Q4 2023 Canadian Pacific Kansas City Ltd Earnings Call

James: Good afternoon. My name is James, and I will be your conference operator today. At this time, I'd like to welcome everyone to CPKC's fourth quarter and full year 2023 conference call. The slides accompanying today's call are available at investor.cpkcr.com. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, simply press the star and the number 1 on your telephone keypad.

Good afternoon, My name is James and I'll be conference operator today.

Speaker Change: At this time like to welcome everyone to see PK seats fourth quarter and full year 2023 conference call.

Slides accompanying today's call are available at Investor <unk> C. P K CR dot com.

Speaker Change: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question and answer session. If you'd like to ask a question simply press Star then the number one on your telephone keypad.

Chris de Bruyn: If you would like to withdraw your question, press star 2. I'd now like to introduce Chris de Bruyn, Vice President, Capital Markets, to begin the conference. Thank you, James. Before we begin, I want to remind you this presentation contains forward-looking information, and actual results may differ materially.

To withdraw your question press Star two.

I'd now like to introduce Christa, Vice President capital markets to begin the conference.

Thank you James Good afternoon, everyone and thank you for joining us today.

Christa: Before we begin I want to remind you. This presentation contains forward looking information.

Christa: Actual results may differ materially the risks uncertainties and other factors that could influence actual results are described on slide two and in the earnings press release filed with Canadian and U S regulators.

Chris de Bruyn: The risks, uncertainties, and other factors that could influence actual results are described on slide 2 and in the earnings press release filed with Canadian and U.S. regulators. This presentation also contains non-GAAP measures, outlined on slide 3. Please note, in addition to our regular quarterly financials, there is supplemental Q4 and full-year combined revenue and operating performance data available at investor.cpkcr.com, which some of today's discussion will focus on. With me here today is Keith Creel, President and Chief Executive Officer, Nadeem Velani, our Executive Vice President and Chief Financial Officer, John Brooks, our Executive Vice President and Chief Marketing Officer, and Mark Redd, our In the interest of time, we'd appreciate it if you could limit your questions to one. It's now my pleasure to introduce our President and CEO, Mr. Keith Creel. Hey, thanks, Chris.

Christa: The patient also contains non-GAAP measures outlined on slide three. Please note. In addition to our regular quarterly financials their supplemental Q4, and full year combined revenue and operating performance data available at Investor got P. P. T C. Our dot com, which some of today's discussion will focus on.

Christa: With me here today is Keith Creel, President and Chief Executive Officer, Nadeem, Delaney, our executive Vice President and Chief Financial Officer.

Christa: John Brooks, our executive Vice President and Chief Marketing Officer, and Mark read our executive Vice President and Chief operating Officer.

Christa: The formal remarks will be followed by Q&A and the interest of time I'd. Appreciate if you could repeat your question as to why is.

Christa: It sounds like pleasure to introduce our president and CEO, Mr. Keith Creel.

Keith Creel: Hey, Thanks, Chris and thanks, everyone for joining us today give us a chance as a team to share our fourth quarter results as well as.

Keith E. Creel: And thanks, everyone, for joining us today. Give us a chance as a team to share our fourth quarter results as well as our view for this exciting year ahead in 24. We have to create value for our shareholders, for our customers, and for our CPKC family. So with that comment, let me start by thanking that CPKC family, a 20,000 three-nation strong family of railroaders, industry best. Their body of work enabled the results that we get to talk about today and, obviously, the work that's ahead of us as we create value for all of our stakeholders. And I can tell you as a leader, it's my honor to be able to be with the colleagues that So let's have a speech about the results.

Keith Creel: Our view for this exciting year ahead in 24 that we have tried to create value for our shareholders for our customers in the North Sea Teekay Shea family.

Keith Creel: So with that comment let me start by thinking that she PKC family 20003 nation strong family of railroad as industry best their body of work enabled the results when we get to talk about today and obviously the work. That's ahead of us as we create value for all of our stakeholders and I can tell you as a leader it's my honor to be able to get the colleagues.

Keith Creel: That are with me here today to represent their body of work.

Keith E. Creel: For the quarter, this team delivered revenues of $3.8 billion, which is up 4%, volume growth of 4%, an operating ratio that represents 220 basis points of improvement versus last year to 58.7, and core EPS of $1.18, also up 4% versus last year. And for the full year, revenues were $13.9 billion, up 5%, volume growth of 1%, a very unique industry story, an operating ratio of 62%, and core EPS was $3.84, up 2% versus last year. So, the results stand alone certainly unique and impressive results, even more so when you think about this as a railroad in the early stages of an integration, working against a challenging macro environment, all at the same time. So here we are 10 months into our forever story at CPKC.

Keith Creel: So would that be able to speak to the results for the quarter. This team delivered revenues of $3 8 billion, which is up 4%.

Keith Creel: Volume growth of 4%.

Keith Creel: And operating ratio that represents 220 basis points of improvement versus last year to $58 seven.

Keith Creel: Core EPS of $1.18 also up 4% versus last year and for the full year revenues of $13 9 billion up 5%.

Keith Creel: Volume growth of 1%, a very unique industry story, an operating ratio of 62% core EPS at $3 84 per cent.

Keith Creel: Up 2% versus last year.

Keith Creel: So steadily standalone, certainly unique and impressive results.

Keith Creel: Even more so when you think about this as a railroad in the early stages of an integration working against a challenging macro environment. Although at the same time. So here. We are 10 months into our forever story at CP, Casey and I'm, telling you I'm extremely proud of the progress that the team has made across the organization be it operationally sales in March.

Keith E. Creel: And I'm telling you, I'm extremely proud of the progress this team has made across the organization, be it operationally, sales and marketing, finance, IT, all areas of the business. This is a team that's committed to creating value. As we said we would, we're doing exactly what we said we would do. And I can tell you a tremendous amount of work went into preparing for this merger, for this combination, and even more so has gone into executing it. As leaders, I believe this: we're not here to sustain performance.

Keith Creel: <unk> finance I S. All areas of the business. This is a team that's committed to creating value as we said we would be doing exactly what we said we would do that.

Keith Creel: I can tell you a tremendous amount of work went into preparing for this merger for this combination and even more so it was gone into executing it.

Keith Creel: Leaders I believe this we're not here to.

Keith E. Creel: We're here to make it better. We're here to make an impact, to improve upon it. And that's exactly what this team has been doing for the last 10 months.

Keith Creel: Sustained performance here do they get better we're here to make an impact to improve upon it and that's exactly what this team has been doing for the last 10 months, we've watched new services.

Keith E. Creel: We've launched new services, market solutions across the industry that this transaction has uniquely enabled, be it our 180-181 service, or our Mexico Midwest Express, which is the gold standard in the industry, in spite of what anybody else might say, trying to imitate it. It's best in class, delivering fast, reliable, single-line service across a very fluid and always open border. A closed loop service solution for the automotive industry that provides a differentiated level of service and reliability that the OEMs are embracing and recognize the value that that creates in their reliable supply chains.

<unk> solutions across the industry, but this transaction has uniquely enabled b at a 180 181 service or Mexico, Midwest Express, which is the gold standard in the industry in spite of what anybody else might say trying to imitate it that's best in class delivering fast reliable single line service across the very fluid and always open.

Keith Creel: Border closed loop service solution for the automotive industry that provides a differentiated level of service and the liability that the Oems are embracing and recognize the value that that creates and a reliable supply chains connecting origins and destinations of ACP and N C forest products again with the unique.

Keith E. Creel: Connecting origins, destinations, and ACP, MNC, and Forest Products, again with a unique single line service across all three nations. We've made gains in operating efficiency, service, reduced assets, increased velocity, we've reduced dwell, and we've eliminated handles. We've also made strong progress, I'm very pleased to say, on the labor side. On the U.S. side, we've expanded our very unique hourly agreements, which I believe gives us a unique competitive advantage, not only to serve our customers but also to attract and retain the best railroading talent in the industry. And in Mexico, establishing trust and respect with our one union that's there, working towards agreements that not only improve service but also benefit the employees.

Keith Creel: Single line service across the all three nations they make gains in operating efficiency service reduced assets with increased velocity.

Keith Creel: Swell, we've eliminated handles we've also made strong progress I'm very pleased to say on the labor side well the U S side, we've expanded our very unique hourly agreements, which I believe gives us unique competitive advantage not only to serve our customers, but also to attract and retain the best railroad and talent in the industry.

Keith Creel: And in Mexico, establishing trust and respect with our one union that's there working towards agreements that it not only improved service, but also benefit the employees. So it's truly a win win for Mexico for employees as well as our customers utilize our service.

Keith E. Creel: So it's truly a win-win for Mexico, for our employees, as well as our customers that utilize our service. Also, through the year, while we're doing all that, we've continued progress on our hydrogen locomotive program. We now have two low-horsepower hydrogen locomotives that are servicing customers every day in Calgary, come rain, come shine, come snow.

Keith Creel: Also through the year, while we're doing all that with continued progress on our hydrogen locomotive program. We've now got too low horsepower locomotives that are servicing customers everyday in Calgary come rain.

Keith Creel: I'm, Sean kind of snow reliably producing a zero emissions Calgary customers in that market as well as be fabricated at first high horsepower locomotive, which we completed late last year.

Keith E. Creel: We're loudly producing zero emissions for our Calgary customers in that market, as well as fabricated our first high horsepower locomotive, which we completed late last year. It's completed its first test movement. We'll be putting that into service later this year in a coal loop with a tender car, cycling coal between The Coal Mines of British Columbia and the Tidewater of British Columbia in partnership with our largest customer, Tech Coal, creating a green corridor. And above all that, while we're doing that, most importantly, we've improved and continue to make vast improvements in our safety performance as a combined company, building upon CP's So all that to say, we've entered 2024 in a position of strength, with industry-leading results, and we're going to continue to build upon that. You know, Mother Nature has humbled us a bit. In the first month, that said, it's a challenge. It's not an excuse.

Keith Creel: Its first test movement will be putting that into service later this year and a cold with a tender car, but cycling coal between.

Keith Creel: The coal mines in British Columbia in the Tidewater in British Columbia in partnership with our largest customer check KOL, creating a green corridor.

Keith Creel: And above all that while we're doing that most importantly, we have improved and continue to make vast improvements in our safety performance as a combined company building upon C piece long history of industry, leading safety performance.

Keith Creel: So all that to say, if we've entered 2024 and a position of strength industry, leading results and we're going to continue to build upon that when a.

Keith Creel: Mother nature of his troubled us a bit in the first month that said, it's a challenge it's not an excuse for well positioned to recover we've regained our momentum.

Keith Creel: We started the year with.

Keith Creel: And we're in a great position to continue that through this quarter and into the balance of the year.

Speaker Change: So let me close by saying 23 was a very special year, we bought.

Keith E. Creel: We're well-positioned to recover. We've regained the momentum that we started the year with, and we're in a great position to continue that through this quarter and into the balance of the year. So let me close by saying 23 was a very special year. Two great companies together, CP and KCS, to create a very unique, Industry Leading Most Relevant Rail Network, CPKC. We've connected a continent in a way that's never been done before and, I would suggest, will never be done again. Three continents.

Speaker Change: Two great companies together C P and K C S to create a very unique.

Speaker Change: Industry, leading most relevant rail network and C. D. K C. We connected a continent in a way that's ever been done before that would suggest we'll ever be done again three times. So its a combination took effect in April we've seen a steadily built momentum.

Speaker Change: I can tell you. We're just getting started 2024 shaping up to be equally exciting more year than 2023. So that said, let me yeah, Let me hand, it over to Mark I want him to expand speak to some operational points. Yeah, I was going to bring some color on the markets and they do more things.

Mark: You saw them on the numbers and then we'll open it up for questions. So I'm going to do more right. So first of all thank you Keith good afternoon, I'd like to just first of all I think the operating team for their continued hard work and delivering safe reliable service crosses great network. If I think about bringing two networks together certainly this isn't easy and there's been still a long list of opportunities out there, but I.

Keith E. Creel: Since the combination took effect in April, we've seen steadily building momentum, and I can tell you we're just getting started. 2024 is shaping up to be an even more exciting year than 2023. So that said, let me hand it over to Mark.

Mark A. Redd: I want him to expand, speak to some operational points. John's going to bring some color to the markets, and Nadeem will bring us home on the numbers, and then we'll open it up for questions. So, over to you, Mark.

Mark: Pleased with the progress we're collectively making also I'd like to thank the teams effort to combine C. P. Casey that work as we enter 2024 and a place of strength as Keith noted, but while we've been dealt with some weather for the first part of the year, we are well positioned to rebound quickly and have done so.

Mark A. Redd: Right. So, first of all, thank you, Keith. Good afternoon.

Mark:

Mark: As I look at safety, I would remind and hum.

Mark A. Redd: I'd like to first of all thank the operating team for their continued hard work in delivering safe, reliable service across this great network. If I think about bringing two networks together, certainly this isn't easy, and there's still a long list of opportunities out there, but I'm pleased with the progress we're making collectively. Also, I'd like to thank this team's effort to combine CPKC network as we enter 2024 in a place of strength as keep note. While we've been dealing with some weather for the first part of the year, we're well positioned to rebound quickly and have done so. As I look at safety, I would remind and I'd like to recognize the entire team for the tremendous safety results that we've had.

Mark: Like to recognize the entire team for the tremendous safety results that we've had I'm extremely proud to see again 2023 we have the lowest train accident frequency on class.

Mark: Last one railroad building onto C DS 17.

Mark: 17 consecutive years in the industry.

Mark: This is an impressive milestone highlights the team's dedication to excellence, while ensuring the safety remains our top priority, but also showcase the strong commitment to safety that boat Casey S and C. D brought together in this merger.

Mark: Because I look at the operating performance.

Mark: Year over year for the quarter, Yeah for any personal injuries landed at 1.10, which is a 15% improvement. Therefore I train accident frequency was a 1.08, which is a 23% improvement.

Mark A. Redd: I'm extremely proud to say again that, in 2023, we have the lowest ever train accident frequency on Class 1 railroads, building on CP's 17 consecutive years in the industry. This is an impressive milestone that highlights the team's dedication to excellence while ensuring that safety remains a top priority. It also showcases the strong commitment to safety that both KCS and CP brought together in this merger because I look at the operating performance. [inaudible] If I look at locomotive productivity improved by 13%, our train speed is 6%, our fuel is 2% better, and our average terminal dwell was down 11%, a strong indicator of how well our network is performing. As I talk about this, I think about the backdrop of all-time record highs of GTMs, 5% year-over-year and 11% subsequent year-over-year. From a safety perspective, I think about 27 subdivisions and around 2,600 miles of dark territory are now protected with CPKC's Broken Rail Detection System.

Mark: Look at locomotive productivity improved 13%.

Mark: Rain speed at 6% our fuel is 2% better.

Mark: And our average terminal dwell was down 11% as strong an indicator of how well our network is performing.

Mark: As I talk about the US I think about the dry the backdrop of all time record highs of G. T M, 5% year over year.

Mark: 1% sequentially.

Mark: From a safety perspective, I think about twenty-seven subdivisions and around 2600 miles of dark territory now protected with C. D. Casey's broken rail detection system.

Mark: Putting eight more additional subdivisions in 2024.

Mark: The acoustic bearings, we're looking at an additional five across the network because this will expand on our detection capabilities.

Mark: Looking at our capital projects for the year 2023 we in service three new sidings and constructed.

Mark: We'll construct five more in 2024. This is all part of the 275 million merger commitment that we have.

Mark: If I look at the Laredo Bridge, where 45% complete at this point, we remain on target to be done by end of year.

Mark A. Redd: We plan on putting eight more additional subdivisions in 2024. So I look at the acoustic bearings; we're looking at an additional five across the network, which will just expand our detection capabilities. If I look at our capital projects for the year 2023, we have in service three new sidings and constructed, and we'll construct five more in 2024. This is all part of the $275 million merger commitment that we have. If I look at the Laredo Bridge, we're 45% complete at this point.

Mark: We're also investing in capital in Mexico, and increased capacity fluidity across the north South corridor between Laredo and San Luis Potosi.

All of these projects will support growth.

Mark: Other improvement in the network performance.

Mark: Look at 'twenty 'twenty four will continue to build the momentum that we generated in this past year. In 2023, we continue to work strongly Johns team to to provide to provide service to generate industry, leading growth that this network can achieve and with that I'll turn it over to John Alright. Thank you Mark and good afternoon, everyone.

John Brooks: So having now wrapped up our third quarter as the combined C. P. Casey I'm as excited as ever I can tell you about the opportunities that sit in front of this company, it's a unique franchise.

Mark A. Redd: We remain on target to be done by the end of the year. We're also investing in capital in Mexico to increase capacity and fluidity across the north-south corridor between Laredo and San Luis Potos. All of these projects will support growth and further improvement in network performance.

Year and quarter ended on a strong note and we are well positioned to continue delivering differentiated growth in 2020 four.

John Brooks: Looking at our results on a combined basis, we had record freight revenue up 4% on 4% our T M growth versus pro forma C. P. Casey a year ago in line with exactly what we spoke about during our third quarter call.

Mark A. Redd: And as I look at 2024, we'll continue to build the momentum that we generated in this past year in 2020. We continue to work closely with John's team to provide service and generate industry-leading growth on this network, and with that, I'll turn it over to John. All right, thank you, Mark, and good afternoon, everyone.

John Brooks: Since part of RPM was flat year over year with fuel and other freight offsetting a continued strong pricing environment now.

John Brooks: Now taking a closer look at our fourth quarter revenue performance I'll speak to the FX adjusted results on a comparison versus C. D. Casey had the combination occurred in 2022.

John Kenneth Brooks: So, having now wrapped up our third quarter as the combined CPKC, I'm as excited as ever. I can tell you about the opportunities that sit in front of this company. It's a unique franchise.

John Brooks: Starting with bulk grain revenues were down 3% on a 7% decline in our Tms.

Gideon grain volumes were down 15% year over year, driven by a weaker harvest for.

John Kenneth Brooks: The year and quarter ended on a strong note, and we are well positioned to continue delivering differentiated growth in 2024. Now, looking at our results, on a combined basis, we had record freight revenue of 4% on 4% RTM growth versus pro forma CPKC a year ago, in line with exactly what we spoke about during our third quarter call. Since PRRTM was flat year-over-year, with fuel and other freight offsetting a continued strong pricing environment, now taking a closer look at our fourth quarter revenue performance, I'll speak to the FX adjusted results on a comparison versus CPKC had the combination occurred in 2022. Starting with bulk, grain revenues were down 3% on a 7% decline in RTM.

John Brooks: So the 2023 'twenty 'twenty four crop year, particularly in our C. P. Casey draw territory. Additionally.

Additionally, we saw the Canadian farmer be more price sensitive and hold on to more of their crop, which added to the weakness in this volume on the quarter.

John Brooks: While this was a headwind to closing out 2023, ultimately this grain will still move and it provides some modest upside into 2024 now that being said, we still expect to see weakness year over year in Canadian grain to persist until we get to the new crop.

John Brooks: U S screens.

John Brooks: Or up 3% as we benefited from a solid harvest steady market demand and growth from synergies as we continue to connect new origination and destination pairs across our new network. Additionally, we continue to see investment in growth in our 8500 foot model at the end of 'twenty 'twenty, 460% of our Fran.

John Kenneth Brooks: Canadian grain volumes were down 15% year-over-year, driven by a weaker harvest for the 2023-2024 crop year, particularly in our CPKC Draw Territory. Additionally, we saw Canadian farmers be more price sensitive and hold on to more of their crop, which added to the weakness in this volume for the quarter. While this was a headwind to closing out 2023, ultimately, this grain will still move, and it provides some modest upside into 2024. Now, that being said, we will still expect to see weakness year over year in Canadian grain prices to persist until we get to the new crop. U.S. Greens We're up 3% as we benefited from a solid harvest, steady market demand, and growth from synergies as we continue to connect new origination and destination pairs across our new network.

Charges in Canada will be 8500 foot capable.

John Brooks: All eight of the 8500 foot.

John Brooks: Elevators that Richardson international is developing across our network. We continue to roll out this model and worked with customers down in the U S and ultimately down into Mexico to rollout this high efficiency operating model.

Moving out of potash revenues were up 16% and 20% volume growth.

<unk> increase was driven by strong supply chain performance and higher volumes of export potash with Canpotex as we work together to find additional outlets for volume given the Portland terminal outage during the first two quarters two months of the quarter.

John Kenneth Brooks: Additionally, we continue to see investment and growth in our 8,500-foot model. By the end of 2024, 60% of our franchise in Canada will be 8,500-foot capable, including all eight of the 8,500-foot elevators that Richardson International is developing across our network. We continue to roll out this model and work with customers down in the U.S. and ultimately down into Mexico to roll out this high-efficiency operating model. Moving on to Potash, revenues were up 16% on 20% volume growth.

John Brooks: In early December the Portland terminal came back online and we're able to quickly returned to a full run rate by the end of the year.

John Brooks: We are positioned well for strong potash growth in 2024.

John Brooks: And it finished finished out the bulk business whole revenue was up 32% on a 33% volume growth driven by favorable compares following last year's outage at tax out of your mind.

John Brooks: Now moving on to the merchandise franchise E. C. P revenue grew 6% on 3% volume growth.

John Kenneth Brooks: The volume increase was driven by strong supply chain performance and higher volumes of export potash with Campitex as we worked together to find additional outlets for volume given the Portland terminal outage during the first two months of the quarter. In early December, the Portland Terminal came back online, and we were able to quickly return to a full run rate by the end of the year. We are positioned well for strong potash growth in 2024. And to finish out the bulk business, whole revenue was up 32% on 33% volume growth, driven by favorable comparisons following last year's outage at Tech's Elk View Mine. Moving on to the merchandise franchise, ECP revenue grew 6% on 3% volume growth.

John Brooks: Refined petroleum products in asphalt group, driven by new market share and growth also within plastics to the Midwest. We will continue to benefit from the new business wins that started up in Q3 and Q4 of last year.

James: Good afternoon. My name is James, and I will be your conference operator today. At this time, I'd like to welcome everyone to CPKC's fourth quarter and full year 2023 conference call. The slides accompanying today's call are available at investor.cpkcr.com. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, simply press the star and the number 1 on your telephone keypad.

John Brooks: Some of this growth was muted by a facility outage and a slower ramp up.

John Brooks: With solid demand fundamentals ongoing ramp up this business wins and continued synergy gains we are setting up for a strong 2024 and ECP.

In forest products revenues were up 2% on a 1% increase in volumes.

Operator: If you would like to withdraw your question, press star 2. I'd now like to introduce Chris DeBruin, Vice President, Capital Markets, to begin the conference. Thank you, James. Before we begin, I want to remind you this presentation contains forward-looking information, and actual results may differ materially.

John Brooks: Despite a softer demand in our base business in this area, we have seen nice synergy wins in this space.

John Brooks: Customers take advantage of our new single line haul network connecting new markets.

John Brooks: The metals minerals and consumer products portfolio was up 3% on flat volumes.

John Kenneth Brooks: Refined petroleum products and asphalt groups driven by new market share and growth, also within plastics, to the Midwest. We will continue to benefit from the new business winds that started up in Q3 and Q4 of last year, although some of this growth was muted by a facility outage and a slower ramp-up. With solid demand fundamentals, ongoing ramp of these business wins, and continued synergy gains, we are setting up for a strong 2024 in ECP. For unforced products, revenues are up 2% on a 1% increase in volume.

Chris DeBruin: The risks, uncertainties, and other factors that could influence actual results are described on slide 2 and in the earnings press release filed with Canadian and U.S. regulators. This presentation also contains non-GAAP measures, outlined on slide 3. Please note, in addition to our regular quarterly financials, there is supplemental Q4 and full-year combined revenue and operating performance data available at investor.cpkcr.com, which some of today's discussion will focus on. With me here today is Keith Creel, President and Chief Executive Officer, Nadeem Velani, our Executive Vice President and Chief Financial Officer, John Brooks, our Executive Vice President and Chief Marketing Officer, and Mark Redd, our In the interest of time, we'd appreciate it if you could limit your questions to one. It's now my pleasure to introduce our President and CEO, Mr. Keith Creel. Hey, thanks, Chris.

John Brooks: We continue to see strong growth in steel out of our production facilities across our network supporting industrial and infrastructure growth across North America.

John Brooks: This quarter. However, in this area with offset somewhat by weakness in Frac sand to the Bakken and the also the Permian basin as we saw in earlier seasonal downturn and some growth in in basin sand.

John Brooks: Automotive revenues continued to be strong up 22% and 19% volume growth another record quarter for our automotive franchise.

John Brooks: Our automotive franchise is benefiting from new business solid continued production from our Oems and steady equipment supply driven by improved operations and cycle times, particularly in Mexico.

John Kenneth Brooks: Despite softer demand in our base business in this area, we have seen nice synergy wins in this space, as customers take advantage of our new single line hall network connecting new markets. The Metals, Minerals, and Consumer Products portfolio was up 3% on flat volume.

John Brooks: We are pleased with the new agreements we have developed that enable closed loop service solutions, providing this industry service reliability. It has never had in the past, including the use of our new auto compound in the Dallas Metro area and linking customers traffic between the U S, Canada, and Mexico via our <unk>.

Keith Creel: And thanks, everyone, for joining us today. Give us a chance as a team to share our fourth quarter results as well as our view for this exciting year ahead in 24. We have to create value for our shareholders, for our customers, and for our CPKC family. So with that comment, let me start by thanking that CPKC family, a 20,000, three-nation strong family of railroaders, industry best. Their body of work enabled the results that we get to talk about today, and obviously, the work that's ahead of us as we create value for all of our stakeholders. And I can tell you as a leader, it's my honor to be able to be with the colleagues that are with me here today to represent their body of work.

John Kenneth Brooks: We continue to see strong growth in steel out of our production facilities across our network, supporting industrial and infrastructure growth across North America. This quarter, however, growth in this area was offset somewhat by weakness in frac sand to the Bakken and also the Permian Basin, as we saw in the earlier seasonal downturn and some growth in in-basin sand. Automotive revenues continue to be strong, up 22%, with 19% volume growth, another record quarter for the automotive franchise.

John Brooks: Line haul service.

John Brooks: For automotive 'twenty 'twenty four is positioned to be exciting year as we see a path to record volume on our franchise.

On the intermodal side revenue was down 11% on flat volumes.

John Brooks: <unk> incremental intermodal continues to be challenged by lower retail volumes ample truck capacity and.

John Kenneth Brooks: Our automotive franchise is benefiting from new business, solid continued production from our OEMs, and steady equipment supply driven by improved operations and cycle times, particularly in Mexico. We are pleased with the new agreements we have developed that enable closed-loop service solutions, providing this industry service reliability it has never had in the past, including the use of our new auto compound in the Dallas metro area and linking customers' traffic between the US, Canada, and Mexico via our single line haul service for Automotive 2024 is positioned to be an exciting year as we see a path to record volume on our franchise. On the intermodal side, revenue was down 11% on flat volume.

Keith Creel: So let's have a talk about the results. For the quarter, this team delivered revenues of $3.8 billion, which is up 4%, volume growth of 4%, an operating ratio that represents 220 basis points of improvement versus last year to 58.7, and core EPS of $1.18, also up 4% versus last year. And for the full year, revenues were $13.9 billion, up 5%, volume growth of 1%, a very unique industry story, an operating ratio of 62%, and core EPS was $3.84, up 2% versus last year. So, standalone, certainly unique and impressive results, even more so when you think about this as a railroad in the early stages of an integration, working against a challenging macro environment, all at the same time. So here we are 10 months into our forever story at CPKC, and I'm telling you, I'm extremely proud of the progress this team has made across the organization, be it operationally, sales and marketing, or finance.

John Brooks: Some general market softness.

John Brooks: R. M. M X 180, 181 that Keith spoke to cross border service continues to perform very well. This is truck like service with a safe reliable border crossing between Mexico and the U S.

John Brooks: We saw growth in this service in the fourth quarter, particularly across our north palm volumes.

John Brooks: While the base demand in domestic intermodal is something myself and my team are watching closely particularly across Canada. The opportunity for cross border intermodal will continue to see steady synergy growth from over the road conversion and new customer solutions as we move throughout the year.

John Brooks: As part of those new solutions I'll remind you we are very excited to break ground in February on the new Americold facility co located in our intermodal terminal in Kansas City.

John Kenneth Brooks: Domestic Intermodal continues to be challenged by lower retail volumes, ample truck capacity, and some general market software. Now, our MMX 180-181 that Keith spoke to, cross-border service continues to perform very well. This is a truck-like service with a safe, reliable border crossing between Mexico and the U.S. We saw growth in this service in the fourth quarter, particularly across our northbound valley. While the base demand for domestic intermodal is something myself and my team are watching closely, particularly across Canada, the opportunity for cross-border intermodal will continue to see steady synergy growth from over-the-road conversion and new customer solutions as we move throughout the year. As part of those new solutions, I'll remind you we are very excited to break ground in February on the new AmeriCold facility co-located at our intermodal terminal in Kansas City. This partnership with AmeriCold is another step in creating new rail options for shippers in a market that is dominated by trucks. Moving over to International Intermodal. After a challenging third quarter, this business has picked back up. We ended the quarter with volumes up two percent.

John Brooks: This partnership with Americold is another step in creating new rail options for shippers in a market that is dominated by trucks.

John Brooks: Moving over to international intermodal.

Keith Creel: IS, all areas of the business, this is a team that's committed to creating value. As we said we would, we're doing exactly what we said we would do. And I can tell you, a tremendous amount of work went into preparing for this merger, for this combination, and even more so has gone into executing it. As leaders, I believe this, we're not here to sustain performance.

John Brooks: After a challenging third quarter. This business has picked back up we ended the quarter with volumes up 2%.

John Brooks: Although we remain cautious on our outlook for 2024 in this space. We are certainly encouraged by the recent trends. We're also encouraged about the progress we are making at the port of lateral Cardenas and 2023 the terminal thought <unk> growth of 30% while C. P casing volumes grew by <unk>.

Keith Creel: We're here to make it better. We're here to make an impact, to improve upon it. And that's exactly what this team has been doing for the last 10 months.

Keith Creel: We've launched new services, market solutions across the industry that this transaction has uniquely enabled, be it our 180-181 service, or our Mexico Midwest Express, which is the gold standard in the industry, in spite of what anybody else might say, trying to imitate it. It's best in class, delivering fast, reliable, single-line service across a very fluid and always open border. A closed loop service solution for the automotive industry that provides a differentiated level of service and reliability that the OEMs are embracing and recognize the value that that creates in their reliable supply chains.

John Brooks: 35% versus 2022.

John Brooks: Our customers are enthusiastic as we continued to develop this service and educate them on the supply chain alternatives.

John Brooks: When you combine this with our 50% ownership in the Panama Canal Railroad. We are excited about the unique solution C. P. Casey can offer ocean carriers and their beneficial cargo owners.

John Brooks: So in closing despite some early weather challenges in January we are entering the year with strong momentum.

John Kenneth Brooks: Although we remain cautious on our outlook for 2024 in this space, we are certainly encouraged by the recent trends. We're also encouraged about the progress we are making at the Port of Lazzaro-Cardinese. In 2023, the terminal saw PU growth of 30%, while CPKC volumes grew by 35% versus 2022.

Well, we have a known headwind from Canadian grain in the macro backdrop remains uncertain. We have a strong line of sight to remain uniquely positioned to deliver long term growth.

Keith Creel: Connecting origins, destinations, and ACP, MNC, and Forest Products again with a unique single line service across all three nations. We've made gains in operating efficiency, service, reduced assets, increased velocity, reduced dwell, and eliminated handles. We've also made strong progress, I'm very pleased to say, on the labor side.

Our synergies in 2024 combined with base self help initiatives and a disciplined pricing approach will continue to be an exciting story and differentiator for us in this industry.

John Kenneth Brooks: Our customers are enthusiastic as we continue to develop this service and educate them on this supply chain alternative. When you combine this with our 50% ownership in the Panama Canal Railroad, we are excited about the unique solution CPKC can offer ocean carriers and their beneficial cargo owners. So in closing, despite some early weather challenges in January, we are entering the year with strong momentum. While we have a known headwind from Canadian grain and the macro backdrop remains uncertain, we have a strong line of sight to remain uniquely positioned to deliver long-term growth. So with that, I'll stop, and I'll pass it over to Nadeem.

Keith Creel: On the U.S. side, we've expanded our very unique hourly agreements, which I believe gives us a unique competitive advantage, not only to serve our customers but also to attract and retain the best railroading talent in the industry. And in Mexico, establishing trust and respect with our one union that's there, working towards agreements that it not only improves service but benefits the employees, so it's truly a win-win for Mexico, for our employees, as well as for our customers that utilize our service. Also, through the year, while we're doing all that, we've continued progress on our hydrogen locomotive program. We've now got two low-horsepower hydrogen locomotives that are servicing customers every day in Calgary, come rain, come shine, come snow. We're loudly producing zero emissions for our Calgary customers in that market, as well as we fabricated our first high horsepower locomotive, which we completed late last year. It's already completed its first test movement.

John Brooks: With that I'll stop and I'll pass it over to Nadine great. Thanks, John and good afternoon. So first I'd like to thank the C. P. Casey family railroads for working tirelessly throughout the year to bring our two companies together 2023 with truly historic and I am extremely proud of the hard work and dedication that the team has displayed.

Nadine: Looking at the quarter see Pkc's reported operating ratio was 61, 8% and the core adjusted operating ratio led the industry for the second quarter in a row coming in at 58, 7%, which was a 220 basis point improvement versus Q4 2022 earnings.

Nadine: Earnings per share was a dollar and Tencent and core adjusted combined earnings per share was $1 18 up 4%, which was also industry best on a quarter on.

Nadeem S. Velani: Great, thanks, John, and good afternoon. First, I'd like to thank the C.P. Casey family of railroaders for working tirelessly throughout the year to bring our two companies together.

Nadine: On a full year basis see Pkc's reported operating ratio was 65% and the core adjusted combined operating ratio came in at 62%.

Keith Creel: We'll be putting that into service later this year in a coal loop with a tender car, but cycling coal between the Coal Mines of British Columbia and the Tidewater of British Columbia in partnership with our largest customer, Tech Coal, creating a green corridor. And above all that, while we're doing that, most importantly, we've improved and continue to make vast improvements in our safety performance as a combined company, building upon CP's long history of industry-leading safety performance. So all that to say, we've entered 2024 in a position of strength, with industry-leading results, and we're going to continue to build upon that. You know, Mother Nature has humbled us a bit. In the first month, that said, it's a challenge. It's not an excuse,

Nadeem S. Velani: 2023 was truly historic, and I'm extremely proud of the hard work and dedication that the team displayed. Looking at the quarter, CPKC's reported operating ratio was 61.8%, and the core adjusted operating ratio led the industry for the second quarter in a row, coming in at 58.7%, which was a 220 basis point improvement versus Q4 2021. Earnings per share was $1.10, and core adjusted combined earnings per share was $1.18, up 4%, which was also industry best for the quarter.

Nadine: Earnings per share was $4.21 and core adjusted combined earnings per share.

Nadine: $3 84 up 2% year over year.

Nadine: Now taking a closer look at our income statement reported operating expenses for Q4 and full year are provided on slide 14.

Nadine: Combined operating expenses for Q4 are on slide 15.

Nadine: Similar to what we shared last quarter, our combined operating expenses illustrate the estimated effects of the acquisition for the fourth quarter and since the acquisition closed on January 1st 2022.

Nadine: And I will only speak to FX adjusted fourth quarter operating results in these prepared remarks.

Keith Creel: We're well-positioned to recover. We've regained the momentum that we started the year with, and we're in a great position to continue that through this quarter and into the balance of the year. So, let me close by saying 23 was a very special year.

Nadine: We have included full year results in the appendix for records.

Nadeem S. Velani: On a full-year basis, CPKC's reported operating ratio was 65%, and the core adjusted combined operating ratio came in at 62%. Earnings per share was $4.21, and core adjusted combined earnings per share was $3.84, up 2% year-over-year. Now taking a closer look at our income statement, reported operating expenses for Q4 and full year are provided on slide 14. Combined operating expenses for Q4 are on slide 15. Similar to what we shared last quarter, our combined operating expenses illustrate the estimated effects of the acquisition for the fourth quarter as if the acquisition closed on January 1st, 2022, and I will only speak to FX Adjusted 4th Quarter Operating Results in these prepared remarks. We've included full year results in the appendix for reference. Starting with Comp and Benefits, its expense was $637 million, up 2% when compared to combined Comp and Benefits expense a year ago. This includes $7 million of integration-related expenses. The increase was driven primarily by wage inflation, increased incentive costs, and higher volume.

Starting with comp and benefits.

Speaker Change: It's expensive.

Speaker Change: $637 million up 2% when compared to combined comp and benefits expense a year ago.

Keith Creel: Two great companies together, CP and KCS, to create a very unique, industry-leading, most relevant rail network in CPKC. We've connected a continent in a way that's never been done before, and I would suggest it won't be done again. Three continents.

Speaker Change: This includes $7 million of integration related expenses incurred.

Speaker Change: The increase was driven primarily by wage inflation increased incentive comp and higher volumes.

Speaker Change: Average head count was down slightly sequentially in Q4 looking at 2024, we expect headcount growth to be below volume growth on a year over year basis.

Keith Creel: Since the combination took effect in April, we've seen steadily building momentum, and I can tell you we're just getting started. 2024 is shaping up to be an even more exciting year than 2023. So that said, let me hand it over to Mark.

Speaker Change: Partially offsetting the increase was lower current service costs and the DB pension plan, resulting from higher discount rates and lower stock based comp.

Speaker Change: Looking at 'twenty 'twenty four we expect to have a $16 million headwind, resulting from lower discount rates, which has more than offset below the line.

Keith Creel: I want him to expand, speak to some operational points. John's going to bring some color to the markets, and Nadeem will bring us home on the numbers, and then we'll open it up for questions. So, over to you, Mark.

Speaker Change: Fuel expense was down 8% year over year decline was primarily driven by a 10% decline in combined fuel price along with a 2% improvement in fuel efficiency that Mark mentioned.

Mark: Right. So, first of all, thank you, Keith. Good afternoon.

Mark: I'd like to first of all thank the operating team for their continued hard work in delivering safe, reliable service across this great network. If I think about bringing two networks together, certainly this isn't easy, and there's still a long list of opportunities out there, but I'm pleased with the progress we're collectively making. Also, I'd like to thank this team's effort to combine CPKC's network as we enter 2024 in a place of strength, as we keep note. So while we've been dealing with some weather for the first part of I'm extremely proud to say again that, in 2023, we have the lowest effort for train accident frequency on Class 1 railroads, building on CP's 17 consecutive years in the industry. This is an impressive milestone.

Partially offset by a 5% increase year over year.

Materials expense was down 9%.

Speaker Change: The decline was largely driven by reduced broken motive maintenance materials then.

Speaker Change: For them it rents were 676 million down 1% improvements in efficiency and an increase in receivables drove the improvement.

Speaker Change: Partially offset by an increase from inflation and lower use of C. P. Casey intermodal equipment by other road.

Speaker Change: Depreciation and amortization expense was up 6%, resulting from a higher asset base.

Speaker Change: Purchased services and other was relatively flat year over year, a reduction of the casualty expense and gains in efficiency were offset by volume related increases and inflation.

Nadeem S. Velani: Average headcount was down slightly to question. Looking at 2024, we expect headcount growth to be below volume growth on a year-over-year basis. Partially offsetting the increase with lower current service costs in the DB pension plan, resulting from higher discount rates and a lower stock base. Looking at 2024, we expect to have a $16 million headwind resulting from lower discount rates, more than offset below the line. Fuel expense was down 8% year-over-year. The decline was primarily driven by a 10% decline in combined fuel prices, along with a 2% improvement in fuel efficiency that was partially offset by a 5% increase. Amateur. Materials Expense was down 9%. The decline was largely driven by reduced locomotive maintenance materials.

Speaker Change: Moving below the line I'll make a couple of comments on inflation.

Speaker Change: Last year, we were not able to reprice, our entire book to offset the impact of inflation on our cost structure.

Speaker Change: Created a headwind to or throw in 2023.

Speaker Change: As we move into 2024, the impact of inflation on our expenses as moderate. Additionally, the pricing environment remains strong and we will re price a portion of our contracts that did not renew during the period of higher cost inflation in 2022 and 2023.

Mark: Highlights the team's dedication to excellence while ensuring safety remains a top priority. It also showcased the strong commitment to safety that both KCS and CP brought together in this merger, as I look at the operating performance. Year over year for the quarter, the FRA Personal Injury landed at 1.10, which is a 15% improvement.

Speaker Change: These together, we should see some catch up in a tailwind to or in 2020 four from inflation dynamics.

Speaker Change: Moving below the line other expenses without 12 million in the fourth quarter.

Mark: FRA Train Accident Frequency was 1.08, which is a 23% improvement. If I look at locomotive productivity, it improved 13%, our train speed is 6%, and our fuel is 2% better. And our average terminal dwell was down 11%, a strong indicator of how well our network is performing. As I talk about this, I think about the backdrop of all-time record highs of GTMs, 5% year-over-year, and 11% sequentially. From a safety perspective, I think about 27 subdivisions in around 2,600 miles of dark territory are now protected with CPKC's Broken Rail Detection System.

Speaker Change: Other components of net periodic benefit benefit recovery decreased $34 million, reflecting higher discount rates compared to 2022.

Speaker Change: We expect this line to increase by approximately $23 million in 2024 from $327 million in 2020 three offsetting the headwind in comp and benefits from the current service cost.

Nadeem S. Velani: Employment rents were $676 million, down 1%. Recruitment and Efficiency and an increase in receivables drove the improvement, partially offset by an increase from inflation and lower use of CPKC intermodal equipment by other railways, appreciation and amortization expenses up 6% resulting from a higher, Purchase services, and other was relatively flat year over year, a reduction in casualty expense, and gains in efficiency. Offset by Volume Related. Before moving below the line, I'll make a couple comments on a plate. Last year, we were not able to reprice our entire book to offset the impact of inflation on our costs, which has created a headwind for O.R. throughout 2020. Moving into 2024, the impact of inflation on our expenses is moderate. Additionally, the pricing environment remains strong, and we will reprice a portion of our non-renewed during the period of higher cost inflation in 2020. Putting these together, we should see some catch-up in the tailwind to OR in 2024 from an inflation dynamic, moving below the line. Other expense was up $12 million in the portfolio. Other components of net periodic benefit recovery decreased $34 million, reflecting higher discount rates compared to 2012.

Speaker Change: Net increase in net interest expense of $206 million or 200 million on an adjusted basis. The decline was driven by reduced debt balance.

Speaker Change: On the quarter income tax expense of $275 million and 315 14 million on a core adjusted combined basis.

Mark: We plan on putting eight more additional subdivisions in 2024. So I look at the acoustic bearings; we're looking at an additional five across the network, which will just expand our detection capabilities. If I look at our capital projects for the year 2023, we have in service three new sidings and will construct five more in 2024. This is all part of the $275 million merger commitment that we have. If I look at the Laredo Bridge, we're 45% complete at this point.

Speaker Change: Looking ahead to 2024.

Speaker Change: C. P cases core adjustments combined effective tax rate to be approximately 25%.

Speaker Change: Turning to slide 17, we continue to generate strong free cash flow as cash provided by operating activities of $1 3 billion in Q4.

Speaker Change: First call on capital continues to be the business and growth in there.

Speaker Change: In the quarter, we reinvested just over 700 million to end the year in line with our outlook to invest $2 7 billion in capital on a combined basis.

Speaker Change: Looking at 'twenty 'twenty four we will remain disciplined in our approach to capital allocation and we expect capital spending to be $2 75 billion for the year.

Mark: We remain on target to be done by the end of the year. We're also investing in capital in Mexico to increase capacity and fluidity across the north-south corridor between Laredo and San Luis Potos. All of these projects will support growth and further improvement in network performance.

This reinvestment in the business builds off of a record capital investment as a combined company in 2023, and our network is well positioned from a capacity perspective to absorb the growth that we have in front of us this year.

Mark: And as I look at 2024, we'll continue to build the momentum that we generated in this past year in 2020. We continue to work closely with John's team to provide service and generate industry-leading growth on this network. And with that, I'll turn it over to John. All right, thank you, Mark. And good afternoon, everyone.

Speaker Change: We generated $785 million and adjusted combined free cash flow on the quarter and just under $2 2 billion in 2023.

Speaker Change: [noise] adjusted combined leverage was three four times to end the year on our path back to our targeted leverage of two five times, we expect to reach this target late 2024 or early 2025 at which point, we will evaluate shareholder return turns with our board.

Nadeem S. Velani: We expect this line to increase by approximately 23 million in 2024 and $327 million in 2023, offsetting the headwind in competition, a net increase in net interest expenses of $206 million, and 200 million on an adjusted basis. Climb was driven by a reduced debt balance, on the quarter income tax expense of $275 million and $314 million on a core adjusted combined basis.

John: So, having now wrapped up our third quarter as the combined CPKC, I'm as excited as ever. I can tell you about the opportunities that sit in front of this company. It's a unique franchise.

Speaker Change: Looking ahead, despite known headwind Ingrain, John mentioned and is still somewhat uncertain macro we expect to deliver double digit core adjusted combined earnings growth from the core business in 2024.

John: The year and quarter ended on a strong note, and we are well positioned to continue delivering differentiated growth in 2024. Now, looking at our results, on a combined basis, we had record freight revenue of 4% on 4% RTM growth versus pro forma CPKC a year ago, in line with exactly what we spoke about during our third quarter call. Since PRRTM was flat year-over-year, with fuel and other freight offsetting a continued strong pricing environment, now taking a closer look at our fourth quarter revenue performance, I'll speak to the FX adjusted results on a comparison versus CPKC had the combination occurred in 2022. Starting with bulk, grain revenues were down 3% on a 7% decline in RTM.

Speaker Change: We also anticipate generating strong free cash flow, while making record investments in the network to sustain future growth and getting back to our targeted leverage.

Nadeem S. Velani: Looking ahead to 2024, I expect CPKC's core adjusted combined affected tax rate to be approximately $25,000. Turning to slide 17, we continue to generate strong cash flow with cash provided by operating activities of $1.3 billion. The first call on capital continues to be business and growth, and in the quarter, we reinvested just over 700 million to end the year in line with our outlook to invest 2.7 billion in capital on the combined. Looking at 2024, we will remain disciplined in our approach to capital. We expect capital spend to be $2.75 billion for the. This reinvestment in the business builds off of record capital investment as a combined company. [inaudible] Generated $785 million in adjusted combined pre-cash flow for the quarter at just under $2.2 billion.

Speaker Change: Putting all this together C. PKC offers a truly differentiated investment profile and I'm excited to continue delivering on the commitments that we've made to our shareholders.

Speaker Change: Looking back we ended 2023 with strong momentum best in industry earnings results, that's yet to come.

Speaker Change: Workers performing well synergies are ramping and we are well positioned for strong 2024.

Speaker Change: Is an exciting time to be railroading at C. P. Casey so with that let me turn it back.

Speaker Change: Thanks, gentlemen, operator, let's open up the line for questions.

Speaker Change: Thank you.

Speaker Change: I'd like to ask a question simply press Star then the number one on your telephone keypad, if you'd like to withdraw your question Press Star two as previously highlighted please limit yourself to one question.

John: Canadian grain volumes were down 15% year over year, driven by a weaker harvest for the 2023-2024 crop year, particularly in our CPKC Draw Territory. Additionally, we saw Canadian farmers be more price sensitive and hold on to more of their crop, which added to the weakness in this volume for the quarter. While this was a headwind to closing out 2023, ultimately, this grain will still move, and it provides some modest upside into 2024. Now that being said, we will still expect to see weakness year over year in Canadian grain prices to persist until we get to the new crop. U.S. Greens was up 3% as we benefited from a solid harvest, steady market demand, and growth from synergies as we continue to connect new origination and destination pairs across our new network.

Speaker Change: Yeah.

Speaker Change: And we'll take our first question from Walter <unk> with RBC capital markets.

Walter: Thanks, very much operator, good afternoon, everyone. So.

Nadeem S. Velani: 2020. Our adjusted combined leverage was 3.4 times to end the year, on our path back to our target leverage of 2.5. [inaudible] Looking ahead, despite a known headwind and grain, John Manchin, Corp. We also anticipate generating strong free cash flow while making record investments in the network to sustain future growth. Back to our Target Level. Putting all of this together, CPKC offers a truly differentiated investment, and I'm excited to continue delivering on the commitments that we have made to our shareholders. Looking back, we ended 2023 with strong momentum and best-in-industry earnings results with the best yet. Network is performing well, synergies are ramping, and we are well-positioned for a strong 2020. It's an exciting time to be railroading. So with that, let me turn it back.

Walter: On the double digit earnings growth I noted, even when you when you that's consistent with what you provided at Investor Day.

Walter: They're in July and I'm, just I know during the later in the session.

Speaker Change: That day, you kind of gave.

Speaker Change: You gave us an indication into a doubling of your earnings growth by the end of that multi year period, suggesting kind of a mid teen.

Speaker Change: EPS growth in the early year, and then perhaps ramping once you are able to kick in.

Speaker Change: The buyback is that still the case that in the early year here in the year one the.

Speaker Change: The mid teen cadence is still holding and then ramping after that or or have if conditions change that.

John: Additionally, we continue to see investment and growth in our 8,500-foot model. By the end of 2024, 60% of our franchise in Canada will be 8,500-foot capable, including all eight of the 8,500-foot elevators that Richardson International is developing across our network. We continue to roll out this model and work with customers down in the U.S. and ultimately down into Mexico to roll out this high-efficiency operating model. Moving on to Potash, revenues were up 16% on 20% volume growth.

Speaker Change: Cause you to change that that overall view.

Speaker Change: Well you know since we gave our guidance in June.

Chris de Bruyn: Okay, thanks, gentlemen. Operator, let's open up the line for questions. Thank you. If you'd like to ask a question, simply press star, then the number 1 on your telephone keypad.

Speaker Change: Walter Nothing has change other than I'd point out that we had a grain crop that came in maybe a bit weaker.

Speaker Change:

Starting in the grain crop starting in August so that's going to hurt us near term.

Operator: If you'd like to withdraw your question, press star 2. As previously highlighted, please limit yourself to one question. And we'll take our first question from Walter Spracklin with RBC Capital Markets. Thanks very much, operator. Good afternoon, everyone.

Speaker Change: Probably in Q2 of this year other.

Speaker Change: Other than that the the model remains the same we're going to support the business with with face organic growth.

Speaker Change: We're going to have the benefits of synergies which were.

John: The volume increase was driven by strong supply chain performance and higher volumes of export potash with Campitex as we worked together to find additional outlets for volume given the Portland terminal outage during the first two months of the quarter. In early December, the Portland terminal came back online, and we were able to quickly return to a full run rate by the end of the year. We are positioned well for strong potash growth in 2024. And to finish out the bulk business, whole revenue was up 32% on 33% volume growth, driven by favorable comparisons following last year's outage at Tech's Elk View Mine. And moving on to the merchandise franchise, ECP revenue grew 6% on 3% volume growth. Refined petroleum products and asphalt groups were driven by new market share and growth, also within plastics, to the Midwest.

Speaker Change: Ahead of schedule on.

Speaker Change: And then we're going to see continued margin.

And then the benefit in the outer years of our share buybacks and shareholder return. So nothing has changed on that thesis.

Walter Spracklin: So on the double-digit earnings growth, I know, Nadeem, when you said that it was consistent with what you provided at Investor Day there in July, and I'm just, during later in the session at that day, you kind of gave us an indication of a doubling of your earnings growth by the end of that multi-year period, suggesting kind of a mid-team EPS growth in the early year and then perhaps ramping once you're able Is that still the case that in the early year, here in year one, the mid-teen cadence is still holding and then ramping after that, or have conditions changed that would cause you to change that overall view?

Speaker Change: The double digit for this year, we're obviously not going to get a benefit from.

Speaker Change: Buybacks in any fashion.

Buy back stock until we get our target leverage back.

Speaker Change: So that's going to hurt.

Speaker Change: Curtis compared to the outer years of that five year outlook.

Speaker Change: But that's the only only changes, let's say that the.

Speaker Change: Macro environment is probably a little bit weaker still in terms of the intermodal side that John mentioned.

Speaker Change: But other than that we're right on track right on our on our plan to that that guidance. We gave you.

Speaker Change: Okay I'll keep it to one thanks very much.

Walter Spracklin: Well, you know, since we gave our guidance in June, Walter, nothing has changed other than I'd point out that, you know, we had a grain crop that came in maybe a bit weaker, starting in August. So that's gonna hurt us near-term a little bit, probably Q2 of this year. Other than that, the model remains the same.

Speaker Change: Thanks Walter.

Speaker Change: Our next question will come from Tom Water-witch with UBS.

Tom Wadewitz: Great. Thanks, Good afternoon wanted to see if you could give a little bit of a perspective on what's underneath the earnings guidance. Just in terms of how are you thinking about our Tam grows. So you think of like mid single digits, what kind of what ballpark should we be in and then how do you think about.

John: We will continue to benefit from the new business winds that started up in Q3 and Q4 of last year, as some of this growth was muted by a facility outage and a slower ramp-up. With solid demand fundamentals, ongoing ramp of these business wins, and continued synergy gains, we are setting up for a strong 2024 in ECP. For Forest Products, revenues are up 2% on a 1% increase in volume.

Nadeem S. Velani: You know, we're gonna support the business with based organic growth. We're going to have the benefits of synergies, which we are. Head of Schedule On, and then we're going to see Margin Improvement. The benefit in the outer years of share buybacks and shareholder returns. Nothing has changed on that thesis, you know; we've guided to double-digit growth for this year. We're obviously not going to get a benefit from it. Bye-bye, fashion.

Tom Wadewitz: The magnitude of improvement in operating ratio that would.

Speaker Change: You know would fit into a base case. Thank you.

Speaker Change: No Tom that's a great question I'll tell you. This this is what we're expecting most frequent visit our Tam growth.

John: Despite softer demand in our base business in this area, we have seen nice synergy wins in this space, as customers take advantage of our new single line hall network connecting new markets. The Metals, Minerals, and Consumer Products portfolio was up 3% on flat volume.

Speaker Change: Double digit EPS and margin improvement and tell me what the back half of the year looks like tell me what the macro is going to do we've taken I believe.

Nadeem S. Velani: We're not going to buy back stock until we get our target leverage back. The macro environment is probably a little bit weaker still in terms of the mobile side that John mentioned, but other than that, we're right on track, right on our plan for that guidance. I'll keep it to one. Thanks very much.

Speaker Change: And appropriate conservative approach in the back half surprises and some of those weaknesses that they didn't spoke off the domestic.

John: We continue to see strong growth in steel out of our production facilities across our network, supporting industrial and infrastructure growth across North America. This quarter, however, growth in this area was offset somewhat by weakness in frac sand to the Bakken and also the Permian Basin, as we saw in the earlier seasonal downturn and some growth in in-basin sand. Automotive revenues continue to be strong, up 22%, with 19% volume growth, another record quarter for the automotive franchise.

Speaker Change: Be it a normalized grain crop or maybe a little bit better then there's some upside there, but we've taken a modest.

Tom Wadewitz: Our next question will come from Tom Wadewitz with UBS. Great, thanks. Good afternoon. I wanted to see if you could give a little bit of perspective on what's underneath the earnings guidance, just in terms of how you are thinking about RTM growth. Are you thinking like mid-single digits?

Speaker Change: Approach responsible reasonable conservative approach and we expect to hit these results and again, if we get a couple of things that might turn our way then we certainly have an opportunity to exceed them.

Speaker Change: Okay, great. Thank you.

Speaker Change: Uh huh.

Our next question will come from Faddish Amun with BMO.

Faddish Amun: Yeah. Good evening. Thank you.

Faddish Amun:

John: Our automotive franchise is benefitting from new business, solid continued production from our OEMs, and steady equipment supply driven by improved operations and cycle times, particularly in Mexico. We are pleased with the new agreements we have developed that enable closed-loop service solutions, providing this industry service reliability it has never had in the past, including the use of our new auto compound in the Dallas metro area and linking customers' traffic between the U.S., Canada, and Mexico via our single line haul service for Automotive 2024 is positioned to be an exciting year as we see a path to record volume on our franchise. On the intermodal side, revenue was down 11% on flat volume.

Faddish Amun: You know at the June Analyst Day, you indicated you had 240 million ounces come out.

Keith E. Creel: What, you know, kind of ballparks should we be in? And then how do you think about the magnitude of improvement in operating ratio that would fit into a base case? Thank you. You know, Tom, that's a great question.

Faddish Amun: Actual annualized revenue synergies than you suggested yet our pipeline line of sight to 950 I'm just wondering like as we stand today, what does it look like and how do you feel about the pipeline for 2020 for some of these revenue synergies.

Keith E. Creel: I'll tell you this, this is what we're expecting. Low-sequential digit RTM growth. Double-Digit EPS and Margin Improvement. Now, tell me what the back half of the year looks like. Tell me what the macro is going to do.

John Brooks: Hey, Paddy it's John.

John Brooks: As I said I feel really really good I think we've made great progress in.

Keith E. Creel: We've taken, I believe... an appropriate conservative approach and at the back half surprises and some of those weaknesses that Nadeem spoke of, be it domestic or a normalized grain crop or maybe a little bit better, then there's some upside there. But we've taken a modest approach, a responsible, reasonable, conservative approach, and we expect to achieve these results, and again, if we get a couple of things that might turn our way, then we certainly have an opportunity. Okay, great. Thank you. The next question will come from Fadi Chamoun with BMO. Yeah, good evening.

John Brooks: In the first 10 months.

John Brooks: I can tell you we've got some contracts and some wins in in 2023 that we haven't realized yet they're just starting to ramp up and I think we're going to see a progression with those I still think we got a long tail on on the 180 181 product as we move through.

John: Domestic Intermodal continues to be challenged by lower retail volumes, ample truck capacity, and some general market software. Now, our MMX 180-181 that Keith spoke to, cross-border service continues to perform very well. This is a truck-like service with a safe, reliable border crossing between Mexico and the U.S. We saw growth in this service in the fourth quarter, particularly across our northbound valley. While the base demand for domestic intermodal is something myself and my team are watching closely, particularly across Canada, the opportunity for cross-border intermodal will continue to see steady synergy growth from over-the-road conversion and new customer solutions as we move throughout the year. As part of those new solutions, I'll remind you we are very excited to break ground in February on the new AmeriCold facility co-located at our intermodal terminal in Kansas City. This partnership with AmeriCold is another step in creating new rail options for shippers in a market that is dominated by trucks. Moving over to International Intermodal. After a challenging third quarter, this business has picked back up. We ended the quarter with volumes up two percent.

Through 2024, and hopefully we see you know some of the domestic intermodal trends macro trends, maybe move in our favor a little bit in and honestly that included the lazaretto also you know it's been a quite of educating process with the steamship lines and the beneficial car.

Fadi Chamoun: Thank you. Unknown Speaker, You know, at June analyst day, you indicated you had 240 million scans out, actual annualized revenue synergies, and you suggested you had a pipeline line of sight to 950. I'm just wondering, as we stand today, what it looks like, and how do you feel about the pipeline for 2024 in terms of these revenue synergies? Hey, Fadi, it's John.

Go owners around what that port potentially could do <unk> be honest I would hope that would be a quicker start up but we are starting to gain some some traction there. So you know I think we.

John Kenneth Brooks: So, as I said, I feel really good. I think we made great progress in the first 10 months. I can tell you, we've got some contracts and some wins in 2023 that we haven't realized yet. They're just starting to ramp up.

John Brooks: We guided to a three we mentioned $350 million, we saw as a we were very comfortable we're on that pace I would tell you right now that we've we've slightly exceeded the that we're ahead of that and well on the way to those numbers, we talked about it at Investor day.

John Kenneth Brooks: And I think we're going to see a progression with those. I still think we have a long tail on the 181 81 product as we move through 2024, and hopefully, we see some of the domestic intermodal trends or macro trends maybe move in our favor a little bit, and honestly, that includes the Lazaro also. It's been quite an education process with the steamship lines and the beneficial cargo owners around what that port potentially could do. To be honest, I'd hope that it'd be a quicker startup, but we are starting to gain some traction there. We mentioned $350 million. We were very comfortable that we were on that pace.

Thank you.

Speaker Change: Thanks Betty.

Speaker Change: Our next question will come from Chris Wetherbee with Citi.

Chris Wetherbee: Yeah, Hey, Thanks, Good afternoon, maybe a question on pricing. So you guys noted that there's a little bit of catch up going on in 'twenty four in terms of some of the contracts that you didn't get a shot at over the last couple of years and you have moderating inflation, that's a little bit different than what we've heard from some of the players in the space, particularly some of the U S name. So maybe if you could just put a little bit of color around sort of the pricing environment.

John: Although we remain cautious on our outlook for 2024 in this space, we are certainly encouraged by the recent trends. We're also encouraged about the progress we are making at the Port of Lazzaro-Cardinese. In 2023, the terminal saw PU growth of 30%, while CPKC volumes grew by 35% versus 2022.

John Kenneth Brooks: I would tell you right now that we've slightly exceeded that. We're ahead of that and well on the way to those numbers we talked about at Investor Day. Thanks for having me.

Chris Wetherbee: That you're seeing and is this sort of upside opportunity in the U S versus Canada, if theres any sort of difference there kind of what the contract renewals are coming in and around that.

Speaker Change: Yeah, Chris John a couple a couple of thoughts on that one is I'll tell you Q3, and Q4 were quite strong.

Chris Weatherby: Our next question will come from Chris Weatherby with Citi. Hey, thanks. Good afternoon.

John: Our customers are enthusiastic as we continue to develop this service and educate them on this supply chain alternative. When you combine this with our 50% ownership in the Panama Canal Railroad, we are excited about the unique solution CPKC can offer ocean carriers and their beneficial cargo owners. So in closing, despite some early weather challenges in January, we are entering the year with strong momentum. While we have a known headwind from Canadian grain and the macro backdrop remains uncertain, we have a strong line of sight to remain uniquely positioned to deliver long-term growth. So with that, I'll stop, and I'll pass it over to Nadeem.

Chris Weatherby: Maybe a question on pricing. So you guys noted that there's a little bit of catch-up going on in 24 in terms of some of the contracts that you didn't get a shot at over the last couple of years, and you have moderating inflation. That's a little bit different than what we've heard from some of the players in the space, particularly some of the US names.

Speaker Change: Some of the best rail pricing that that I've seen.

John Brooks: And again I think part of that was us through the year kind of catching up to some of those inflationary numbers. So we're gonna get a tailwind on that there's there's been a fair amount of repricing and as we've dug into the bulk of the new company.

John Kenneth Brooks: So maybe if you could just put a little bit of color around sort of the pricing environment that you're seeing, and is there this sort of upside opportunity in the US versus Canada, if there's any sort of difference there, kind of what the contract renewals are coming in at? Yeah, Chris, John, I have a couple of thoughts on that. One is, I'll tell you Q3 and Q4 were quite strong.

John Brooks: And in some of those contracts have rolled over there.

John Brooks: There's been opportunities, where we felt that we needed to re price some of that book.

John Brooks: I'll remind you we took control and in April of last year. So a lot of the contracts are you know leading up to that time Tcs Standalone had Ed had had renewed on their own. So I can tell you. My team is kind of getting a first look at a number of those contracts.

John Kenneth Brooks: Some of the best rail pricing that I've seen. And again, I think part of that was us through the year kind of catching up to some of those inflationary numbers. So we're going to get a tailwind on that. There's been a fair amount of repricing as we've dug into the book of the new company. And some of those contracts have rolled over. There have been opportunities where we felt that we needed to reprice some of that book. You know, I'll remind you, we took control in April of last year. So a lot of the contracts, you know, leading up to that time, KCF standalone had renewed on their own.

Nadeem S. Velani: Great, thanks, John, and good afternoon. First, I'd like to thank the C.P. Casey family of railroaders for working tirelessly throughout the year to bring our two companies together.

John Brooks: Rolled over to start start this year and the results I think most importantly are the results in those areas continue I would say on the trajectory of what we saw in Q4.

Nadeem S. Velani: 2023 was truly historic, and I'm extremely proud of the hard work and dedication that the team displayed. Looking at the quarter, CPKC's reported operating ratio was 61.8%, and the core adjusted operating ratio led the industry for the second quarter in a row, coming in at 58.7%, which was a 220 basis point improvement versus Q4 2020. Earnings per share was $1.10, and core adjusted combined earnings per share was $1.18, up 4%, which was also industry best for the quarter.

John Brooks: So again my expectation would be the first half of this year.

John Brooks: <unk> remained strong on that front end and we'll see what the back half comes when we get there.

Speaker Change: Great. Thanks very much.

Speaker Change: Okay.

Speaker Change: Our next question will come from Steve Hansen with Raymond James.

John Kenneth Brooks: So I can tell you, my team is kind of getting a first look at a number of those contracts that have rolled over to start this year. And the results, I think most importantly, the results in those areas continue, I would say, on the trajectory of what we saw in Q4. So again, my expectation would be that the first half of this year remains strong on that front, and we'll see what the back half brings when we get. Great, thanks very much. Our next question will come from Steve Hansen with Raymond James. Yeah, good afternoon, guys. Thanks.

Steve Hansen: Yeah, Good evening guys. Thanks.

Steve Hansen: Look your network wide improvements in speed and dwell has been pretty striking over the past several months notwithstanding last week or two.

Steve Hansen: Just hoping you could point to where these gains have been coming from more specifically on a geographic basis and what that might imply for some of the prior congestion issues you've acknowledged in Mexico, and then I guess ultimately what it means for bringing on the revenue synergies down there as well thanks.

Steve Hansen: Steve Great question, Let me, let me say that I'm going to have two gentlemen that are driving it leak into separate day, both Mark you know mark as part of the store John as part of the store and their teams.

Nadeem S. Velani: On a full year basis, CPKC's reported operating ratio was 65%, and the core adjusted combined operating ratio came in at 62%. Earnings per share was $4.21, and core adjusted combined earnings per share was $3.84, up 2% year over year. Now taking a closer look at our income statement, reported operating expenses for Q4 and full year are provided on slide 14, and combined operating expenses for Q4 are on slide 15. Similar to what we shared last quarter, our combined operating expenses illustrate the estimated effects of the acquisition for the fourth quarter as if the acquisition closed on January 1st, 2022. And I will only speak to the FX-adjusted fourth quarter operating results in these prepared remarks.

Steve Hansen: That's the beauty of this is not singular it's diversified.

Steven P. Hansen: Look, your network-wide improvements in speed and dwell have been pretty striking over the past several months, notwithstanding the last week or two. I'm just hoping you could point to where these gains have been coming from more specifically on a geographic basis and what that might imply for some of the prior congestion issues you've acknowledged in Mexico. And then, ultimately, what it means for bringing on the revenue synergies down there as well. Steve, great question. Let me, let me say this, and I'm going to have the two gentlemen that are driving and leaving on a separate day, both Mark, you know, Mark's part of the story, John's part of the story, and their team. That's the beauty of this.

You know what Mark has done in Canada relative to driving well down train speed off for 100 senior strains that never ran better.

Steve Hansen: The focus there and the intensity and the opportunity to drive not only train speed, but asset turns and locomotive velocity and fuel efficiency.

Steve Hansen: Mark and the team are doing a phenomenal job and at the same time.

Steve Hansen: Part of the task force, we've taken a challenge.

Steve Hansen: Which comes with growth we've turned it into an opportunity and John took this team has turned it into an organization that's focused on process focused on <unk>.

Steve Hansen: Saar principles, what return on assets, where we get better for our customer we whiteboard with GM, we whiteboard with Atlanta.

Steve Hansen: Atlantis, we whiteboard with Bartlett, we like both with our customers. So that we can identify what's possible. It can be worked to strive to achieve the art of the possible and it's all about asset turns speed and velocity. It is a result of that too although I said I'm gonna. Let these guys talk I get carried away here.

Nadeem S. Velani: We've included full-year results in the appendix for reference. Starting with Comp and Benefits, its expense was $637 million, up 2% when compared to combined Comp and Benefits expense a year ago. This includes $7 million of integration-related expenses. The increase was driven primarily by wage inflation, increased incentive costs, and higher volume.

Keith E. Creel: It's not singular; it's diversified. You know, what Mark has done in Canada relative to driving well down, train speed up, our 100 series trains, it never ran better. The focus there and the intensity and the opportunity to drive not only train speed but asset turns and locomotive velocity and fuel efficiency.

Speaker Change: You know part of what we learned that we're super excited about is with a little bit of a strategic investment much like in the playbook of P. S. O R. In the past this isn't about cutting cost its a.

Speaker Change: About strategic clean surgically investing money to create capacity in Brazil.

Speaker Change: The resiliency to eliminate bottlenecks turn assets more it's about locomotive productivity. It's about train speed. It's about crew productivity, it's about fewer re crews, it's about turning assets, creating car capacity.

Keith E. Creel: Mark and the team are doing a phenomenal job. And at the same time, you know, as part of the task force, we've taken a challenge. [inaudible] Stellantis, Whiteboard, Bartlett, Whiteboard with our customer so that we can identify what's possible, and then we work to strive to achieve the art of the possible. It's all about asset terms, speed, and velocity.

Nadeem S. Velani: Average headcount was down slightly to question. Looking at 2024, we expect headcount growth to be below volume growth on a year-over-year basis. Partially offsetting the increase with lower current service costs in the DB pension plan, resulting from higher discount rates and lower stock base costs. Looking at 2024, we expect to have a $16 million headwind resulting from lower discount rates, more than offset below the line. Fuel expense was down 8% year-over-year.

Speaker Change: Capacity to doing that for our customers. So that we can create more loads with less cars. It's P. S. R 2.0, and John has done a masterful job of integrating and starting that evolution in Mexico. Since that task Force was created so you know again a couple of highlights John couple of highlights Mark you guys have got it I guess.

Keith E. Creel: And as a result of that, too, although I said I'm going to let these guys talk, I get a little carried away here, you know. Part of what we learned that we're super excited about is that with a little bit of strategic investment, much like in the playbook of PSR in the past, this isn't about cutting costs. It's about strategically and surgically investing money to create capacity and resilience to eliminate bottlenecks, and turn assets more. It's about locomotor productivity.

Speaker Change: Proud guy that gets to talk about it I love it when I see it happened, but let me let me give these guys a chance to share a couple of highlights for you Steve as well as the rest of our investors to give you some more.

Speaker Change: Meat on the bone so to speak not just a bunch of rhetoric, but real life examples.

Nadeem S. Velani: The decline was primarily driven by a 10% decline in combined fuel prices, along with a 2% improvement in fuel efficiency that marked, partially offset by a 5% increase. Material expense is down 9%. The decline was largely driven by reduced locomotive maintenance materials.

Speaker Change: We are to the possible.

Speaker Change: So if we think about just 100 series in Canada, maybe we've we've shortened some of the trains up just to be just to get more track speed across the network and that's been.

Keith E. Creel: It's about train speed. It's about crew productivity. It's about fewer rearrangements.

Speaker Change: We've been able to produce locomotives by doing that we've been able to give a product to the two to John that he can sell to the marketplace. So that's some of the years, we focused on large focus on K CSR property, where we had boots on the ground at the switching yards that we spoke about this in the previous quarters, we spoke about some of the in train.

Keith E. Creel: It's about turning assets, creating cars, and capacity to do that for our customers so that we can create more loads with less cars. It's PSR 2.0.

Keith E. Creel: And John has done a masterful job of integrating and starting that evolution in Mexico since that task force was created. So, you know, again, a couple highlights, John, couple highlights, Mark, you guys have done it. I get it. I'm the proud guy that gets to talk about it. I love it when I see it happen. But let me give these guys a chance. The Meat on the Bone, so to speak, not just a bunch of rhetoric but real-life examples of the art of the posture.

Nadeem S. Velani: Employment rents, $676 million, down 1%, due to improvements in efficiency and an increase in receivables throughout the improvement, partially offset by an increase from inflation and lower use of CPKC intermodal equipment by other regulators. The depreciation and amortization expense is up 6%, resulting from a higher asset price. Purchase services and other was relatively flat year over year. A reduction in casualty expense and gains in efficiency are offset by volume related. Before moving below the line, I'll make a couple comments on a plate. For the past year, we were not able to reprice our entire book to offset the impact of inflation on our costs, which created a headwind for O.R. throughout 2020. Moving into 2024, the impact of inflation on our expenses will be moderate. Additionally, the pricing environment remains strong, and we will reprice a portion of our non-renewed during the period of higher cost inflation in 2020. Putting these together, we should see some catch up in the tailwind to OR in 2024 from an inflation dynamic. Moving below the line.

Speaker Change: Payers that we're doing at Kansas City, and really just ramping mechanical operations. Some of the things we haven't spoke too much about its not train speed is not this other stuff, but it's about working in diesel shops, we're gonna take 'twenty 'twenty four spend some time on the diesel shops, and do our own overhauls, where we've had to do that in the past and give it.

Mark A. Redd: Yeah, so if we think about just 100 series in Canada, I mean, we've we've shortened some of the trains up just a bit just to get more track speed across the network. And that's been, we've been able to produce locomotives by doing that we've been able to give a product to the to John, that he can sell to the marketplace. So that's some of the areas we focus, large focus on KCSR property where we've had boots on the ground at the switching yards that we spoke about this in the previous quarters we spoke about some of the in-train repairs that we're doing at Kansas City and really just ramping up mechanical operations, Some of the things we haven't spoke too much about, it's not train speed, it's not this other stuff, but it's about working in diesel shops.

Speaker Change: Two third parties will do more of that in house. We will also leverage the top plant that we have in Shreveport, Louisiana leverage the wheel shop that we have in Winnipeg and use that cross border to build up to in house, our wheels put the chamber and the and the ride away, where we need to and then.

Speaker Change: Hence our engineering gangs as well.

Speaker Change: Do some of that head count and engineering gangs, but also this will be the first year that we can.

Speaker Change: Work toward.

Speaker Change: Some games with Casey's, sorry, and also the salon and with that I'll hand, it over to John to talk a little bit about Mexico, yeah, Thanks, Mark and thanks Keith.

John Brooks: Think are all used to seeing frame because we've got the same approach we've taken our boots on the ground effort to help stabilize and improve Mexico operations in 2023.

Mark A. Redd: We're going to take 2024, spend some time in the diesel shops, and do our own overhauls where we've had to do that in the past and give it to third parties. We'll do more of that in-house. We'll also leverage the top plant that we have in Shreveport, Louisiana, leverage the wheel shop that we have in Winnipeg, and use that cross-border to in-house our wheels, put the timber in the right-of-way where we need to, and enhance our engineering gains as well. We'll reduce some of that headcount in engineering gains, but also this will be the first year that we can work toward. System Gains with KCSR and also the Sulan.

John Brooks: Force was a tri National Task forces Railroader, who went to the central part of Mexico around the automotive hub to really streamline the businesses there.

Nadeem S. Velani: Other expense was up $12 million in the Other components of net periodic benefit recovery decreased $34 million, reflecting higher discount rates compared to 2020. We expect this line to increase by approximately 23 million in 2024 and $327 million in 2023, offsetting the headwind in competition....

Unlock the potential of the fluidity in the south of Mexico and worked progressively northward.

John Brooks: Proved our dwell in summer, we supposed to see Monterrey, and our border terminal at Sanchez yard that all started to really pull together the velocity the resource utilization improvements on locomotive use locomotive productivity and even labor productivity.

Mark A. Redd: And with that, I'll hand it over to John to talk a little bit about Mexico. Yeah, thanks, Mark, and thanks, Keith. I think I'll use the same phrase because we have the same approach. We have made a boots-on-the-ground effort to help stabilize and improve Mexico's operations in 2020. And the task force was a tri-national task force of railroaders who went to the central part of Mexico around the automotive hub to really streamline the businesses there and unlock the potential of the fluidity in the south of Mexico and worked progressively northward and improved our depots in San Luis Potosi, Monterrey, and our border terminal at Sanchez Yard.

John Brooks: Since then the task force has worked to embed best practices that we.

Nadeem S. Velani: Net interest expenses, $206 million. $200 million on an adjusted basis. The decline was driven by a reduced debt balance, and on the quarter income tax expense of $275 million and $314 million on a core adjusted combined basis.

John Brooks: Shared or inherited from the C. P. P C merger and now we're turning our attention to you improving cycle times on some of the bulk business or some of the more complex larger customers in the steel and metals sector.

John Brooks: We're we're using the time that we spent boots on the ground to really pinpoint star.

Nadeem S. Velani: Looking ahead to 2024, we expect CPKC's core adjusted combined affected tax rate to be approximately $25,000. Turning to slide 17, we continue to generate strong cash flow, with cash provided by operating activities of $1.3 billion. The first call on capital continues to be business and growth, and in the quarter, we reinvested just over $700 million to end the year, in line with our outlook to invest $2.7 billion in capital on the combined. Looking at 2024, we will remain disciplined in our approach to capital. We expect capital expenditure to be $2.75 billion for the year. This reinvestment in the business builds off of record capital investment as a combined company. Mors Woodin, Erik Robinson, Fabian Alaly, and Brian Kowalski.

John Brooks: Structural improvements engineering out two points and that's reflected in our 2024 capital allotment as you said, Keith very precise and targeted to continuing the fluidity.

John Kenneth Brooks: That all started to really pull together the velocity, the resource utilization, the improvements in locomotive use, locomotive productivity, and even labor productivity. Since then, the task force has worked to embed best practices that we shared or inherited from the CPPC merger. And now we're turning our attention to improving cycle times on some of the bulk business or some of the more complex, larger customers in the steel and metals sector, and we're using the time that we spent boots on the ground to really pinpoint structural improvements, engineering out control points, and that's reflected in our 2024 capital allotment, which is, as you said, Keith, very precise and targeted to continuing the fluidity, the opportunity to grow the That's Bruyn guys, thanks.

John Brooks: The opportunity to grow the business and to continue to pivot to growth.

Speaker Change: And separately you guys. Thanks.

Speaker Change: Our next question will come from Scott Group with Wolfe Research.

Scott H. Group: Hey, Thanks afternoon.

Scott H. Group: John with everything going on at Suez in Panama.

Scott H. Group: Curious your thoughts if Vancouver allows ROE or if one is better positioned than the other two to benefit from that and then just separately Keith I know, we've got the labor negotiations going on up in Canada any any update you can give us on.

Scott H. Group: How to think about that thank you.

Keith Creel: Yeah, let me start with that one on labor I'll give you a quick update and maybe still a little bit of John's Thunder and let him add some more color.

Keith Creel: So on the labor side listen I remain cautiously optimistic I'm a realist we're at the table, we actually re engage today.

Nadeem S. Velani: The following sessions are for ONCS 20-23, and our network is well positioned from a capacity perspective to absorb the growth that we have in front of us. We generated $785 million in adjusted combined pre-cash flow for the quarter in just under $2.2 billion. 2020. Our adjusted combined leverage was 3.4 times to end the year, on our path back to our target leverage of 2.5. We expect to reach this target in late 2024 or early 2025, at which point we will evaluate shareholder returns with our Looking ahead, despite a known headwind and grain grain, John Manchin. Still somewhat uncertain macro, we expect to deliver double-digit core adjusted combined earnings growth. Corbett.

Keith Creel: Through war with a TCR see through the end of this week I believe.

Scott H. Group: Our next question will come from Scott Group with Wolf Research. Hey, thanks for joining us this afternoon. John, with everything going on in Suez and Panama, just curious about your thoughts on Vancouver or Lazaro or if one is better positioned than the other to benefit from that. And then, separately, Keith, I know we've got the labor negotiations going on up in Canada. Any update you can give us on how to think about that? Thank you. Scott, let me start with that one.

Speaker Change: <unk> is doing the same thing and I'm going to remain optimistic we can get to a negotiated settlement that state if not.

Speaker Change: As investors are going to have a heads up effectively the way the process works. It can reach in and Pat impasse, either party could file for conciliation and for the time that happens then it would be very public if it happens where we deserved notice or are they just serve notice. It's the 96 day process before you would at the earliest.

Keith E. Creel: On labor, I'll give you a quick update and maybe still a little bit of John Sunder and let him add some more color. So on the labor side, listen, I remain cautiously optimistic. I'm a realist. We're at the table. We actually re-engaged today.

Speaker Change: It's a potential strike.

Speaker Change: So again I'm going to give this thing optimism.

I think it's in our best interest and our employees best interest and our customers' best interest obviously in the nation's best interest to keep everybody working and I hope that's what happens, but again, if not you're going to have quite a bit of heads up in time.

Nadeem S. Velani: We also anticipate generating strong free cash flow while making record investments in the network to sustain future growth and get back to our target level. Putting all of this together, CPKC offers a truly differentiated investment, and I am excited to continue delivering on the commitments that we have made to our shareholders. Looking back, we ended 2023 with strong momentum and the best in industry earnings results. The network is performing well, synergies are ramping, and we are well-positioned for a strong 2020. It's an exciting time to be railroading. So with that, let me turn it back.

Keith E. Creel: We're with the TCRC through the end of this week, I believe. CNN's doing the same thing, and I'm going to remain optimistic that we can get to a negotiated settlement. That said, if not... You know, as investors, you're going to have a heads up, effectively, the way the process works. If you reach an impasse, either party could file for conciliation, and for the time that happens, and it would be very public if it happens, where we deserve notice or they deserve notice. It's a 96-day process before you would, at the earliest, experience a potential strike.

Speaker Change: To be aware of what's going on in it relative to <unk>.

Speaker Change: The Suez the Panama.

Speaker Change: Zero West Coast U S West Coast, Canada, Let me just say, that's now hand, it over to John Lazar role as a whole lot closer to Panama and Prince Rupert It already is.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: It was luck.

Laura Panama.

Speaker Change: It's another tool in our toolbox.

Right now like I.

Speaker Change: I'm really surprised volumes have recovered.

Speaker Change: Pretty strongly and in Vancouver.

Keith E. Creel: So again, I'm going to give this thing my optimism. I think it's in our best interest, it's in our employees' best interest, it's in our customers' best interest, obviously, and the nation's best interest to keep everybody working. And I hope that's what happens. But again, if not, you're going to have quite a bit of a heads up in time to be aware of what's going on in the U.S., Panama, Lazaro, the West Coast, and Canada. Lazaro is a lot closer to Panama than Prince Rupert is.

Speaker Change: And I don't think that has anything to do with that.

That is a whole different issue and I don't see that really being a volume driver Q2, our west coast ports.

But I do see our value proposition of multiple last four outlet the ability to get through the Panama Canal.

Operator: Okay, thanks, gentlemen. Operator, let's open up the line for questions. Thank you. If you'd like to ask a question, simply press star, then the number 1 on your telephone keypad.

Speaker Change: Rising.

Speaker Change: Already down there.

Speaker Change: Being an opportunity for us it's just broaden the discussion with all of these customers.

Keith E. Creel: Scott, um, look, uh, Lazaro, Panama... another tool in our toolbox. I'll tell you right now, I'm really surprised volumes have recovered pretty strongly in Vancouver. And I don't think that has anything to do with the, That is a whole different issue, and I don't see that really being a volume driver for our West Coast ports, but I do see our value proposition of multiple Westport outlets, the ability to get through the Panama Canal, utilizing the railroad down there, being an opportunity for us, just broadened the discussion with all these customers, and I fully expect you're going to see us continue to ramp Thank you, guys. Our next question will come from Benoit Poirier with Desjardins Capital Markets. Yes, thank you very much. Good afternoon, everyone.

Speaker Change: And I fully expect you're going to see us continue to ramp up the volume.

Walter Spracklin: If you'd like to withdraw your question, press star 2. As previously highlighted, please limit yourself to one question, and we'll take our first question from Walter Spracklin with RBC Capital Markets. Thanks very much, operator. Good afternoon, everyone.

Speaker Change: Through that terminal down that allowed Roe.

Speaker Change: Honestly, the big thing I'm watching right now is is east coast labor situation and that that's the area that really could present itself from some opportunities for us.

Keith Creel: So on the double-digit earnings growth, I know, Nadeem, that's consistent with what you provided at Investor Day there in July. And I know later in the session that day, you kind of gave us an indication of a doubling of your earnings growth by the end of that multi-year period, suggesting kind of a mid-team EPS growth in the early year and then perhaps ramping once you're able to kick in the buyback. Is that still the case, that in the early year, here in year one, the mid-teen cadence is still holding and then ramping after that, or have conditions changed that would cause you to change that overall view?

Speaker Change: Thank you guys.

Speaker Change: Yep.

Our next question will come from Denwa Poirier with Desjardins capital markets.

Yes, thank you very much.

Benoit Poirier: Good afternoon, everyone with respect to the situation in Mexico with the decree now being enforced and given the fact that you've submitted your feasibility study to the mix at the government. What are the next step in if you could talk a little bit about the benefits of the second Bridget Laredo and kind of the benefit.

Keith Creel: Well, you know, since we gave our guidance in June, Walter, nothing has changed other than I'd point out that, you know, we had a grain crop that came in maybe a bit weaker, starting in August. So that's gonna hurt us near term a little bit, probably Q2 of this year. Other than that, the model remains the same.

Benoit Poirier: The positive impact, we should expect on volume dwell and velocity.

Speaker Change: Great. Thanks very much.

And then my great Great to hear from me, let me at a high level I'll start with the Laredo Bridge obviously.

Benoit Poirier: With respect to the situation in Mexico with the decree now being enforced, and given the fact that you've submitted your feasibility study to the Mexican government, what are the next steps? And if you could talk a little bit about the benefits of the second bridge in Laredo and the kind of benefits and positive impact we should expect on volume, dwell, and velocity, that would be great. Thanks very much.

Speaker Change: Doubling our capacity and the ability to essentially create a double track across.

Speaker Change: The border point that allow strains to pass and that turns to stage a waiting in queue.

Speaker Change: Driven a lot of improvement John and team prior to our acquisition and even in trust.

Speaker Change: We took windows, where they used to being in Q12 hours or eight hours cut them down to four hours. So theres been a dramatic improvement.

Keith Creel: You know, we're gonna support the business with based organic growth. We're going to have the benefits of synergies, which we're... ahead of schedule on, and then we'll see. The benefit in the outer years of share buybacks and shareholder returns. Nothing has changed on that thesis, you know; we've guided to double-digit growth for this year. We're obviously not going to get a benefit from it. Bye-bye, fashion.

But four hours in Q versus no hours in Q, it's material I don't know exactly what number to put on it yet we'll see but I can tell it gives us again it adds to the unique structural and strategic advantage that our network represents to our customers the ship over that border.

Keith E. Creel: At a high level, I'll start with the Laredo Bridge, obviously, Doubling our capacity and the ability to essentially create a double track across the Boarder Point that allows trains to pass and not trains to stage and wait in queue. We've driven a lot of improvement prior to our acquisition and even in trust. You know, we took one of those where they used to have to be in queue for 12 hours or 8 hours, cut them down to 4 hours, so there's been a dramatic improvement, but 4 hours in queue versus no hours in queue, it's material. I don't know exactly what number to put on it yet; we'll see, but I can tell you it gives us again adds to the unique structural and strategic advantage that our network represents to Shifting to the passenger rail, I'm a bottom line, up front guy. Let me say this.

Speaker Change: Shifting to the passenger rail.

Speaker Change: Bottomline.

Keith Creel: We're not going to buy back stock until we get our target leverage back. The macro environment is probably a little bit weaker still in terms of the mobile side that John mentioned.

Speaker Change: Upfront Guy, let me say this.

Speaker Change: I have zero expectation or belief that mexico's ambitions and intent.

Speaker Change: To integrate and initiate passenger rail service in concert with freight rail service.

Keith Creel: But other than that, we're right on track, right on our plan to that guidance. I'll keep it to one. Thanks very much, as well.

Speaker Change: <unk>, our ability to hit our synergies or any of the targets over a multiyear guidance I think that's an important place to start number two are we.

Operator: Our next question will come from Tom Wadewitz with UBS. Great, thanks. Good afternoon. Wanted to see if you could give a little bit of perspective on what's underneath the earnings guidance, just in terms of how you are thinking about RTM growth. Are you thinking like mid-single digits?

Speaker Change: We speak with a bit of experience in it and I'm, saying this from a place of.

Speaker Change: Most humility.

Speaker Change: We didn't always get this Friday CP, we made a commitment shortly after I came to CP.

Tom Wadewitz: What, you know, kind of ballparks should we be in? And then how do you think about the magnitude of improvement in operating ratio that would fit into a base case? Thank you. No, Tom, that's a great question. I'll tell you this. This is what we're expecting. Low-sequent digit RTM growth.

Speaker Change: I don't know probably two or three years into how that quite frankly, I got tired of being kicked in the tail by Amtrak complaining about their service and I said listen we can do both.

Speaker Change: As long as you've got the right infrastructure you have a schedule where scheduled railroad those faster trains don't just show up let them on time and get them out of the way and they don't become a problem as long as you have the infrastructure to be able to handle both so that's sad.

Keith E. Creel: I have zero expectation or belief that Mexico's ambitions and intent to integrate and initiate passenger rail service in concert with freight rail service will impact our ability to hit our synergies or any of the targets of our multi-year guidance. I think that's an important place to start. Number two, we speak with a bit of experience, and I'm saying this from a place of the utmost humility.

Keith Creel: Double-Digit EPS and Margin Improvement. Now, tell me what the back half of the year looks like. Tell me what the macro is going to do.

Keith Creel: We've taken, I believe, an appropriate conservative approach, and at the back half surprises and some of those weaknesses that Nadeem spoke of, be it domestic, be at a normalized green crop or maybe a little bit better, then there's some upside there. But we've taken a modest. We've got to take a responsible, reasonable, conservative approach, and we expect to get these results. And again, if we get a couple of things that might turn our way, then we certainly have an opportunity. Okay, great.

Speaker Change: When I first.

Speaker Change: They came to see all this combined entity I knew that Mexico different nation.

Speaker Change: Different expectations completely autonomous sovereign the important part to me was to understand and learn but I didn't know about Mexico. So I made it an initiative an important initiative.

Keith E. Creel: We didn't always get this right at CP, but we made a commitment shortly after I came to CP. I don't know, probably two or three years into it, quite frankly, I got tired of being kicked in the tail by Amtrak complaining about their service, and I said, listen, we can do both. As long as you've got the right infrastructure, you have a schedule, we're a scheduled railroad, those faster trains don't just show up; let them on time and get them out of the way, and they don't become So, that said, you know, when I first...

Speaker Change: To get in front of.

Speaker Change: The president of Mexico, right out of the Gate, you know Pat and team have done a phenomenal relationship with respect based on performance and.

Tom Wadewitz: Thank you.,,,,,,, Our next question will come from Fadi Chamoun with BMO. Yeah, good evening.

Speaker Change: And years of history, where the Mexican government regulatory environment. So I said, let's go to Mexico, let's meet with President Angelo.

Fadi Chamoun: Thank you. Thank you. You know, at the June analysts' day, you indicated you had $240 million in scandal, actual annualized revenue synergies, and you suggested you had a pipeline line of sight to 950. I'm just wondering, as we stand today, what it looks like, and how do you feel about the pipeline for 2024 in terms of these revenue synergies? Hey, Fadi. It's John.

Speaker Change: And that initial meeting and I've shared this he told me his vision about.

Speaker Change: Creating prosperity in the country and he explained the need.

Speaker Change: For passenger service in Mexico, and he also said to me that your concession requires it will obviously that I've done a little bit of homework I had a lot of time preparing to get this merger I'm never one get it accomplished number to get it approved that did a lot of reading and of course that read about this concession.

John: So, as I said, I feel really good. I think we made great progress in the first 10 months. I can tell you, we've got some contracts and some wins in 2023 that we haven't realized yet. They're just starting to ramp up.

Keith E. Creel: I came to see all this combined entity; I knew that Mexico, different nations, Different Expectations, Completely Autonomous, Sovereign. The important part to me was to understand and learn what I didn't know about Mexico. So I made it an initiative, an important initiative, to get in front of the President of Mexico right out of the gate. You know, Pat and his team have built a phenomenal relationship of respect based on performance and, in years of history with the Mexican government, the regulatory environment. So I said, let's go to Mexico; let's meet with President AMLO. In that initial meeting, and I've shared this, he told me his vision for it. You know, creating prosperity in the country, and he explained the need for Passenger Service in Mexico, and he also said to me that your concession requires it.

Speaker Change: And it said that you know that's part of the concession if they say they want to run in passenger trains you got to figure it out.

Speaker Change: So with that said when he told me that I said listen President I get it I understand it theres a way to do both and be successful we need to define and understand what capacity is needed to be able to succeed at both so we automatically and this is may of last year said you know what.

John: And I think we're going to see a progression with those. I still think we have a long tail on the 180 181 product as we move through, through 2024, and hopefully, we see some of the domestic intermodal trends, macro trends, maybe move in our favor a little bit. And honestly, that includes Lazaro also.

Speaker Change: I'm going to pay for the study I'm going to get an industry expert that knows how to define what capacity is required for both and.

John: You know, it's been quite an education process with the steamship lines and the beneficial cargo owners around what that port potentially could do. To be honest, I'd hoped that'd be a quicker startup, but we are starting to gain some traction there. So, you know, I think we got into a three, we mentioned 350 million. We saw it as, we were very comfortable.

Speaker Change: And I'll, let you know what the results are and we can talk more at a later time when we did that we.

Initiated an RFP, we selected H D R, which are industry experts in determining the rail capacity that's needed we engaged in that and started that well before that decree came out in November of 2023. So we were not surprised now.

John: We were on that pace. I would tell you right now that we've slightly exceeded that, we're ahead of that, and well on the way to those numbers we talked about at Investor Day. Thanks, Ravi.

Keith E. Creel: Well, obviously, I've done a little bit of homework. I spent a lot of time preparing to get this merger, number one, accomplished, and number two, approved. I read about this concession, and it said that, you know, that's part of the concession. If they say they want to run faster trains, you have to figure it out.

Speaker Change: Now the decree expanded the scope of it.

Speaker Change: That said it had a date to your point and while we had to submit January 15th what our intentions were and and our intentions were to do exactly what we said we would do we'll work with you Mexican government to identify the capacity needed.

John: Our next question will come from Chris Weatherby with Citi. Hey, thanks. Good afternoon.

Chris Weatherby: Maybe a question on pricing. So you guys noted that there's a little bit of catch-up going on in 24 in terms of some of the contracts that you didn't get a shot at over the last couple of years, and you have moderating inflation. That's a little bit different than what we've heard from some of the players in the space, particularly some of the US names.

Speaker Change: So that we can protect our growth today as well as the future growth that is planned for the country of Mexico that brings prosperity to everyone and great paying jobs and our customers are investing in this capacity and we will figure out what we need to run faster train successfully.

Keith E. Creel: So with that said, when he told me that, I said, listen, President. I get it. I understand it. There's a way to do both and be successful.

Keith E. Creel: We need to define and understand what capacities we need to be able to succeed at both. So we automatically, and this was May of last year, said, you know what? I'm going to pay for the study. I'm going to get an industry expert that knows how to define what capacity is required for both, and I'll let you know what the results are, and we can talk more at a later time.

John: So maybe if you could just put a little bit of color around sort of the pricing environment that you're seeing, and is there this sort of upside opportunity in the US versus Canada, if there's any sort of difference there, kind of what the contract renewals are coming in at? Yeah, Chris, John, a couple of thoughts on that. One is I'll tell you Q3 and Q4 were quite strong, some of the best rail prices that I've seen. And again, I think part of that was us through the year kind of catching up to some of those inflationary numbers. So we're going to get a tailwind on that. There's been a fair amount of repricing as we've dug into the book of the new company. And some of those contracts have rolled over. There have been opportunities where we felt that we needed to reprice some of that book. I'll remind you, we took control in April of last year. So a lot of the contracts, you know, leading up to that time, KCS standalone had renewed on their own.

Speaker Change: So that was submitted January the 15th and essentially that's what it says we're going to include in the additional scope.

Speaker Change: We finished this initial study those additional lines they'd like to look at.

Speaker Change: But I felt again it was important to make sure that not by the written word that were submitted by our inner action, whereas the precedent to make sure that that was represented in its best possible light.

Keith E. Creel: Well, we did that. We initiated an RFP. We selected HDR, which are industry experts in determining the rail capacity that's needed. We engaged in that, and started that well before that decree came out in November of 2023. So we were not surprised. Now the decree expanded the scope a bit. But, said, it had a date.

Speaker Change: So no better way to do that then again request a meeting with the president.

Speaker Change: A week ago yesterday myself, John or Oscar who is the president of our C. P. Casey to Mako property, we met with President Angelo.

Keith E. Creel: To your point, Benoit, we had to submit on January 15th what our intentions were, and our intentions were to do exactly what we said we would do. We'll work with you, Mexican government, to identify the capacity needed so that we can protect our growth today, as well as the future growth that's planned for the country of Mexico that brings prosperity to everyone and great paying jobs, and our customers are investing. So that was submitted on January 15th, and essentially, that's what it says. We're going to include in the additional scope, after we finish this initial study, those additional lines they'd like to look at. But I felt, again, it was important to make sure that not only through the written word that was submitted, but our interaction with the President, to make sure that it was represented in its best possible light.

Speaker Change: At the presidential Palace with President of envelope, we had the minister or the Secretary.

Speaker Change: [noise] interior and infrastructure S E T.

Speaker Change: The secretary.

Speaker Change: While the economy.

Speaker Change: We had the secretary of the interior I think here overall, so we had three secretaries and the president hour and a half meeting.

John: So I can tell you, my team is kind of getting a first look at a number of those contracts that rolled over to start this year. And the results, I think most importantly, the results in those areas continue to be on the trajectory of what we saw in Q4. So again, my expectation for the first half of this year remains strong on that front, and we'll see what the back half brings when we get there. Great, thanks very much.

Speaker Change: It was our meeting to explain to the president what we intended what we expected. So I gave you an update on the merger and we spend an hour talking about what they made it may be in Mexico relative to passenger trains.

Speaker Change: What it would take to get it done and I explained to the president that we had engaged into a study gave him. The timeline, we expect results, which will define that infrastructure. It may I explained to him that it's important.

Chris Weatherby: Our next question will come from Steve Hansen with Raymond James. Yeah, good afternoon, guys. Thanks.

Speaker Change: The Mexico to establish faster service, it's also important to Mexico and our customers.

Steve Hansen: Look, your network-wide improvements in speed and dwell have been pretty striking over the past several months, notwithstanding the last week or two. I'm just hoping you could point to where these gains have been coming from more specifically on a geographic basis and what that might imply for some of the prior congestion issues you've acknowledged in Mexico, and then, I guess ultimately, what it means for bringing on the revenue synergies down there as well. Steve, a great question. Let me say this, and I'm going to have the two gentlemen that are driving and leaving on a separate day, both Mark, you know, Mark's part of the story, John's part of the story, and their team. That's the beauty of this.

Speaker Change: To make sure that we protect freight service and we need to do both of them both well he committed to me that he's along with exactly what my expectations are they want to do well in passenger they wanted to do well and continuing their economic growth and prosperity in the middle class great paying jobs, they are creating and the manufacturing it's come in.

Keith E. Creel: So no better way to do that than again request a meeting with the President. A week ago yesterday, myself, John Orr, Oscar, who is the president of our CPKC Domeco property, we met with President AMLO. At the Presidential Palace with President Amlow, we had the Minister, the Secretary of Interior and Infrastructure, SET. We had the Secretary of State.

Speaker Change: To Mexico, he does not want to jeopardize any of that so these are two complementing.

Keith E. Creel: [inaudible] What it would take to get it done, and I explained to the President that we had engaged in a study, we gave him the timeline, we expected results, which will define that infrastructure in May. I explained to him that it's important for Mexico to establish passenger service.

Speaker Change: Mission is.

Speaker Change: That will get executed and that said it on the last point I'll make and I've said that it's the precedent amyloid so not only can we create.

Speaker Change: A great passenger service or the right infrastructure right investment.

Keith Creel: It's not singular; it's diversified. You know, what Mark has done in Canada relative to driving well down, train speeding up, our 100 series trains, they never ran better. The focus there and the intensity and the opportunity to drive not only train speed but asset turns and locomotive velocity and fuel efficiency. Mark and the team are doing a phenomenal job. And at the same time, you know, as part of the task force, we've taken a challenge, and Tim Stilantes and I have whiteboarded with Bartlett, we have whiteboarded with our customers so that we can identify what's possible, and then we work to strive to achieve the art of the possible. And it's all about asset turn, speed, and velocity.

Speaker Change: We also protect that great great service, and you're not only going to get passengers out of cars.

Speaker Change: Well in passenger trains you're gonna get trucks off the road.

Keith E. Creel: It's also important to Mexico and our customers to make sure that we protect freight service. And we need to do both and do both. Well, he committed to me that he's aligned with exactly what my expectations are. They want to do well in passenger transport. They want to do well in continuing their economic growth and prosperity and the middle class, great-paying jobs they're creating and the manufacturing that's coming to Mexico. He does not want to jeopardize any of that.

Speaker Change: On the freight trains and I said that is a win win if I could ever put one together for the environment for the people of Mexico for the rail network in general that's serving all stakeholders best interest and that resonates. It resonated with the President then he's committed I'm Gonna go back up when I meet with them again, we're going to go back and represent the results of the study.

Speaker Change: Before.

Speaker Change: The administration changes likely in June so again to me, it's just more of what we planned for when not surprised we're gonna be able to do both do both well where protect our customers' interests will protect our nation's interests and we will get it done and we'll be proud of the results when it's over.

Keith E. Creel: So these are two complementary initiatives. [inaudible] And that said, one of the last points I'll make, and I said this to President Amil, I said not only can we create a Great Passenger Service on the Wright Infrastructure and Wright Investment, but we also protect that great, great service. And you're not only going to get passengers out of cars. On passenger trains, you're going to get trucks off the road. Owned

Keith Creel: And as a result of that, too, although I said I'm going to let these guys talk, I get a little carried away here, you know, part of what we learned that we're super excited about is that with a little bit of strategic investment, much like in the playbook of PSR in the past, this isn't about cutting costs. It's about strategically and surgically investing money to create capacity and resilience to eliminate bottlenecks, and turn assets more. It's about locomotor productivity.

Speaker Change: That's a great answer thanks for the time.

Speaker Change: Thank you Pamela.

Speaker Change: Our next question will come from Jon Chappell with Evercore ISI.

Jonathan B. Chappell: Thank you good afternoon.

Jonathan B. Chappell: John you mentioned doing little bit better than the $350 million revenue synergies I assume that it's not completely linear there's probably some areas where you're doing better than you originally thought and some where maybe there's been a few challenges can you speak to the latter part a win there where there may have been some challenges and do you think you eventually get to you know the initial projections or is there something structural.

Keith Creel: It's about train speed. It's about crew productivity. It's about fewer rearrangements.

Keith Creel: It's about turning assets, creating cars, and capacity to do that for our customers so that we can create more loads with less cars. It's PSR 2.0.

Keith E. Creel: And I said that was a win-win, if I could ever put one together, for the environment, for the people of Mexico, for the rail network in general. That's serving all stakeholders' best interests. And that resonated. It resonated with the President then.

Keith Creel: And John has done a masterful job of integrating and starting that evolution in Mexico since that task force was created. So, you know, again, a couple highlights, John, couple highlights, Mark, you guys have done it. I get it. I'm the proud guy that gets to talk about it. I love it when I see it happen. But let me give these guys a chance. The meat on the bone, so to speak, not just a bunch of rhetoric but real-life examples of the art of the posture.

Jonathan B. Chappell: That may have kept you from hitting that point or is it more just kind of the macro headwinds that we keep hearing about them.

Keith E. Creel: He's committed. I'm going to go back. I'm going to meet with him again. We're going to go back and present the results of the study before the administration changes likely in June, so again, to me, it's just more of what we plan for. We're not surprised.

Jonathan B. Chappell: Let me just first say, it's macro and timing Jon I feel good about the synergies.

Jonathan B. Chappell: And hitting them.

John: You know certainly I think I mentioned earlier I thought we would see a quicker ramp up on on labs are out.

Keith E. Creel: We're going to be able to do both, do both well. We'll protect our customers' interests, we'll protect the nation's interests, and we'll get it done, and we'll be proud of the results when it's done. That's a great answer, Keith. Thanks for your time.

John: It has been an education process with Athene chip lines.

John: It's been an education process with beneficial cargo owners and frankly, it's been a lot of work around making sure that we have a seamless border a seamless product for those shippers I can tell you that.

Mark: Yeah, so if we think about just the 100 series in Canada, I mean, we've shortened some of the trains up just a bit just to get more track speed across the network. And that's been, we've been able to produce locomotives by doing that. We've been able to give a product to John that he can sell in the marketplace. So those are some of the areas we focus on, a large focus on KCSR property where we've had boots on the ground at the switching yards that we spoke about in the previous quarters. We spoke about some of the in-train repairs that we're doing at Kansas City and really just ramping up mechanical operations. Some of the things we haven't spoken too much about, it's not train speed, it's not this other stuff, but it's about working in diesel shops.

Keith E. Creel: Thank you, everyone. Our next question will come from John Chappell with Evercore ISI. Thank you. Good afternoon, John. You mentioned doing a little bit better than the $350 million of revenue synergies. I assume that it's not completely linear.

John: How to work and I sit here today with a lot of confidence that the team will deliver and you're going to see that begin to build itself in 2024.

John: As much as I'm Super proud of the service the state border I'm 180, and 181, the overall environment and the macro a.

Jonathan B. Chappell: There's probably some areas where you're doing better than you originally thought and some where maybe there's been a few challenges. Can you speak to the latter part where there may have been some challenges? And do you think you'll eventually get to, you know, the initial projections? Or is there something structural that may have kept you from hitting that point?

John: Trucking fraud prices in that.

John: Made that a little bit more of a challenge than certainly I think we initially anticipated, but again in a really good position.

John Kenneth Brooks: Or is it more just kind of the macro headwinds that we keep hearing about? Let me just first say: it's macro and timing, John. I feel good about the synergies in hitting. Certainly, as I mentioned earlier, I thought we would see a quicker ramp-up on Lazaro, but it has been an education process with the theme ship lines, it's been an education process with beneficial cargo owners, and frankly, there has been a lot of work around making sure that we have a seamless border, a seamless product for those shippers. I can tell you that it's been a ton of work, and I sit here today with a lot of confidence that the team will deliver, and you're going to see that begin to build.

John: Schneider National our partner there has had a stronger startup than we ever could have anticipated.

John: We're working in some specific areas to introduce some retail products.

On that train got some of our.

Mark: We're going to take 2024, spend some time in the diesel shops, and do our own overhauls, where we've had to do that in the past and give it to third parties. We'll do more of that in-house. We'll also leverage the top plant that we have in Shreveport, Louisiana, leverage the wheel shop that we have in Winnipeg, and use that cross-border to manufacture our wheels, put the timber in the right-of-way where we need to, and enhance our engineering gains as well.

John: Partners in Canada, when you think about the growth in reefers and that.

John: Beginning to start up on that service so.

John: You know that that intermodal area has been just a little bit tricky, but I'm looking for big things in 2000, 2024 that go along with an area of surprise like the automotive sector that we've we've just seen a lot of success.

John Kenneth Brooks: As much as I'm super proud of the service, the safe border on 180 and 181, the overall environment on the Mack Road, trucking fraud, prices, and that have made that a little bit more of a challenge than I think we initially anticipated, but again in a really good position. You know, Schneider National, our partner there, has had a stronger startup than we ever could have anticipated. We're working in some specific areas to introduce some retail products on that train. We've got some of our partners in Canada, when you think about growth in reefers, in the beginning stages of starting up on that service. So you know, that intermodal area has been just a little bit tricky, but I'm looking, and we've seen a lot of success. Creating is Keith spoke about that closed loop system in that area. So I hope that's helpful. Yeah, very helpful.

Creating as Keith spoke about that the closed loop system in that area. So I hope that's helpful. John.

Mark: We'll reduce some of that headcount through engineering gains, but also this will be the first year that we can work toward System Gains with KCSR and also Sulan. And with that, I'll hand it over to John to talk a little bit about Mexico. Yeah, thanks, Mark. And thanks, Keith.

Speaker Change: Yeah. Thank you John.

Speaker Change: Yes.

Speaker Change: Our next question will come from <unk> Gupta with Scotiabank.

Gupta: Thanks, operator, and good evening, everyone. Just wanted to understand if it's new lease synergies you reported that in the 2022 things what would 2024 earnings look like.

John: I think I'll use the same phrase because we have the same approach. We have made a boots-on-the-ground effort to help stabilize and improve Mexico's operations in 2020. The task force was a tri-national task force of railroaders who went to the central part of Mexico around the automotive hub to really streamline the businesses there and unlock the potential of the fluidity in the south of Mexico and worked progressively northward and improved our depots in San Luis Potosi, Monterey, and our border terminal at Sanchez Yard.

You say that again.

Gupta: So I'm thinking in terms of parsing out the double digit EPS growth for 'twenty four maybe most of them are John.

Gupta: <unk> 2022 synergies you realized how much 'twenty 'twenty four earnings would grow without growing synergies.

Speaker Change: Well, you say you want to understand what our 24 synergy incremental is versus 23, how much of that of our double digit earnings.

Konark Gupta: Thank you, John. Our next question will come from Konark Gupta with Scotiabank. Thanks, Operator. Good evening, everyone. Just wanted to understand if you freeze the synergies you reported in the 2023 earnings, what would 2024 earnings look like? Can you play that again?

Gupta: Yes.

Gupta: It's a very visible.

Speaker Change: Yeah we're.

John: That all started to really pull together the velocity, the resource utilization, the improvements in locomotive use, locomotive productivity, and even labor productivity. Since then, the task force has worked to embed best practices that we shared or inherited from the CPPC merger. And now we're turning our attention to improving cycle times on some of the bulk business or some of the more complex, larger customers in the steel and metals sector. And we're using the time that we spent boots on the ground to really pinpoint structural improvements, engineering out control points. And that's reflected in our 2024 capital allotment. As you said, Keith, very precise and targeted to continuing the fluidity, the opportunity to grow the business, and to continue to pivot to grow. That's brilliant, guys, thanks.

Speaker Change: We're not giving that granular.

Speaker Change: Guidance at this point so.

Speaker Change: Giving you an indication of where we see our synergies. We told you that you know.

Speaker Change: Right.

Speaker Change: 400, and kind of run rate and we're going to ramp up over the course of the next three years.

Speaker Change: Actually guided to a $1 billion over the first three years and that we're on pace. So I think you can kind of do the math yourself.

Operator: So I'm thinking in terms of passing out the double-digit EPS growth for 24, maybe more for Nadeem and John. If we freeze 2023 synergies, you realize how much 2024 earnings would grow without growing synergies? Well, so you want to understand what our 24 center... [inaudible] Yeah, maybe that's the right way to go. We're not getting that granular with guidance at this point.

Speaker Change:

Speaker Change: Yeah happy to if you want to follow up with Chris and actually go after the call.

Thank you for your question before cardiac.

Speaker Change: Thank you.

Speaker Change: Our next question will come from Ken <unk> with Bank of America.

Ken: Hey, great. Good afternoon, and thanks for the detailed answers so far maybe nadeem if I can follow up on the cost side synergies. There they've spent a lot of questions to John on the revenue side can you talk about how well you've you've executed to your your target so far where you you see that going.

Nadeem S. Velani: We gave you an indication of where we see our synergies. We told you that we're at a 400 kind of run rate, and we're going to ramp up over the course of the next three years. Guided to a Billion dollars over that first three years that we're on pace, and kind of do the mods yourself. I'd be happy if you want to follow up with Chris and Ashley after the call.

Keith Creel: Our next question will come from Scott Group with Wolf Research. Hey, thanks. Afternoon.

Nadeem S. Velani: You can see some of those synergy goes on the cost side and then.

Nadeem S. Velani: Thinking about head count how do we think about that going forward relative to your U R. T M. I think keep throw out there.

Scott H. Group: John, with everything going on in Suez and Panama, just curious about your thoughts on Vancouver or Lazaro, or if one is better positioned than the other to benefit from that. And then, separately, Keith, I know we've got the labor negotiations going on up in Canada. Any update you can give us on how to think about that? Thank you. Scott, let me start with that one.

Nadeem S. Velani: Mid single digit RPM growth is part of the double digit earnings growth, how does head count play on that thanks.

Nadeem S. Velani: Thanks for being here. Thank you. Our next question will come from Ken Hoexter with Bank of America. Hey, great. Good afternoon.

Great Ken so.

Kenneth Scott Hoexter: And thanks for the detailed answers so far. Maybe, Nadeem, if I can follow up on the cost side synergies there. There's been a lot of questions from John on the revenue side. Can you talk about how well you've executed on your target so far? Where do you see that going? Where can you see some of those synergies goals on the cost side?

Ken: Think about what we had guided to on.

Ken: On the EBITDA synergies on the expense side, we had talked about $180 million in the first three years.

Ken: So it's very much on target.

Ken: The head count piece of that.

Nadeem S. Velani: And then thinking about headcount, how do we think about that going forward, relative to your RTM? I think Keith threw out there a low-mid single-digit RTM growth is part of that. It's part of the double-digit earnings growth. How does headcount play in that?

Ken: Initially it was a big part of it just given.

Ken: Near term attrition in some of the cause of the team combined.

Ken: Some people chose not to be a part of the team and so you can imagine that our at.

Keith Creel: On labor, I'll give you a quick update and maybe still a little bit of John Sunder and let him add some more color. So on the labor side, listen, I remain cautiously optimistic. I'm a realist. We're at the table. We actually re-engaged today.

Ken: At the more senior level some of those costs were a little higher so so from a G&A type of head count where.

Nadeem S. Velani: Thanks. Great, Ken. So, think about what we had guided to on the EBITDA synergies on the expense side. We had talked about $180 million in the first three years. So it's very much on target.

Ken: Fully on track a little bit ahead of schedule for.

Ken: From an operating synergies.

Nadeem S. Velani: You know, the headcount piece of that initially was a big part of it. [inaudible] Fully on track, a little bit ahead of schedule from an operating synergies point of view, we're going to see that increase in year two. Certainly, that's going to ramp up if you think about early on, focus on the U.S. part of the network, think about where some of the challenges on the network were on the Mexico side. So we weren't getting a huge amount of operating synergies near-term as kind of day one, but have you seen the results this quarter, and we've talked about the huge improvements both across the network on the former KCSM and So I'm really bullish on where we see the operating synergies coming in. You think about some of the procurement, some of the sourcing synergies; those take time as contracts come up, and you can negotiate with your vendors. We're on track in the first year, actually slightly ahead of schedule.

Ken: Where it's going.

Ken: See that increase.

Keith Creel: We're with the TCRC through the end of this week, I believe. CNN's doing the same thing, and I'm going to remain optimistic that we can get to a negotiated settlement. That said, if not... You know, as investors, you're going to have a heads-up, effectively, the way the process works. If you reach an impasse, either party could file for conciliation, and for the time that happens, and it would be very public if it happens, where we deserve notice or they deserve notice. It's a 96-day process before you would, at the earliest, experience a potential strike.

Ken: Increase in here too.

Certainly that's going to ramp up if you think about you know.

Ken: Early on focus on on the U S part of the network I'm thinking about where.

Ken: Some of the challenges on the network or on the Mexico side. So we werent getting a huge amount of operating synergies near term.

Ken: It is kind of day, one but have you seen the results this quarter and we've talked about the huge improvements both of them across the network on the former.

Ken: K C. S M K CSR the synergies on the cost side is really starting to ramp up on that front and that's what's given us the ability there to deliver the the ores that we have in the back half of the year in and lead the industry. So I'm really bullish on where we see the op.

Keith Creel: So again, I'm going to give this thing my optimism. I think it's in our best interest, it's in our employees' best interest, it's in our customers' best interest, obviously, and the nation's best interest to keep everybody working. And I hope that's what happens. But again, if not, you're going to have quite a bit of a heads up in time to be aware of what's going on. The Suez, the Panama, Lazaro, the West Coast US, West Coast Canada, let me just say this and I'll hand it over to John. Lazaro is a whole lot closer to Panama than Prince Rupert is.

Ken: Synergies coming in.

Ken: [noise] about some of the procurement some of the sourcing synergies you know those take time as contracts come up and you can negotiate with your vendors.

Ken: On track in the first year or actually slightly ahead of pace.

Nadeem S. Velani: This year, we'll start seeing additional synergies on that front as additional contracts come to the table. So, all in all, we're slightly ahead of schedule on the expense side. Again, it's a smaller piece of the total synergy pie, but we're slightly ahead of pace, and I think this year we're going to see more of the value come in as we run this network as well as it can. So, I'm very excited about that.

Ken: This year, we start seeing additional synergies on that front that is additional contracts.

Keith Creel: Scott, um, look, uh, Lazaro, Panama... another tool in our toolbox. And I'll tell you right now, I'm really surprised. Volumes have recovered pretty strongly in Vancouver, and I don't think that has anything to do with it. So that is a whole different issue, and I don't see that really being a volume driver for our West Coast ports, but I do see our value proposition of multiple Westport outlets, the ability to get through the Panama Canal, utilizing the railroad down there, being an opportunity for us, just broadened the discussion with all these customers, and I fully expect you're going to see us continue to ramp up the volume through that terminal down in Lazaro. You Thank you, guys. Our next question will come from Benoit Poirier with Desjardins Capital Markets. Yes, thank you very much. Good afternoon, everyone.

Ken: Come to the come to the table. So all in all we're slightly ahead of schedule on that on the expense side again, it's a smaller piece of the total synergy pie, but we're slightly ahead of pace and I think this year, we're gonna see more of the value come in.

Ken: As we run this network as well as it is it can so very excited about that.

Nadeem S. Velani: And thoughts on the headcount versus the volumes going forward? Headcount, you know; we're talking a little single-digit type of RTM assumption. You know, I see a flattish type headcount for the year. Great. I appreciate that. Thanks. Our next question will come from Justin Long with Steven. Thanks and good afternoon. And Nadeem, you mentioned the assumption for low single-digit RTM growth this year. I'm assuming that includes a benefit from Synergy. So is there a way to think about the organic volume growth that you're assuming for the business? And then Nadeem, it would also be helpful to get a little bit of color on the first quarter OR if you can, just given some of the weather disruption we've seen thus far?

Ken: And saw it on the head count versus the volumes going head to head.

Ken: Head count.

Ken: We're talking low single digit type of our.

Ken: Our Tam assumption.

You know I see a flattish type of head count for the year.

Ken: Okay.

Ken: Thanks.

Ken: Our next question will come from Justin long with Stephens.

Justin Long: Thanks, and good afternoon, and Nadeem you mentioned the assumption for low single digit RPM growth. This year I'm, assuming that includes a benefit from synergies. So is there a way to think about the organic volume growth that you're assuming for the business and then nadeem. It would also be helpful to get a.

Benoit Poirier: With respect to the situation in Mexico with the decree now in force, and given the fact that you've submitted your feasibility study to the Mexican government, what are the next steps? And if you could talk a little bit about the benefits of the second bridge in Laredo and the kind of benefits and positive impact we should expect on volume, dwell, and velocity, that would be great. Thanks very much.

Speaker Change: Little bit of color on first quarter or if you can just given some of the weather disruption. We've seen thus far I know you said you could make up a good bit of it but curious how you expect that to net out to margins.

Justin Trennon Long: I know you said you could make up a good bit of it, but curious how you expect that to net out to margins. Yeah, so think about this year, the headwind on grain, the Canadian grain side is going to be made up of kind of base growth. So I'd say, almost flat-ish on the base organic side from a volume point of view, and then the synergies driving below single digits.

Speaker Change: Yeah, so thinking about this year.

Keith Creel: Benoit, great to great to hear from you. Let me, at a high level, start with the Laredo Bridge. Obviously, Doubling our capacity and the ability to essentially create a double track across. The Border Point that allows trains to pass and not trains to stage and wait in queue.

You know the headwind on on grain.

Speaker Change: The Canadian grain side is gonna be made up on kind of base growth. So I'd say.

Speaker Change: Almost flattish on the on the base organic side from a volume point of view and then the synergies driving a low single digit and Keith mentioned, we're being conservative and I think that's appropriate at this point in the macro and at this point not knowing what what's typically what intermodal looks like in the back half.

Nadeem S. Velani: And, you know, as Keith mentioned, we're being conservative, and I think... That's appropriate at this point in the macro and at this point not knowing what intermodal looks like in the back half and where the grain crop comes in. So that's our view. I think more of the growth on the revenue side, we feel very good about the pricing and that just is a... Good output as far as what that brings to the earnings case. As far as the Q1 OR, yeah, you know, January started off great, and then winter hit, and you know, some of these challenges that we had in minus 40, minus 45 ambient temperature without even the wind chill, so, you know, the network is recovering, network's recovered quite well, there's a lot of business to be moved, and dependent on what February looks like and how we close March and Q1 on the weather side, we think we can make up a lot of that volume and get back to kind of a more normal environment Q1 as far as weather, that's going to help us kind of deliver, I think, a better year-over-year OR and strong earnings growth, so more to come, I think we'll have to see how winter plays out, but demand is, Very helpful. Thank you. Our next question will come from Cherilyn Radbourne with TD Colin. Thanks very much. Good afternoon.

Keith Creel: We've driven a lot of improvement, John and team, prior to our acquisition and even in trust. You know, we took one of those where they used to have to be in queue for 12 hours or 8 hours, cut them down to 4 hours, so there's been dramatic improvement. But 4 hours in queue versus no hours in queue, it's material.

And where the grain crop comes in so that's our view I think you know more of the growth on the revenue side, we feel very good about the pricing and that just you know.

Keith Creel: I don't know exactly what number to put on it yet; we'll see. But I can tell you it gives us, again, it adds to the unique structural and strategic advantage that our network represents to our customers that ship over that border. Shifting to the passenger rail, I'm a bottom line, up front guy; let me say this.

Speaker Change: Think of good output as far as what that brings to the earnings cadence.

Speaker Change: As far as the Q1 or you know January started off great.

Speaker Change: Great.

Speaker Change: And then winter hit and you know some of these are challenges that we had in minus 40 minus 45 ambient temperature without even the windshield. So you know the network is recovering networks recovered quite well, there's a lot of business could be moved and and dependent on what February looks like and how we close.

Keith Creel: I have zero expectation or belief that Mexico's ambitions and intent to integrate and initiate passenger rail service in concert with freight rail service will impact our ability to hit our synergies or any of the targets of our multi-year guidance. I think that's an important place to start. Number two, we speak with a bit of experience, and I'm saying this from a place of the utmost humility.

Speaker Change: March in Q1 on the weather side.

Keith Creel: We didn't always get this right at CP, but we made a commitment shortly after I came to CP. I don't know, probably two or three years into it, quite frankly, I got tired of being kicked in the tail by Amtrak complaining about their service, and I said, listen, we can do both. As long as you've got the right infrastructure, you have a schedule, we're a scheduled railroad, those faster trains don't just show up; let them on time and get them out of the way, and they don't become So, that said, you know, when I first...

Speaker Change: We think we can make up a lot of that volume and get back to two kind of a more normal environment in Q1 as far as whether that's going to help us kind of deliver I think a better year over year or.

Speaker Change: And and strong earnings growth so more to come I think we'll have to see how winter plays out but demand is there. The network is there and we plan on executing.

Speaker Change: Very helpful. Thank you.

Speaker Change: Yeah.

Speaker Change: Our next question will come from Cherilyn Radbourne with TD Cohen.

Keith Creel: I came to see all this combined entity; I knew that Mexico, different nations, different expectations, completely autonomous, and sovereign. The important part to me was to understand and learn what I didn't know about Mexico. So I made it an initiative, an important initiative to get in front of the President of Mexico right out of the gate. You know, Pat and his team have built a phenomenal relationship of respect based on performance and... I have years of experience with the Mexican government regulatory environment, so I said, let's go to Mexico, let's meet with President AMLO. In that initial meeting, and I've shared this, he told me his vision for creating prosperity in the country, and he explained the need for Passenger Service in Mexico, and he also said to me that your concession requires it.

Cherilyn Radbourne: Thanks, very much good afternoon, I was wondering if you could give us some color on crude by rail volumes in Q4, and whether you think that's an area, which could have some upside for you just with the completion that they can't X expansion running into another issue here.

Cherilyn Radbourne: I was wondering if you could give us some color on crewed by rail volumes in Q4 and whether you think that's an area which could have some upside for you just with the completion of the TMX expansion running into another issue here. Yeah, thanks, Cheryl. Thanks, John. I think our Q4 numbers are off by a little bit. Inc., R.O.C. Endowment, L.A. M.S. We had a lot of facility issues that really drove that.

Speaker Change: Yeah, Thanks, Carolyn and John.

Speaker Change: I think our Q4 numbers are off a little bit we had some facility issues.

Speaker Change: That really drove that I can tell you. We've got a 24 plan that is stronger and the crude by rail space.

John Kenneth Brooks: I can tell you we've got a 24 plan that is stronger in the cruise liner rail space. We expect our DRU business to continue strong, and we've picked up a couple other business opportunities. The phones are ringing a fair amount, Cherilyn, around CMX and those issues, but it's just really not an area we're chasing. If the right opportunity presents itself, we'll go after it. So I think all that, you put that into the mix, there is probably a little bit of upside in 2024, but not massive. Thank you. Yep. Our next question will come from Brian Ossenbeck with J.P. Morgan. Hey, good afternoon.

Speaker Change: We expect our <unk> business continued its strong and we've picked up a couple of other business opportunity.

Speaker Change: The phones are ringing a fair amount trailing around <unk>.

Keith Creel: Well, obviously, I've done a little bit of homework. I spent a lot of time preparing to get this merger, number one, accomplished; number two, approved. I did a lot of reading, and, of course, I read about this concession. And it's said that, you know, that's part of the concession. If they say they want to run faster trains, you have to figure it out. So with that said, when he told me that, I said, listen, President. I get it. I understand it. There is a way to do both and be successful.

Speaker Change: <unk> and those issues.

Speaker Change: But.

Speaker Change: Just really not an area, where we're chasing if the right opportunity presents itself.

Speaker Change: Well, we'll go after it so I think all of that you put that into the mix is probably a little bit of upside in 2024, but.

Speaker Change: But not massive.

Speaker Change: Thank you.

Speaker Change: Yep.

Speaker Change: Yeah.

Speaker Change: Our next question will come from Brian Austin Beck with J P. Morgan.

Keith Creel: We need to define and understand what capacities we need to be able to succeed at both. So we automatically, and this was May of last year, said, you know what? I'm going to pay for the study. I'm going to get an industry expert that knows how to define what capacity is required for both, and I'll let you know what the results are, and we can talk more at a later time. Well, we did that, and initiated an RFP. We selected HDR, which are industry experts in determining the rail capacity that's needed. We engaged in that and started that well before that decree came out in November of 2023, so we were not surprised. Now, the decree expanded the scope a bit. That said, it had a date.

Speaker Change: Yeah.

Hey, good afternoon, thanks for taking the questions.

Brian Ossenbeck: Thanks for taking the question. I just wanted to see if you could give us an update on COFEFE. We saw the headlines a little while ago, but I'm not sure if we've seen the final scope of that review yet. Obviously, it's something that KCS went through a few years ago, but it didn't have much of an impact, so I just wanted to see if you had any updated thoughts on that. And then, John, maybe you can give some update on just the fluidity of the border crossing. You mentioned that a couple times with the 180-181. Is that actually showing up in conversions?

Speaker Change: So you could give us an update on the Coface I saw the headlines a little while ago I'm not sure. If we've seen the final scope of their review yet obviously.

Obviously, something that case, yes went through a few years ago didn't have much of an impact. So I just wanted to see get updated thoughts on that.

Speaker Change: And then John maybe you can give some update on just the fluidity of the border crossing you mentioned that a couple of times with the 180 181 is that actually showing up in conversions are shippers willing to move some freight, especially as they see the second bridge at Laredo coming on towards the latter part of this year.

Keith E. Creel: Are shippers willing to move some freight, especially as they see the second bridge of Laredo coming on towards the latter part of this year? Thanks. You know, again, the bottom line up front: you answered the question. The COFA C piece, to me, is the government. The Government Regulatory Body that's charged in Mexico with protecting and making sure competition exists. There have been two different historical COFA-C engagements with KCS D'Amico, but nothing has come out of those.

Speaker Change: Thanks.

Speaker Change: Again bottom line upfront you answered the question the Copa C piece to me, it's the government.

Speaker Change: The government regulatory body, that's charged at Mexico, with protecting and making sure our competition exist.

Keith Creel: To your point, Benoit, we had to submit on January 15th what our intentions were, and our intentions were to do exactly what we said we would do. We'll work with you, the Mexican government, to identify the capacity needed so that we can protect our growth today as well as the future growth that's planned for the country of Mexico that brings prosperity to everyone and great-paying jobs, and our customers are investing in this capacity, and we'll figure out what we need to run faster and train successfully. So that was submitted on January 15th, and essentially, that's what it says. We're going to include in the additional scope, after we finish this initial study, those additional lines they'd like to look at. But I felt, again, it was important to make sure that not only through the written word that was submitted, but our interaction with the president, to make sure that it was represented in its best possible light. So there is no better way to do that than again requesting a meeting with the President. A week ago yesterday, myself, John Orr, and Oscar, who is the president of our CPKC Domeco property, met with President AMLO at the Presidential Palace.

Speaker Change: There've been two different historical Copa see engagements with K C. S. Domenico nothing has came out of those I can tell you. This one is not targeted at CP Casey we've not been served.

Keith E. Creel: I can tell you this one is not targeted at CPKC; we've not been served. This is an industry-wide review. In our case, I know this. The facts don't support anything but pro-competitive.

Speaker Change: This is an industry wide review.

Speaker Change: And in our case I know this the facts don't support anything but pro competitive we said, we're going to create competition, we've done nothing but create competition I can also say that now that we have control I've looked at the rates, we might be a guilty of not charging enough for this premium service, but certainly not guilty of charging too much.

Keith E. Creel: We said we'd create competition. We've done nothing but create competition. I can also say this, now that we have control, I've looked at the rates. We might be guilty of not charging enough for this premium service, but certainly not guilty of charging too much. So again, whatever that scope is, whatever that review is, I have nothing to tell me with any indication that we're going to do anything but be supportive of our case. I'm not deluded with our, And let me be quick about the border as well, in the interest of everybody's time, as far as the way we've executed it. That border's been fluid. It has not been shut down. Not just because it's the best route going into Mexico but also because it's the most secure route.

Speaker Change: So again whenever that.

Speaker Change: Scope is whatever that review is I have nothing to tell me, but any indication that we're going to do anything but be supportive of our case or.

Speaker Change: Not dilutive of our case.

Maybe quick about the border as well.

Speaker Change: In the interest of everybody's time as far as the way we've executed that borders being fluid at border has not been shut down not just because it's the best route going into Mexico, but also because it's the most secure route and that didn't happen because of.

Keith E. Creel: And that didn't happen because of... C.P. That happened because of the hard work and effort over many, many years of investment and multi-layers of security by the KCS team that have established a very secure border that's only getting more secure as we progress into this. You've got more capacity, it's even more secure, more reliable, and more fluid in spite of what might be happening at other borders that don't represent those same value propositions or security elsewhere coming into Mexico or between Mexico and the United States.

Speaker Change: C P that happened because of the hard work and effort over many many years of investment multiple layers of security.

Keith Creel: We had the Minister, the Secretary of Interior and Infrastructure, SET. We had the secretary; we had the Secretary of the Interior overall. We had 3 Secretaries in the President's hour and a half meeting. It was our meeting to explain to the President what we intended, and what we expected, so I gave them an update on the merger, and we spent an hour talking about what they needed. They'd be in Mexico, relative to passing their trains.

Speaker Change: By the Casey's team that have established a very secure border that's only getting more secure as we progress into this you build a second bridge you got more capacity, it's even more secure more reliable more fluid in spite of what might be happening happening at other borders that don't represent the same value propositions are securities.

Speaker Change: Elsewhere coming into Mexico between Mexico, and the United States. So again.

Keith Creel: What it would take to get it done, and I explained to the president that we had engaged in a study. We gave him the timeline. We expect results that will define that infrastructure in May. I explained to him that it's important for Mexico to establish passenger service. It's also important to Mexico and our customers to make sure that we protect freight service. And we need to do both and do both well. He committed to me that he's aligned with exactly what my expectations are. They want to do well in passenger transport. They want to do well in continuing their economic growth and prosperity and the middle class, great-paying jobs they're creating and the manufacturing that's coming to Mexico. He does not want to jeopardize any of that.

Keith E. Creel: So, again, another very accretive, unique, value-creating opportunity for us to go to the marketplace. You know, and I kind of look at it this way, and I've said this, I actually was talking to my board, obviously, they asked some of the same questions, you know what is this all this mean and I say I look at it this way there's a lot of trucks every day there's 1.8 million there's 10,000 a day however you do the math there's going to be truck capacity going across that that border there's going to be train capacity and you got a choice it's a value proposition, You know, you can ride the Falcon. Week in Rye.

Speaker Change: They're very accretive unique.

Speaker Change: Creating opportunity for us to go to the marketplace.

Speaker Change: Kind of look at it this way and I've said this actually was talking to my board obviously to ask some of the same questions.

Speaker Change: What is this all of this mean and I I say I look at it this way there's a lot of trucks every day, there's $1 8 million was 10000 a day. However, you do the math.

Speaker Change: There's gonna be truck capacity going across the board.

Speaker Change: Border, there's gonna be train capacity.

Speaker Change: And you've got a choice, it's a value proposition.

Speaker Change: You know you can ride the Falcon.

Speaker Change: You can ride.

Keith E. Creel: Gemini, whatever you want to call the other alternative services, there's a value proposition. If you're prepared to risk some of those very obvious undeniable experiences that our shippers, their shippers have experienced, and price doesn't matter, then you know what? I kind of look at that as your value problem. But that's not all.

Speaker Change: The Gemini whatever you want to call. The other alternative services, there's a value proposition.

Speaker Change: If you are prepared to.

Speaker Change: Risk some of those very obvious and at Apple experiences that our shippers.

Keith Creel: So these are two complementary initiatives that will get it. And that said, one of the last points I'll make, and I said this to President Amil, I said not only can we create a great passenger service with the right infrastructure and the right investment, but we can also protect that great freight service, and you're not only going to get passengers out of cars. On passenger trains, you're going to get trucks off the road.

Speaker Change: Pacific experience and price doesn't matter then you know what I kind of look at that is that's your value proposition, but that's not ours, we're going to provide a reliable.

Keith E. Creel: We're going to provide a reliable Premium Service that warrants and commands, and we're never going to apologize, expects a premium price. It costs a lot of money to provide a reliable service.

Speaker Change: Premium service that warrants and commands and we're never going to apologize.

Speaker Change:

Speaker Change: Expects a premium price.

Speaker Change: It cost a lot of money to provide the reliable service our customers that have rewarded us with business demonstrated it matters and I can tell you. This last one what's the sort of challenges that are the border has experienced ours has not experienced the same thing and as a result, those customers that have chosen to move with us have expressed their deep appreciation.

Keith E. Creel: Our customers that have rewarded us with business have demonstrated that it matters, and I can tell you this last little episode of challenges that the border has experienced, ours has not experienced the same thing, and as a result, those customers that have chosen to move with us have expressed their deep appreciation, and they're rewarding it with business. So, again, I make a choice every day if my product's got to get from point A to point B. I've got a rate I can pay if I want to put it in the U.S. Postal, and I'm saying this in American terms, and I've got a rate if I want to pay FedEx or UPS.

Keith Creel: And I said, that is a win-win, if I could ever put one together, for the environment, for the people of Mexico, for the rail network in general. That's serving all stakeholders' best interests. And that resonated. It resonated with the President then.

Speaker Change: <unk> and a rewarding it with the business.

Speaker Change: So again I'll make a choice every day of my products Gotta get from point a to point B.

Keith Creel: He's committed. I'm going to go back. I'm going to meet with him again. We're going to go back and present the results of the study before the administration changes, likely in June. So again, to me, it's just more of what we planned for. We're not surprised.

Speaker Change: I've got a radar can pay up I want to put a U S postal and I'm, saying this in American terms and I've got a rate if I'm gonna pay fed extra EPS, you've got to decide what matters to you and your value proposition and where you choose to put your afraid to make your decision and I believe that this value proposition matters, even more so than it ever has.

Keith E. Creel: You've got to decide what matters to you and your value proposition and where you choose to put your freight and make your decision, and I believe that this value proposition matters even more than it ever has. Thanks, Keith. Our next question will come from Brandon Oglenski with Barclays. Hey, and thanks, Keith, for letting me sneak my question in here. And John, maybe I'll close out with you on the low single-digit growth outlook this year. I mean, I get it; there's a lot of uncertainty in the macro. And obviously, you've talked about intermodal and grain.

Keith Creel: We're gonna be able to do both, do both well. We'll protect our customers' interests, we'll protect the nation's interests, and we'll get it done, and we'll be proud of the results when it's over. That's a great answer, Aki. Thanks for your time.

Speaker Change: Understood. Thanks Keith.

Speaker Change: Okay next question.

Speaker Change: We've got one more.

Keith Creel: Thank you, Benoit. Our next question will come from Jon Chappell with Evercore ISI. Thank you, good afternoon. John, you mentioned doing a little bit better than the 350 million dollars in revenue synergies. I assume that it's not completely linear.

Speaker Change: The next question will come from Brandon No glinski with Barclays.

Speaker Change: Hey.

Brandon Oglenski: Thanks, Keith for letting me sneak my question in here and John maybe I'll close out with you on the low single digit growth outlook. This year.

Brandon Oglenski: There's a lot of uncertainty in the macro and obviously you've talked about intermodal and grain, but I think the commentary was pretty upbeat on merchandize can you talk about the incremental customer opportunities you see there.

Jonathan B. Chappell: There's probably some areas where you're doing better than you originally thought and some where, maybe, there's been a few challenges. Can you speak to the latter part where there may have been some challenges, and do you think you will eventually get to, you know, the initial projections, or is there something structural that may have kept you from hitting that point, or is it more just kind of the macro headwinds that we keep hearing about? Let me just first say it's macro and timing, John. I feel good about the synergies in hitting.

Brandon Oglenski: But I think that the commentary was pretty upbeat on merchandise. Can you talk about the incremental customer opportunities you see there, you know, playing out in 2024, and maybe where you see positive variance to where the industry is going to see growth rates in merchandise? Yeah, Brandon, historically, the Legacy TP franchise was involved with, particularly the strongest merchandise ETP franchise, but this new combination is an area of strength, and I'm super pleased with what the team has been able to deliver in that space early in 2023. Honestly, if you think about the synergies we've talked about, that's been an overweight area.

John: Out in 'twenty, 'twenty, four and maybe where you see positive variance to where the industry is going to see a growth rate in merchandise.

Speaker Change: Yeah Brandon.

Speaker Change: Historically, the legacy CEB franchise left with.

Speaker Change: Particularly the strongest merchandise ETP franchise, but the new combination is if it's an area of strength and I'm Super pleased with what the team has been able to deliver in that space. Early in 2023 honestly. If you think about the synergies we've talked about that that that's been an overweight area.

John: You know, certainly, I think I mentioned earlier that I thought we would see a quicker ramp-up on Lazaro, but it has been an education process with the theme ship lines, it's been an education process with beneficial cargo owners, and frankly, there has been a lot of work around making sure that we have a seamless border, a seamless product for those shippers. And I can tell you that it's been a ton of work, As much as I'm super proud of the service, the safe border on 180 and 181, the overall environment on the Mack Road, trucking fraud, prices, and that have made that a little bit more of a challenge than I think we initially anticipated, but again, in a really good position.

Speaker Change: That's that's an area that we would achieve more.

Speaker Change: It's on the backs of strong trip plan, good local service getting those cars and in steel car cycles.

Speaker Change: In tank cars cycled.

Speaker Change: So as I said, we had some good wins in the back half of the year in terms of share and synergies in that merchandise ETP space.

John Kenneth Brooks: That's an area that we've achieved more, and it's on the back of a strong trip plan, good local service, Steel Cars Cycled, and, As I said, we had some good wins in the back half of the year in terms of share and synergies in that merchandise ECP space. We haven't even felt the benefit of the bulk of those agreements; we're going to see that ramp up. And I'm really bullish on our steel franchise, between not only our Mexico production facilities supporting the growth down there in the automotive industry and other industries, but also our Field Facilities in the U.S. and Canada, so that's an area to keep an eye on it. I think you're going to see some strong growth.

Speaker Change: Haven't even felt the benefits of the bulk of those agreements were going to see that ramp up and I'm really bullish on our steel franchise between not only our.

Speaker Change: Our Mexico production facilities.

Speaker Change: Supporting the growth down there in the automotive industry and other industries, but also.

Speaker Change: Our steel facilities in the U S and Canada. So that's an area to keep an eye on it I think youre going to see some strong growth. Thanks branda.

John Kenneth Brooks: Thank you. We have reached our allotted time for Q&A. I would now like to turn the call back over to Mr. Keith Creel. Okay, thanks.

Speaker Change: Thank you.

Speaker Change: We have reached our allotted time for Q&A I would now like to turn the call back over to Mr. Keith Creel.

Keith Creel: Okay. Thanks, Thanks, operator, and listen again, thanks for joining us. This afternoon I hope that you leave this call understanding will be sampling the very beginning we.

Keith E. Creel: Thanks, operator. And listen, again, thanks for joining us this afternoon. I hope that you leave this call understanding what we said at the very beginning. We are in the middle of creating history. We've created a very unique network, bringing these two wonderful companies together. We've got a unique value-creating opportunity that is going to stand the test of time. You know, in a hard macro environment, we've shown growth. In the middle of integration, we've shown growth. And when I say growth, I'm not talking about just RTM growth, RTM growth, or earnings growth. And we've shown an ability to improve margins all at the same time, while we've never invested more to create more supply chain resiliency at a time when our three nations have never needed it. This formula works.

John: You know, Schneider National, our partner there, has had a stronger startup than we ever could have anticipated. We're working in some specific areas to introduce some retail products on that train. I got some of our partners in Canada when you think about growth in reefers and that, beginning to start up on that service. So you know, that intermodal area has been just a little bit tricky, but I'm looking for big things in 2020-24 to go along with an area of surprise like the automotive sector. We've seen a lot of success in creating Keith's book about the closed loop system in that area. Yeah, very successful. Thank you, Jen.

Keith Creel: We're in the middle of creating history, we've created a very unique network, bringing these two wonderful companies together.

Keith Creel: We've got a unique value creating opportunity that it's got approved the test of time.

Keith Creel: And our hard macro environment.

Keith Creel: Shown growth in the middle of integration, we've shown growth and when I say growth I'm not talking about just our Tam growth our team growth earnings growth and.

Keith Creel: We've shown an ability to improve margins at the same time, we've never invested more to create more supply chain resiliency at a time all three nations have never needed it more.

Keith Creel: This formula works it standing the test of time, it's going to be here for generations to come we're on a journey with the best railroad in this industry, a very unique value, creating story for our employees our communities our shareholders all stakeholders.

John: Our next question will come from Kunar Gupta with Scotiabank. Thanks, Operator. Good evening, everyone. I just wanted to understand if you freeze the synergies you reported in the 2023 earnings, what would 2024 earnings look like? Can you play that again?

Keith E. Creel: Standing the test of time, it's going to be here for generations to come. We're on a journey with the best railroaders in this industry, a very unique value-creating story for our employees, our communities, our shareholders, all stakeholders. A bit again, it will become, in time, the most relevant rail network in North America.

Keith Creel: That again.

Keith Creel: We will become.

Keith Creel: In time, the most relevant rail network in North America. We thank you for your trust, we fully intend to reward you for it.

Kunar Gupta: So I'm thinking in terms of passing out the double-digit EPS growth for 24, maybe more for Nadeem and Maeghan. If we freeze 2023 synergies, you realize how much 2024 earnings would grow without growing synergies? Well, so you want to understand what our 24 centers... followed for are out of our double-digit. Yeah, maybe that's the right way to go.

Those they trust us and make your investment decisions with us have a safe and productive day, and we look forward to sharing our first quarter results in the months ahead.

Speaker Change: This does conclude today's conference call you may now disconnect.

Speaker Change: [music].

Kunar Gupta: We're not getting that granular guidance at this point, giving you an indication of where we see our synergies. We told you that. We're at a 400 kind of run rate, and we're going to ramp it up over the course of the next three years. We got $2 billion over that first three years that we were on pace, kind of do the mods yourself. I'd be happy if you want to follow up with Chris and Ashley after the call.

Nadeem S. Velani: Thank you. Our next question will come from Ken Hoexter with Bank of America. Hey, great. Good afternoon.

Keith E. Creel: Thank you for your trust. We fully intend to reward you for it. Those that trust us and make their investment decisions with us, have a safe and productive day, and we look forward to sharing our first quarter results with you in the months ahead. This does conclude today's conference call.

Ken Hoexter: And thanks for the detailed answers so far. Maybe, Nadeem, if I can follow up on the cost side synergies there. There's been a lot of questions from John on the revenue side. Can you talk about how well you've executed on your target so far? Where do you see that going? Where can you see some of those synergies goals on the cost side?

Nadeem S. Velani: And then thinking about headcount, how do we think about that going forward relative to your RTM? I think Keith threw out there a low, mid, single-digit RTM growth as part of the double-digit earnings growth. How does headcount play into that?

Operator: You may now disconnect. [inaudible]...........

Nadeem S. Velani: Thanks. Great, Ken. So. You think about what we had guided to on the EBITDA synergies on the expense side, we had talked about $180 million in the first three years, so it's very much on target. The headcount piece of that initially was a big part of it, to be part fully on track, a little bit ahead of schedule from an operating synergies, we're going to see that increase in year two, certainly that's going to ramp up if you think about early on focus on the U.S. part of the network, think about where some of the challenges on the network were on the Mexico side, so we weren't getting a huge amount of operating synergies near term as kind of day one, but if you've seen the results this quarter and we've talked about the huge improvements both across the network on the former KCSM and the KCSR, the synergies and the cost side is really starting to ramp up on that front and that's what's given us the ability to deliver the ORs that we have in the back half of the year and lead the industry, so I'm really bullish on where we see the operating synergies coming in, you think about some of the procurement, some of the sourcing synergies, those take time as contracts come up and you can negotiate with your vendors, we're on track in the first year, actually slightly ahead of pace, this year we'll start seeing additional synergies on that front as additional contracts come to the table, so all in all we're slightly ahead of schedule on the expense side, again it's a smaller piece of the total synergy pie, but we're slightly ahead of pace and I think this year we're going to see more of the value come in as we run this network as well as it can, so very excited about that. And thought on the headcount versus the volumes going forward? Headcount, you know, we're talking a little single-digit type of RTM assumption.

Hum.

Speaker Change: Mhm mhm.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: [music].

Speaker Change: Mhm.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: [music].

Nadeem S. Velani: You know, I see a flattish type of headcount for the year. Great. Appreciate that. Thanks. Our next question will come from Justin Long with Stevens.

Justin Long: Thanks and good afternoon, Nadeem. You mentioned the assumption for low single-digit RTM growth this year. I'm assuming that includes a benefit from Synergy, so is there a way to think about the organic volume growth that you're assuming for the business and then Nadeem? It would also be helpful to get a little bit of color on the first quarter OR if you can, just given some of the weather disruption we've seen thus far. I know you said you could make up a good bit of it, but I'm curious how you expect that to net out in the margins. Yeah, so think about this year. You know the headwind on grain. The Canadian grain side is going to be made up of kind of base growth, so I'd say, almost flattish on the base organic side from a volume point of view, and then the synergies are driving below single digits.

Nadeem S. Velani: And you know, as Keith mentioned, we're being conservative, and I think that's appropriate at this point in the macro and at this point, not knowing specifically what intermodal looks like in the back half and where the grain crop comes in. So that's our view. I think, you know, more growth on the revenue side; we feel very good about the pricing, and that just, you know, is a... good output as far as what that brings to the earnings case. As far as the Q1 OR, yeah, January started off great, and then winter hit, and you know, some of these challenges that we had in minus 40, minus 45 ambient temperatures without even the wind chill, so, you know, the network is recovering, and it's recovering quite well.

Nadeem S. Velani: There's a lot of business to be moved, and dependent on what February looks like and how we close March and Q1 on the weather side, we think we can make up a lot of that volume and get back to kind of a more normal environment in Q1 as far as weather is concerned. That's going to help us kind of deliver, I think, a better year-over-year OR and strong earnings growth. So, more to come. I think we'll have to see how winter plays out, but demand is there, the network is there, and we plan on it. Very helpful.

Sherlyn Radborn: Thank you. Our next question will come from Sherlyn Radborn with TD Colin. Thanks very much. Good afternoon.

John: I was wondering if you could give us some color on crewed by rail volumes in Q4 and whether you think that's an area which could have some upside for you just with the completion of the TMX expansion running into another issue here. Yeah, thanks, Cheryl. Thanks, John. I think our Q4 numbers are off a little bit. Facility issues really drove that.

John: I can tell you we've got a 24 plan that is stronger in the crew-by-rail space. We expect our BRU business to continue strong, and we've picked up a couple other business opportunities. The phones are ringing a fair amount, Carolyn, around PMX and those issues, but it's just really not an area we're chasing. If the right opportunity presents itself, we'll go after it. I think you should put that into the mix. There's probably a little bit of upside in 2024, but not massive. Thank you. Yep. Our next question will come from Brian Ostenbeck with J.P. Morgan. Hey, good afternoon.

Brian Ostenbeck: Thanks for taking the question. I just wanted to see if you could give us an update on COFEFE. We saw the headlines a little while ago. I'm not sure if we've seen the final scope of that review yet. Obviously, it's something that KCS went through a few years ago. It didn't have much of an impact, so I just wanted to see if you had updated thoughts on that.

Keith Creel: And then, John, maybe you can give us an update on just the fluidity of the border crossing. You mentioned that a couple times with the 180-181. Is that actually showing up in conversions?

Keith Creel: Are shippers willing to move some freight, especially as they see the second bridge of Laredo coming on towards the latter part of this year? Thanks. You know, again, the bottom line up front: you answered the question. The COFA C piece is, to me, about the government. The government regulatory body that's charged in Mexico with protecting and making sure competition exists. There have been two different historical COFA-C engagements with KCS D'Americo, but nothing has come out of those.

Keith Creel: I can tell you this one is not targeted at CPKC; we've not been served. This is an industry-wide review. And in our case, I know this, the facts don't support anything but pro-competitive.

Keith Creel: We said we'd create competition; we've done nothing but create competition. I can also say this, now that we have control. I've looked at the rates. We might be guilty of not charging enough for this premium service, but certainly not guilty of charging too much. So again, whatever that scope is, whatever that review is, I have nothing to tell me with any indication that we're going to do anything but be supportive of our case. I'm not deluded with our, And let me be quick about the border as well, in the interest of everybody's time, as far as the way we've executed it. That border's been fluid. It has not been shut down. Not just because it's the best route going into Mexico but also because it's the most secure route. And that didn't happen because of C.P.

Keith Creel: That happened because of the hard work and effort over many, many years of investment and multi-layers of security by the KCS team that have established a very secure border that's only getting more secure as we progress into this. You've got more capacity. It's even more secure, more reliable, and more fluid in spite of what might be happening at other borders that don't represent those same value propositions or security elsewhere coming into Mexico or between Mexico and the United States.

Keith Creel: So, again, another very accretive, unique, value-creating opportunity for us to go to the marketplace. You know, and I kind of look at it this way, and I've said this before. I actually was talking to my board, and they obviously asked some of the same questions. You know, what does all this mean?

Keith Creel: And I say I look at it this way. There are a lot of trucks every day. There are 1.8 million, there's 10,000 a day, however you do the math.

Keith Creel: There's gonna be truck capacity going across that border. There's gonna be train capacity. And you have a choice, it's a value proposition. You know, you can ride the Falcon. You can ride.

Keith Creel: Gemini, whatever you want to call the other alternative services, there's a value proposition. If you're prepared to risk some of those very obvious undeniable experiences that our shippers, your shippers, have experienced, and price doesn't matter, then you know what? I kind of look at that as your value problem. But that's not all.

Keith Creel: We're going to provide a reliable, premium service that warrants and commands a premium price, and we're never going to apologize. It costs a lot of money to provide a reliable service. Our customers that have rewarded us with business have demonstrated it matters. And I can tell you this last little episode of challenges that the border has experienced, ours has not experienced the same thing.

Keith Creel: And as a result, those customers that have chosen to move with us have expressed their deep appreciation by rewarding us with business. So again, I make a choice every day if my product's got to get from point A to point B. I've got a rate I can pay if I want to put it in the U.S. Postal, and I'm saying this in American terms, and I've got a rate if I want to pay FedEx or UPS.

Brandon Oglenski: You've got to decide what matters to you and your value proposition and where you choose to put your freight and make your decision. And I believe that this value proposition matters even more than it ever has. Thanks Keith. Our next question will come from Brandon Oglenski with Barclays. Hey, and thanks, Keith, for letting me sneak my question in here. And John, maybe I'll close out with you on the low single-digit growth outlook this year. I mean, I get it, there's a lot of uncertainty in the macro, and obviously, you've talked about intermodal and grain.

John: But I think that the commentary was pretty upbeat on merchandise. Can you talk about the incremental customer opportunities you see there, you know, playing out in 2024, and maybe where you see positive variance to where the industry is going to see growth rates in merchandise? Yeah, Brandon, historically, the Legacy TV franchise wasn't blessed with, particularly the strongest merchandise ETP franchise. But this new combination is, it's an area of strength. And I'm super pleased with what the team has been able to deliver in that space early in 2023. Honestly, if you think about the synergies we've talked about, that's been an overweight area.

John: That's an area that we've achieved more. And it's on the backs of a strong trip plan, good local service, getting most cars, steel cars cycled, and Ethan Kroups and Hank Jones, Kevin Schucko, and so forth. We have some good wins in the back half of the year in terms of share and synergies in that merchandise ECP space. We haven't even felt the benefit of the bulk

John: We're going to see that ramp up, and I'm really bullish on our steel franchise, between not only our Mexico production facilities supporting the growth down there in the automotive industry and other industries but also our and other field facilities in the US and Canada. So that's an area to keep an eye on.

John: I think you're going to see some strong growth. Thanks, Brandon. Thank you. We have reached our allotted time for Q&A. I would now like to turn the call back over to Mr. Keith Creel. Okay, thanks.

Keith Creel: Thanks, operator. And listen, again, thanks for joining us this afternoon. I hope that you leave this call understanding what we said at the very beginning. We were in the middle of creating history; we created a very unique network, bringing these two wonderful companies together. We've got a unique value-creating opportunity that will stand the test of time. You know, in a hard macro environment, we've shown growth. In the middle of integration, we've shown growth. And when I say growth, I'm not talking about just RTM growth, RTM growth, earnings growth. And we've shown an ability to improve margins all at the same time, while we've never invested more to create more supply chain resiliency at a time when our three nations have never needed it. This formula works.

Standing the test of time, it's going to be here for generations to come. We're on a journey with the best railroaders in this industry, a very unique value-creating story for our employees, our communities, our shareholders, all stakeholders, a bit again, will become, in Time, the most relevant rail network in North America. We thank you for your trust. We fully intend to reward you for it. Those that trust us and make your investment decisions with us, have a safe and productive day and we look forward to sharing our first quarter results in the months ahead. This does conclude today's conference call. You may now disconnect. ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪