Good morning, everyone. Please note that during today's call, we will make certain forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or future performance of Norfolk Southern Corporation, which are subject to risks and uncertainties and may differ materially from actual results. Please refer to our annual and quarterly reports filed with the SEC for a full discussion of those risks and uncertainties we view as most important. Our presentation slides are available at norfolksouthern.com in the investor section, along with a reconciliation of any non-GAAP measures used today to the comparable GAAP measures, including adjusted or non-GAAP operating ratio. Please note that all references to our prospective operating ratio during today's call are being provided on an adjusted basis.
Turning to slide three, I'll now turn the call over to Norfolk Southern's President and Chief Executive Officer, Mark George.
Good morning, and thanks for joining. With me today are John Orr, our Chief Operating Officer, Ed Elkins, our Chief Commercial Officer, and Jason Zampi, our Chief Financial Officer. Before we get into the numbers, I want to recognize our Thoroughbred Team. 2025 was a demanding year in every sense, and our people have met it with resilience, focus, and commitment. They kept serving customers, improving our railroad, and they did it while tuning out the noise and concentrating on what matters most. Look, Q4 played out in an environment where volume was clearly softer than anyone had predicted, but even so, we controlled the controllables. Costs landed exactly in line with the guidance we provided last quarter, reflecting disciplined execution across the company.
While there's been heavy external attention around the merger, I'm really proud that the team maintained its focus on the business, prioritizing safety, dependable service, and strong cost control. Now, looking back at the full year, 2025 was dizzying. It started with a challenging winter, followed by persistent tariff uncertainty, and then competitive dynamics tied to the announced merger. In the back half, the macro softened further and freight flows shifted, but through it all, our operating foundation held. Safety, our most important work, continued to advance, and service was consistent and reliable. We expanded our digital train inspection program, so now more than 3 quarters of our traffic each month is scanned by portal technology. We had 0 reportable mainline derailments in the fourth quarter. Let me repeat that: 0 reportable mainline derailments in the quarter.
Our investments in our one-of-a-kind digital inspection technology, our enhanced processes, as well as investments we've made in our people, are collectively paying dividends. John will share more detail, but based on current data, 2025 stands as our best year in more than a decade when it comes to train accident rates. That progress comes from better technology tools, rigorous standards, and a culture that treats safety as a value, not a statistic. A year ago, I spoke about our desire to adopt a total quality management mindset at the railroad, and in our results, we are now seeing evidence of what we call Total Quality Railroading. On cost and productivity, we did what we said we would do, and in several areas, we did better. We moved 3% more GTMs in 2025 with 4% fewer employees. That's 7% productivity.
Our network is humming, and in 2025, we delivered steady efficiency gains with improved fluidity, asset utilization, and day-to-day execution that our customers can feel. These aren't one-off wins, but they're the product of sustained discipline and a team that knows how to execute. With that, I'll turn it over to the rest of our leadership team to walk through the quarter in more detail. John, let's start with you.
Good morning, and thanks, Mark. I want to repeat Mark's opening comments, recognizing the outstanding railroaders across all of Norfolk Southern. Today, I will highlight their resilience, discipline, and committed leadership that produced the transformational results that I'll share with you today. 2025 was a defining year for operations. We strengthened the core of the franchise, delivered measurable improvements in safety and service, and advanced the structural changes required under PSR 2.0 to build a more resilient and efficient railroad. Despite macroeconomic volatility, weather-related disruptions, and the operational transitions required by the zero-based plan, the team executed with discipline and intention. The progress achieved in 2025 reflects the maturing operational culture, one grounded in accountability, transparency, and intentional leadership, and positioned us to enter 2026 with stronger fundamentals, improved cost discipline, and a more reliable network for our customers. Turning to slide 5, safety as an operating system.
In 2025, we closed the year with exceptional safety performance. As we enter 2026, operations strategy is clear: a relentless commitment to our core value of safety, a relentless focus on service, and decisive actions to operate with cost discipline, positioning Norfolk Southern to compete and win. The data points on the slide represent a structurally safer, more resilient railroad poised to deliver consistent and reliable performance. Our FRA reportable injury ratio improved 15% to 1.0, and reportable accidents improved 31% to 2.19, reflecting meaningful, sustained progress that underscores the effectiveness of our transformation. We closed the year with a capstone and tremendous momentum, delivering a quarter with 0 reportable mainline derailments, finishing the year with an industry-leading 0.43 ratio. For the quarter, our mainline accident rate dropped to 0.13, a 71% improvement year-over-year. Taken together, these results are balanced and intentional.
We are developing generational railroaders through the Thoroughbred Academy, placing people in the right roles with the right workload, and reinforcing organizational clarity. Stop Work Authority is respected, and safety accountability is synchronized at every level. Turning to Slide 6, disciplined scheduled operations. Our PSR 2.0 transformation has been rapid, multidimensional, and disciplined. It is an operating model designed to simultaneously deliver safety, service, and productivity. In 2025, we focused on delivering high-quality service and reducing costs in response to variability. One of our most effective productivity levers was train operations, increasing train size while lowering the horsepower used to move those trains. Throughout this effort, we were intentional about protecting service performance and keeping the network operating at a low-cost structure. This strategy delivered meaningful results. Train load increased 4%, horsepower per ton decreased nearly 10%, fuel efficiency improved 4%, and GTMs per crew start rose 2.5%.
war rooms have matured into a core competency, improving over-the-road performance and tackling complex mechanical and need-for-speed challenges. Year-over-year, unscheduled stops declined 31%, and through zero-based plan migrations, Q4 2024 versus Q4 2025, we reduced qualified T&E headcount by 7% and 6% for the full year. Let's go to the balance line for a minute. Our new Wheel Integrity System introduced just last quarter has already proven its value, pinpointing a critical external vendor casting flaw on a wheel set that had been in service for less than a week. The new system, internally developed by NS, coupled with our relentless root cause investigation with stakeholders, confirmed there were seven additional brand-new wheel sets across North America with the same manufacturing defect. Our findings and the collective actions of stakeholders led to an immediate industry-wide recall of these defects across North America.
This is a powerful example of how Norfolk Southern's advanced digital capabilities help us solve real problems with scale, speed, and accountability. From an infrastructure point of view, mega work blocks continue to elevate productivity. In 2025, we delivered our $2.2 billion capital programs on time and on budget. Network reliability derived from our PSR 2.0 flywheel has allowed us to reduce our 2026 capital envelope by a further 14%, bringing our 2026 capital budget down to approximately $1.9 billion, delivering a two-year $450 million planned capital reduction while supporting a safe and reliable network ready for future growth. Turning to slide seven, continuous measurable improvement. Our team delivered a clear and compelling result. Even after raising our cost takeout commitment to $200 million during the year, we outperformed that higher target, delivering $216 million in full-year savings. As we have said before, our team is never satisfied.
As you can see in the chart, we exceeded our 2025 cost takeout targets, and we are once again raising our 2026 cost takeout savings commitment from $100 million to $150 million, bringing our three-year cumulative total cost takeout to approximately $650 million. This underscores the strength of our PSR 2.0 transformation and our committed leadership to deliver. Turning to 2026, we are intensifying efforts to lower dwell for both cars and locomotives. We will apply our new Zero-Based Terminal methodology to terminals with outsized consumption of core resources and assets. By challenging and strengthening processes, our ZBT will instill factory management mindset, empowering terminal teams to operate their yards like small businesses. Supporting this shift are our Clarity Camps, which will equip frontline supervisors to think like owners, understanding how their decisions influence cost, how they drive profitability, and how to do so while maintaining industry-leading safety performance.
They will gain a deeper appreciation for the cost of every asset and help build a bottom-up culture of disciplined cost control. I'm proud of how our team performed in 2025. They embraced change, delivered results, and strengthened the foundation of this railroad. We have talent. We have 19,000 railroaders who deliver safety with intention. Where discipline drives performance, where accountability builds trust, and where culture fuels pride. Our people are propelling our PSR 2.0 transformation, shift by shift, mile by mile, with intention and clarity. Now I will pass the mic to Ed.
Thanks, John. Let's move to slide 9. Overall, this quarter presented challenges for both volume and for revenue. As you can see on the slide, merchandise led the way, although our success was tempered by challenging market conditions within Intermodal along with persistently weak export coal markets. Overall volume for the fourth quarter was down 4%, driving a 2% reduction in total revenue. The volume impacts were partially offset by positive mix with RPU increasing 2% year-over-year. Now, within merchandise, volume increased 1% from a year ago, driven by auto and our chemicals markets. Merchandise revenue, less fuel, grew 2% year-over-year, reflecting strength in both volume and price, supported by our strong service product that John mentioned. RPU, less fuel, grew 1% year-over-year within the segment as negative mix offset core pricing, most notably mixed within the chemicals franchise.
In our Intermodal business, shifting market conditions during the quarter drove a 7% decline in volume. RPU was up slightly at 1% as we continue to compete in an unexceptional pricing environment, leading to a 6% decline in revenue. Let's look at coal. Volume was up as increased electricity demand, favorable natural gas prices, and regulatory support gave strength to our utility markets, which was partially offset by reduced volume in export. So while volume was up 1%, revenue was down 11% as lower seaborne coal prices drove RPU, less fuel, down by 12%. If you'll turn with me now to slide 10, let's review the full year. Walking left to right on the waterfall chart, we achieved an outstanding year in our merchandise business, growing revenue, less fuel, by $287 million, or 4%, through volume growth and pricing discipline.
To underscore the strength, we delivered record annual revenue and record revenue excluding fuel across each of the underlying merchandise business groups for the full year 2025. Now, I want to drill into this one just a bit. We delivered a record year for our automotive franchise, setting a record for total revenue and revenue, less fuel. This performance was enabled by strong train performance and car order fill, thanks to our Operations Group, as well as focused efforts by our Customer Logistics Group to reduce on-terminal dwell. The key result of these combined efforts was a 4% year-over-year improvement in equipment cycle times and substantially greater terminal fluidity, allowing us to take advantage of the favorable market conditions and deliver the record revenues that I just noted. A really nice job by everyone involved, and our customers took note, gaining confidence in our service throughout the year.
Back to the numbers, Intermodal revenue finished flat as we weathered trade volatility throughout the year and second-half share losses due to merger-related competitor activity. seaborne coal market weakness throughout the year drove a $108 million year-over-year decline, even as utility coal volumes increased in 2025. Finally, volatile fuel surcharge revenue represented $134 million of drag for the year. These factors combined to produce a modest increase to overall volume and revenue. Moving to slide 11, we have our market outlook. Like last quarter, we continue to navigate an uncertain economic environment. For our merchandise markets, we expect a mixed outlook for vehicle production due to affordability challenges and the fading EV incentives. Overall manufacturing activity remains mixed, with output forecasts to expand modestly amid ongoing economic uncertainty.
Elevated natural gas fracking and drilling activity in the Marcellus/Utica is contributing to stronger demand across non-crude chemical energy sectors, driving increased engagement and business development with both new and existing customers. Looking to our Intermodal markets, import volumes are expected to remain soft due to continued tariff volatility and evolving trade pressures. Warehousing capacity is increasing as companies deplete inventory backlogs, and truck capacity remains oversupplied. All these factors, plus an enhanced competitive environment in response to our merger announcement, shape our restrained view for Intermodal. seaborne coal prices have remained pressured with significant uncertainty surrounding export trade, but we expect that utility demand to remain elevated due to continued strong demand for electricity generation in our service area, along with supportive natural gas pricing. All right, let's quickly turn to slide 12 while we're on the topic of coal.
We're proud to be partners with Warrior Met Coal in servicing their new Blue Creek facility in Alabama. Back in 2024, we noted that the mine was in development, and we're equally proud now to have attended the formal ribbon-cutting ceremony earlier this month. As the mining operations, the belts, and the rail loadout are now fully operational, we are pleased to be ramping up rail service and delivering high-quality metallurgical coal to markets around the world. As always, we want to thank all of our customers for their continued partnership and their business. The entire NS team is aligned around delivering the service that our customers need every day, building trust as a vital partner in their supply chains. With that, I'll hand it over to Jason to review our financial results.
Thanks, Ed. I'll start with the reconciliation of our GAAP results to the adjusted numbers that I will speak to today on slide 14. Total costs attributable to the Eastern Ohio incident were $29 million, which included $24 million of recoveries under our property insurance policies. In addition, we recorded $65 million in merger-related costs consisting primarily of legal and professional services and employee retention accruals. Adjusting for these items, the operating ratio for the quarter was 65.3, and from an EPS perspective, we earned $3.22 per share. Moving to slide 15, you'll find the comparison of our adjusted results versus last year and last quarter, both comparisons reflecting a degradation in the operating ratio due to the top-line headwinds, as Ed just discussed. The drivers of the revenue decline are similar to what we discussed last quarter.
Additionally, as we previously guided, we absorbed a full quarter's worth of impact from competitor responses to the merger in the fourth quarter. Expenses were favorable by 1% in both periods, primarily due to one large land sale in the quarter that benefited operating expenses by $85 million. Those year-over-year expense variances are laid out on slide 16. Overall, we had guided to quarterly expenses of $2 billion-$2.1 billion. Absent the large land sale that we weren't counting on closing in the quarter, we were right within that range. Notably, inflationary pressures we've experienced throughout 2025 in wages, materials, and depreciation continued to be headwinds in the quarter. That, coupled with timing of certain expense activity, drove increases primarily within purchase services and materials. Nonetheless, we continue to focus on the controllables, delivering significant improvements in fuel efficiency and continued strong labor productivity.
Lastly, I'd point out we did have some recoveries in the quarter associated with storm damage incurred throughout the year. All in, while there were some puts and takes in the quarter, we are pleased with how our team handled a dynamic environment. Turning to full-year results on slide 17, you'll note favorable performance across all metrics compared to last year, however, not in the way we originally intended. A year ago, we were projecting 3% revenue growth, which didn't materialize, but we did control the controllables. We had good cost discipline and exceeded our original productivity targets, as John just discussed, by over $65 million. In addition, while the timing of large land sales is hard to predict, the actions we took to monetize these underutilized assets during the third and fourth quarters helped to mitigate the operating income shortfall from the weak macro.
The fourth quarter and full year also benefited from the resolution of a state tax issue, which increased net income and EPS by $50 million and 22 cents, respectively. Overall, the bottom line grew by 5% compared to last year. Finally, moving to cash flow on slide 18, we generated $2.2 billion in free cash flow, an increase of almost $500 million over the prior year. In addition, our free cash flow conversion was very strong, with the highest conversion rate since 2021. As we had guided to, we spent $2.2 billion on our capital plan, a 7.5% decrease from 2024. Going forward, we are planning for a $1.9 billion CapEx spend in 2026, with continued focus on the safety and resiliency of our network. I'll hand it back to Mark to wrap it up.
Okay, thanks, Jason. Before we wrap up, I want to leave you with a clear view of how we are approaching the road ahead. With the amount of change and uncertainty around us, given the demand environment, and of course, the pending merger, we are keeping our team focused on simple priorities for 2026. We will prioritize safety. We've got to keep our employees and our communities safe. We must continue to deliver consistent and reliable service. And we will control costs by driving productivity across the network, all while we fight for every dollar of quality revenue that is available. While we are seeing long-awaited stabilization in truck pricing, the impacts of shifting tariff policies remain uncertain, and many customers continue to adjust to fluid conditions. So the macro backdrop remains hard to read, but we are staying sharply focused on the fundamentals.
For the year ahead, we expect our cost base to be in the range of $8.2-$8.4 billion, with an ability to accommodate a variety of volume growth scenarios within this cost envelope. We are also reducing capital spending by nearly $300 million to $1.9 billion, reflecting a prudent approach in this environment while still supporting the reliability and safety of the network. Now, let me close with a brief update on the merger. As you heard from Jim on Tuesday, we are working closely with UP to include the additional information requested by the STB and submit an augmented application, taking the necessary time to ensure that it's thorough. We remain committed to working constructively with all stakeholders throughout the regulatory review.
We continue to firmly believe in the benefits of creating the nation's first transcontinental rail network, one that connects the United States from east to west and gives shippers a more competitive single-line rail option to ship across and within the watershed. Growth has eluded the U.S. rails, and I strongly believe that this merger is a necessary catalyst to grow, helping us recapture freight from the highway while supporting the reindustrialization of our country and strengthening our supply chains while offering better opportunities for employees across a unified network. We will have a more efficient, flexible, and reliable railroad, providing single-line access to more than 100 ports connecting to global markets and 10 gateways to markets in Canada and Mexico.
So to wrap, as we move into 2026, the priorities for our team are clear: focus on the preservation of safety, protect the excellent service that our customers count on, maintain tight control of our cost structure, and compete hard for quality revenue. That's how we will continue delivering value, both as Norfolk Southern today and as part of a stronger future transcontinental network. So thanks for your time and your continued confidence in our team. We'll open it up to questions.