Kansas City Southern (KSU) 19 Oct 212021 Q3 Earnings call transcript

Good morning everyone and welcome to the Kansas City Southern Third Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please also note, today’s 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, Jamey. you call. Kansas thank quarter Southern's and earnings XXXX morning for City joining third Good

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

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

us you Thank you, Slide Ashley. joining start just call. X. Good third Thank with morning, for earnings I'll quarter for everyone. our

timeline detailed probably ask from about most of the event I did known, we we in us Godderz into Fahmy General to is all join get notice some well the its everyone today, merger the will here the our think and Sameh Adam you Counsel questions absence agenda today.

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connection with franchise. and Canadian statement SEC with toward North statement with rail closing this in our progress We as registration the American shareholder filed a Canada linking Pacific to know proxy and create continue transaction make transaction. the Canadian very to votes rail and you network Pacific line Mexico the a first We good single for U.S., on have use truly

Following mail both year. meeting meeting our completion meeting the end materials date the of our for to CP shareholders. process, to the special will KCS and and by shareholders the shareholder of the proxy for special SEC occur we We announce review currently expect

full CP know, of closing you and KCS Closing regulatory Mexican As into most the in voting conditions noticeably we including other the and subject trust, Antitrust the COFECE into will shareholders agency. approvals, satisfaction to is which receive voting first consideration KCS their upon expect quarter closing of the XXXX. approvals, trust and shareholder

a board business Dave trustee. KCS the and as team CEO is existing and while Starling independent in management reminder, KCS will voting act trust, former run continue as leave the Just will and our to

We While and milestone, and on CP would in XXXX, independence approvals applicable we merger manage closely to ability terminated planned after to investments process. very trust advance are the we anticipate CP working of and full voting control program. rights and which control with our the receiving second capital have planning other the STB process will merger and then regulatory approval KCS. of will In the trust approval retain be full full in capital half according this and of integration, voting both

any section to and and and on. people. begin call full Be works, Following our to happy any the questions networks, these of of potential STV our answer integration people. Q&A later control, markets to the happy unlock the markets Be plans our in we questions our our answer to implement intend

to results from down Volumes for X% fuel. Slide I'll X% on XX% were and adjusting last or Moving for after from Revenues last briefly year. up year, were FX just the X, our quarter. cover

shortly. the metrics service on. we've microchip railroad and between City. will And, in of. everyone caused customer very, strikes by supply chain area bright stretch that which John We continue in that on again, global We're our and well Teacher operations Mexico has Mike disruption about regulation pleased commercial our service of our feedback, Masking products service shipments increased hit refined Mexico of some with improvement environment certainly areas and in challenging that customer seen business. that talk Cardenas Lazaro of to operate resulted disruptions aware which, and plant and of the very in that and and is very into we have finally, fuel auto with shortage shutdowns will improvements the later

quarter both reported the of of XX.X which share diluted ratio related of and operating of earnings includes per $X.XX, merger impact Second costs.

due Our our a ratio commercial for of better of results adjusted to operating of challenges and have underlying adjusted quarter. our fallen that previous and $X.XX a I results is These moment the EPS XX.X of short view ago. guidance mentioned primarily expectations the

for revenue experienced shortfalls second some of operating year. earlier return the that network, service, Additionally, our quarter improve we performance, of this in incremental we deployed restore to the be resources prepared and the

to our than to of addition guidance demand the We're to teacher disruptions. the get for addressing challenges. this particularly better has supply improve that and in which quarter the these pressure minutes. John at are In time performance on product the And limited refined shortage, we on a until more service, strikes quarter. third over quickly visibility will did, in the the first a course early couple we chain admit created the productivity suspending of of commercial therefore is side chip given talk a little the duration feel we about expect did bit it

improvements Particularly X, dwell to for improvement hours. exited the gross XX more the quarter the at per sequential of historical standards. into third and dwell with encouraged XX.X October. the by and mile throughout gross quarter We a to per hour a we're velocity best quarter velocity and on return from made ever the The mile pleased with third network Slide was Moving we've XX.X perspective. hour

sustained and hopefully as screen. Our U.S second John accelerated this or to operations a the make comments of up improvements lead invite quarter course upon of going and on built October. that, the over the still of quarter well. you're early into at the Mexico this point part demonstrated half And in while the and in looking the a at the improvement third I'm to it. slide is few all quarter third

some on touch our slide the see we to and that a continue well. momentum following metrics then operating few cover as details and the Just initiatives and of performance network to on in key more

if make you'd comments here, some John, So like to

where said, respectively yep, velocity the for the gross levels. and October start we and we quarter you gross a as the weeks the the -- The and And levels. very early and point. the Or XX% particularly sequential strong resource finished half encouragement QX Pat. QX, of range. Thank QX you. see velocity into in and this the you at a the you about Thank rate of the said of first of encouraging are And than was perspective the transformation continuing dwell improvements performance US moving dwell said, led XX QX, in U.S what's best again lead is gross velocity continuing said the velocity gross and said, as you there's three were into the and second better and good hour And well and respectively. XX improvement I promising. in better the XX% is are And QX You, of to with XX% you traction just lot as as quarter range third I dwell. as velocity the well QX Mexico or as really is and levels. run part and in XX from in really October. our XX% feel network our promising, into

and network, we're seeing locomotive in both centre utilization fluid more our improvement a have crews. We of

QX locomotives, it exited and of than average tell active the equity, morning, return the of to in an saw While was of X,XXX story. lot more our up in or lower year XXX XXX And locomotives. we're continuing average improvements the this park over a quarter and able our over and active of an We to doesn't count range initiatives our in locomotive the of quite as quarter college were fleet. really through units. And sweat with QX. was And units. We full fleet we fleet is began the push we X% with fleet what XXX year,

and T&E from meet you year-over-year, demand and in the back our brought as is And current and locations we Our for to up furlough. added volume said we've crews headcount growth. key select

I adjusted versus Our healthy, you inventory resourcing improved accordingly. Mike The execution the and afford In believe better out. The global On improving a have mile supply the train Of network, Significant capacity X% levels move see from XX% XX% Walczak, team really despite field of very, at U.S., first If or could and impact can in crew are positive American the lowest XX% for growth at levels. the GTMs has will improvements are in are yields Tim initiatives XXXX. origination is XX%. successful the recruits the discipline fluid of down through and And and six improvements operating XXXX. there are documented in XX% very maintenance well season. from the XX% September. dwell stands in locomotive we're and to GTMs half resource performance network and the right the have or May and operating velocity to a year at the very that car, down initiatives other level well criminalization to Right our X, versus low counts of North beginning year-ago. capacity and perspective resulting per are in XX% well-positioned Livingston and starts and were additional utilization levels on to last And the and train crew in historic versus execution driven peak XX% recrews gross were but NOC improved -- the reacting by challenges broad for and time within chain. the and example, foundational versus to ensure we in improvement in above understood Slide behaviors, costs XX% metrics. by that metrics reliability, overall starts Mexico well crew changing real-time controllables to level

the where implemented team most and and our time drill calls approximately destination One days to daily to make early this versus operations cross train year, optimize of in spring. for the we cross-functional, standards, XX days and themselves readiness handoffs necessary accelerate online optimize The led recent the is grain barometers mechanical and of and border against time border across shuttle cross into offline is We cycles our XX XX distance divisions interchange the organizational performance, partners. tactical they earlier cycle. health NOC terminal measures reliability decisions the and and days

of as the Exiting skill rigor of broader them we've improvements I give Southwest day has the areas that metrics some examples and facing of team Zones execute the of I in and the are area. rail key dramatic in Trackage congestion that Laredo. our driving of could and discipline all the can of longest yards Mexican in improvement Mexico been to Given or points, sustained runs mentioned. the add followed you improvements talked network removing I've implement Rights, previously some strengthened City has day KCS traverse customer and and Kansas were Vanegas into Ahorcado, these some Nuevo the Southern past has the network the These adaptability on the velocity Mexico that well our Borders to unlocking moves to workload and best that includes network of Illinois and from over the trends. requires able in and and out. from past and several the team about Central and and rationalizing reduction that Structural one Monterrey the responsive This as level months. a If catalysts is Houston of performance

Our Coordination the overall year improved. compliance sequentially measures July. between sales trip and and since communication much operations the capability and over customer and service at is marketing of and have our highest lane a in levels reliability improved has that

customers reliability end-to-end our As identification effort, And to any bias optimizing investing into customer and part we've of is the complex. product towards issue supply complex deal reliable complexity mile PCR the the These of view encouraging Most operating increased embedded the with execution the our in service market. global customer use Real-time focused and resources chain. first on and of level growth, maximizing that are KCS a customer lateral of is PSR. very tower with assets across through mature -- and with last deliver -- and extra We're commercial turn highlights And results control making and in things operations very key of moderate I'll Mike that, class within the financial and alignment solutions and creating this KCS's team. decision favorable the Upchurch. in world our customers delivering engagement really vertical are and for and momentum cohesive groups mile industrial solutions is sustainable to over stakeholders. this

next little X% But John, everyone. good morning, detail I'll going revenue on more comments on cover quarterly grew Thanks, XX% Slide in overall, and my start I'm XX. to volumes decline. the a and a volume slide. revenues on

$XX reported of million related incur ratio merger operating quarter. that Our XX.X% we includes the costs of during

to merger point Excluding and sequentially. those costs, our adjusted OR basis XX.X% XXX was increase flat year-over-year

address from basis roughly that $XX to service the expense adjusted experiencing quarter we mentioned, items few We earlier costs deployed on the we and several contributed incurred in Pat year. will in As XXX detail incremental expense discrete to congestion But or the few commercial challenges challenges the let the cover million points in quarter OR. the that next of in of slides. were discuss key more network increased a me from had we the I that resources

we that basis referenced You to headwind congestion. attributable quarter approximately of from XXX last points costs may remember

these third So as John as and down the achieve we've good better long forward a seen resources good costs news able networks improved have productivity. we've running quarter the improved along us that our we in deployed is service time. a about as progressed indicated, our come leverage through level and The significantly be of to trajectory will going confidence gives with as

$X outsourcing little basis that incurred quarter, bit XX in we XQ more We reform million impact from a expense. and I'll and cover call, point in an year-over-year the discussed million And the following detail $X casualty roughly point in as Mexico slides. a on we also XX basis derailment higher or the incurred

and were FX decline earnings revenue a On in Continuing overall earnings revenue diluted Our growth X%. generated our from quarter $X.XX, was share per adjusted this The for basis, $X.XX, carloads. share merger diluted reported, was per fuel costs X% a exchange. year from X% Slide XX, XX% on a foreign adjusted we growth constant ago. up

As foreign and exchange operating are generally a neutral. fuel impacts reminder, income

point OR long although due the a impact experience to prices. we quarter, the in basis run, fuel higher XX negative did Over largely

per Our up XX%. revenue was unit

issues mix down that overall ended with some intermodal impacting have carloads RPU. XX% We positively up

from and positive were U.S primarily unit, and within that haul industrial business benefited our per in pricing length also the petroleum higher revenue We and of increases chemical units.

In addition revenue increases FX. per fuel to seeing overall and in unit from

Regarding price, on in we keeping inflation. are the an eye recent uptick

is Our but previous year, in rising concerning. what inflation increasingly QX were consistent seen pricing this we've results with quarters

carefully are their the monitoring of have we And renewal XXXX review we in heavy specifically, first a costs. as contracts customers to We overall work inflation season and as we head with and transportation half thirds of into half going being of of costs. our two mindful XXXX will the that repriced in to first business get adequately in be ensure inflationary certainly roughly need that the pricing with to We're quarter. almost manage covers

now. more month trains or XQ, with essentially impacted the protests no July, teachers than days August traffic interruptions but have timing Pat XX%. for to was was and we we business metals the it's unclear shutdowns production. related to were are in as at operating volumes, plastics September. including production we intermodal Currently, shortage, QX due the are global volume Lazaro microchip volume and to blockages our on areas saw auto of when plant in impacts and these driven down Turning inputs our the customers auto volumes from to We primarily three obviously that parts only resulting to some by the XX supply In them supply as consecutive earlier, chains key segments, due that Service with move ready into mentioned vehicles working southbound other stand decline we the our auto into finish overall and support chain to will pressure normalize, closely understand additional about normalizes. Mexico

of to about During point ratio impacts the negative lower the along These impact volumes. $XX intermodal and revenue, or blockage fuel metals Pemex for to XXX line with quarter, our as EPS. negative operating of blockages approximately $X.XX in XX% in resulted for basis Lazaro about volumes some lost oil as resulted million negative well a impact heavy moves

have fuel in impacted disruptions. quarter, government reform regulatory in by resulted refined lower resulting Mexico, supply chain certain volumes. discussed been shipments temporary XX% These last impacts we increased regulation product As energy our in negatively

gasoline temporary to the Mainly the continue that are The to Mexican two dynamics we impacts However, compliance market these regulations. underlying remained new ensure expect we with customer government as of help thirds and the continue unchanged. And diesel the import extremely in obviously KCS well-positioned U.S that Gulf the product demand market. cover the the is being Coast supplied Mexico to help by shortfall. from supply to is bring

been business volumes is believe While and carloads and a we with year that consumer and up X%. online have new cycle and this rail and a we're easy we've truck earlier. shift and coal importation into And while unit evidence come up that carloads fuel between stockpiles, obviously more will high carloads demand on then Arthur Port steel industrial year helped still by about were times rail facilities XXXX. the consumer in our been were driven production in later hovering John plants Ag energy, Industrial Energy talked natural continue is X% steady somewhat we rebound. from Min. that for have far to demand will open that $X terminal. mentioned Ag and mode XX% finally, but and there $X. some gas we a see new healthy of seeing and that This steady startup has improved been Min to Along efficient Strengths, there's the have the a low up few transportation benefited industrial in demand, were prices from that that comps which also DRUbit by of ago, and up

blockages microchip withdrew our chain the certain disruptions. the uncertainty supply refined to related As fuel to mentioned, we and Lazaro Pat guidance due issue, the

our to However, medium we remains transitory do units outlook business are nature believe for those that and these long-term unchanged. in

Slide to Moving XX.

XX% quarter, from our Mexico such expense higher the an to outsourcing drivers as derailment price and we expenses, incurred and saw reform service we other that fuel recover challenges $X in Given $XX overall FX, casualty the and million increase Fuel GTMs the in consumption, price and countries by in from driven higher increased in million operating primarily U.S both from fuel bulk increases from and price increased shipments. expense.

hours million exchange, saw foreign increase inflation, little talk worked, in We next a increase million million from that a and increase wage million which compensation. and revenue headcount offset more which slide, FX. was a reduction an a was $X also from by bit partially about $XX $X more increase by from experienced We expense in the than along offset benefit $XX I'll with $X million in from but a incentive

signaled incurred was offset quarter expense Mexican incremental $X benefits purchase And we we comp activities by from outsourcing increase. and saw services but on specifically, related QX partially lower the as in-sourcing in we Additionally, to for increased that our million, year-over-year reform. second in $X call, million net million $X

$X would fully million be but as believe an incur additional reform, of in Looking will services. vendor we forward, expect increase in-sourcing impact we the savings due XXXX the to realize outsourcing expense the immaterial to

a fleet referenced. $X supplies million the We from increased incurred locomotive that in materials primarily John increase and also

in-sourcing a but lodging higher million $X from we we a we year-over-year fully supplier car by active We hire, driven crew locomotive because reduction of saw also we incentives, employee $X million higher in should taxi casualties, XQ as incurred costs million fourth that's quarter, for a our million year-over-year crews, resulting in property increase fleet, and tax, increase costs in expenses recorded negative of starts. And $X to in $X given a and However, XXXX. in into by expenses let million expense million QX; XX, $XX from times and ben real hours, the cycle on $X driven increased improved then the XX% quickly. comp does benefits or from in headcount me improvement increase headcount in the more provided and and Slide service decline, that credit those carloads work a higher expect in in a finally, headcount, fuel increase Comp we've we cover T&E we had primarily crew were which comp which address in in exclude saw see the would on the million to a due as and U.S., velocity. of go resources the that the growth and we entirely as decrease derailments $X X% U.S., finally And improve the in have volume impact The increase the we slide. X% the brought in led information almost to industry. saw starts on

on But the As earlier, the to I we outsourcing. be and incur that expect did discussed slide, comp in quarter prior expense services immaterial. in incremental on we benefits going benefits impact indicated some into in XXXX as purchase Mexico and saw

We increase decline driven also incentives those XX% impact million in a increases $X by consumption. incentive lowered accrual and $X then quarter, then fuel by offset wage in from comp XX% million fuel as and foreign increase were from exchange, a benefits in we and in million $X increased had XXXX. a expense to price, the for annual foreign finally the compared And XQ of exchange our

despite the just did think decline transitory and a on volumes, here have in saw ratio prior execute X% as As we issues. side very a cost in from Mexican quick much of slightly law we're particularly sequential type equipment perspective, creep, demand XQ. improved we summary operating quarters, done there in of I've fuel then had negative quarter tough some labor impacts. a perspective, largely price and XQ, a some impacts obviously we a a better And from the We getting maybe but quarter

what QX the setup for QX. So and in will saw better XXXX we XQ into think we going and than be

back to turn I'll the that, Pat. with So call

Okay.

well. really think, the I Mike, quarter summarized

would that is, and Just the the I referred way like a setup. couple to he of things add, that

the quite related quarter Mexico, were bring the we some to Just deal fuel intentional to network the to things permitting requirements, during congestion, refined unexpected cetera. issues fuel, back et with this resources in

magnitude today, X, the Slide of seeing improvement our most John think some really the that this metrics. of transitory we We're in Mike down just is service the impactful long to of presentation went level in through Maybe transitory. the our customer And that here I how covers, one can we timeframe. well. touched the headwinds, what believe areas the are as on still debate, that revenue

better crystal than Our is else's. ball no anybody

close fourth set next but very And come when like think up. does are progress return to clear focus a few the our but business Again and the think soon obviously using and well months. we in back -- in are really the And I quarter, customers, the the getting shareholder all year. finish term, that to that for will hopefully then auto in recovery vehicles, We staying that early merger path Mike's certainly and we markets business there. next regulatory certainly great making see the I on approvals concluding transaction hopefully

So team with that, questions. your of the whole is available for any

with ahead today Wetherbee Citigroup. go your question. from Chris question Please first comes Our Instructions] from [Operator

Chris. morning, Good

morning, operating can the ask Good morning. just Maybe I guys. ratio. Good about

to about that you're the some talked sort metrics were also maybe going setup the forward be sort in some you of how talked So about going. some on catch service additions But things to and up of able of we sequentially highlighting. improvement resource

I part here. two maybe question guess So

of you there's then quarter, And as can guidance the operating think For we you XXXX, that lack back because you is get fourth do do think ratio a appreciate you're to to what catch think I improvement. ability out beyond, year-over-year of for we're XXXX that? have I operating we have seeing Or rebased can ratio if the do up, we sort visibility. transitory. you to But upon improve appreciate our of and beyond pulling to -- actually expectations think and then higher

year. move understand, and progress as might we XQ of kind how to you the want then just setup So into think out next

Well, I'll a stab take lot there's But Chris. at in that. a that one,

equipment progressing I always we're confidence here the on Our ratio well, from goal cost side. have to improve some operating that perspective pretty is do a and particularly

chip in thing, that But I to labor we've got of just to ways productivity And I when has on its very and sector been itself. Lazaro fulfilled lot to incredibly auto know, this focus to predict on importation if we going little last. and be on we there's begins gap wrong in has still strength relieves depend to confidence market. of product, is show think huge efficiency, a a is of a as a to demand long go the a the think environment. that continue going fuel little by the auto resolves have frustrating. think There's about and issue to lots well-positioned. itself. that. of that demand but one situation supply we're accurately We can't how we'd lot that entire like chip issue will bit And Refined

to just us wait improving. we're I see. compliance going the well hump see for over I dwell and going on having about of and those at every and comment that data, saw we mean, and productivity long-term. I as now prospects don't have on to feel up having mean, made good the the still some We business. XXXX, we the see this incumbent service velocity of challenges, set about then we growth and medium the incredibly I But all. our it's get as So, gotten And changed to earlier. And track all some tripping us metrics you think up are single reasonably that we sets day forward. back and to the in levels other And

appreciate Thanks the Great. it. time. I for

of your question. go Our question Please with comes America. from Hoexter from ahead Ken Bank next

team. Hey, Pat, Mike and

talk the industries, -- you've both. sounds do a some permanent externally this on yourself strikes, and network about impacting protect been like, And need I mean, I if a same control more to going you've seem been the those timeframe I how can ongoing on you thing if, What you It don't the strikes of possible? seems energy that's mean, what in talked doing like shut down. then, you've been and for It with something these on know here. resolution be other Thanks. reform. in resources to for got all have government impact. especially they're your Maybe or the teacher if that to long you on and about at follow-up can the Mexico? really impacting in issues. come Just, if do I doesn't time dealing

impact talking time the Mexico, not of lot a blockage days protesters not very the the these federal. employed from customers, substantial. the property. we with of also in law for of state teachers the businesses. is part state hopeful the politics longer country. -- does a level. between of still recently, that. the fact remove It of haven't us time. the letter here the optimistic that particularly It's companies. leadership teacher federal of they of who's all We aren't Finance X. highways the ago lobby reiterating did and and make to and that issue We're do the time is not The were other level affect are a have us, need enforce will very the been who aggressively the just in of citizens be a Minister, We October government Oscar to and state -- it the this. government removed. and our on is on wrote think understand to is leadership clear, very [indiscernible] this The in going losses this Mexico because certainly anybody They spends the economic to to of of the I worse this are levels transition gotten by years, sure And remains chronic economic rivalry to our breakthrough. on a impact trying enforcement, the do would X in followed term, strikes, on breakthrough it and we're that some we issue we block officials the many Just the of tracks be but We law a

the be So the equal is an fact law enforcement government But opportunity it just remains tends we disruption. to that. do need them to for and responsible

this certainly that optimistic resolved. are We get will

that all the in to us or region restoring And to will change payments addressing reasons made. compensation. being about what hope term teachers, complaints -- allow back have that administration about lead get we that some in will think with are peace to That's We the that to just address longer it's sustainable their their operations.

I that question. that's refined, I know don't the know answer mouthful. -- a don't your On

it that got. very answer, be the satisfying answer I said, that’s a but we not As may

of in a and product normal have working attractive the be and Mike, interruptions of We second coming these government. refined this the you really quarter third that have the perspective, we fuels, then, rules of that? the did third very the opportunities in on rippled heightened congestion that how some own down noticed our resolved continue in yards flow But the product railroad moving at know it what inspection products are, across a with strong, and we know think caused we to feel and U.S into the of of move and I productively not And caused don’t know, pipeline the piece of service kind we've was get whammy, originations We're if to I congestion Gulf some to and from without that On of we the now to added rules that add for this demand double the the out we've service during but I of have down cycle government time, is But back continue quarter, to broader cracking our surprised kind terms got that the inspections think humming there. That the when into growth our was slow may impact because think going rules Coast. -- permit the The it along change. for hopefully that supply levels. more that we're portfolio. can quarter. predictable only for Mexico, of the on the anything was disruption into we very cost seen. I like some dampening it, and going a our and entire the are and our unusual chain product, permits disruptions

to because And move country. a it's rail the product move I we're confident moved way some frankly, product product is I of cost the guess will that only more regulatory extent to administer to it's over and to into and the truck, the easier that move to the perspective. add would effective continues that efficient from to back is thing quite that, that eventually

Thanks, Pat. Thanks, Mike. Great.

question with ahead next Please Amit Bank. question. go from comes Our from Mehrotra Deutsche your

Thanks. Good morning, Pat.

you can the maybe Mike maybe pricing any on sticking pricing Mexico that obviously give with kind you're expand really if you opportunity is even But was expect wondering if can of can us you periods Upchurch, compare to constrained us approval can you any today give past obviously, path, opportunity a capacity down hoping you hurdles. noted second. process of an constrained, capacity. to Naatz wondering additional Mike update then, kind in on Just remarks. the you for color. I if insurmountable your don't progressing hoping Mexico. know And in Obviously, just the I of

all forget COFECE. go the to your question, Before we we'll

Our application is in.

I to COFECE's think for in back the with information. ball a court is come request

think So the it's process here experience but months. learned the last fairly we early, about several a prior lot I through over

not we think for we're is There any from going as so, requests information Kansas don't They what knows get until not Canadian look maybe antitrust City. terminates from that process an Pacific issue here a be should easier. But have exactly in issue, everyone to should like. certainly I And operations. an this duplicate be little COFECE, bit sure

think is know this COFECE and a case. been resources. challenged straightforward fairly we But also we staffing that has So with

based than months. gotten see a from so what hopefully the of any feedback moving matter get we we our normal don't can to with a case the heard seems little just real might far, their be based difficulties we've advisors, a we've backlog slower like. on So on in few But approval and

Certainly Mike inflation have that watching. pricing we're something think environment pricing a attractive the side the we I is of on house, earlier, as mentioned right now.

certainly other pricing transportation. inflation basically the that that at incremental premise hold high costs of is in And seeing rail will above pressures past, inflation We're in seeing we forward. same or through moving railroad. the pricing in You're the inflationary had levels, we we've which modes and will be levels

follow-up, ability to just how isn't just levels an ask to to price rather than constrained But capacity talk inflation next that above market given is? price well how there sorry inflation about the to I'm given opportunity but capacity price the year? constrained your is to

that. that the seeing the we contracts. taking have abilities into that be are To opportunistic certainly consideration you're extent Yes, our negotiate we'll things price, to as those we

Appreciate Thank guys. Okay. it. you

Hey, thanks, Amit.

question. Brian Ossenbeck from your J.P. with from comes question next Morgan. Our ahead Please go

Thanks morning. question. good the for taking Hey,

see more broadly. down settles Do bit comment, products regulatory just expect side Just want the when probably is of to to consolidation as here. little you you little imports? side? the go you the to able net to Can come bit permitting the pick back reform what's refined just and more to a trains the on a energy that on up unit I'm surprised effect to get capacity a truck some Because

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against a there's reform. think we've energy I that went the first move of seen pricing kind on

the be been That'd on you. So what as has well. the you impact comment the Thank on of helpful. that, maybe can implications market

business products manifest train the right. versus With the All I'll unit train, has and consistent. respect to comments our start. fairly go unit ahead refined on been

behalf Mexico. Mexico back try are be to We respect to border Central I'm demand manifest a entirely may expect not do But forward. of in a sure Mexico understood disruption LPGs, the the on LPGs that indicated they Mexico, that they as supply resolve LPG respect country. With going I in That northern with costs move this consumers obviously, to pricing and ultimately question marketplaces. question, the again the the has will become results the contain Mexico to moving into effectively but subsidizing a where we environment on business magnitude I supply migrated trucking the more manifest the haven't haul activity, expect pick manifest portion into itself of the chain to the business that taking Mexico that the normal regulatory the that of that has fuels are short over up. as we've that largely will into of do the a and products It's house. same guess, seen seen side We issues,

that [indiscernible] XXXX. that. that you to a caps a I too Thank it time since if here of we've capping couple the you. ago, just other the was first like was impact about question the sounds Yes, on put aren't translate pricing implications might from curious products. which of that is other volume seen much months But seeing there's

there's there's those into Well, and that are products -- those going those -- marketplaces. other to to, migrate [indiscernible] markets products go and that going markets to probably can there's alternative

loads quarter Brian, perspective to Mexican though, put a X,XXX are energy moving car that X,XXX we're to to just reform. it in tied

a pretty, of wouldn't expect small have pretty to part I our So impact. business. a big it it's

you Okay. it. Appreciate guys. Thank

comes question ahead from Please question. your go with Justin Stephens. next from Long Our

morning. good products. ask I wanted and refined another one on Thanks to

and think influence is you you pulled incremental margins a change, mean So, earlier, you structural Pat, you're the does to in get to back? mentioned requirements structural time. think going overcome? guess there's that Or that change as potential the you're inspection that some for do these that a have business? to of Does for permitting regulations that be it viewing this and a I some if And could this about headwind way how returns

us, it's take Mike only meant on our permit a and of to heightened and early this for customers at and is, too obviously for scrutiny a inspections. know little but I'll Oscar. then some compliance shot maybe there's I think maybe What not first of a level I

the disruption how so past the that we cost seen know, we in I play Oscar, don't to we we've they because actually smaller terms market, Would if can don't the profile add of I affecting we And the that market. some I in smaller benefit of play have through see all terminals to moment, number know serve. terminals back that's out here some players participants Once have of having to of this be of term. how going terms versus you and different type large that, seen that to out some And But going business. density the players, in that smaller is maybe and Mike, can don't the result and of we it receivers, requirements. the customers us, and whether compliance don't have the think going and of of I definitely we the this consolidation the really in And terminals all versus in play the or out. of a some receiving deciding thoughts we're to The way some exactly maybe customers, will the customers serve experiencing change at number and expectations. of still about Mike, is a terminals, of them to of longer this could to of those would think know want terminals, this guys and I you say small of how or recent because seeing a the this work our fewer are opinions a come efficiency adapt locations of more in business that's set in disparate

licenses respect permits facilities a receiving the proper be servicing and the those but terminals, facilities, be won't should reviewing and numbers basis in they in declined of Pat, result with say about to a of directionally guess correct. here, exactly and government the operation, as going regulatory my on has right number half. I'd by I

our demand keep more depend given dealing about the be to than in authorities needs of namely be fewer in quantities with operations. We trucks move thirds two the a house mind, to U.S with course, we're is of demand upon will to much just entities inspect regulations, the Mexico going other nature from expect that rail easier smaller with to we that it get those countries, up in because would efficient the than there's overall to expect rise of more benefits their compliance much fewer think suggest operations with with But regulatory And truck. And in it rail market here. us -- if in come the destinations. still make efficiencies to business number somewhat operational order, dynamics extent And shortfall going you to into more things. if are pool, entities, these that there dealing as slowly you approving the To will. is the

back we this why market good feel that's still it as out. So settles about

Okay. Appreciate everyone. Thanks, the time.

Thank you.

Our with next go from UBS. comes question question. Wadewitz your ahead from Tom Please

interesting disruption -- this outsourcing for any about seen certainly point would of dramatic thought morning. longer things Pat, -- any this a disruption to what I the just of Asia get types from has Yes, longer Do going good costs sense to that skyrocketed these the have refined have Asia any remarkable. customers Are kind ask but mean, that supply interest. been from of related customer seen the well, from products. I'm take your But of have chain container have to on time, you kind year I wanted we've Mexico? thought if -- term to is you know there of importing long-term from basis, a in you seen things the you you'd rates. say, let's opportunities or outsourcing of kind I would see. not of kind supply of we've to year terms term this in from And chain. kind

You're take things right. These time.

hopefully North is a or these America. combined and can't CP network drive list said plant North there, KCS long of you of American new announcements to recent decisions Obviously, across we benefit of it's we the whether entire As continent. across help show Mexico some locations, in the going the past in

chain resourcing currently their were their volume network to to volumes decision certainly Mexico. validates makers beyond that of to that This from don't that that from -- isn't production anything changing for are up know and I us, But truck retailer, coming into West discussion U.S talking alive. I have discount anything kind Asia available Mexico, I America coming that do about well derisk specific early, it Mike, know We is issues, of be chains. don't that overplay a are that -- … should add. supply the have and but work virtually to of intermodal from and but sourcing material some you Coast was substantial manufacturing away with going of Again, of nothing, to all retailer the are global company terribly encouraging talking don't of was looking in obviously. But It prolonged an make they that fact fuel sure but vendor some to sign thesis having. and specifically that there's the and was And about large extent to last had The opportunity doing North supply large a I on we very those up between really is differences between chain and diminish think issues, and -- the had thinking certainly government implementing be three still thesis Mexico to terms the decisions. I'm -- everyone aware resolving countries much Naatz chain very policies lot issues supply very of in USMCA week our a lot a they to this. a not Mike very a from would and that. of Asia, significant of Mexico, supply the and supply product if

said No, you it well.

Okay, Appreciate great. Thanks, it. Pat.

Okay.

with from Group question Research. comes next Scott ahead go your from Our Please question. Wolfe

Hey, thanks. Good morning, guys.

sure or when get I'm be the then review you by the review cash can if guys year just if Is do next another And the are you are Just the the on to you'll expedited from are you or the business? outline so. for focused can it maybe not not. merger -- growing are But maybe full -- for owned you you year going call what merger priorities year timeline, while Is what or the operations? be Is a business? STB? for we'll guys it that Pat, think doing separately, early so, know just you to earnings in trust, So flow? of an earnings going your it key network

we it's prepared for too to much think thesis, are advantage improving opportunities that. whether of in know or the of doing the really believe of it's we CP-KCS the what don't us, merger is being now, that to from growth. take or network whether about front beyond story just it's all of that in the I are growth year way trust, so change which operations, we're the it's you all next Certainly, -- going

going up period And feel can of So really that well, to can to but argue plants some I time the said you certainly of to get how and still revenue -- of able we're it everything it are we our got headwinds industry, that auto back, think We I that want business part been do could long for comes network we our that. to transitory. the experiencing and that's prepared and very that. about no set XX auto handle we We Mike we've declare transitory, we to something are return come in -- back doubt Mexico strong. when believe

for to we is a where type that second be to the to that think and going allocation terms team better to for we and on of continuing getting I've -- performance don't core COVID, in mantra terms to I of that growth need of by the elements capital last not expenditures I because capital can. than So and A in I think necessary. steam growth. through obviously that's but all good business ahead efficiency. things our that service just Laredo. think going at example in think certainly bridge definitely that be to the we We're other John, the be few operations and repurchase think project, focusing and bit, on the fall wayside months, dusted really begets the be any capital there's of prepared network we share seem the it's to going dividend of thing, doing them full little off But be will get of the It's change. going the kind improving

I'm the the expedited might merger looking whether here, timeframe. as that going question on know have clarity we accept I far don't is STB at Adam when first we review, Godderz to the more As about will. when

on working exactly very the is have think clock don't Pat reviewing good now. to Adam, start file and will is you shape this in future, for answer STB. which I good merger really application Scott, right. for we're right in then a on near with full the the the we Yes, merger that that the I we're know Obviously, process that

holding the at guidance point, final give. still true can that there think merger of XXXX. approval, second you this the we But if best I sort projection that's we're be of the the half will, in to obtained will

it. Okay. Thank you guys. Appreciate

Scott. you, Thank

comes from question with next Please go Majors Susquehanna. Our from Bascome question. ahead your

a for taking resourcing business where has about semi optimistic mid-term to you're to thanks talk permanently going volume Clearly, you're timeline? about think appropriately. been Thank through a of that you permanently? are or optimistic think question. you're lot where back Yes, come Just and challenges the maybe my a demand your less parts lost, of you trying snapback you. Can in

of know, volatile, to gas Coal have I is guess, be I'll supported you that something prices to start very recently. with small coal higher the portion into of we've here we're as tends has the coal. a it's had been natural of that tailwinds that that one. on risk that. Certainly though into use the even future. and say year, next good and But are our optimistic I'd at half us that very book Demand of first and going moving some is

Thank you.

Brandon Our Barclays. Please with Obolensky go from next from comes question ahead your question.

from we priorities more improvement regulations maintain and end you model in that change morning, the do I these about the And know, especially It question. like Hey, can XXXX. issues like everyone build at your ratio operating teachers for strike. forward? of can if can guess resiliency don't recurring, be how Scott's in taking you and some my just in obviously seems follow-up you Pat, variability thanks But can good question markets. going such what

maybe the cycle I that a I'll the network a choked mean, caused needed really ask The would cycles. that and we're congestion don't at believe clear John fundamentals performing lot issues on the mentioned that But where the and well. is the stab of of we and up. behind -- position I've the we've way all from really a operate. that been deep grain been going just the us and to I the Illinois us But years to say think cross that I of extremely some in We in XX was good. we is to get here, now I made times John on have some I it's focus don't ever way that. I that we've Western grain improvements take comment think ever the into grain into for think seen border statistic one Mexico this out

efficiently back, comes we back the very things a because So really of good to and high quarter as of we to that the the the level during volume are did network get to it think handle very handle I in performance. position third

handle resiliency and terms in and these know to So, growth John, that. I future. in events if you to don't the ability add to want of

-- It's going months, deliverables the great always headwind capacity on team perspective, Pat, either thanks, monitoring always green and of terminals over something tailwind Pat. the industry of is capability days cross and team up I the and happen. the border finance at and and of it's it to even of dealing partners, alignment chain, any development last leveraging are XX strike, green into lot a the days supply Yes, to And vertical really X the the chain, mile on and across diving manageable KCS through the what not and is support, incremental a every or separates the especially me, into people any or supply same when a improvement look of breaking the -- offline that It's and starting to asset spot refined allocation, Teacher issue the improvement the had the continuous airways. taking But making mile team on the any resilience execution the the on ecosystem, question. the principles effectively unique, and people of to happen surround deal it the down somewhere, team team, or of that And we've standards. are the and course border be opportunity, with with countries two terminals, the that issues the operations, it's improvements for and that some rail there's commercial first across across product transportation point. segment you're discipline reality weather right, in of down XX to setting X working fuel and interruption. is from the lateral

what So on are projected creates based X this to from of to our a our PSR, sure And continuous now improvement a And looking X growth, and level the on against of catalog learned capacity that when of continuous next reliable a we're at my health the we the look the barriers. making from some use based people bumped and maximizing years product for the customer course more headwinds agenda. at strength got the the we we've through we're improvements Where it that on view, improvement. from the the we've deliver reasonable that of that growth, from assets, we of importantly, view service focus reliability, resiliency. up

and were from the And themselves continuous the X for set velocity playbooks initiatives as that then some establishment manifests activity a a for our terminal takes the improvement and perspective is collective management continuum. well into standards crew the of perspective. level how And from crews improvement institutional for just that of continuous that we of us improvement early next bargaining it see from capacity onset along Slide

this the reliable elbows and really and builds what customer our being group sharp, proposition. on cohesive constructive a well-positioned are, within aligned the momentum keep deliver our I values that's organization service the our in commercial operations, eyes it missed, strength are sustaining financial reliable customers. same field engineering, of And say from value there's -- down a creating the what sustainable that team proposition the the our network would from can't be weighing of the health and for tension to So maintenance to of perspective safe,

of on is them. we team. to seeing variable locomotive, go sure they're working. costs that the they're somewhat we That, position when when fixed sweating not the so assets, costs, operating them, need putting we them they're and across even if in that discipline me And actually I'm like So some long that reduce making so ready

Thank you.

next our from ladies question Kauffman. And comes and Jeffrey gentlemen,

of has Hello, network about of thoughts on some with question. challenges my there the thank in in light any In and taking budget operating what's for been terms with you of capital the the going Lazaro, Are the are some were chain your was thoughts supply with of given guess the shifting out challenges? sticking that investment? same still I and that just we And I environment numbers on wondering the how there? autos

much term that of this available lot A network. historically just we network will to synergy this our we CP. kind not able and keep we would plans thinkers volume that can sure handle of suggest changing quarter to of the the post longer grow we're support make revenue on ahead is that been Yes, required CapEx and lot we business us confidence with have that our the a the combined here business. in we've focus on a the deliver intact We're growth to combination continue spend to

So at change no all.

Okay, that's you. my one. Thank

Thank you.

now that Mr. will And gentlemen, back remarks. Ottensmeyer over for turn with any the conference call to to be I closing ladies and concluding like question-and-answer we session. today's

do things around you all here future. to for the look our on timeline to merger your develop everyone forward the all front you seeing We'll as posted attention. Thanks conferences keep and best the you. Thank market in at

And conclude gentlemen, today's that you conference ladies call. will for attending We thank presentation. and today's do

lines. now may your You disconnect