Norfolk Southern Corporation (NSC) Earnings Call Transcript & Summary

Good morning. Welcome to the 2021 Annual Meeting of Shareholders for the Nordic Southern Corporation. I would now like to turn the call over to Mr. Jim Squires, Chairman, President, Chief Executive Officer. Mr. Squires?

Good morning. I'm Jim Squires, Chairman, President and Chief Executive Officer of Norfolk Southern Corporation. It's 8:40 a.m. Eastern Daylight Time on May 13, and I now call to order the 2021 Annual Meeting of Shareholders. Thank you for joining us today. We're hosting our 39th annual meeting virtually. Our experience with our first virtual meeting last year showed that this format allows more greater participation by our shareholders regardless of their geographic location. More importantly, the virtual format ensures safety in light of the continuing public health concerns regarding the coronavirus pandemic. I'll talk more in a few moments about how our company responded to the challenges of the past year and our transformational efforts to build a faster, more efficient and technologically innovative railroad. But let me just say that I'm as proud as I've ever been to be a member of the Norfolk Southern team. We play a vital role in the nation's supply chain. While we face significant challenges in 2020, the NS team never wavered. From the frontline operations to back offices and make-shift home offices, employees across all departments stepped up in truly heroic fashion to deliver for our customers in the country. Thanks to their tireless efforts, Norfolk Southern is a leaner, smarter and more efficient company. We've tested our virtual platform this morning, and I can see that we have several shareholders and guests joining us for today's meeting. As is our custom, we will conduct the business portion of our meeting first and answer questions at the end of the meeting. Although we may not be able to answer every question, we will do our best to provide a response to as many questions as possible in the time we have allotted. If we have to interrupt our meeting for an emergency in our broadcast location or connectivity issues, we'll recess for 30 minutes and ask shareholders to rejoin after the recess. It's now my pleasure to present the members of our Board of Directors who with me are standing for election at this meeting for a term expiring at the date of the 2022 Annual Meeting. Thomas D. Bell, Jr., Chairman of Mesa Capital Partners; Mitchell E. Daniels, Jr., President of Purdue University and Former Governor of Indiana; Marcela E. Donadio, former Ernst & Young Partner and oil and gas sector leader; John C. Huffard, Jr., Co-founder of Tenable Network Security and Tenable Holdings, Inc; Christopher T. Jones, former President of the Technologies Services Sector of Northrop Grumman Corporation; Thomas C. Kelleher, former President of Morgan Stanley; Steven F. Leer, former Chief Executive Officer and Chairman of Arch Coal, Inc; Michael D. Lockhart, former Chairman of the Board, President and Chief Executive Officer of Armstrong World Industries, Inc; Amy E. Miles, former Chair of the Board and Chief Executive Officer of Regal Entertainment Group; Claude Mongeau, former President, Chief Executive Officer and Director of Canadian National Railway Company; Jennifer F. Scanlon, President, Chief Executive Officer and Director of UL; and John R. Thompson, former Senior Vice President and General Manager of BestBuy.com LLC. All of these directors are attending online today. These hard-working directors consistently devote substantial time and effort to advancing the best interest of Norfolk Southern and you, our shareholders. They're a great Board. We also have with us our executive management team. They are Ann A. Adams, Executive Vice President and Chief Transformation Officer; Mark R. George, Executive Vice President and Chief Financial Officer; Cynthia M. Sanborn, Executive Vice President and Chief Operating Officer; Alan H. Shaw, Executive Vice President and Chief Marketing Officer; and Vanessa Allen Sutherland, Executive Vice President and Chief Legal Officer. I feel fortunate to have such a talented and outstanding executive management team, and I thank them for their leadership. We're also joined here today by our independent auditors, representing KPMG LLP are Scott Flynn, Randy Green and Paul Benedict. They will be available to respond to appropriate questions during the general question-and-answer period following adjournment of this meeting. The corporation has appointed Broadridge Financial Services to act as inspector of election. [ Belinda Massafra ] from Broadridge is with us today and has taken the oath of inspector of election required under Virginia law. The inspector has informed me that a majority of the shares entitled to vote is represented, and that a quorum, therefore, is present for the conduct of business. After the formal meeting has been adjourned, we've allowed time for general questions. Only validated shareholders may ask questions in the designated field on the web portal. [Operator Instructions]. Please note that this meeting is being recorded by Norfolk Southern, and it will be posted to the Investors section of our website next week. However, no one attending via the webcast or telephone is permitted to use any type of recording device. In accordance with the bylaws and notice of the meeting, there are 5 matters to be acted on today, which I and 2 of our shareholders will present. Please note that we will give shareholders an opportunity to comment on the items themselves after all proposals have been presented. Please feel free to submit questions at any time. However, we will not respond to questions that relate to matters other than those to be voted on until the designated question-and-answer period following the meeting. Item 1 is the election of 13 directors named in the proxy statement for a 1 year term. The Board recommends a vote for the election of each of the nominees. Because no other nominations have been received from shareholders during the time period prescribed in the company's bylaws, I declare that the nominations are closed, and we will vote later in the meeting. The second item of business is ratification of the Audit Committee's appointment of KPMG LLP, independent registered public accounting firm, as our independent auditors for 2021. The Board recommends a vote for the ratification of the appointment of KPMG LLP. The third item is an advisory vote by shareholders to approve the compensation of our named executive officers as disclosed in the proxy statement for this annual meeting. The Board recommends a vote for the advisory resolution approving the executive compensation of our named executive officers as set out in the proxy statement. The fourth item is a shareholder proposal regarding revisions to ownership requirements for proxy access, if properly presented at this meeting. The Board recommends a vote against the proposal. The fifth item is a shareholder proposal regarding a report on lobbying activity alignment with the Paris Climate agreement, if properly presented at this meeting. The Board recommends a vote against the proposal. Under Norfolk Southern's bylaws, no other matter may come before this meeting for a vote. At this time, Jeffrey Perkins will present both the shareholder proposal regarding revisions to ownership requirements for proxy access on behalf of Mr. John Chevedden and the shareholder proposal regarding a report on lobbying activity alignment with the Paris Climate agreement on behalf of Friends Fiduciary Corporation. As a reminder, Mr. Perkins, you'll have 3 minutes to present each proposal, and I ask that you limit your remarks to reading each proposal. Operator, please open Mr. Perkins' line to allow him to present the proposals.

Thank you, Mr. Squires. Good morning, fellow shareowners and members of the Board. My name is Jeff Perkins. I'm Executive Director of Friends Fiduciary Corporation, and we are a long-term shareholders of Norfolk Southern. On behalf of John Chevedden, sponsor of proposal #4 to improve our catch-22 proxy access, I hereby move item #4. Shareholders request that our Board of Directors take the steps necessary to enable as many shareholders as may be needed to combine their shares to equal 3% of our stock owned continuously for 3 years, in order to enable shareholder proxy access. The sponsor urges a vote for yes on Proposal 4 to improve our proxy access. Proceeding now to shareholder proposal #5, I hereby move item 5, Friends Fiduciary proposal asking the company to provide a report describing if and how its direct and indirect lobbying activities align with the Paris Climate agreement's goal of limiting average global warming to well below 2 degrees Celsius and how the company plans to mitigate the risk presented by any misalignment. Climate change will have a material, direct and indirect impact on our company's long-term operations and those of its customers. NSC has not demonstrated in its disclosures or policies that its lobbying spending, either direct company ending or indirect spending through trade association memberships, aligns with climate policy that will support our company's long-term sustainability. Despite the financial materiality of the physical and transmission risks related to climate change, our company belongs to organizations that have been among the leading opponents of Paris-aligned climate policy, including America's Power and the National Association of Manufacturers. In addition, its primary trade association, the Association of American Railroads was identified in the 2019 study as the most active organization in the climate denial movement. Company transparency and accountability are in the best interest of Norfolk's Southern shareholders. Shareholders are unable to determine whether the company's lobbying expenditures work for or against the company's own sustainability objectives. Proxy advisers, ISS and Glass Lewis, both support this proposal, noting that additional reporting would assure shareholders the company funds are being spent in a manner that furthers its stated objectives, particularly in light of increasing risk to company-related climate change. One of our companies peers has agreed to review and report on their lobbying and climate policies and those of trade associations to which they belong. Our company's shareholders need this additional reporting in order to understand and anticipate risks related to whether Norfolk Southern's lobbying expenditures are supporting or countering the company's stated environmental, sustainability leadership. Therefore, we urge shareowners to vote for items 5. That ends my statement. Thank you.

Thank you. The Board of Directors has recommended a vote against each of these proposals for the reasons stated in the proxy statement. I'll now pause to allow shareholders who would like to submit a question pertinent to any of the voting items to submit their questions through the web portal.

Mr. Chairman, I see no further questions has come in that are pertinent to voting items, so you may proceed.

It is now 8:50 Eastern Time on May 13, 2021, and the polls are now open. Any shareholder who hasn't yet voted or wishes to change their vote may do so by clicking on the Voting button on the web portal and following the instructions there. Shareholders who have sent in proxies or voted via telephone or Internet and do not want to change their vote, do not need to take any further action. [Voting]

Now that everyone has had the opportunity to vote, I declare the polls for the 2021 Annual Shareholder Meeting closed. I'll now ask the inspector of election to provide a preliminary vote report. Operator, please open Ms. Massafra's phone line.

The nominees for election to the Board have been duly elected. The ratification of the appointment of KPMG LLP as the company's independent auditors for 2021 has been approved. The compensation of the named executive officers has been approved by advisory vote. A shareholder proposal regarding revisions to ownership requirements for proxy access has not been approved. And the shareholder proposal regarding a report on lobbying activity alignment with the Paris Climate Agreement has been approved. I now ask the operator to turn the meeting back to the Chairman.

Thank you. We will be reporting the final vote results for today's meeting in a Form 8-K to be filed within 4 business days. There being no further business to come before the meeting, the 2021 Annual Meeting of Shareholders of Norfolk Southern Corporation is adjourned. Now I'd like to say a few words about Norfolk Southern, following which we will address shareholder questions. Since we last gathered, Norfolk Southern has made tremendous progress in a year defined by resilience. Thanks to the tireless efforts of our field employees and the dedication of our entire NS team, we have continued operating safely and reliably throughout the COVID-19 pandemic. Despite inherent challenges, we've advanced our long-term strategic goals to build a faster, more efficient and technologically innovative railroad. We've reduced our company's resource needs, exercise strong financial discipline and achieved consistent operating ratio improvement. We're now accelerating our implementation of precision scheduled railroading principles to drive the productivity and efficiency of our organization even further, helping us better serve customers, support growth and drive long-term value. With a leaner workforce and fewer, more fuel in locomotives pulling longer, heavier trains, our added efficiencies are reducing operating expenses, providing cash to reinvest in our network and reward our shareholders. With a resurgent economy, volumes and operating revenues are on the rise, and we are well positioned to meet increased market demand. Consistent with these conditions and our commitment to provide superior shareholder value, we repurchased more than $1.4 billion in company shares. And in January, our Board of Directors approved increased dividend distributions. Having made significant progress in our company's transformation. Technology remains at the center of our strategy. We are moving quickly to lead the industry in innovation, launching our digital NS initiative and building the digital railroad of the future. Mobile applications, artificial intelligence and mathematical models are all at work across our organization to enhance safety and increase productivity. We're paying close attention to the evolving supply chain needs of our customers, using our technological capabilities to improve the customer experience and better aligning our definition of success with their own. We have goals that range from short-term practical improvements in daily operations to long-term aspirational moonshot projects that will transform our company and the rail industry. Regardless of their scope, these technology investments reflect our company's pursuit of operational excellence as well as a deep commitment to sustainability as core to our business. For example, by adopting smart operating practices and energy management technologies, we achieved record locomotive fuel efficiency in 2020. We expect this trend to continue in the year ahead and are excited to move forward with our transition to diesel electric hybrid cranes at our intermodal facilities, advanced plans to further reduce fuel consumption and develop our science-based target to reduce emissions consistent with the Paris agreement on climate change. By combining these measures with innovative initiatives such as our industry-first issuance of green bonds, we're partnering with our customers and investors to reduce our respective carbon footprints and business costs while pursuing responsible growth. Operating our business sustainably also requires prioritizing the well-being of people. Led by company wide efforts, such as our creation of an NS inclusion leadership council, we're committed to making diversity a competitive advantage. By leveraging our differences, we drive collaboration and inspire innovation. With great determination, the NS team continues to advance our strategic goals and build on the progress of the past year. As a result, we achieved yet another company quarterly record operating ratio of 61.5% in the first quarter of 2021. With improving economic conditions and positive trends across our first quarter financial metrics, we remain confident in our ability to deliver a great 2021 to shareholders. We have many reasons to be optimistic about Norfolk Southern's future. We're especially eager to complete the move into our new corporate headquarters in Atlanta, a state-of-the-art facility that recently received the Atlanta Business Chronicle's Best in real estate award for design. Atlanta is a diverse talent-rich technology hub with world-class talent. And the city is ideally suited for our innovative and inclusive culture. Our new headquarters will promote the health and well-being of our employees, empower collaboration and help create a lasting competitive advantage for our company. We are proud of what we've accomplished together in the past year, and we're eager to move forward with a highly anticipated year of growth and progress. Thank you for your participation in today's meeting, and thank you for your investment in Norfolk Southern. I'll turn to the general question-and-answer session that follows our annual meeting. Please note that only questions that are relevant to our annual meeting or our business will be addressed. Thank you for the many questions you submitted in advance of today's meeting. We appreciate your interest and engagement with Norfolk Southern. As an initial matter, we've received several questions on the recent merger discussions between other Class I freight railroads. We're watching the situation closely, but we won't be responding to any questions related to the proposals or industry speculation. We recognize that there are a lot of interested industry stakeholders focused on the proposed transaction, including NS, and we will be protected of our shareholders' interests and our customers' interests. As the regulatory review process unfolds, there will be opportunities for further discussion. We'll answer as many questions as time allows. If multiple questions are submitted on the same topic, those questions will be grouped and answered collectedly. [Operator Instructions] Corporate Secretary, Denise Hutson, has our first question.

Thank you, John. The first question is do you support the enhanced funding for Amtrak mass transit and high-speed rail that President Biden has proposed?

With the Biden administration's recent proposal on infrastructure, there is a lot of enthusiasm for expanding rail services for both passengers and shippers. And there's no action that Amtrak has developed an ambitious plan. We'll continue to work collaboratively with Amtrak at the appropriate time to ensure that passengers and shippers get the safe, reliable transportation services they deserve.

Thank you. We've received several questions regarding Norfolk Southern's adoption of precision scheduled railroading, or PSR. One questioner suggests that PSR implementation by other railroads has ultimately required major capital investment to rebuild infrastructure, hire new employees and purchase equipment to maintain service levels. How are we planning to balance the short-term and long-term benefits of PSR to avoid diminished service to customers?

For those on the call who aren't familiar with it, PSR is a railroad strategy to optimize key assets and maintain a strict operating plan to improve operating efficiency and achieve low operating ratios. And the PSR strategy has been adopted by virtually all the major railroads in North America and has been credited with helping railroads reduce their operating ratios. Cindy Sanborn, our Chief Operating Officer, is joining us. Cindy, why don't you talk about the short-term and long-term benefits?

Thanks, Jim. Ultimately, PSR is about simplifying and having the rail return its assets as quickly as possible while absorbing growth into the existing trains. The basics of PSR, controlling cost, providing good service are the foundation of good railroad. We are now several years into our PSR implementation. We are seeing great results. NS took a balanced approach to PSR, resulting in customer service improvements and significant operating expense saves. It's also been able to provide that service while using fewer assets. As the pandemic eases and business returns, we are prepared to continue to provide high-quality service while handling any increased [indiscernible].

Thank you, Cindy. Jim, we received a number of questions asking about Norfolk Southern's official position on the new voting law in the state of Georgia. We have received comments from shareholders that voice the support and opposition to the law and asking about our position in light of Norfolk Southern's opening its new headquarters in Atlanta later this year. Can you speak on that topic?

In terms of voting rights, we believe that democracy is good for all businesses. And we believe in a foundational and fundamental right to fair, accessible and secure elections at all levels and for all citizens. And we recently published a statement on our website affirming these beliefs.

Thank you. Next question, a shareholder asks how many diesels are in storage right now. And another shareholder asks whether stored locomotive should be reintroduced into operations to ensure the ability to meet customer needs?

While we don't publicly disclose the number of locomotives that are in storage, I will say that Norfolk Southern has a surge fleet of locomotives available. We think our existing active fleet is sufficient to handle current business and growth. But that surge fleet is available to ensure that we are prepared to handle any increase in volumes and to continue to provide high-quality service to our customers.

Thank you. We've received a couple of questions on Board effectiveness. One shareholder states, moving forward, the Board of Directors should have a limitation on the number of Boards that they can be on. They should be focused on 1 or 2 other companies at most, so that we are getting their full attention. If they are currently at the top management of their company, they should only be on 1 Board of Directors. Do you believe the director should be limited to the number of company boards they sit on?

Thanks for the question. It's a topic that our Governance and Nominating committee has discussed and will continue to consider. Our policies currently limit our directors to serving on at most 3 other Boards of public companies. Also, I'm limited to only serving on 1 outside Board.

Thank you. Our next question, I saw that you recently issued green bonds. Do you have any insight to give on that transaction?

Yes. We're excited to be the first Class I railroad in North America to issue green bonds. Mark and his team worked hard on this project. Mark, can you say a few words about the initiative?

Yes. Sure, Jim. For those who may not be familiar, a green bond is a financing instrument that's used specifically to fund projects or investments that are determined to be green in nature or helping sustainable causes. And those are clearly defined and validated by a second party, a firm called Sustainalytics. So in our case, proceeds from our borrowings will be invested in a range of projects outlined in our green financing framework that you can find on our website. Some of those projects include the conversion of our older technology DC fleet of locomotives to more efficient AC technology. It also finances the inclusion of energy management systems on locomotives to optimize train speeds for fuel efficiency. And we also have funds allocated to restore natural landscapes as well as recycling and recovery programs. And we will even be financing the expansion of intermodal terminals that promote the shift of freight from trucks to trains. And remember that relative to truck, the railroad is a more sustainable alternative by moving the same tonnage of freight at a fraction of the carbon consumed. Rail is 3 to 4x more efficient than truck and can reduce emissions 75% on average. Collectively, our customers avoid 15 million metric tons of carbon emissions each year by shipping with us instead of truck. And that's the equivalent of the carbon captured by 5 million acres of forest in a year, which is almost a size of New Jersey. Now in regards to the $500 million of bonds themselves, there was tremendous investor interest in purchasing our green notes. In fact, there was final investor demand for over $1.8 billion of these bonds, which is over 3.5x more than the amount that we were seeking. And in fact, at a coupon rate of 2.3%, we believe that the 10-year note actually carries a modestly lower interest rate than a traditional bond. So I can just tell you, this was an exciting effort, and we are glad it was so well received. We're super proud to be the first in the industry.

Thank you, Mark. Our next question is why are you unwilling to commit to a process of annual reporting about your climate change impacts and strategies, it would give you something to boost about if you achieve tangible results.

To the extent the question is about the shareholder proposal that we received this year, the report described in the question is not what the proposal was asking us to produce. However, we do produce an annual report, our corporate responsibility report, which includes many highlights of our sustainability initiatives. And that report as well as additional information can be found on the Sustainability page of our website. Vanessa works with the Governance and Nominating committee of our Board of Directors, which has oversight of the corporation's sustainability initiatives. Vanessa, do you have anything to add?

Certainly, Jim. Just a couple of quick points. I would add, we were the first to begin disclosing greenhouse gas emissions in 2009. And last year, we were recognized by the Wall Street Journal as one of the 100 most sustainably managed companies in 2020. This year, we expect to publish Norfolk's Southern's annual corporate responsibility, which you referenced a moment ago by the end of September. Norfolk Southern integrates sustainability into daily operations in ways that advance our business goals and honor our commitment as a responsible corporate citizen. We recently committed to setting a science-based emissions target that will be aligned with the 2 degree of Celsius standard that's set out in the Paris Climate Agreement. And Jim, my last point, as you mentioned a moment ago, our website includes additional information about our sustainably program, and we update that regularly and would encourage people to visit that section of the site.

Thank you, Vanessa. Next question, what are the future plans for use of Moorman Yard?

In June of 2020, we announced that NS was idling the hump at Bellevue in Bellevue, Ohio, also known as Moorman Yard, although we have continued to use the yard for switching railcars. This alteration allowed for greater efficiencies and improved customer service. We'll continue to look at all our yards and see how they can speed up cars, as the primary goal is keeping cars moving through terminals as quickly as possible and not handling cars any more times than necessary. At this point, we don't have any plans to change the footprint of Moorman Yard.

Our next question, major railroads, including Norfolk Southern, has been accused of practicing climate science denial. What is the railroad's position?

First, as Vanessa mentioned in response to a previous question, I'd like to make sure you're aware of our recent commitment to setting science-based emissions targets. These targets will be in line with the Paris Climate Agreement. I would also like to take this opportunity to highlight that Norfolk Southern today can, on average, haul a ton of freight 440 miles on a single gallon of fuel. Rail currently moves 45% of all freight ton miles for long-distance shipping in the U.S. and only produces 7% of freight carbon emissions. Moving freight by rail lowers overall transportation emissions, relieves highway congestion and reduces wear on the publicly funded interstate highway system.

Thank you. Next question. How do I become a member of the Board of Directors?

The Governance and Nominating Committee of our Board of Directors will consider Board candidates recommended by shareholders. And detailed information about shareholder nominations for director candidates and their qualifications is available in the proxy statement.

Our next question, how are new customers being actively pursued? Everywhere around me are old rail leads? Is there someone pursuing this potential revenue?

Norfolk Southern is always pursuing new business. And Alan, why don't you explain more about our growth strategy?

Sure, Jim. For those who are not familiar, a rail lead is actually the track that allows Norfolk Southern to serve our customers. It leads into their facility. We have interdepartmental teams, including employees for marketing and operations working to pursue new customers. And frankly, some of our best leads come from our operations team, the train masters and the T&E crew members who are serving our customers. Our leadership in sustainability are resonating with our customers in the markets we serve, validating these efforts. We're confident in our ability to leverage our excellent service, sustainable, low-carbon transportation alternative to our customers to secure new opportunities, supporting our customers' growth and growing our margins.

Thank you, Alan. Our next -- we have a comment next regarding the disparity between the CEO's pay and average worker pay that's -- and it says, that income inequality is embarrassment to ethics and morality. The shareholder then asks, when will you invest in workers that makes the company successful rather than the CEO who lives off of their efforts?

Let me start by correcting the characterization of railroad worker pay. We are proud that employees in the rail industry, including NS, are among the most highly compensated employees in the nation. Freight railroad employees ranked above 94% of employees in other industries in average annual compensation. As for my pay, it is established by the independent compensation committee of our Board of Directors. The committee uses an independent compensation consultant to help establish the terms of my pay, which includes looking at pure data for CEO pay. NS' pay program is designed to align compensation with our company's overall business strategies by tying pay to the company's performance.

Thank you. Our next question, with the revenue and gross profit margin numbers NS has, we should be able to spend more money on shareholders. I would like to see a dividend rate to a 3% yield. I realize that this is practically double the current dividend, but we can afford this raise. We all benefit from it. Can you please comment?

Well, thank you for the observation. We are resolute in our commitment to shareholder returns, and we accomplished this through dividends as well as share buybacks. I'd like to ask Mark, our CFO, to elaborate.

We are very proud of our shareholder-friendly approach to capital allocation, which includes, as Jim mentioned, the combination of dividends and share repurchases. Over the last 3 years, our combined dividend and share repurchases amounted to over 80% of our cash flow from operations, with the remainder being reinvested in the business in the form of capital expenditures, maintaining the integrity of our infrastructure as well as to drive and support growth. The 80% allocation to shareholders is higher than the other Class I railroads as well as the S&P 500. Now for dividends alone, in January 2021, we not only increased the dividend by 5% from $0.94 to $0.99 per share, but we increased our long-term target dividend payout ratio to be between 35% and 40% of net income. And just 2 weeks ago, we announced that starting this quarter, we are effectively accelerating dividend payments to shareholders by significantly reducing the number of days between shareholder of record date and payable date. Our dividend payout ratio and dividend yield compare favorably among the other Class I railroads as well as with the broader S&P 500. In fact, our dividend yield is 12% higher than the average of the railroad industry. Our strong commitment to dividends is demonstrated by 155 consecutive quarters of dividend payments. Now of course, our goal is to never have to cut dividend. So we established a sustainable dividend level that can withstand challenging business cycles. So in good times, that results in excess cash or capital that we choose to return to shareholders, but it's in the form of share repurchases. And remember, by repurchasing our own stock, it has the effect of reducing the number of shares outstanding. Meaning that the remaining shareholders have a larger slice of the earnings pie. This results in higher earnings per share, and that contributes to appreciation in your stock price. So dividends plus stock appreciation, they combine to create TSR, which is total shareholder return. And this is the ultimate shareholder metric. And on this measure, NSC total shareholder return is consistently ahead of the S&P 500. In fact, NSC has outperformed the S&P 500 in total shareholder return in each of the past 5 years and 8 out of the past 10 years.

Thank you, Mark. Our next question, we have a comment on graffiti on trains. And the shareholder is asking what Norfolk Southern can do to address that problem.

Graffiti on trains is a problem that railroads have been battling for years. And while both NS and our customers regularly repaint locomotives and railcars, we're, of course, limited in our ability. We'll continue to emphasize the extreme dangers of trespassers coming on the railroad property and being near railroad rolling stock to not only reduce graffiti, but more importantly, to avoid trespasser injuries and save lives.

Thank you, Jim. We have time for 2 more questions. Next question is, are there any plans for a stock split in the near future?

No. We don't have any plans for a stock split in the near future. Mark, anything you'd like to say about stock split?

Yes. Jim, we've done the research. There's no credible evidence that stock splits add long-term value to shareholders. The share count doubles, the price per share divides in half. So it's a zero-sum gain. Other than the fact that we have administrative costs in order to effect the split. So we also annoy a lot of analysts who have to update their valuation models. So it's not something we're entertaining. There was a time where investors could only buy stock at 100 share lots, and that's what led a lot of companies to slip their shares in order to create lower price stock. But nowadays, you can buy single shares and even fractional shares to the brokers. And frankly, most retailer investors increasingly own their shares through mutual funds and ETFs. So we prefer to just focus simply on creating shareholder value through strong and consistent operating and financial performance.

Thanks, Mark. Our last question, since the onset of COVID-19, majority of the NS workforce has been working remotely. How has this transition been going for the company? And what amount, if any, of remote work do you anticipate once the new headquarters is open for business?

I want to start out by pointing out that our field operations employees who make up the overwhelming majority of our workforce continue to work on-site throughout the past year. And I want to recognize these employees for their dedication to operating this railroad as efficiently and safely as possible over the unprecedented times in the past year, while at the same time, delivering for our customers and our country. The transition to remote work by our office-based employees has gone well. Annie Adams, our Chief Transformation Officer, is with us today. She and her team are doing a phenomenal job, and I'd like for her to respond to your question.

Thanks, Jim. We transitioned most office-based employees to remote work in March 2020. Our IT department quickly deployed laptops and implemented technologies that allowed employees to remotely connect to our phone switch and even enable direct radio communications with trains. We also accelerated our rollout of Microsoft Teams for virtual collaboration. While about 75% of our office-based workforce worked remotely over the past year, like you, I also want to highlight the contributions of our employees who contributed to work -- who continued to work on-site to ensure that we delivered for our customers and kept the U.S. economy moving. Looking to the future, we've proven that remote work can be effective, but we've also learned that it's no substitute for being together for activities like collaboration, relationship building and mentoring. So when we return to on-site work in our offices, we'll offer many of our employees the flexibility of working from home part of the week. In an era where individual work can be done in a remote setting, it will be even more important that when employees come together, it's in a workplace that maximizes the benefits of personal interaction. I'd like to highlight 3 reasons why I think our new corporate headquarters will be a model workplace in a post-pandemic world, particularly one where employees have the flexibility to balance in-person and remote work. First, employee health and well-being were a central focus of our design from the very outset of the project. Second, the design promotes healthy personal interaction. In addition to traditional meeting spaces, we have a variety of flexible alternative workspaces where people can come together, including some great outdoor spaces that are truly unparalleled in an urban setting. And third, the advanced technology we've incorporated into the design of our headquarters will not only drive the employee experience in the building, everything from parking to security, calling an elevator or even ordering lunch. But it'll also seamlessly connect people who are on-site with those who are working remotely.

Thank you, Annie. Jim, we actually have time for one more question. And our last question is I was disappointed by your decision not to print a 2021 Norfolk Southern calendar. Your calendars were amongst the very best in the railroad industry of calendars. You are a profitable corporation, and I hope that you will change your calendar policy. Will you be offering a 2022 Norfolk Southern calendar for public sale?

Well, thank you for the question. We did make a decision last year to stop publishing the calendar. While we understand that employees, retirees, customers, rail fans and even members of Congress love that calendar. Well, that's all the time we have for questions today. Thank you all for your attendance and for your confidence and investment in Norfolk Southern Corporation. Let me end by emphasizing our commitment to doing our best for you, our shareholders. This includes working tirelessly to drive enhanced profitability and shareholder returns. We're committed to providing superior value to shareholders while delivering best-in-class service to customers. We know there's more improvement to be made across our organization, and we'll continue executing on our commitments to drive efficiencies and create long-term sustained value for our shareholders. Thank you, and have a safe day.

Thank you. This concludes the annual meeting of Norfolk Southern Corporation. You may now disconnect.