Kansas City Southern (KSU) 16 Oct 202020 Q3 Earnings call transcript

Good morning and welcome to the Kansas City Southern Third Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. It is now my pleasure to introduce you to Ashley Thorne, Vice President, Investor Relations for Kansas City Southern.

Thank you, Joe. you call. Kansas thank quarter Southern and earnings XXXX morning for City joining third Good

the begin, on year want to the December of or risks of in we Form materially factors, statements forward-looking Act Before XX-K in as but Report I amended. combination for Securities differ statements presentation and that as and by of by within not of limited XXXX, contains from this our Exchange a those including the such results result factors meaning Actual filed Commission, the quarter anticipated the XX, us ended ended for the our Exchange to XX, XXXX. identified Securities reports could including Annual other report remind forward-looking September quarterly you number a with

reflect which on now information. any statements to Forward-looking CEO, Kansas or events, the only not they introduce my to developments are information Pat to update and statements Southern's of undertake it KCS City is any with forward-looking that, does future obligation as date Ottensmeyer. President pleasure the reflect And made. other

Thank you, just presenters over are will participants everyone. Ashley morning the call in X, the good on the as prior I and same Slide quarter. skip and

we directly in let's So what of go the of quarter quick preview period recap a the see with third of a to Slide X bit and ahead. a

results, third on saw were you volume As X%. quarter lower revenues of than the our release, previous reduction press XX% the year in

improvement over an year Kansas was all-time for point Southern, ratio adjusted City XXX on XX.X%, operating basis prior of an quarter basis. Third the best

from story growth talk volumes to prior the into that these quarter Mike of and improvements second in third the coaster The validation we about operating this the run in fact recovery basis share an quarter the clearly quarter efficiency specifically of hold generated on for reduction basis, the and our last year unprecedented Upchurch quarter. minutes. in truly ratio, a later. a PSR The in X% revenues will improvements savings which operating from is the our Mike roller versus hold Third decline then quarter over was will $X.XX able XXX very efficiency a and foreign get year headline resulted sustainable adjusted experience point Fahmy improvements to of more this ride, meaningful PSR XXXX. and second year above is to were exchange our and per and XX% we few the in for half, the during primarily and cost ability way $X.XX, above year prior which sharp about the operating as those a solid our ratio and operating ratio driven and with and cost transformation. steep reduction that a improvements have substantial detail network more produce earnings

outlook are number improving ahead, a Looking for topics. of our - and we reinstating slightly on

will guidance bottom revenue. has XX% see million the quarter $XXX as roughly remain slide, in 'XX for and of outlook CapEx you of the our on the previous of XXXX the 'XX As at half it with

million in later on, our XXXX free cover a cash will full as guidance free flow million, increase XXXX. $XXX increasing are from for cash We which Upchurch flow year from $XXX Mike is to XX%

our this our operating our repurchase as to this that million business quarter, accelerated they confidence and be announce the this and billion agreement And in share year morning outlook Really with for now taking be to outstanding announced are position, the previously expecting coupled to the pleased program. approximately business, KSU of in and shares an recovery step $X looking for for year. part of very our EPS were than We slightly $XXX to $XXX adjusted share repurchase our financial last are full repurchase at our share we sustainability cash accelerated executed million higher our the of announce liquidity performance program. in position, efficiencies repurchase

with turn Songer to comments for I back the a some then and So be that over concluding will presentation minutes. in few Jeff

Thank on our I'll with morning. you, update Okay. comments status. X quick on Pat my XX and start good COVID- Slide a

diligently minor as outset operate the impacts and since to the manage to continue to with our of only pandemic. we We workforce continue have as

We show efforts of and our feel close are results. workforce season continue enter fall focus on safety a maintaining to good will the that positive our as we

operating XX.X hours Two increased dwell of sequential of sequentially. XX.X sequentially. Moving improved XX% metrics declined of key hour per year-over-year primary velocity to performance key and the miles performance affected and Dwell factors in for X% year-over-year our the metrics particular. but quarter,

metrics resources volumes, ended the shift trough. to First have key in the the quarter The we We've rightsizing on chart throughout continually to which volume, daily in pronounced the year seen focus these evolving plan a our illustrates execution. service our added the rapid swings maintaining the XX% responded red line throughout by year. over QX extremes and

incurred we region to the hurricanes Second, the back Gulf back during in quarter.

backlog with outages across traversing a cross-border have over more traffic, was and of prior segments traffic. volumes network these Compounding we cross-border in impacts traffic were year. rebound the XX% impact led those seen region. up sequentially prior several As XX% events Gulf years, of in the rapid The hurricane on again the this and pronounced created to

the key continued that PSR future metrics improvement are in allow as We ongoing confident that Sameh describe initiatives will and detail network stabilizes. and will for

against was fuel challenged previously were train while quarter the key described, mixed. X during PSR efficiency Turning length to as velocity goals their exceeding and on I goals. overall Dwell Slide are progress

are in such changes months. amount the length, in service as pleased very incorporating past volume areas in are rapidly team of train a to we swings able will network start has fuel short support our These over by several We outstanding will yard been and of improvements fluidity in Ongoing extensions with have make the to to that significant train which early year's efficiency year, by rapid strides few and performance be have complete XXXX. how projects the we Mike on to By cost in review control will some continue siding reflected capacity quickly accelerated plan end and responded expansion reduction work his presentation. time. this investments

Presidential a bridge Finally, of have international quarter you for may construction U.S. second gateway. Laredo we the have rail - at Nuevo that seen Laredo during secured a permit

and the processes, now project. many and design step presentation turn positive over a I modeling steps While in Mexican to this other we are cost the and for is will construction started first preliminary permitting scheduling general there the Sameh. have

you, Good Jeff. Thank Yes. morning.

unprecedented, was hurricanes. increase Jeff very in of was was back like said, very, time. That same then compounded And a this So short to very swing of exceptional period quarter. time at back a XX% volume the

XX% the was like Transportation. our a which very you outages and an weekend, order KCS worked in we to recover it of resilience of team, the that long - equivalent Hurricane time So in had and headed for a testament it. caused collapse, period bought in he it's increase Who Laura of us VP absorb by and volume Truitt, the to short of the very Labor Steve days, day hard, and the four including to washouts about night bridge team name Day from very, diligently his

days we artery run critical and very on So between we U.S. had couldn't when the like traffic, four Mexico. the essentially north-south

hour. miles team velocity the per velocity the managed U.S. get the the the XX in on to that, Actually, is So through network. back is this morning

from bringing disproportionate the bringing numbers, going typical So explain locomotives back or job, and in as to temptation minutes. had have we pulling always is way assets are to But done in it that going still which go, storage, in we adding few a just to need they without before did through the great, team it I'm be, railroads where we the - did a of room to crews PSR. great

measured are not you the doing symptom. size response you're going your and and right keep You the in address way right problem, the and and

So the to assets you the of added. not problem and bottom go to

at is to in know through are have down different, the X%. and XX% that look QX. against have by drop crew you And headcount of starts. only is head QX see all the it it. yet this count the we And we attrition, which did which the volumes the can on team And we did transportation. by down dropped headcount, went the graphs, And - in important. U.S. you the starts the by we managed pandemic, X%, very XX% the you went when So learnings during rules the Mexico, the where but dropped this, get actually reflective XX%. crew maintained And in by used in even

compared $XX headcount the of translated Mexico, the year. by the to between and previous a went total U.S. reduction that into XX% So and transportation down million

you to because on that basis. - where an in the using $XX reduction last actually cost same If pretty the It's as million - much are go numbers, I'm annual state, with were steady they now September year. which a like volumes are

do went that train it, lot the for the we Again and allowed Mexico, or you limitations. compliance. slide, that grow the to The the about locomotives and Slide expand on can where lot, XX, now are on one lot is So the way getting again at is you still what of the to all X% X%. us lengths, is that's us is room mechanical the is see of team of locomotives traffic smarter this, the on we now plan are we mechanical spite where it, design. by expanding in you the the consolidation opportunity. time in down a train XX% And up XX.X% ratio, by how we you headcount where the do and by is, to service see a have XX%, that, shops, X%. but volume The available headcount in better reduction in again did which and and work and technique have look you do lot a And of us operating U.S., which getting down next a combine at trip are that keep like only down XX% ahead we number mechanical for the I'll

down traffic the from the another go train We Potosi in Luis and and when they go San customers our and you train traffic in of with times then missing then and connection the and the train are again from intermodal connect how connect U.S. to Escobedo. connection on measuring

key so and the that, tool our the monitoring that of some now, For build customers that, field but we we intermodal are not react. can only

opportunity its we it, traffic. the revenue And And expedite react don't that until plan missed KCS KCS we PSR revenue. and said the from help a is last unique the it, because to they we service begets came in We clear. grow say, well, year, failed. the and And trip first growth growing the did beginning in like will shipper So for the very wait has Pat survey, of can many many, actually in service us have provide it's service. on times and

doing. work of testament the a we it's So are

Another it. big switching you --the a area is of balancing, PSR reducing train principle have It's a way as balancing principle is of the same and lengths.

car in Don't have is the to now the Monterrey. reduce The the - on there we a many it is customers try smarter time have where switch do a opportunity. right of border, to times lot the of want the it's very north, too hundreds Monterrey so we Sanchez a other yards, the car. on yard thing you same don't has like switching. big At a And the and a lot large yard the has yard tight customers, is same of which level, configuration. closer

the started Sanchez even that, two in train leaves we to for to customers, go got the the the past build months something to So monthly doing we've before Sanchez Monterrey. blocks is

do. Monterrey, which network. that Monterrey captive to the it's in to case four car are [indiscernible] switching packed, a yard the short, that switched switched get So Monterrey Otherwise it's in the has get tracks times because filled, less is

So many, many you switch have times. to

are move just that did we And of one And free And big railroads and capacity area. Sanchez. Sanchez doing do the us for where issues of Actually of south. in we instead of example Escobedo, like our that Monterey will half went Nuevo to the work and it. reduce think more the right can in that places in famous traffic I wish our go the yard had the a hours is will to upgrading. distributed a the other to interchange and you when the are two on And calls, the lot if we that we And lot do because trains the explained and resolved Last Victoria And Laredo. San do six the we yet month blocking Mexico we hours windows. before earlier. do a the Potosi which that shutdown north, the the on just want the back So in six window the windows classification We you any Queretaro, that that for you six to a and with of yard flip-flopping actually that trains at hour, know classification And in time up which Nuevo then about the the are waiting in to North, blocking earning yard, you capacity bridge. this some it to Luis for learned you actually we yard work, a But which center is an that's months in work blocking - issue limitation for intermodal very had terminal we forward. of and described origin about allow South Monterrey, small this hours. miss you place more at Salinas, miss ago. not as Laredo, South, work exercise. And where bridge, these yards in got a go to do north, lot in if to keep a I by that. We we'll of we do again you are at origin traffic in the end of definitely in

only we that very very it. working to on So as we to not very, move we want away And yard are the altogether. but are from that, hard as windows much removing possible, close completely

let eliminating windows, week, let windows a go. you south. this which we without And hours. these to believe in go it flip-flopping very, if six happen static wait two for you'd very them breakthrough are to you There have is Some case, we that and close northbound keep you southbound, having of

The increasing other the putting and the all also blocking trains. mentioned property like we and it complementary infrastructure with our has to yards thing are parallel it efforts we in in strategy that these with Jeff consolidating synergetic trying and money started happen is and in lengths continuing to these where to big do what and is switching of train

So you invest longer in sidings.

our squeeze sidings we spite Benjamin And this two managed in switching envelope. improvement long expedited flow that two and extensions train in our big yard, We and off to very the locations our configuration, have cash We improvements year along more are in a lot yard, the making capital needs of important have we Vanegas, Sanchez, in, between in trains. it's siding reduction actually in because in doing where we lead. of Mendez a yards critical

thing doing in and the same you that, unblocks So Luis are San when the switching line main are it, we Potosi.

parallel, at are about And lengths, same and things happening XX%. would to the well sort all But far X,XXX is our are grow And things now allow we're time. they train went be. is are by these out all right can us from this very we that where So, these up feet. happy they

can by going look a XX And all If we we the we - at, The to miles the as things same velocity, for speed, the to to a hour. the obviously where the these way industry, feet train are hour, can mean, at hurricanes I backup, we but affected are go velocity, per go rest mile lengths. XX-mile at X,XXX the the to our you us are per for per of XX go and is. even back hour, we are way XX we rest get normal industry have that beginning of will still had to we

from U.S. a PSR, have the we number, is you the we that's started it opportunity higher efficiency. was a the KCS which least is per - at an is portion opportunity of we the great efficiency, worse gallons there. at is not The the very, So improvement And The portion fuel Yet, at X.XX X.XX. Fuel are. are X.XX. very KGTM. when when X.XX. It's Mexican

of would that like to and average and that So should that where would help down be X.X lower we be something maybe down help, can or be. to get maybe able driven X.XX bring should to that us we

is time. on still to there take and So - lot opportunity a want more go of but I I don't can any and

would I at turn to to, it this Mike think point, I Naatz. like Mike?

Page you, on and decline all. down in begin I'll year-over-year was a revenue and and go Thank Sameh, third comments XX% volumes. ahead Overall good XX. quarter my X% morning

you a strong sequential experienced we heard say, Pat volume As recovery.

The levels. rising We X% experienced year-over-year. XX% nice from volumes quarter of volume a quarter the rising third the September with very second close quarter

unit, quarter-to-date outpaced declines. Looking This the the part in you generally the performance RPU portion at slide. the by may can by right upper at of that observe reconciliation in business revenue declines be the least explained, volume

prices the fuel and per lower that of in see unit. accounted the FX revenue together preponderance You'll for our decline

X% our a shorter domestic disproportionate and the and segments we another some would go business, in contributed to mix the cost fuel haul including decline you price our along business with franchise clearly results constant, been chemical indicate increased intermodal were peso decline business benefits and lower that growth does well. hold FX few by offsetting unit, brief that. and unit imply know It's Returning of not revenue important a also chart have to note per in our by cost. petroleum Business the down lower fuel in which that RPU and was RPU. Similarly for which driven in in mix to offset our have by unit highlights profitability, to If we year-over-year. partially the volume and nor length volumes cross-border X% contributed LPG products about example, contributor and in As as sourcing the shift X% revenues refined growth declining to declining segments, was to The consumer lower in driven business. our experienced metals volumes business, by largely patterns. weakness our fall strong a volumes, repricing industrial

to Ag down is, here. sequential in XX% up due drilling oil volumes news was good in which & area, of collapse demand used to for continued improvement. revenue products, metals pipe, the are were see and and sequential we're continue course, lower The up X% infrastructure projects. carloads, We and were that X% Min volumes market in for decline this looking X% for

While grain down, volumes carloads volumes related which weather driven infrastructure were energy down resulted business were were decline mineral in flat year-over-year, XX%, ores in a XX% and unit revenue. delays. by The

markets down forward. many to finished Similar with I think the up and frac familiar provide second sequential intermodal off low did of demand all as all were and disciplined down execute vehicle to prices. sand only coal, our coal year-over-year. OEMs continue This contract the the Lazaro X% and Healthy offset cross-border franchise through volumes we strong case you're story, competition, pricing of natural And automotive And during the both and September with carloads by and core volumes some seeing the up Intermodal recovery The due plants to in volume. with the quarter, crude weaker peso lastly, X% a our largely trucking by oil pricing weak demand. optimism due across ramp was held U.S. were gains in capacity. continued growth improvement the and with inventories lower quarter. domestic see XX%. near to these and inventory were at tightening up to volumes. as well, strategies. replenishment, driven quarter port XX% continue looking were year-over-year and demand strong We this truck were us lower e-commerce gas Unfortunately

lows mentioned our total which actually growth Turning This And above as year-over-year segments bottoming quarter, second to ended daily performed since a from segments quarter Overall, market these the key position. a get Page were you'll the are growing better representation and visual quarter. XX, levels. pre-COVID strategic up unique improvement was my on in our of recovery. XX%, colleagues by out second led had highlighting basis, well carloads

our that XX%, demonstrating were Specifically, in business with rebounded in unique role Mexico between Mexico. play trade XX% related XX% cross-border volumes. we franchise facilitating revenues The rising the increase and and the energy U.S. up a volumes

and think a demand refined intermodal you product this as situation. result really we've the of when it, You remain impressive And discussed quite already about is COVID-XX automotive consider business. soft, the

you demand up on refined XX% Page an strong looking I in our were quarter business. at again impressive in seen bit increase On in third Year-over-year a business. and the cross-border business and COVID-driven manifest unit trains, provide fuel noteworthy. to we've sorry XX, as can revenues products XX%, you So, is see map, which our detail particularly more our - growing I'm wanted excellent in weakness carloads, growth remain considering the with train

Now the with as has positioned the uniquely uneven. remarkable, we a in along you opportunity recovery can bit Coast In see in customers. to the map, forward Gulf from product to albeit been the this we growing refined summary, look our Mexico. move are And

half crude the expect feedback While business the have upon segments do such pressure. COVID across will improving resurgence XXXX. Based pricing. inventories segments, good business and is remain has Port The tightening schedule we're low be risk, been and of many of we Arthur project with under steady a be optimistic. we expected and economy operational trucking to in customer the continue And continues sequential reason seeing the certain capacity demand as DRUbit is second and U.S. on to improved recovery.

as them turn to economic chain comments, over And our that, our supply my both Upchurch. Mike the long-run Mexico. improve that our to continues hold believe and to Mike? continue And to the the look promise value forward change. and in CFO, to and U.S. working things continue concludes the nearshoring customers We I'll we absolutely conditions in opportunities with with

terrific saw improvements operating my combined Slide Thanks. environment. comments XQ, Thanks, financial incredibly positions XQ think, structural the with the our expect Mike the start I an performance we improved - for our to company volume in and in And third and XXXX. to quarter Compared costs, continued well the profitability, good as going on deliver we to improvement demand I'm morning improving XX. help in everyone. and

quarter respectively, point to improvements operating ratio cost X% XX% led in increase flows. X% XX%. Reported and structure post volume cost evidence EPS carloads in KCS to incremental XX.X%, actions ever nearly year. over the over $X.XX, operating prior of revenues third dropped basis QX sequential improvement Strong of cash our XXX record XXXX. contributing greatly Although permanent helped XX% of to a An which above margins increasing improved and of up our ratio a are EPS was $X.XX, adjusted quarterly was

and in our $XX.X on tax. from benefit issued that adjusted Based tax adjusted a of tax rate final million. we a exemption an aspects lowering for XX% to reported the these adjustment from which new per GILTI XX%, guidance share certain effective includes provide to regulations regs, retroactive includes Our of $X.XX July, are earnings XXXX

guidance categories, forward new other strong regulations the think, rate operating a think the result Expense adjusted by reductions all depreciation. operating or going management. management I lowering are of expense XX%. cost I XX, terrific we cost On also were declined achieved really across than team. XX% of quarter-over-quarter, again expenses And adjusted XX to evidence As our tax everyone on Slide

and fewer starts train train $XX reduced efforts by our declined Our PSR is of from attributable and efficiency lower result of to a from the that consumption benefit fewer next $XX headcount compensation hours bit improvements. that and as expense fuel mainly Fuel I'll discussed. on consolidation million, cover in price fuel worked, declined million, declines benefits fuel slide. expense the And in a detail comp more Sameh

benefited $X reduction and active primarily as expense fleet. saw reduced million, car and in also our maintenance a locomotive freight We mechanical declined from expenses repairs

quarter, Offsetting depreciation million is reductions higher peso the expenses year-over-year these OpEx in during COVID-XX approximately Finally, drove driven million $X $XX impacts. by of benefits.

During in employees compensation to due expense quarantine the off incurred requiring COVID-XX, approximately incremental protocols. illness or to be we from due work quarter, to either $X million

in and incurred cleaning, pandemic. we employees $X sanitizing to other million safe expenses, Additionally, health-related during our another keep this

PSR Finally, previously we savings remain track on the deliver million. $XX XXXX solidly to announced of

Moving to XX. Slide

in with work benefits as lower Let me slide. headcount detail I $XX an benefits on more we expense little bit hours, driven comp declined and by from million saw and mentioned cover along comp Overall, and a fuel. the reduction prior XX%

separation average headcount actions primarily voluntary and program. furlough X%, down was quarterly Our the driven the in U.S. the by

benefits also in result lower hours. a to compensation comp KCSM starts and This hours experienced lower XX% discussed. example from and at of expense that work benefits The crew from headcount reduction transportation, We decline Sameh and reduced starts and of is work train during taken third were have forward. excellent our we have to offset inflation the PSR and that how of those quarters actions, benefits by an structure reductions wage retain second going $X benefited million. expect we partially cost and These

$XX we million how $XX a of Moving of million while lower fuel to volumes as and And improvements savings, fuel efficiencies drove a Most result as importantly, to also running in benefit scaled efficiency, return. fuel, fuel drove this million expense from savings. price efficient savings declined XX% benefits in are in QX to consumption fuel as indicated, and as Both plan reductions $X of fuel in meaningfully volumes achieved downturn. longer trains. we these many cost keep quickly and down variable compensation more costs examples during have Sameh with and excellent to

Finally, capital I XX, allocation to our highlights. want discuss moving to Slide

increase Pat flow cash was year million increased as we $XX XXXX have XX% XX%, over cash back we free increased in million flow full to a XXXX. noted, XX%. nearly our free executed lease outlook And have year-to-date up buyout, excluding free from January, $XXX flow would our cash million, Our locomotive $XXX

And we less CapEx down to locomotive year-to-date purchases driven of million primarily that year. $XXX $XXX million is XX% spend Our track capital on the remain this in we on by experienced XXXX. or

repurchases. XX% share Finally, up by year-to-date are led in XX% shareholder increase returns year-over-year, a

repurchases the in second comfortable, share sustainably did quarter improving May. April early we felt noted we and and were beginning more having in resume XQ as As bottomed on call, after earnings more that volumes

'XX April accelerated a new program, we $XXX offering. utilizing our morning this from debt million Additionally, repurchase stock announced proceeds

of year. to plan of back shareholder cash continue our with to the structure With With growth, expect and allocation have closing flow before superior of end we the and a by repurchase Directors, from our the authorization, in $X billion year visibility reassess consumed billion $XXX improvement. the And million recovery Board, to capital turn for increasing to additional it approved stock that, also some $X.X goals with revenue I'll less November comments. the our margin pandemic Pat XXXX. to our we delivering than in ability Board ASR, free And our ago confidence

Thanks, Mike. Okay.

of a comments. quick Just couple

think the Naatz's you, in the is on if was Slide of I impactful most saw just the everyone aware course, you call of presentation, slide know this. and I XX, Mike

efficiency, down By we of a XX% remarkable a we running end roller XX%, basis. quarter challenge last coming the of - on efficiency really half a volumes coming that XX%. But created. service, back the remarkable quarter coaster. were our just of back the to That's recovery resources, the very thoughtful above - The operating Second daily and the demand. were we as in cost meeting business our being bringing back as were quarter, a trough was depth efforts course up year the maintaining and and over story bringing the to, third was have and introducing out the seeing balance PSR customer about

of other uncertainty results good I as the service play out. quarter. from improving compared data about - that. the think have No, rails did standpoint? face our pretty going we how rail service Sameh exactly that job, as in were was this about to general, the again mentioned feel recovery of we a we outstanding Did to and our think course flawlessly customer over And but execute balancing that I to an in

focused on We as service we and from operate metrics service level. are this customer new very now

an of and final our over employees call Going are forward focused the made comments last meeting throughout performance this quarters the we and the extremely are and a I as discipline employees the executive about that release of to company, amazing know resiliency we want expectations. customer's making sure and our reiterate of comment, the that really lot on quarter this throughout in focus I team all the Company. and tremendous A in I the the just press two

for rapidly what and it roller efforts coaster conditions. business of of truly to a Serve were in our they Just in - that the able employees was and the couple volume put accomplish. to remarkable changing the hurricanes addition in

workforce are and talent that so proud with the feel shape the are team. forward, in has our of on have We that great what produced we going here we

answers, over it turn friendly the a on and I is to questions. guidance questions mic up Before and little open

is questions - some unresolved still questions will not probably I about We there that. will know we about M&A, entertain

beyond. for updated We have that budgets on we XXXX We for the position forecasting to volume the save we not provide of in are guidance tightened we've finally, January. in questions respond intend your be commented that want through will position something clarity as then guidance, on our might some of in any and some our rumors today the to, are areas revenue, any to just we a and and you market and to not may to. don't we in a so additional give but And get on in guidance year we

will questions. So I or open with that, to for call the be answer happy

Allison question comes from go Landry Instructions] Please of first ahead. [Operator Credit Suisse. The

give guide how of And change current the the is what to could OR So, a QX the throughout in out guess, volume I trended each you. you trying during month? specifically September? extent maybe just year to given to and dramatic OR holds? there I'm volume upside some the that Thank where the in sense is, understand the trend full shook quarter, you us for

September you that volume. question, increases good margins incremental the improvement get on X%. volume added volume benefit up With we that throughout was of an in Definitely, Yes, saw quarter, Allison.

And would so I better we quarter. tell you the trended generally throughout

The question ahead. from Wetherbee next of Citigroup. comes Please go Chris

of one sort be in context couple and which would the helpful. XXs guys view in business, there potential you had anything don't perspective, know now. quarters the year-to-date, the how a that the to you've I around an OR but you're of M&A is you of challenging of XQ, I maybe Obviously kind running topic COVID help term us think very higher of good from address the a longer think about want can in

And when that you are to think where are the today, lay that. do? kind to of longer-term opportunity you have good what of what kind you see of Where of Sort to potentially track go? plan out can not today, of sort the do not business, of can on if you if is you but recovered OR can volumes expect you're fully comfortable given we a should longer-term of that sort give guys us sense

in guidance what and was take is in just of you year Yes, think one. below the year The the XX%, Chris, for our it, XXXX Clearly, you at Mike. XX.X% pandemic. XX.X%, XX.X%, wonder in look the without I was when we have XQ, been it XQ but year which started this kind now January. if I'll could that

third in that now the well margins And our manage look that So When that we're in to showing the and with beginning a think outlook continue alive that very, going a to we down. be well sequentially quarter. we're on to XX%. you trending certainly model quarter. to volume constructive below we're here number actually And volume growth, very And ability the have environment see is is cost over growth. incremental

done still are an it and is the you of begin short OR so And do stop there better growth. for volumes little January that bit number we've in typically macro, issuing to do better giving we nice by uncertainty as We're We'll going be of getting in consistent will some full guidance. while to XXXX. set believe a of seeing and

improvement that you Is longer maybe can January? think and good on something think little about of of for? there Or of clarification just sort view in longer XXXX, when But is potentially wait piece term we also here. I we something from that to expect just Okay. that, a have is one that a

of any see And have why operating Yes, for we reason that's standing don't think, Obviously, in some time, I either, position. is we we in said give else did everybody best like term outlooks, still the long but industry. year. will remember a certainly we this just January ratio our not longer no, the can't have

Evercore Chappell go ahead. The next comes Please of ISI. from question Jonathan

I the bit to one change medium relates were for of of auto, there little cautious think, in September, a of conferences the term it about automotive. as Maybe tones in tone, outlook some

Naatz well things numbers, work like inventory. unemployment. given, optimistic Mike from and pretty was Just as some some favorable as home But and SAAR we've seen completed

means you're customers normalized get are as inventory how you? six situation. wondering But so, auto or the do cross-border? how for about thinking also, just we months your kind to your to back the So in maybe that feel telling COVID situations produce a to What customers next the nine you about and ramp-up, to all what Mexico's ability the for given in normalize of

one. go recovery are speaking, certainly This business. optimistic. aspects we is in surprised is been ahead remained and have And that's vehicle low. levels the segments that said, of some the take and Naatz, But unemployment why the the I'll There pleasantly with some that we've Mike generally remain. sales remain economy auto Yeah, that inventory on strong I

necessary as they've to sure the to smoothly ability efficiently I but And that of produce And generally speak precautions directly possible. more operate the believe taking mixed some that historical those with vehicles the auto get by as end generally continue I OEMs to XXXX. and to down levels the back make Mexico's that. we there, can't course, respect to are for getting believe signals, We of but should plants levels been that seen

not and plant to recently are well. specific is continue COVID as that's any shutdowns from aware going of that are we here have that We optimistic resulted

next from Please Stephens. go question Long The ahead. comes Justin of

service to network. seen improvement up any that rail And to basis there to would your have way Whether there. points seeing a for mind there is us can today you're I to tailwind going you forward? love contribute that. XXX commentary. could wanted follow how that to conversions how wanted Just get some to thoughts volumes? substantial of through truck Is that that or going we've you that's impacted basis on and level help the growth in forward, think framework a about high Obviously that's on points, volume the ask conversions just in XXX

guidance, specific you of to the Mike as comment about suggested. short think fall Naatz you're to I going giving - specific I'll issues seeing intermodal. generally in probably as and capacity But we're just the trends ask

or that truckload of convert currently Laredo less rail. Well, truckload we are of that to the rail. the are business we've have used nice on believe moving cross-border I'll to example we in across a refer past. volumes X% over sort moving And an opportunity to We that have

So we ease we able should think into to that. be

of intermodal performance we in we're lot upside service domestic to And clearly, the a volumes as seeing long cross-border our So is marketplace, months. acceptable recent see here in and there. that

that bullish remain we So on front.

Amit of The next question Please from Deutsche comes ahead. Mehrotra Bank. go

to question. get Upchurch, like call as The number. that OR up cadence to I you estimate wanted incremental to nicely, on of to seems it growth it of sequential up in XQ XQ only like be is to a low will the kind If let's follow on on margins XX% XX%, look the kind Congrats reasonable I Mike quarter. probably about operating the implied XXs margin XQ. of revenue a think business, just XQ sequential revenue the

wonky terms to go in as it's But important you So to think you want trying a seems momentum have the about that question. I of improving think address just operating it's you kind on. that, to I of be

should XX% incremental CapEx down why second sequentially? for part my my of first So the then And revenue. step just question, - of has

questions? from give to you. isn't in a in doing sorry, you're as that out we stuff creates basically the capital decided effectively most two 'XX, capacity the that of - way all that the to guys there number U.S. PSR I industry to all it you in KSU rail XXXX, most the You why 'XX, would those terms With CapEx address would a Thank the lower perspective, industry. can look be rail out if mean the - capital-intensive

to constructive a think we've little is going quarter. the got But not there. seen But we've just outlook that. incremental XQ, to stay think speaks volume see continue environment. take XQ that say, growth on we Yes, to to number bait now, don't the your I the revenue like And bit have on third strong. XQ going would I right performance well, strong a And XQ for we'll very into we conviction of itself. margins the What from throughout we I'm are just know

the XX% of target forward. going On you is CapEx question our that asked, kind

we in the network outgrown improve that volume, of your terms in improve of clearly the incremental about without train trains. to on extensions, longer and length a 'XX. siding to that yard expansions, plan that 'XX do industry have CapEx able you some for expansions investments and projects do to terrific run be with and need and to siding the a to that's the we don't talked number Sameh some investments And fluidity expanding think We just to significantly make do capacity. payback, has a

The Morgan comes Please next go ahead. Ravi of Stanley. from Shanker question

So this question the unfair, of bit set bar have shows maybe this but you kind guys probably high yourself. a little

and items were I kind hurricanes of operating I didn't quantify a of sort like of that without of think this like? what quantify the OR look metrics ex-COVID, the the were of by strike results quarter couple your such? but kind had a own mixed hurricane look definition, kind like are items if you and guys things unusual to like you would also there hear hurt what XQ, the there in and this, such. of And the and able kind you quarter

then quarter in haven't And of we and ballast did of doing about is have in the storm and way with listen, you come hurricanes kind did mean, where cleanup costs. all to were that in. the for $XX we issues We a some hurricanes any of related harm's like those I of with Harvey waiting only time out part operate we but business moving incremental to XXXX, or in understand million deal in that of cost, in incremental it. to country and XXXX incur $XX think other pass, that we the But typically ever I substantial equipment just have talked an in part million expense. along Ravi, had Alex environment are operating that quantified kinds and with the Yes. It's we that and rough not having that. of costs to kind those

gave your description as that. of good some a Yes, isn't were damage, to fluidity physical Sameh incremental that's of just it's And equipment. good think trying not and costs I there all reposition pretty of of takes about bit to kind in time a talk there, incremental it quarter. million cost little But we're of not a any the to and specific just number few recover. going it's say

I the just something from can good? get as with we can the be I coming-off to incremental Or they along, margins picking-up incremental - know very do better volumes margin now? we follow-up of expect ask of kind XX XX If momentum Do question, of go now are different strongest margins do I or months bottom? If the sneak expect the are you the a in previous to quick strong as one. in you way, now, should a we as incremental

quarter. that We're end improve with try leave going to are here, And to I at given to incremental year full that XX% We've commentary. guidance XX% of stick margins single And it range. guidance, to we're continue we we every going the improve think low going that. our our to to to

question Wadewitz go comes Tom of next ahead. Please from The UBS.

going for the wanted you kind segments best what other you kind level I of be on you segments. there go would to had of like just catalysts Is growth? are could what more? thoughts of I bit it's obviously on in So if business refined You which see hard might that the products, hard a know, Are to to refined for like catalysts other you if to to, - most the offer guess, optimistic talked it's current some think products? like XXXX potential from about elevated

and volume powerful kind the of So a what of you most XXXX kind of drivers? think frame growth

question? that take to want you Naatz, Mike

I'm sorry the Pat. Could question please? you repeat

the volume was do look from or it's go other to here? the volume also visibility some you most question are intermodal so when XXXX, Yes, time growth growth at where you segments, products, have where you powerful most I of the XXXX? know drivers? you on refined spend think what whether do basically And kind think you do you

remain continued components intermodal the that in to and including will believe across of be business. the And as moving I recovery will the that cross-border continue different good variety comprise continue business well. will be border including grain to a good auto,

some expect in that improve, segment. in continue we'll inputs the to would our Consumer Industrial would as also We economy so products lift that & see manufacturing include

Would from products you expect we in further are? where growth refined

people of in trends, things returning that and back would the COVID continue current depends improve. work given expect go in would the It economy. on to how to I But all terms

ahead. from comes Please Cowen. The of next Jason question Seidl go

roller think Wanted been so six many I right to think little coaster bit, a has mentioned times, now. slides because word at talk the we're I

benefits normalized the roller about side? most environment? going of on So should in a in did more that more where other operating to cost types when you're should thinking especially we on normalized coaster that see So we sort XXXX, a the see operating of environment, words, hit you forward in what where of cost guys and improvement

but saw, Jason, I saw of the you unfortunately roller can hurricanes. only the not you the impact like that, coaster, take being by compounded that, of

in dwell time yards. You a of the progresses. - that as in that, saw will is number that And improve the clearly it

same that XX%. Southern now and hurricanes have volumes not are abrupt of don't in we that improving, saw, we we that stabilized. Now the to continue that they The percentage but increase improve,

to And a keeping more used grain, grain revenue. is The is at incredible from And loading XX, to an the dwell Mike to revenue, be generate beginning be like was back very it improvement cycles one to a months. a all Mexico This actually grain to close for it. that, And it X.X of at the confident assets for in the the in we'll that The and of improvement And cost the the last XX-day the have reduction also were now good loads. end are now hurricanes. September, an think especially we Naatz. cycle of generates A increase back, car PSR. demanding unloading. is Mike and the used same before to was which It So cycle is the I but we the about it, and okay? is in And means past City, cycle. per should the on definitely cycle XX see revenue used an same car meet Pat way very number including months. per days and - got like Kansas targeted, the suffered, one that in went that in has we touched number example record. from This continued velocity, to the September, on or assets like City down substantial, particular we that record for we months And forecasted is all-time customer, quite October, that the revenue. then is

classification, do in stuff your and be that talked Jason, I answer classification. question, once are about, through the especially we the out, design the we smart. service to read - QX, them And while you in hurdles went all we So removing that and that

and the switching higher increasing and and cost. improve the that do your your revenue can you is While going then to if or be, hopefully without a all velocity, cost, reduce translate that need into you

big we're where going that's are to improvement. think So to I going see, see we a

that in just lengths them for guys handling can Well, to your throw plans you one If look difficult XXXX increase more in, I credit environment and Sameh we to very have even XXXX. obviously you as team a train producing further and mentioned operating in here results.

already. XXXX? basis percentage whether goals improvements, be think expect What XXXX type You basis, on a or are for in a foot of above, it your I we total should

Sameh, you take... to want

at to Pat. Mexico mean, as train are U.S. I that continuing continuing, this Take improve, we like we and both lengths. are are an example, morning X,XXX

We're okay. that to going a So we're going keep to We're watching up. go going not hawk, like backward.

- And provide lengths some probably siding sidings. I as velocity. of of have is enable is X%. we allow these - things, the and a an XX,XXX extensions, an more like at Mike trains. not, a out going in meet length location other conservative to minimum, way we more train a would we will where and for not improvement you starts - about longer more do Upchurch additional trains in asking long Without then feet that places, you is of lengths, Now train we'll the on do as of the mean, be Jason, many that, lot. to for And that a OR, be that until guidance, at where feet passes-through the a trains said, to order improvement January, train us and whole time one or long more can have XX,XXX and the the train take

So something at like the we extensions. critical that is plan in siding big, the believe deploy total going finalize pace the for of very have that them. this year, as And it's we siding of big we're siding I And the the a XX extensions, to extensions. plan. end that are deploying to

great I and gentleman. and color Well, time the it's appreciate I as appreciate always update the a

happened. there, operator the we to do question? has reach is see Jason. Did who lose trying to we Operator, standby operator? out what another you, Thank have Anyone the we're

do. Will

wanted to I Excuse me? just me. check you to This conference is the operator. able are hear

we yes. you, hear to in the able queue? questions have more Do I'm

Wolfe Research. comes Please question. from with of Yes. The Group ahead your next go Scott question

just savings 'XX operating just for more Thank Mike of to on PSR leverage? revisiting just PSR then three here? go savings? three turns leverage at turns the leverage, you the - look there from update for structure do you more So or an is comfortable on an it feel it, about do talk And early savings of and Mike about, railroad maybe you separately have the maybe running can capital you. Upchurch, absolute you would out there, mentioned took the about go slide, Is you you

take Yes, let those me order. in reverse

track note savings savings for million $XX of on And still slide will are for annualized indicated, the for You with are track we we discussed that XXXX. PSR of we million $XXX continuing we XXXX. on on expenses

into well going So the had low-two's is a longstanding capital respect we've of target XXXX. ratio. to that and With structure, alive leverage

of environment time, the But point of anything potentially some and those we've the at Board before to have in that. interest structure, are kind wouldn't occur after which capital this I our mix think debt rate until discussions of in end we to I here year. with our the had about with do conversations and Board, commit we to given our equity expect the going moving

this free terrific just feel generating warranted. And management that We it's a was flow, So and it. probably just cash operating business given been we know, we're flows business. cash at the understand we're the upwards looking structure conservative But some is the feel the in prospects that of about of intentional. adjustment that capital there the

The next Wells Fargo. of from question ahead. Poliniak Allison comes go Please

the just environment commentary. Is color relative traffic. you're kind normal of on any can compliance, us to cross-border today, goals? you where with trip that in And can thoughts there here, to some way you think relative go your the on achieve So how are there? the particularly you quickly target, a comments particularly want to already like It any to your sounds plan on to taking service give back steps customer cross-border

answer that to Naatz, you Mike do question? want

open. is your line Naatz, Mr.

Okay. Naatz. [Technical we've difficulty] It lost Mr. appears that

growing continues in growth terms a area of premium think market absence, particular. go a in I opportunity the have and solid sensitivity a that to one market may Mike's I service the more service - And In share, certainly area. that earlier, share Okay. intermodal, as be - would the plan where and the to the current we intermodal see business. for misstated more very is much And like we back, of consideration number of stated trip Mike on cross-border is given compliance

know we have product. that that So cross-border you terms base the intermodal we have as the our good we space. we for a of The options our very position in routing in wholesaler customer are feel about

IMCs are commitment regardless the specifically of Class customer, railroads opportunity interline service that of or the customers with give big meaning - options, serve rail to any our and and to an other partners have service So preference all IMC we X us really partners. their

more improving. we this, reliability. improve this again to normal see this pretty through particularly a made to containers So, equipment, our is market, providing a trains, recovering that - me, of those I'll I volumes good Feel numbers of state customers visibility about - grow come more use build the declining opportunity. steady excuse to from consistency I are we and kind to then the have the to think the a And continue continue get to commitment they as - Those out once in point. think have rapidly have and specifically baseline roller to terms coaster of good resources, our into and this term focus all

that no doing steadily resiliency improving the the bridge, intermodal of reliability some key the concern some Laredo and - across time, of other intermodal those But reliability crews second eliminating using to bridge customers. the as consistency is just and the at for and gateway, windows all border, to to issues consistency contribute automotive all with And as increasing that Nuevo are Sameh and of doubt mentioned, to building the Laredo the that and ultimately going is specifically things the well international capacity over we utmost the the service, and related are then automotive commodities. and factor which really as customers, technology,

to your up adds that of good answer a to all if question. know don't I So

opportunity, the today. X% in we X% as think share market range far the are As to we

capacity, share is there do a This to lot is the partners I the of opportunity, described a an time. continue the and intermodal in of things very our for improve with space, where reliability that opportunity of earlier, could particularly and consistency add and long period growth. So over clearly market we If see work service. growth we

to Pat And maybe add this to monitor we add, like this, mentioned day. every I to

of definitely And have connections happened, like San compliance know have definition, is to trip trains we XX%. bit have connecting understand section, have on We - you nontypical. plan about issues by plan get And traffic room that And now, Typically, And from have latitude. of you and traffic Escobedo. at you delays or this we way SLP, that do of right that. know Potosi the we working a where on in my which the - have numbers. improve. said zero are the is know we we compliance missed connections So, on is little on kind at can - hours, the Luis trip where the I

looked it you as an even is we if treated margin. two specific within a at with - would not in two-hour is other traffic it that many But - a If makes that customers, example, cases the success. it be some as hours

but improve. great, the - And is with every not been regular focused review this every morning a through now week, have also commercial plus it call, with our considering we what operation, on is very between and XX% eyes So numbers and quarter. decent these our review quite during it, will with

last the today of And go from come Hoexter. ahead, America. question Please Thank of will Bank you. Hoexter Ken

that Maybe just just as a volumes and to haul, structural longer thoughts in terms employees understand bit best-in-industry do potential on costs clarify with of potential. want just your little about on moves on thoughts a margins, regional back I given comments your coming intermodal more attaining your you rails on on margin your versus nothing Thanks. ramp. And to locomotives see then

this Ken, in terrific terms will look at any cost bit. performance help maybe coming had and of think cost we I Yes. here, it, way little I back a just mean, on, we

to lot we flat across mean of think looking were volume, expenses, kind XQ, on going to expenses it's Board. to at but of slightly depend the as I higher look I we XQ at a

think single expectations see bit digit on flat better I may you volume a line just some to growth. low comp little the item, given around

services and question got equipment uptick obviously all which a think a in incremental in. interest kind and good materials to some for I margins. going is the are and everybody has creates think range, be This purchase of I other flattish

XQ margin. XQ, just incremental XX% a XQ think, there that's So volume But I environment what can say XQ, out see plus to let to we reasonable. like. looks and go we'll pretty me something think the had similar, we I see

there pay of Yes, margins kind fee operating maybe on cross-border, and that mean, in But are I have got some shorter a make give sure, some and that to seeing obviously like on would or term. the points I and which we you lot is in looks That's longer-term, around costs to terms up ratio sweet Class some better of the more the good we've in the that crown the having based referenced, us given Mexico spot is government nothing net-net, jewel. then cross-border, there continue our from best We pluses security the prevent costs we growth our industry. haul that Xs, structural but revenues. minuses concession that will us that going labor there. believe we other that's In the And for larger favorability. way the long minor offsets

to closing any Like Thank turn over back sir. to call for sir. you you, the remarks,

of Okay, here, taking that here. clunkiness but well thanks. for the that's an Apologize distancing are we seriously indication some

So getting in we'll for forward thank like. what very and additional for conferences much. we as back looks fourth you attention you our all updates all XXXX look to quarter your and occur at Thank about feel they January together commentary and

concluded. Thank presentation. for now has you conference The today's attending

disconnect. now may You