Greetings, and welcome to the Norfolk Southern Corporation's Second Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Michael Hostutler, Norfolk Southern Director of Investor Relations. Thank you. You may now begin.

Thank you, Shea, and good afternoon. Before we begin today's call, I would like to mention a few items. First, the slides of the presenters are available on our website at nscorp.com 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 afternoon, everyone. It's also my pleasure to welcome you to our Second Quarter 2013 Earnings Call. With me today are several members of our senior team, including Jim Squires, our newly appointed President; Don Seale, our Chief Marketing Officer; Mark Manion, our Chief Operating Officer; and John Rathbone, our Chief Financial Officer. As usual, Don, Mark and John will provide commentary in their respective areas, and then all of us will be available for your questions. Norfolk Southern's earnings for the quarter were $1.46 per share, a decrease of 9% compared with last year, but a very solid result in the face of some considerable headwinds year-over-year. We continue to face a difficult environment in export coal, with loadings down 16% in the quarter. In addition, we had a $65 million headwind associated with the fuel revenue lag. As you will recall, second quarter of last year had a $61 million favorable fuel lag compared to this year's $4 million unfavorable. Despite these 2 factors, the majority of our other businesses performed well in the quarter. Revenues other than coal were up 3%. Overall volumes were up 2%, as increases in Intermodal and merchandise traffic up 5% and 2%, respectively, were partly offset by the 4% decline in coal volume. Don will provide you with all of the revenue details in a few minutes. Our system velocity and service products remained at a very high level. Our most recent customer survey confirms the value of our reliable and consistent service, with overall satisfaction increasing to a new all-time high. In addition to this positive external response, we see continued momentum in our service metrics. Terminal Dwell and system average speed both improved compared to a very good second quarter in 2012. Crew starts during the quarter were down 2% on the 2% increase in volume, and equipment rents declined $5 million or 7%. As all of you know, a more efficient network allows us to better utilize our people and our physical assets, and Mark will outline some more specifics following Don's remarks. Wrapping up the presentations will be John with an analysis of each of our expense categories. The continued focus on productivity and efficiency improvements kept operating expenses only 1% above last year as compared to a 3% increase in revenue ton miles and resulted in an operating ratio of 70.2%. Now let me turn the program over to Don and the rest of the team, and I'll return with some closing remarks before we answer your questions.

Thanks, Wick, and good afternoon to everyone on the call. During the second quarter, both our merchandise and Intermodal networks achieved all-time revenue records, up 2% and 4%, respectively, while coal revenue was impacted by declines in our export and southern utility market segments. Our overall portfolio of business generated $2.8 billion in revenue, down $72 million or 3% compared to the second quarter of 2012. Total volume grew by 2% or 39,000 units, led by Intermodal, automotive and chemicals. With respect to yield, revenue per unit declined by 5% due to a 14% decline in coal revenue per unit. Merchandise RPU was flat, and Intermodal revenue per unit was down 1% compared to second quarter of last year. Unfavorable fuel surcharge revenue accounted for lower-than-average RPU gains in both merchandise and Intermodal. Negative mix in price, mostly associated with export coal, and negative mix within our utility markets accounted for $75 million of the overall revenue decline for the quarter, and fuel surcharge revenue was down $59 million year-over-year. On the plus side, higher volume contributed a positive $62 million in revenue variance. With respect to volume, on the next slide, shipments increased 2% for the quarter due to gains in Intermodal and merchandise, which offset a 4% decline in coal. Intermodal grew 5% with a strong domestic market, and merchandise results were mixed as chemicals and automotive were up 16% and 8%, respectively, which offset declines in metals, agricultural products and paper. Now turning to our individual market segments. Coal revenue was $626 million in the quarter, down $129 million or 17% over last year due to weaker demand across most market segments and pricing pressure in the export coal sector. Weak economic conditions in Europe, slower growth in Asia and excess coal supply across the globe impacted…

Thank you, Don, and good afternoon, everyone. Starting with safety, based on preliminary data, our second quarter performance stands at 1.07. We are well into our second year of implementing behavior-based safety. And while our safety ratio has increased in the second quarter, we're confident we're doing the right things to reduce injuries in our workplace. We see more and more evidence of engagement in the safety process by our workforce, as well as the proactive management of safety. Turning to service. Our composite service metric continues to show consistent high levels of service performance and year-over-year improvement. For the second quarter, composite performance stands at 83.7% and it represents a slight improvement over the second quarter last year and above a goal of 82.5%. These gains were achieved despite a more normal winter this year in the first quarter and a very active spring weather pattern with flooding and a series of storms in the Midwest. These gains continue to be led by train performance, which improved 2.5% versus the same quarter last year, and in fact even with these challenges, all the service components, train performance, connection performance and plant adherence have consistently remained at or above historical highs. Turning to the next slide. Spring weather patterns primarily impacted train speed, but overall train speed remained essentially flat but consistent with the high levels that we've seen over the last 1.5 years. Turning to Terminal Dwell. The other major component of network velocity showed good improvement, about 2% over the same period last year. On our next slide, building on the progress we've seen over the last 6 quarters, improved velocity and other productivity initiatives are the drivers behind the improvements you see here. Overall, we have reduced crew starts 2% against a volume increase of 2% and a gross ton miles increase of 3%. Concurrently, we've reduced T&E overtime by 13%, in addition to a re-crew reduction of 14% over the same period last year. Velocity-driven equipment rents have been reduced 3%, while carloads per locomotive have improved 4% and gross ton miles per gallon have improved 1% despite an unfavorable traffic mix change. Turning to the next page. We continue to manage our manpower and asset base commensurate with our traffic volumes and improvements in network velocity. Our active T&E workforce stands at 11,444, that's a 5.5% reduction over last year. From an asset perspective, we have 244 locomotives in storage. Simultaneously, we've been able to reduce our active locomotive count by 2% versus the second quarter last year. And finally, we have approximately 9,900 freight cars in storage. In addition to the velocity and productivity improvements that we reviewed on the previous slide, we will continue to adjust the manpower and asset base in line with our traffic volumes. We also continue to push productivity initiatives on all fronts, targeting improvements while maintaining high levels of service and velocity. Thank you. And now, John, I'll turn it over to you.

Thank you, Mark. I'll now review our financial results for the second quarter. Let's start with our second quarter operating results. As Don described, our railway operating revenues for the quarter totaled $2.8 billion, down $72 million or 3% compared to last year's second quarter record. Our results included a $4 million unfavorable fuel surcharge lag effect, which is a $65 million decline compared to last year's $61 million favorable lag. Railway operating expenses increased $26 million or 1% for the quarter on a volume increase of 2%. Income from railway operations totaled $836 million, down $98 million or 10%, and our operating ratio increased 2.7 percentage points to 70.2%. Turning to our expenses. The next slide shows the components of the $26 million increase. Purchased services and rents increased $18 million or 5%, reflecting higher expenses in shared Conrail operating areas, increased roadway maintenance repairs and greater haulage and other transportation activities. For the sixth consecutive quarter, equipment rents were lower as we continue to see benefits from improved network performance and fewer equipment leases. Materials and others increased $8 million or 4%. Increased material charges for equipment repairs and higher environmental expenses were partly offset by a more favorable personnel injury claims development. We expected second half materials expense to approximate recent years' averages. Conversely, second half casualty and other expenses may face moderate headwinds as a result of prior year's favorability. As you recall, in the fourth quarter of last year, we saw a $17 million favorable reduction in personal injury expenses. Turning to our compensation and benefits expenses. Similar to the first quarter results, productivity improvements reduced employee activity levels. In addition, the quarter benefited $8 million from a resolution of a payroll tax matter. These combined improvements effectively offset a $16 million pay rate headwind.…

Thanks, John. Well, as you've heard, the company delivered very solid results for the second quarter, given the combined headwinds of what we've seen in coal and the unfavorable comparison in the fuel surcharge revenue lag. On the plus side, there were some real positives to take away from our second quarter results in terms of both our continued operating performance, as well as strength in our autos, chemicals and intermodal franchises. I will say that our overall carloads in the second quarter do not indicate that the pace of recovery in the U.S. economy had quickened. And in fact, the latest data would indicate that the economy actually slowed somewhat. Looking ahead, we see more of the same, with slow and uneven economic growth for at least the next couple of quarters. It goes without saying that from a Norfolk Southern standpoint, coal remains a real question mark, although we are approaching more favorable comparisons as we lap the higher market-based export pricing that was in effect through most of the first 8 months of last year. With respect to the coal markets, as you've heard from Don, exports seem to be weakening while domestic utility coal shows signs of bottoming as excess stockpiles decline and natural gas seeks a reasonable price point. Offsetting those uncertain coal markets, we do have a balanced franchise and expect that the strength we have seen in some other components of our business will continue as well. We'll stay focused on continuing the improvements in our service, product and cost structure. And our goals are, as always, to give our customers superior service with a superior value proposition and our shareholders a superior return. Our dividend increase is an indication of our commitment to provide those returns, and we are confident in our ability to do so for the long term. Thanks, and I'll turn it back over to the operator to take your questions.

[Operator Instructions] Our first question comes from the line of Matt Troy from Susquehanna International.

I was interested in your commentary about export coal pricing and specifically, how we do, in fact, anniversary those higher levels, let's call it in another 2 months. If you look at any of the pricing indices internationally, obviously, you have compressions suggestive of some pretty material spot weakness, which should translate into export coal pricing compression into next year, at least in the current trajectory. Just wondering your thoughts in terms of where you see current transport spot rates for export coal? And should we expect another down year into next year just given where the markets are suggesting they will be today?

This is Don. With respect to the spot coal market for export, we have seen the API 2 for steam coal, for thermal coal. And then Northern Europe, met [ph] dropped down to 79% at the current level, mid-80s for 2014 delivery, which is implying marginal improvement from where we are now but not much. And I would say that most of our production base, with the exception of Illinois Basin and some of Northern App is -- they're pushed with respect to margins at those levels of API 2. With respect to met coal, we know that the met coal settlements for the third quarter for the high-end met coal is in the 1 40s. That makes it problematic for a lot of U.S. coal production. And frankly, one of the impacts that we saw in our franchise in this quarter was that low-vol, more expensive met coal from the U.S. is not as competitive with hi-vol b, for example, a lower cost coal coming from the U.S. going into markets at a cheaper price.

Understood. And my follow-up would be just on the domestic side. Our sense, and we've heard from your competitor but also just speaking with utilities, is that stockpiles seem to be more historically consistent than your comments seemingly implied. Are you just being more conservative on the domestic outlook or stockpiles perhaps higher than some might think, remaining in your service regions like the Southeast? Or are you just trying to be a bit conservative after what has been admittedly a painful 2 years?

No, it's really -- it's a story of 2 different market segments. In the North, we're seeing stockpiles normalize. In the South, we're still seeing stockpiles above normal. We're seeing heavier gas competition in the South as well. So -- but with the summer burn that we are seeing, we're seeing stockpiles begin to come down in the South, and they're at the normal level in the North.

Our next question comes from Justin Yagerman from Deutsche Bank.

So I was looking at the Intermodal side of the business, and you've got 5% volume growth but pricing was down. I'm just kind of curious in terms of market positioning, whether or not that was mainly the more competitive truckload market in the second quarter that you would kind of attribute that to? Or if there's been some market share out there that you've been looking to grab as there's a competitive dynamic within that business?

The primary driver on the RPU for Intermodal is the negative year-over-year fuel revenue that we pointed out, it was $59 million lower. So Intermodal is wrapped up into that. The second is that our growth segment in Intermodal in the quarter was domestic highway conversion. And it is coming on. It will not have the same RPU characteristics of, say, transcon intermodal that has a higher revenue per unit.

Got it, that make sense. And just looking at the crude by rail business, obviously, good growth in the quarter and off of a low base. Curious if you guys are seeing the decreasing spreads between WTI and Brent impacting volumes, and really how that's factored into yield when I think about that business. I know you guys have commented in the past that crude by rail comes on at kind of a lower than average chemical RPU. Curious how dynamic that is with what the spreads are doing when you think about how the pricing is positioned on that business?

We don't see the spread compression that we've seen very, very recently between Brent and WTI impacting our pricing at this point nor are we seeing that spread compression impacting volumes. I think it has happened rather quickly, and we will have to see whether or not that type of spread compression continues. But at this point, we haven't seen an impact in pricing or volume.

Our next question comes from Brandon Oglenski from Barclays.

I wanted to ask you, and maybe this one's good for Wick or maybe Don, but as export markets feel like they're deteriorating a little bit more here in the back half of the year, is the network facing another dynamic where you could face compressed margins again as that high-revenue positive mix business comes off again like it did last third quarter? Or is there enough to offset at this point that we're lapping some of those resets that we had last year and you're getting the growth in Intermodal and these really good productivity metrics that the risk to margin compression from here is pretty much going to be contingent on maybe a worst macro outcome?

Well, I think you've kind of identified one of the issues we've been looking at. As we mentioned, we do see the comparisons changing, particularly as we get past the first 8 months or so of the year when we really, as a result of the deterioration in the export market, saw substantial compression in the margins which were necessary in order to keep U.S. coal competitive. As Don mentioned, there's still softness out there in the export market. We'll respond to it in the appropriate fashion, both from a productivity standpoint and Mark has a lot of initiatives underway on the productivity side. But also on the pricing and margin standpoint, it's necessary to keep U.S. coal competitive but to move the business at levels -- margin levels that we find attractive. Having said all of that, we saw a collapse, as Don outlined and as you all know, in benchmark export metallurgical coal pricing from $330 a ton down to $160 a ton. We don't see anything like an equivalent collapse out there. So we may see margins bounce around along around the level they are at now, but certainly not another big reset in what we're going to do in export pricing.

Well, and maybe if I can follow up on that. On the domestic front, Don, you did put on a few slides here talking about length of haul and how that impacts RPU, which is obviously helpful from a modeling perspective. But should we be thinking that higher RPU equals higher margin or is this going to be relatively consistent because that's what ultimately matters, right, for op earnings?

No, our shorter-haul business is very profitable to us. It's attractive business with favorable margin characteristics. The reason that I'm providing that color with respect to the differences in market segments, it impacts revenue per unit, and it impacts the total revenue of the book of business for coal. But I certainly -- it certainly is profitable business, and we wouldn't be handling it otherwise.

Our next question comes from Ken Hoexter from Merrill Lynch.

I guess, one of the pillars of sort of rails really has been the pricing power. And I guess, I would just want to understand, Wick or Don, how you think your -- if you're being more aggressive on pricing versus your peer, and I think you tried to address this earlier. But if you look at your peer, they posted overall yields that were positive, yours are down 4.5%. And then particularly in Intermodal, they were up 1.5% -- or more than 1.5%, yours are down 0.5%. How shall we read that in terms of looking at competition within the market? I understand their mixed differences, but just want to understand if we're seeing a more competitive environment, particularly given what we're seeing on the yields from what we can see as analysts?

Well, and Ken, let me just say this. There's always been a competitive environment out there and there always will be. Our message to everyone has consistently been, we price to the market and respond to the markets, and that's what we'll continue to do. In terms of some of the comparisons that you've talked about, I think you put your finger on a very significant issue, which is mix matters. And we have a very dynamic coal franchise and a coal franchise that looks different from any other carriers' coal franchise. And as Don showed, we have had significant changes within the mix of that franchise that have an impact on our revenue per unit. In a similar way, we have a great Intermodal franchise, the business -- the volume continues to grow there. But there is some amount of that volume that grows that is shorter haul. And that can have an impact overall on revenue per unit as well. So we look upon it as we're competitive, but we think everyone else in the transportation marketplace that we see and come up against is equally competitive. We're going to continue to price the market, and we'll -- I think we'll do fine.

So if I could just follow up on that. I guess -- because looking at your volumes on Crescent were great at 9%, but it's half of Heartland's level. But yet given the investments in new terminals that launched, do you view that as disappointing? Is that something we should see ramp up or is it just a pace as new facilities are coming out or, I guess, fully ramped up, we could see that accelerate?

Well, let me go back to something I think we talked about in the last quarter. As we have brought these new facilities on, we're obviously committed to filling them up. We have a significant capital investment in them. We have new train service, we're outselling that train service. But we have made a commitment to everyone that we are going to fill those terminals up with business at margins that make good sense for us. And we'll continue to be deliberate about bringing that business on to make sure it's the kind of profitable business that we want. So do we view the acceleration there as disappointing? In no way, and we expect continued growth in that -- in all of those quarters.

Can I just clarify something, Wick, there that you just said? Are you saying your pricing to market or are you still saying inflation plus pricing?

No, our long-term commitment as we have said before, and you have to kind of take the issues in the coal market for what they are, is that our long-term commitment is to price at inflation plus. And we're confident that over the long term, we'll do that.

Our next question comes from Keith Schoonmaker from MorningStar.

Can you share average length of haul in Intermodal, and is this trending downwards as you're taking share in these shorter length of haul lengths?

Keith, the length-of-haul traffic that we're converting locally in the domestic market, I will tell you, is less than the length of haul that receive traffic that we generate in the transcon market. And also, International business moving from some of the East Coast ports, like Savannah to Atlanta, are in the 280-mile range. So it is a mix of different lengths of haul, and I can tell you that some are as low as 260, 280 miles.

Sure. And long run, that'll reduce RPU, I guess, as we're -- as you're growing in domestic, even if profitable. That's a lot of what we're seeing this quarter, I guess, with the 1% decline in RPU, is that correct?

That is absolutely correct.

Our next question comes from Chris Wetherbee from Citi.

Don, maybe I could follow up on the coal pricing side. I guess, when you think about the export market, as you mentioned, the settlements have come down for the third quarter. And typically, there has been some variation relative to settlements both on the API side for thermal and met coal, too. If you look out into the back half of the year, is it fair to assume that coal yields are likely to be slightly down from where we were in the second quarter all else equal like fuel surcharge? Or is there something else we should be thinking about? Obviously, kind of keeping mix relatively consistent with where we were in the second quarter?

Chris, with mix held constant second quarter to third quarter, we see marginal decreases with respect to overall RPU as the second quarter versus the third quarter pricing reflects that market dynamic, the change between the 2 quarters.

Okay, okay, that's helpful. And then just maybe bigger picture, you mentioned some of the clearing price or profitability on some of your coal customers into the export market with where the international settlement prices are now. Do you have a rough sense maybe of what percentage of your export business kind of is profitable at these levels for the producers? So I guess, trying to say it another way, as you start to roll out into the back half of the year and into '14, is there a set -- a kind of a number of tons we can kind of think about that has the potential to maybe come out because of not being economic at these levels?

Well, we -- in general, Central App production is under the greatest pressure because of the cost of production. So met coal coming out of Central App, especially if it is low-vol, higher-priced coal, is under greater pressure because what we're seeing in the steel market is international and domestic. But primarily domestic, our international producers of steel taking a different approach to save cost of producing coke for steelmaking where they are taking a longer process in the coke ovens, which enables them to use lower quality coals like high-volume -- high-vol b coals. So we're seeing that dynamic. The Northern App coal is tight right now in terms of this overall availability. The domestic market is getting more robust, and we're seeing that compete for some of the Northern App coal that could go into the export market. And, of course, the Illinois Basin coal, while the cost structure is favorable, we're still facing an API 2 that's falling.

Okay. So it sounds like there's a lot of moving parts when you think about all the potential puts and takes of what can be going into the export market in the next, call it 2 to 4 quarters?

Right.

Our next question comes from Walter Spracklin from RBC Capital Markets.

Just a quick follow-up where you mentioned that the coal revenue per unit would be down sequentially, if I understood that. Were you referring only to the export coal side or overall coal revenue per unit?

On the export side but also the domestic utility side, to the extent that our northern utility coal continues to outpace our southern utility coal. The reason I'm saying that is our northern utility coal, based on length of haul, on average is about 50% of the RPU of our longer-haul southern utility coal.

Okay. Just switching gears now over to seasonality of your earnings profile historically has seen a third quarter that is typically stronger than your prior quarters. That took -- there was an impact last year due to some of the factors that you are mentioning around mix. As that normalizes itself, if we were to look on a seasonality adjusted basis, taking into consideration mix and any of the other moving parts like fuel surcharge, headwind and so on, do you see that historical pattern returning? Or are we in a period that seasonality, we would likely not see the same lift as we have in years prior to 2012?

That's certainly been a pattern in the past. But I would tell you that our crystal ball for the third quarter right now is not good enough to tell you if that's a pattern that's going to be sustained or not. We have a lot of uncertainties in our business as we've outlined, and we'll just have to see what the results are.

Okay. Depressed market, I don't know if you can talk a little bit about employee count and how you see headcount evolving through the rest of the year?

Yes, Walter, so far this year, we've dropped -- in operations, we've dropped a little over 400 people. And that's pretty much across all the different operating groups. And as we continue to roll out various productivity initiatives, we will continue to see that same gradual trend, that same drop in headcount.

So overall, you're likely to end the year around 400, 500 people lower than last year this -- on an average basis?

No, we dropped over 400 so far this year. So I think we'd be looking at something around the same run rate for the rest of the year.

Our next question comes from Tom Wadewitz from JPMorgan. Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division: I wanted to ask you, first, just kind of a follow-up to a prior question, I guess, on the crude by rail. You were hearing that there's not really an impact I think from yourselves and from others on crude by rail yet from this sharp compression in spreads. And I'm wondering if you could give a sense, do you think that that's primarily due to term commitments as your big customer, I guess, for crude by rail. Are they already committed to the volume and that's why you're not seeing the volume respond to the change in spreads? Or what the economics would point that they're being impact from those narrower spreads at some point in time? So I wonder if you could give us some thoughts on whether it's term or volume commitments or if that's not the case?

Tom, it's all of what you just mentioned, the volume commitments, the commitment to rail cars to handle that volume but also the fact that at the wellhead, Bakken, as well as Canadian heavy crude, is being priced in a way that is competitive with Brent even with a compressed spread at this point. Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division: Okay, all right. On the -- I guess, switching topics to the Intermodal side, you also had some questions along those lines. But how do we think about the ramp-up of the Crescent Corridor? It seems like you've got a lot of the capacity in place and a lot of potential. I guess when you talked about this a number of years ago, you identified, I think, 1 million annual loads. And eventually, I don't know if your capacity is more like 500,000 or whatever. But is it -- is the issue that the truck market is not tight enough and fuel prices aren't high enough or if you're more gradual in your ramp-up? Or are you just really trying to be disciplined so you don't do this well in terms of service and that it's a matter of patience on offering new -- starting up new trains, or what is it? Because I would have just thought that this would be a pretty big impact at some point in terms of the volume side with the Crescent Corridor?

Tom, as you'll recall, back in the fourth quarter and also in our January call, we talked about 34 new service lanes, but we were going to phase those lanes in over the course of 2013. So we're phasing the services in, we haven't launched them all simultaneously. And second, we are definitely watching margins closely to build the books of business as prudently as we can to optimize the attractiveness of that business that we bring to the new network.

Yes, let me -- to add to that, Don is exactly right. And one of the things that we're -- we know a lot of potential customers are doing is they're looking at our service patterns that we've now established. They want to see how well we're performing against them, what that service reliability is and what kind of commitment they want to make. And I can tell you the trains are running well, and we're very encouraged by everything that we see. Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division: So it's reasonable to think that 9% accelerates looking forward?

I think -- yes, I think that's a reasonable assumption. Having said that, we are going to continue to be very measured and thoughtful about bringing this business on.

Our next question comes from Bill Green of Morgan Stanley.

Wick, can I ask you for some longer-term thoughts here just on the margin? We talked a lot on this call about the mixed headwinds. And I'm sort of looking at Norfolk Southern's kind of historical performance, and you were industry-leading for so long. And so far this quarter, actually Norfork will have one of the higher ORs. And so at what point do you sort of say, "You know what, we've got to take this more into our own hands and really start to work these costs out in a much more significant way?" Because if the mix is going to be more of a permanent issue as it relates to coal, it would seem to me that Norfolk has some tools at its disposal to try to change that outcome. But I'm curious how you think about that.

Well, Bill, we look at this all of the time. And as Mark has outlined, we are always looking at our cost structure. We have implemented a lot of technology to help us reduce significant areas of our cost structure. We have done a lot of work and a lot of analysis to show that one of the best ways that we can do that is just continue to increase network velocity. We're committed to that. And the other piece of this, obviously, is that operating ratio and margin are extremely important as an indicator of how well we're doing, but we also want to go out there and grow business. And we think that it takes some thoughtfulness in terms of the best way to grow earnings, and thereby -- therefore, grow shareholder returns. So we'll confront the changing business mixes and we'll react accordingly, but we are focused all of the time on trying to squeeze cost out of the network to the very best of our ability.

Yes, okay. Maybe you or Don could comment on this one. When we think about the service levels that you're showing here, and they're quite good, does service directly lead to kind of -- if you have industry-leading service, should you get industry-leading price? Is it that simple or is it more, I don't know, it's not quite so direct of a line?

Bill, industry-leading price could be defined in terms of the definition of RPU, and we're looking at RPU with respect to the results for the quarter. And it reflects a lot of moving parts, as we have already discussed. So we do believe that superior service over time leads to superior pricing.

But, Bill, let me return to something I said earlier, which was we went through some rigorous analysis over the past year or so in terms of system velocity and network performance, trying to understand at what point you optimize your cost structure. We understand that higher system velocity leads to better service, which leads to more customer satisfaction and eventually, we think more business. But the driver that we found was that the faster we can drive the system, the more costs come out. So we view our initiatives around service and system velocity as much as a positive on the cost side, as we do just in terms of providing that superior service to our customers.

Is it correct to believe the industry-leading service has a higher cost component? I mean, I know you said the cost kind of come out with the fluidity. So is that the only piece of it or does it actually have an offset where the net is -- you're required to get better price effectively.

No, no. In fact, that's -- I think that's the point and that was one of the things that came out of our analysis and really what you have been seeing in Mark's presentations now for some time, and that is the faster we can run the network, it -- the fewer assets it requires, the fewer people it requires, the fewer locomotives it requires, fewer cars it requires to handle the same amount of business. So that's an important piece of cost reduction is continuing to take the network velocity up.

And it also had the -- this is Mark jumping in here. It also had the effect, as you see, of reducing our equipment rents, it reduces our re-crews, it reduces our overtime costs. And so while all that is going on with the improvements we see with increased velocity, we have got productivity projects that are teed up around the railroad that are also helping to drive cost reduction. And one of the newest ones that we've got launched which will be more significant is a pretty intensive project that will work its way through our terminals, where we will be going terminal to terminal, finding a lot of efficiencies and productivity that will also lower our costs for our terminal expense.

Our next question comes from John Larkin from Stifel, Nicolaus. John G. Larkin - Stifel, Nicolaus & Co., Inc., Research Division: Have there been any major adjustments to the capital spending program for 2013 in light of the, perhaps, more tepid outlook on traffic for the entirety of 2013 than you might have envisioned when you put the capital plan together in the first place?

No, John, there haven't -- we came in with, we think, a very good capital plan. We're -- the spending we're doing will enhance and maintain the network and our assets, add some new technology which we think is important. And as you saw, we continue to generate cash flow, which is more than adequate to cover that capital plan, cover our dividends, including the increased dividend, and help us repurchase shares. So we're comfortable with the capital level that we projected for this year. John G. Larkin - Stifel, Nicolaus & Co., Inc., Research Division: And then maybe a second one. There's been a lot written about how the shale revolution is generating kind of world-class energy costs in the U.S., and that could lead to a lot of industrial development. And I was just wondering if Don perhaps could give us an outlook on what projects might be out there over the next couple of years they could locate on your railroad that could perhaps offset some of the uncertainty in the coal business?

John, that's a very good question, and we are seeing a very robust pipeline of potential industrial development projects that involve everything from DRI [ph], direct iron reduction plants to ethane crackers to new manufacturing facilities for all types of plastics, ethane conversion, as well as the ongoing activity of reshoring some of the manufacturing that departed the U.S. that went to Asia, that's beginning to make its way back to this country.

Our outlook is optimistic on industrial development. John G. Larkin - Stifel, Nicolaus & Co., Inc., Research Division: Is that something that could have a meaningful impact in the next year or 2, or is it longer term than that?

It's longer term than that. Although I will say, John, that in the auto sector, we are seeing decisions made to move more manufacturing, more production of autos to this country not only for the domestic market but for the export market as well to use U.S. as a platform for exports.

Our next question comes from Justin Long from Stephens.

Maybe just to follow up on the margin question earlier. You've talked about productivity gains this year of about $100 million. Now that we're through the first half, I was just wondering if there was any update to that expectation? And also, if you could just talk about how much of that is coming from cost initiatives versus any changes we're seeing in mix?

Well, as far as that $100 million savings, we are well on track in order to meet that and, in fact, exceed that. And that is coming from the variety of productivity initiatives that I spoke of earlier. So we look forward to more of that same in the second half.

Okay, great. now we're getting a little closer to peak season, I was just wondering if you had an early read on the potential pickup we could see in demand just based on what you're hearing from your customers today?

Justin, with respect to the -- what we used to call peak season, we basically now see elongated supply chains that ordering starts much sooner in the summer. And I would describe our outlook for our fall peak to be more of a fall mount. It will be a gradual uptick to support retail sales, which are not that strong to start with. But we don't expect to see a peak. We do see -- we do expect to see increased volumes starting August, September, October to support the retail season.

Our next question comes from Allison Landry from Credit Suisse. Allison M. Landry - Crédit Suisse AG, Research Division: So in the past, you've had a pretty favorable long-term secular view on the role of the U.S. in export coal markets. But given the comments you made earlier in terms of efficiency gains at coke making facilities and steel mills and the fact that we are seeing a lot of this occur in China, and maybe even layering on top of that expectations for reduced steam coal burn in Europe due to some of the environmental legislation going on over there, has your view changed here? It seems like there's been some structural changes, so hoping to get an update there.

No, our view on the export market over time has not changed other than the fact that right now, we're seeing an oversupply of coal in the world market. The Australian exchange rates are helping their cost structure, their production is up. We're seeing Europe in terms of their economic recovery not doing very well. And Europe, Northern Europe in particular, is a natural market for U.S. export coal. So until we see the European economy begin to recover, we will continue to see exports from the U.S. be challenged. I do believe that thermal coal in the world market will continue -- the demand for that will continue to grow probably by as much as 50 million tons next year, just year 2014. So power plants are being built. Coal usage is being ramped up around the world. It's all a matter of who's going to supply it and who has the cost structure to be able to supply it at world prices.

Our next question comes from Jason Seidl from Cowen & Company.

A couple of quick questions. Looking at the Intermodal business, we've been hearing some hours of service going through some of your truck-competitive lanes right now. You're obviously taking some market share off the highways. I was wondering what is your long-term view on some of the competitive trucking prices? I mean, it's been pretty muted for a while now. Is there going to be an opportunity coming up for you or, even more importantly, some of your partners to be able to raise some of these Intermodal rates?

The hours of service law that just went into effect July 1, we obviously are not seeing any impact yet. We've all seen the same type of projections out there of somewhere between 3% and 5% loss of productivity in -- over the road trucking as a result of the hours of service law. We expect that will continue -- that will show or manifest itself as time goes on, and the law is being monitored and enforced. So we do expect it to make trucking tighter, the capacity a little tighter, and we expect it to have a favorable increase or impact on Intermodal pricing.

Okay. My second question was a follow-up. You guys, I think, Wick, you're talking about running a faster network should equal fewer assets and employees. So as we look out longer term looking at your headcount, is this going to be something where the headcount just sort of hovers around this level as you improve the network fluidity and speed?

I would say, as Mark indicated, we've taken our headcount down some. We expect it to come down some more, it will be gradual. We've got a lot of initiatives underway in terms of productivity not only in the train and engine workforce but across all of the operating divisions. We expect them to -- they won't come to fruition in the next 2 months. But over the next year to 18 months, we'll see continue rent reductions there. And then the second piece of this is what's the volume? And we'll have to -- headcount will, to some extent, be determined by -- particularly on the train and engine side, by what are the volumes we're handling. I can tell you we think that we have plenty of capacity in the network today, certainly in the merchandise train network, to take on volumes without having to add a lot of trains or train crews. So we expect that we're going to be able to take headcount down more from here.

Our next question comes from Scott Group from Wolfe Research.

So I wanted to just go back to pricing. All of the other rails get some form of same-store pricing metrics. And they're on that 3.5% to 4% range, if you exclude export coal. Given all the questions you're getting on pricing and yields and when you're talking about as mix and fuel, do you feel comfortable giving us a sense, are you in that 3.5% to 4% same-store pricing range, excluding the pressure you're seeing on export coal?

Scott, we would prefer not to talk about the range of our pricing. We have made that decision based on the fact that there are multiple constituents on our earnings calls. We will tell you that we're confident that we continue to move forward with pricing that will exceed the rate of rail inflation over time, excluding coal at this point in time. We do think coal will bottom out. And at the time that it does, we will certainly convey that to everyone on these calls. But our commitment is to inflation plus pricing.

Okay. And then one other thought or just a question on fuel. It seems like fuel, the lag impact, is more volatile for you than some of the other rails. Is that something that you're thinking about trying to change or can change in the way you structure your fuel surcharges so it's less volatile going forward?

Well, we look at that and we understand that it does add some volatility in terms of the surcharge and the lag as well. Every carrier has and always has had its own program. We have our own program. We look at it and monitor it all the time. It's not something that you necessarily change quickly because a lot of our fuel surcharge components are wrapped up in contracts of various durations. But we're going to do what we do in every instance. We're going to look at the effectiveness of the surcharge program, we're going to look at how it's viewed in the marketplace and respond accordingly.

Are you trying to smooth out that volatility or is there an offsetting advantage you think you have with, yes, we have more volatility but on the offset we get this that maybe other rails don't get?

This -- we've watched this and looked at this, and while we understand that on a quarterly basis, it may add some volatility. At the end of the day, I think we seem to get to this -- to about the same place that most other folks do over a longer period of time, and we'll watch it. But the volatility in and of itself, we view as something that's just part of the program we have in place today.

Our last question comes from David Vernon from Bernstein. David Vernon - Sanford C. Bernstein & Co., LLC., Research Division: Don, I wanted to talk a little bit about the utility pricing in the East. Your competitor has sort of introduced this idea of fixed and variable pricing for about 20% of its business. And I have 2 questions for you. The first is do you have any similar programs in the works? And the second is do you think, at some point, you might be forced to kind of price match at a marginal level to keep some of the plants that you serve competitive relative to those plants that might have a variable pricing structure?

We have been having ongoing discussions with some of our utility clients regarding that pricing methodology on a quarterly basis. We'll continue to have those discussions and reviews. And where it makes sense for us in terms of profitability and margins and being competitive, we will certainly continue to have that dialogue and take definitive action accordingly. David Vernon - Sanford C. Bernstein & Co., LLC., Research Division: Do you think that, that marginal pricing structure could influence dispatch curves and the competitiveness of various plants? I guess I'm just trying to figure out if you feel like you might get pushed that way by the market.

That is very uncertain to us at this point.

At this time, we have no further questions. I'd like to turn the call back over to our speakers for closing comments.

Well, thank you for your patience, everyone, and we look forward to talking to you next quarter. Thanks.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.