and provide excellent returns for our shareholders. Marta described one part of that strategy in terms of our 2014 capital budgets, where we're investing to grow the business, as well as maintain all of our assets in top class condition. Another part of that strategy was illustrated yesterday with the announcement that we're raising our dividend by $0.02 per share, a strong indication of the confidence that we and our board have in our ability to execute our plans for growth. That confidence springs from our belief in the strength of the Norfolk Southern team who are the best in the business, and we believe that our fourth quarter and full year 2013 results are just one more indication of why they're the best. Thanks, and we'll open it up now for your questions.

[Operator Instructions] Our first question comes from the line of William Greene of Morgan Stanley.

Don, can I ask you to sort of offer a little bit more clarity on your comments as you look forward because we had a good fourth quarter trends and we've had some weather here starting out in the first quarter. And so, when we look at the January trends, do you feel like the underlying improvements are consistent with the kind of strength we saw in the fourth quarter? I'm just curious, kind of how to think about some of these calendar effects and weather, and what the underlying outlook really is?

The first 2 weeks of January have been weaker because of the weather. We've seen about a 22% jump in our volumes in the next week after those first 2 weeks, the third week. So we think volumes are going to be fine. We will make up most of the business or all of the business that was deferred because of the first 2 weeks of bad weather. So I feel pretty good about the ongoing volumes in the Merchandise and Intermodal business. As I indicated, I'm not so robust or optimistic with respect to coal.

Okay. And then on that point, as we start to renegotiate utility contracts, the rail industry generally has been very disciplined on price there. Do we feel like these next round of negotiations given where natural prices are given the concerns longer-term, and regulation or what not, do the utilities have a lot more leverage here, such that we need to be thinking about there may have to be some givebacks, if you will, so to speak, on price, i.e., not as much upside left there?

Well, Bill, the market continues to evolve and certainly, gas is competing with coal more effectively. We'll take that into account as we address our contract renegotiations. We have only about 16% of our utility book this year under renegotiation to complete by the end of the year. We are engaged with those discussions now and as we did -- as we always do, we take into account current market factors and market conditions as we reprice.

Our next question is from the line of Allison Landry with Crédit Suisse. Allison M. Landry - Crédit Suisse AG, Research Division: Actually, I wanted to ask a question about crude by rail and the concerns surrounding the composition of Bakken crude and it's low flashpoint characteristics. And given that Norfolk is a connecting carrier, what is really in your control in terms of taking some extra safety precautions in order to avoid an accident? And are you in active discussions or working with the originating carriers to implement any additional procedures?

Well, Alison, the entire industry, quite clearly, is focused on this. So we're in very active discussions across the North American railroad industry as to how best to manage this growing business. And we're also very clearly in discussions with the producers and with the regulators, and so there are really 3, I think, central issues that we are talking about. The first is, of course, the safety of rail operations. The railroads have a great safety story. Our numbers have consistently gotten better over the past 20 years now. There's always more we can do and we're looking at different operating practices, possibly doing some things on speed and routing, and we'll continue to work hard on making it a safer operation, not only for Norfolk Southern, but for all of the carriers. The second thing that I think there's a lot of discussion about is what you mentioned, and that is what exactly are the characteristics of the crude that's coming out of the Bakken. It's certainly more volatile than we originally thought, than any of us originally thought. And I know that the regulators are very concerned with that and taking a hard look at it. And then the third issue is the tank car issue and what is the appropriate safety standard for the tank cars that will be transporting, not only the crude oil, but ethanol and other substances. In addition, there's a new standard. The industry voluntarily adopted in 2011 and the cars that have been built since that time are to this newer safer standard, but there's clearly going to be an evolution there in terms of what's the ultimate tank car design for these kinds of materials. And there is a lot of work underway on the part of, not only the rails, but the car owners, our customers, and the leasing companies as well to come up with that new standard and to understand exactly what we'll do with the cars that are out there now. Allison M. Landry - Crédit Suisse AG, Research Division: Okay. That's very comprehensive answer. Just as they -- my follow-up question. How much of latent volume upside do you believe that Norfolk has related to the housing recovery and some expected improvement in non-resi construction market?

The housing market is a bright spot for '14. We expect starts to be up in the range of 23%, 24%. There's a strong multiplier effect to that market as it expands. Obviously, I mentioned our lumber traffic was up 16% in the fourth quarter. But we also receive plastics, polyvinyl chloride on the chemical side, PVC pipe going into housing, roofing granules for roofing. There's a range of commodities that we transport that are favorably impacted by that increase in housing starts. Allison M. Landry - Crédit Suisse AG, Research Division: Okay. Any volume, sort of magnitude that you could place on that?

We'll have to wait to see how it shakes out, but we feel good about the prospects.

Our next question comes from the line of Chris Wetherbee of Citigroup.

Maybe just a question on the coal side, if I could. When your eastern competitor mentioned roughly a 20% decline in their outlook for export coal. Obviously, they're a little bit more heavier in the thermal market. I just wanted to get a rough sense of how you think, Don, about the outlook for 2014, specifically on the export side of coal.

We completed the year with about 29 million -- right at 29 million tons of export coal of which, 80% was metallurgical and 20% roughly was thermal coal. We all watched the API 2 index with respect to export thermal coal. We know it's not strong. We know U.S. producers face cost production -- cost of production challenges participating in that lower-priced market. And also, we're seeing some challenges with respect to the met coal exports from U.S. as well because of the low settled price that U.S. producers are facing. So we don't expect our export market to be as strong in '14 as it was in '13.

Okay. And order of magnitude, does that sound like that's -- yes, I guess it's a little bit more weighted toward the thermal side, so that would make sense. I guess maybe my follow-up question would just be on understanding sort of the dynamic within coal yields, specifically. So obviously, if you add back the liquidated damages benefit you got in the quarter, it seems like yields were roughly flat from the third quarter to the fourth quarter? Is that right way to think about it? Doesn't sound like you have a lot of exposure on the utility side in '14. And I guess exports are going to be what they are. Just a little curious on how should we be thinking about that?

Yes, in the quarter itself, the $15 million liquidated damage accrual, if we deducted that instead of a 7% increase in revenue per unit, we would had a 4% increase in revenue per unit. And that was driven off favorable export, longer haul export volumes to the port of Norfolk that I mentioned.

Okay. And going forward, I guess we'll have to see how the mix persists. But I guess with the way utility contracts are working, there's nothing that should change materially on that as we roll into '14 at least.

That's true.

The next question is from the line of Justin Yagerman of Deutsche Bank.

A question for Wick. At the end of that prepared remarks, you talked about the economy gaining steam. I just wanted to potentially get a little bit more color from you on what that was predicated on. Obviously, we've seen strong numbers from the ISM. Housing starts are supposed to be up this year, but I think we all know that just because the economic data looks good doesn't necessarily mean it will be good. So I'm curious if you're getting it as from customer conversations that you're expecting CapEx across the board to be up or if this is more based on just kind of a same dashboard stuff that we're all looking at so any color would be really helpful.

Well, I think it's a couple of things, Justin. I think, one is we all do look at the same dashboards and there, we certainly see, as Don mentioned all of these things, some continued strength in autos. I think the steel manufacturers feel a little better about next year. Certainly, housing, it's going to get better, the pace is still to be determined. So all of those factors weigh into it. I think the other thing that just kind of makes us feel a little better about the direction of the economy is as we look at our second half volumes and really our, to some extent, our fourth quarter volumes as compared to the first half of 2013. I would tell you in the first half of 2013, we were less sure about the economy. And as the year went on, we felt better about a lot of our business segments. And we don't see anything on the horizon right now, simply because it does seem to be not going on little quieter in Washington that might provide a serious threat for that.

All right that's fair. One question, just as a follow-up on the Intermodal markets really haven't talked about much. Our RPU is actually down year-over-year for you guys. Curious, it looks like your competitor is starting to see a little bit of a resurgence in their Domestic business with on-highway conversions being better. Curious how you guys think about Eastern Intermodal market share and how you'd rate the fourth quarter performance from your standpoint. And when you think about the competitive dynamic in 2014, do you think it's getting tougher? Or are you guys still confident that with all the investments you've made, you'll still have the premier domestic network?

It's the latter. We remain confident with the investments, the network that we have developed, the new terminals, the services and products that we've launched. And also, the capability of providing a high-quality product, service product that's truly competitive with the Highway. Our growth is going to come from the Highway. It's coming from the Highway. That will continue. And with respect to the revenue per unit, as I mentioned in the quarter, the fuel surcharge actually was the largest driver of the 1% decline. Revenue was up 6%. We still believe that the trucking industry will face some capacity constraints in the face of hours-of-service regulation's, as well as the economy wraps up in demand increases. That capacity won't be as available as it is today. So the outlook for Intermodal, in our view, in terms of coordinated conversion from the Highway into a highly efficient network that we've invested and remains very bright.

So you think -- I mean, obviously, I don't want you to speak for them, but do you think their surge in traffic was probably more driven by more loads getting converted to the real? Or did you guys feel like you had any high-profile losses on the margin in the quarter from customers' standpoint?

In every quarter, you have to look at the comps from the previous year and the Sandy effect. And it all the impacted volumes and increases throughout the Easter network in the fourth quarter.

Your next question is from the line of Tom Wadewitz with JPMorgan. Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division: I wanted -- so I wanted to just follow up briefly on just the part of Justin's last question. Your Crescent Corridor, maybe could you just tell me how much Crescent Corridor volumes grew in fourth quarter? And then I guess in terms of the pace that we had seen in the last couple of quarters, maybe it hadn't been quite a strong a contributor to overall Intermodal volume growth as we had anticipated, given the capacity investment. Is that something when you look at 2014 that you would say “Crescent Corridor is going to be a bigger driver of your overall Intermodal volume growth?”

Tom, this is Don. With respect to your first part of your question, question in the quarter, Crescent was up 6%. For the year, it was up 8%. Hartland was up 9% in the fourth quarter. For the year, it was up 16%. So you can see that gives you a flavor of the percentage increases. And as we have pointed out, as we've invested in high-efficiency service competitive with the highway, we're being very focused with respect to the business we're bringing on in these corridors to ensure that this business pays for itself and generates the type of return that we're seeking with the investments that we've made. So we're not looking to load up the network in 1 to 2 or 3 quarters. What we are looking for is good high-quality freight that we will continue to handle over time. Does that makes sense? Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division: Yes, sure. That's great. That's very helpful. And I guess my follow-up would also probably be for you, Don. Your yield performance revenue per car can often be affected by mix. I think of the 2013 yields, there was probably some mix effect in coal and short-haul growth and things like that and maybe some other mix effects, and also export. How would you want us to think about the mix effect? And also the impact from export coal pricing as we forecast yields in 2014?

Tom, as I pointed out earlier, we expect lower export volumes in 2014 with respect to overall exports. We think the thermal component will be weaker. We also think the met coal component will be weaker as well. And the market, hopefully, is at the bottom with respect to world prices in that $135 to $140 range, actually a lower than that right now on met coal. The API 2 is $85 or less, it's bouncing around $85 a ton. So with those dynamics, we think export will continue -- we are where we are on pricing, I would tell you that. We're not planning to make any adjustments this quarter in export pricing. But with respect to overall demand, we see a softer outlook there. Hopefully, with the weather that we are seeing, stockpiles in the South on our utility network, will normalize. And we think that's underway. Not there yet, but it's underway. That is longer haul, higher RPU traffic. So if we get some replenishment of stockpiles in the South, that would be a favorable mix impact as export is softer. Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division: Okay. So mix on export would be -- or I guess, export impact on yield would be negative, maybe on utility as positive. And then, I guess, overall mix effect, do you want to comment on that?

The overall mix effect, we think, in merchandise, will continue to be comparable to what we're seeing right now. No significant changes. We will continue to see our non-coal energy component of our business increase, and that includes everything from crude oil to natural gas liquids to ethanol, to frac sand. Things that we're putting into that bucket, which I will tell you, Tom, in the fourth quarter and for the year is close to 10% of our merchandise business of our volume now.

The next question comes from the line of Anthony Gallo with Wells Fargo.

I wanted to go back to crude by rail. Maybe if you could speak to what you see as your capacity to expand that. Could you double the business, for example, based on current resources? And then I have a follow-up question on your potential regional railroad partners with crude by rail.

Well, in terms of capacity, the vast majority of this crude moves across our northern region, which is, for the most part, double or triple track. It's a very high capacity railroad so we certainly have the infrastructure to expand. We can accommodate it with a crew base that we have, so we have a lot of room to grow. The ultimate limitation on crude by rail for -- in the East, really, is just purely the number of refineries. And there are, as you know, a number of refineries from Delaware up to Coast, all the way to Nova Scotia, I guess, and a lot of them are already taking crude by rail. There are others that are preparing to, in terms of infrastructure. But that's the limitation. And that will be the cap on the total crude by rail if it moves in across Norfolk Southern, or for that matter, moves across the Eastern part of the U.S..

Certainly. And then as a follow up. Do you do any business with regional railroads and I am thinking about in the context of some of these regulatory changes that may ultimately change the liability aspect of that and to the extent, some of these smaller regional railroads might not be able to handle it because of that. Is there any interaction with regional railroads that you have, where we should worry about maybe they are liability risk if the regulatory environment does change?

And you're talking about interaction in terms of the crude business?

Exactly.

The answer is not really. The crude by rail that we handle, as far as I'm aware, I'm looking at Mark, we don't hand it off to -- really don't hand it off to anyone. It moves Norfolk Southern direct or moves into the shared assets area.

The next question is from the line of Walter Spracklin with RBC.

Just a quick question, just a follow-up on Intermodal. It looks like -- I know you pointed toward an improvement in economy, you pointed toward the trucking capacity constraints. All of that is suggestive that things in the environment should get better in 2014, particularly from a competitive environment with truck. But am I right in assuming that you haven't seen that yet, the impact of that tighter capacity on truck and the better economy playing itself out in contract repricing that you're doing in the Intermodal today?

Walter, on spot pricing, yes. On our contract pricing that tends to run year-to-year, no. We are in that period in the first 90 days of this year, so we will see some of that playing out in our current negotiations. As you know on spot, we see that fairly immediately. But with a lot of our Intermodal business being run at commitments for at least 1 year, this is a -- an active time of replacing of that into Intermodal business in the first quarter.

But it's safe to say that the spot trend is a good leading indicator to how your contracts are going to develop?

Certainly, the spot trend is positive. I cannot tell you that it's going to translate into contracts because we're facing motor carrier competition. And before we convert it, they attempt to hold onto it.

Second question here, I don't know if it's for Mark or for Marta. Mark, the employee count, I'm looking back at my notes what you were kind of indicating toward the end of the year when we spoke at third quarter. It looks like it came in a little bit better than what you would kind of indicated it. As we go into 2014, how do you see the seasonality? And accounting for all the seasonality, how do you see the employee count kind of evolving as we go through 2014?

Well, we have had a pretty good reduction during 2013. And as we go forward, I think we'll stay relatively flat. The -- we've got a couple of areas where we will, just because of -- there are various efficiencies and productivity initiatives that are going on, we'll continue to see some reduction. But of course, particularly with respect to our T&E forces, all that is very dependent on what the volumes are. So relatively flat.

Okay. And on the wage inflation side, Marta you'd indicated that we should still see the same level of trends although perhaps not as much on the kind of incentive compensation. And so for -- in other words, are we looking at just base wage inflation now as we project in the 2014? Or there are other factors that we should consider?

Yes. The wage inflation should be about the same. There'll be a union wage increase in the middle of the year as there was this year. And the portion I spoke to was a reduction in pension and postretirement, medical cost. We think those will be down as a result of our plans being in a better funded position this year.

Okay, but offsetting some of these stock-based compensation lift that we might not see the same kind of growth next year?

Well we really think the incentive compensation in the quarter was heavy, but year-over-year annualized should be about the same.

The next question is from the line of Jason Seidl of Cowen and Company.

I want to go back to your commentary on your crew starts. It looks like they were down 1%, I think, you said in 4Q, but 3% for the year. So should we expect that 1% level to continue? Or is that going to be challenging as we see volumes grow?

Well, we certainly have got more of a challenge just because we've got a real winter this year, so that will have an effect in the short term. Beyond that, I don't know that we'll see the -- some of the steep rate of reduction that we saw in 2013. But again, with some of the various improvements we've got going on into 2014, I think we'll still continue to see a positive trend.

And following up on some of the Intermodal questions. You mentioned that you're seeing, Don, some improvement, I think, on the spot. I don't think I caught it. Could you remind us what percent you guys have that's more spot or transactional in nature? And how quickly do you think you could react to sort of a tightening truckload market to bring in your existing spot rates up.

Most of our business is committed. I would say the spot is in the range of 15% of the book.

Okay. And you can change that spot pretty quickly?

Well, not really. That's -- that percentage continues in a fairly stable way. It's not changeable because we have commitments and change of price.

No, what I'm saying is the spot price that you have is very fluid in terms of the current marketplace?

That's correct.

The next question is from the line of Justin Long with Stephens.

Mark, first question for you. I was wondering if you could provide an update on where things stand on the implementation of both LEADER and Movement Planner? And also, as you think about your $100 million plus productivity target for 2014, how much of that amount is coming from those 2 items?

Well. As far as both LEADER and Movement Planner, Movement Planner is scheduled to be completed by the end of 2014. So we'll see a pretty rapid rollout of, essentially, the last half of our system this year. That will be very good. LEADER, we will get most of the system, as the core part of the system covered with LEADER in 2014, and then once we get it covered, we will continue to see and it's going to take as well beyond 2014. We will continue to see benefits from LEADER as we get better and better at turning on the benefits from that technology. As far as the amount of benefit we're getting out of that, we've got so many things in play, and I would be taking -- I would really be taking a wild guess at that, which I would rather not do, but substantial benefits from both of those.

Okay, great. That's fair. And as a follow-up, I was just wondering, if you strip out the lower level of rail inflation, that it sounds like we're seeing -- have you've seen any changes in the overall core pricing environment in the past 3 to 6 months? And could you just talk about your expectation for pricing headed into 2014?

This is Don. No, no changes in the pricing environment. I will say that if the economy continues to gain traction, we believe that, that environment will become more favorable. And obviously, we'll participate in the market and price to the market as we always do.

The next question is from the line of Thomas Kim with Goldman Sachs.

This question is for Marta. Your cash balance has been steadily increasing, obviously, you had announced an increased dividend yesterday. But it would certainly seem that you’re potential to do a lot more on the capital front. And do -- we'd just appreciate your thoughts about how you're thinking about free cash flow allocation during the year?

Well. We really haven't changed our overall push to free cash flow allocation. We always -- we invested in the business, we talked about our capital program, and after that, we return to shareholders in the form of dividends and share repurchases. And so, really, part of the reason for our increased in cash balance is that, at the end of the year is, we did an opportunistic debt issuance in November. We wanted to go ahead and take advantage of the -- of the low rates, so that's a partly why you see a little bit higher than the run in the past.

That's fair. But the net debt level was actually still decreasing. And I guess, another way of me that, a sort of inquiry, is just the minimum cash flow -- do you have a minimum cash level that you would like to maintain? Or a minimum sort of debt ratio that you're sort of targeting?

Yes. We target to stay within our credit rating spend, and that's one of the reasons why we went ahead and issued the debt, and so we just try to modulate mixture. We've got plenty of cash to invest in the business and still stay within there. You're right that net -- if you take our debt minus our cash right now, we are running a little bit of lower. It's not intentional de-leveraging, it's just the offshoot of the fact that we have very strong free cash flow during the year.

And Don, can I just ask you about the comment on new business gains within the industrial side for your Coal business?

Could you repeat the question? I didn't quite catch it.

Sorry, let me ask one more clearly. Earlier, you'd mentioned that you had won some new business within the coal segment, and it related to industrial. I'm just wondering if you could elaborate on that. Was is it a share shift or were there something else going on? New development, new plants or what not?

No. This is coal increases with some of our industrial accounts like the Paper industry, like the Cement industry, where they are using more coal, and coal is more competitive now with natural gas. And also, they're seeing increased production and usage of coal.

They're not new customers coming on? It's just an organic growth with this -- with existing customers?

Organic growth that we've been able to displace gas with in some cases.

Our next question is from line of John Larkin with Stifel. John G. Larkin - Stifel, Nicolaus & Co., Inc., Research Division: First question was to ask Don, perhaps to take a little deeper into the Southeastern Utility coal situation. First of all, do you have any timetable as to when those stockpiles might be normalized? Is that a 2014 event? Or do you see that happening more in the '15 or beyond time period? And then once they are normalized, will the replenishment come from Central App mines, or more likely from the Illinois Basin mines? And if from the Illinois Basin mines, what type of a favorable mix impact would that have on RPU?

Now your first part of your question with respect to Southern Utility stockpiles, our best estimate is that, that normalization of stockpiles will take most of the first half into the third quarter depending upon, obviously, continued weather patterns that we're getting which are favorable. The second thing, with respect to the basins, that's a good question, we see more coal flowing to the South from Illinois Basin sourcing, and some Northern App sourcing flowing to the South as well. Central App will continue to be pressured, in our view, with respect to sourcing into the South. Just from a cost of production perspective and being competitive. Now I will say that with gas still being in the range of $4 to $4.50 right now, even though we're having a real winter, as Mark pointed out, gas continues to be competitive in the southern utilities, and the North as well. But our volumes down 18% in the fourth quarter tells you that gas is still very, very much a factor in the southern network. John G. Larkin - Stifel, Nicolaus & Co., Inc., Research Division: With the shift from, say, Central App more towards Illinois Basin or Northern App, presumably, when things do ramp-up to replenish those ultimately reduced stockpiles, that should have a positive impact on your yield in the coal business?

John, that's correct. It will be longer hauls. Most likely, higher revenue per unit coal, flowing from those new origination points. It all depends on how much coal they actually take from those new sources. John G. Larkin - Stifel, Nicolaus & Co., Inc., Research Division: And then as a follow on, we -- normally, on these, the calls don't talk about what's happening down at the STB except with respect to maybe the reciprocal switching proposal. But there are a couple of rate cases there that currently that involve Norfolk, Southern one is the DuPont case, and there's a smaller one, the Sunbelt case. How long do you think it'll be before those cases are resolved? And how do you characterize the risk associated with those cases?

This is Wick. We don't normally comment a lot on anything that's up at the STB. We clearly feel that we have a strong position for the rates that we charge. I think the timetable is such that those cases, both should be resolved in 2014. So we'll just see how that comes out.

Our next question comes from the line of Ben Hartford with Robert W. Baird. Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division: A quick question on the EMT fleet. I'm wondering if you can give us a size of the fleet to end 2013, and provide any context to what the expansion plans would be a for 2014, specifically, the number of container net adds in 2014?

The approximate size of the fleet were around 29,000 containers in the combined fleet, and we expect that to expand by about 2,500 boxes.

Our next question is coming from the line of Scott Group with Wolfe Research.

So first one for Don, just on coal. The rise in gas prices we've seen and, obviously, the cold start to weather. Do you think that's having more of an impact on northern or southern utilities as we think about mix there going forward?

Well, certainly, the temperatures in the North have been pretty intense, but they have in the South, as well, and they are as we speak this morning. But I would have to say that the stockpile impact in the North is greater at this point than the South. If we continue to see this weather pattern for the balance of the winter and have a favorable shoulder period through April on into May, I would say that the South will have their turn in it as well.

Right. But it sounds like we should think about northern coal -- coal on the northern utilities better, at least for now, for at least for next couple of quarters going into the South?

That's a correct statement. The northern utilities that we serve, the stockpiles are at normal. They're normalized now, so they're facing this increased generation demand, so they will have to replenish fuel supplies. In the South, we still have the excess stockpile overhang. So even with some increased demand, the overall fuel supply inventory is better.

Okay. That's helpful. And then just one for, I guess, either Mark or Marta. So the PTC budget for 2014 is pretty similar with '13? Once we get through '14, how much is left? And are you planning -- are you on track to have your stuff finished by 2015?

We are going to have, as far as the hardware that's installed, we're going to have everything pretty well in place by 2018. And then, we'll have continuing training efforts in those type things that I expect will take us out to 2020. And then I think it's fair to say for everybody it remains to be seen what the reliability of these really complex systems are going out beyond 2020.

Do -- so you are expecting the mandate to get pushed up by 3 years?

Well. It's hard to know just what's going to happen in Washington, but I can tell you that from the standpoint of what is possible, we're not going to be ready in 2015. That's -- I think that's pretty clear to everybody.

The laws of physics prevail in things like this, so -- and even the FRA has acknowledged that there is going to have to be a several year extension.

And you think that sort of -- do you think that's still likely to get a full 3 years, even given some of the safety issues we've seen over the summer and winter?

Well, it is, as I said, there is just the simple fact that we, and not only we, the North American rail industry is not going to complete this project by the end of 2015, and it will take several years after that to conclude it. The -- there are still substantial parts of this technology that are not tested. We will have a lot of issues to deal with even with -- after we get the software completed, which it's not, and the hardware all installed, which obviously, it's not. We're also dealing, as you know, with an issue right now within the government where we can't get the FCC to give us permission to put the antennas up that we require. There are tens of thousands of those. So it's just a situation where the facts are the facts, and it's going to take some substantial amount of time beyond 2015 to get this system up. And more importantly, as Mark said, to get it working at a level of reliability where the industry could continue to function.

Our next question is from the line of Jeff Kauffman of Buckingham Research.

A quick question for Marta, and then a follow-up on coal. Marta, is cash flow -- free cash flow probably going to be about neutral this year versus next year when I take into account any earnings gains, higher depreciation and lower pension offset by the higher CapEx? Or is there something on the noncash side I should be thinking of?

Well. We never know about our -- about some of the non-operating items, but with regard to free cash flow, I think, the most significant difference is what we described today, is that we think we're going to have about $200 million higher of CapEx. And that's -- other than that, just normal operations.

Right, but your earnings should grow. Your depreciation, which is noncash or noncash expenses higher, and your pension should be lower or the contribution is not going to track with the lower expense you're talking about.

The pension is -- we don't have a -- and we haven't had in the last -- required contribution, and so the pension is a noncash item also. That doesn't flow through.

Quick question on follow-up on the coal. Just given where the heating degree days are in your North and Midwest regions, I understand your trepidation on the export side, but I'm a little surprised you're not a little more optimistic on domestic coal. Can you differentiate, and I know, we focused a lot on the southern region where the utilities are still an issue and there's more gas competition, but could you talk a little bit more about your expectations for domestic thermal volumes next year versus maybe pricing or customer discussions? Because it would seem to me, given what I'm seeing, that the domestic coal story would be a little bit better than you seem to be implying.

It's a good question. Let me put a little bit more color around thermal coal. If you look sequentially, in our tonnage, from the third toward to the fourth quarter, we're down about 2 million tons in Utility coal. And year-over-year, for the entire year, our Utility business was off almost 5 million tons, a little more than 4 million tons. So we are at 97 million tons of Utility coal. We do not see a dynamic out far enough in 2014 to indicate that, that will stabilize or that it's going to be equal to that 97 million tons at this point. Even with the weather we're having right now, we're only seeing this as a snapshot in the first 3 weeks of the year. There are a lot of question marks, obviously, about what we will see for the balance of the year. But the dynamics, the competitive dynamics between coal and natural gas are such that we're not comfortable providing any outlook that says that Utility book at 97 million tons will stay at 97 million tons. We just don't think it will.

So you're not saying necessarily less bad, you're just saying, not necessarily better. Is that a fair way to read it?

I think, yes. I don't see it -- the degradation that we've seen getting worse. I'm only saying that we think the market itself will not support growth.

The next question is from the line of Ken Hoexter of Merrill Lynch.

Mark, just a question on the plan that you talked about rolling out the last few quarters. The renewed -- is this a renewed attack on safety and service that you're addressing with new programs? And then just as in the side, you saw Dwell climb a touch, but crew starts and re-crew and cars per unit all improving. Is that a mix issue in terms of seeing the Dwell decline a bit?

As far as our safety process goes, we are about really 3 years into this, 2 in a big way where we have to workforce engaged. And like I said, we've had a lot of work that went on in 2013, just as far as education in the process, both on the management side and our 224,000 workforce population. It is really -- the core of it is all about engagement of our people. Our people understanding how important they are to the business, creating an environment where they want to come forward with their ideas, participate in problem solving, improving the business, finding ways to be safer. So it is definitely geared toward our safety process but it really touches on all aspects of the business. So we're kind of in the beginning throws of this, but it is a -- this will be ongoing forever. And we hope to see just a lot of good things, not only from a safety standpoint, but for the business in general, as our people get more and more engaged.

And thoughts on the Dwell time? Is that a mix or related to it?

As far as Terminal Dwell, we saw good improvement during 2013, and we have got a pretty large project relative to improvement in our terminals. And so far, we've only been through a pretty small number of those terminals with this project. Of course, we're starting with our biggest terminals, but we've been through maybe 20% of our terminals so far. And as we continue to see overall improvement and efficiencies in the terminals, we think that it will have an effect on lowering the Dwell time. And again, this is hooked up with our behavioral leadership project and engagement of people, it all works together. So we think we'll see improvement in that area. It's hard to know how much though, Ken.

And then, Don, for a follow-up on the Ag business, just given the bumper crop, do you look for volumes to accelerate into '14? Or are inventory levels being replenished and this is a good run rate for the fourth quarter?

You know, in the Ag market, there are puts and takes in it. There was a strong crop, obviously, a corn and soybeans, but that's a good news. The not so good news, as it was a strong crop in close proximity to the southeastern feed mills. And a lot of that corn and soybean product will be trucked to those local mills, displacing longer haul corn and soybeans that would've moved from the Midwest had the southeastern crop not been as strong. So we'll have to work through that supply, and we will as the year progresses. And then we'll see Midwestern grain start moving at a higher volume. So if you put it all together, it should be a much better market than it was last year, but it won't be as robust as one would think, just based on the overall production numbers.

Our next question is from the line of Keith Schoonmaker of Morningstar.

Marta, concerning use of cash, I see you budgeted about 10% of total 2014 investment for PTC, and about the same per facilities and terminals. I want to ask what part of PTC investment you're most excited about. But could you highlight a couple of the major facilities investments you think will bear the most fruit?

Well. And Mark can maybe talk about this a little bit more than me, but we are having major expansion underway our Bellevue yard, which is really got a help with the flow of operations in the northeast and that's one of the portions that, that I'm most excited about. Mark?

No. That's absolutely right. And we're going to pretty much conclude that project by the end of this year. Ever since we were fortunate enough to get the Conrail portion of our network integrated with the rest of the old Norfolk Southern, that is just an area where our business wants to go. It wants to go into that upper Ohio area. And so this will allow for a lot of efficiencies just being able to handle that business in that area in a more productive way.

And the second question, I noticed that your quarterly 10% growth in Auto related volume was substantially better than market growth, in fact, it's about double light vehicle production growth. Could you have some details to the sources of that growth?

Number one, we had production at the plants that we serve growing ahead of the market. And obviously, Ford Motor Company would be 1 of those customers. Toyota, another 1 of those customers. Honda being another 1 of those customers, et cetera. So that's #1. And #2, we've had some market share gains, as well as we compete with Holloway in terms of over-the-road movement of vehicles in that network as well.

Our next question is from the line of David Vernon of Sanford Bernstein. David Vernon - Sanford C. Bernstein & Co., LLC., Research Division: Don, the 97 million tons of coal that you guys have -- utility coals that you guys have done for 2013, what percentage of that would be Utility North versus South?

It's a fairly balanced portfolio with about 1/2 of the business in the North, on a tonnage basis and about 1/2 the South. Although I will tell you that our percentage declines in the South are eroding that balance to where the north now is a little bit heavier than the South. I can't give you the actual percentages off the top of my head, but traditionally, it has been about an equal portfolio, but with the type of -- with Northern Utility, for example, being flat, essentially for the fourth quarter and the year. And the South being down in the fourth quarter as much as 18%. That balance has changed. David Vernon - Sanford C. Bernstein & Co., LLC., Research Division: So the mix is now at -- more heavily in Northern then, right?

Slightly. David Vernon - Sanford C. Bernstein & Co., LLC., Research Division: And then -- and Marta, perhaps, could you help us out with some guidance for what we should be a good effective tax rate for 2014? And also a cash tax rate for 2014?

Yes. We think we'll have about a 37.5% effective tax rate for 2014. And on cash taxes, we don't have bonus depreciation coming up, and so we think the cash taxes will be higher in 2014. David Vernon - Sanford C. Bernstein & Co., LLC., Research Division: Any dollar value or percentage number higher that you could help us out with?

About $200 million.

The next question is from the line of Brandon Oglenski with Barclays.

I'm just going to ask one, and it's probably for Wick or Marta, but you've had 2 quarters now, pretty solid year-on-year operating ratio improvement. And when you talk about $100 million of productivity gains targeted this year, plus Marta, I think, if I heard you right, you said $25 million less pension expense per quarter. That's another $100 million of pension reduction. Is the OR improvements sustainable in '14, what are some of the offsets that investors should be thinking about?

I'll let Wick handle the general question, but I did want to point out, we do have that $25 million reduction, and that's pension and postretirement together. And then we have a $10 million of depreciation per quarter that we think is going to be higher. I did want to mention that. And I also mentioned on the casualties and other expenses that we think run rate, year-over-year those will be higher, so about $10 million a quarter. So the 3 of those that I mentioned somewhat wash, and I'll let Wick handle the overall question about our OR.

Well. Clearly, as we've always been, we are focused on trying to take the OR down further. We think that -- we are optimistic that with a better business climate in 2014, and with -- even with what we do expect, as Don has said, to be some continued pressure on our coal volumes, even over '13, that we'll be able to produce better business results. We're very happy with the productivity improvements that Mark and his team have outlined. And so our goal every year is to drive the operating ratio down further. And that certainly our goal for 20,000 -- or for 2014. And we'll just have to see where we end up, but we think that there are a lot of positives looking at the year that we'll be able to take advantage of.

And those positives are more robust in 2014 than we've seen in the last couple of years when you've had effectively flat OR outcomes, right?

Well. I'd certainly would point first at the fact that we do believe, as does everyone else, that economic growth in this country is picking up. We're starting to see housing rebound as we talked about, which is a critical part of GDP. And Norfolk Southern, a lot of our business is driven directly by the U.S. economy. And as the U.S. economy improves, our results should improve with it.

Mr. Moorman, there are no further questions at this time. Would you like to make any closing remarks?

Well. Let me just say thanks to everyone on the call for your patience. Thanks to all for all of the questions, and we look forward to talking to you next quarter.

This concludes today's teleconference. You may disconnect your lines at this time. And we thank you for your participation.