Q2 2024 Canadian Pacific Kansas City Ltd Earnings Call

Operator: Standby, we're about to Good afternoon, everyone. My name is Beau, and I will be your conference operator today. For the first time, I would like to welcome everybody.

Please stand by. We're about to begin.

Bo: 101, my name is Bo, and I will be your conference operator today.

Bo: At this time, I would like to welcome everyone to CPKC's second quarter 2024 earnings 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.

Bo: Good afternoon, everyone. My name is Beau, and I will be your conference operator today. At this time, I would like to welcome everyone to CPKC's second quarter 2024 earnings conference call.

Operator: These slides accompanying today's call are available at KCR.com. All lines have been placed on mute to prevent any background noise. There will be a question and answer. If you would like to ask a question, simply press star, then the number one.

Bo: These slides accompanying today's call are available at investor.cpkcr.com.

Bo: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question, simply press star. The number one on your telephone keypad. If you would like to withdraw your question, press star two.

Speaker Change: 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 star, then the number 1 on your telephone keypad. If you would like to withdraw your question, press star 2.

Chris de Bruyn: I would now like to introduce Chris De Bruyn, Vice President, Capitol Markets, to begin the conference. Chris, please go ahead.

Chris de Bruyn: I would now like to introduce Chris DeBruin, Vice President, Capital Markets, to begin the conference. Chris, please go ahead.

Keith Creel: Thank you, Bo.

Unknown Executive: Pad. If you would like to withdraw your question, press, I would now like. Chairman, Vice President, Capital Markets. Thank you, Bo. Before we begin, I want to remind you this presentation contains forward-looking information, and actual results may differ materially.

Keith Creel: Good afternoon, everyone, and thank you for joining us today. Before we begin, I want to remind you this presentation contains forward-looking information. Actual results made different materially. The risks, uncertainties, and other factors that could influence actual results are described on slide two, in the press release, and in the Indian A5 of the Canadian and U.S. regulators. This presentation also contains non-GAAP measures outlined on slide three. Please note, in addition to our regular quarterly financials, there are supplemental Q2 combined revenue and operating performance data available at investor.cpkcr.com. Which some of today's discussion will focus on.

Chris de Bruyn: Thank you, Bo. Good afternoon, everyone, and thank you for joining us today. Before we begin, I want to remind you this presentation contains forward-looking information.

Speaker Change: Actual results may differ materially. The risks, uncertainties, and other factors that could influence actual results are described on slide 2 in the press release and in the MD&A files of Canadian and U.S. regulators.

Unknown Executive: The risks, uncertainties, and other factors that could influence actual results are described on slide 2 in the press release and in the MD&A files of Canadian and US regulators. This presentation also contains non-GAAP measures, outlined on slide 3. Please note, in addition to our regular quarterly financials, there is supplemental Q2 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, our President and Chief Executive Officer, Nadeem Velani, our Executive Vice President and Chief Financial Officer, and John Brooks, our Executive Vice President and Chief Marketing Officer.

Speaker Change: This presentation also contains non-GAAP measures outlined on slide 3. Please note, in addition to our regular quarterly financials, there is supplemental Q2 combined revenue and operating performance data available at investor.cpkcr.com, which some of today's discussion will focus on.

Chris de Bruyn: With me here today is Keith Creole, our President and Chief Executive Officer; Nadine Villani, our Executive Vice President and Chief Financial Officer; and John Brooks, our Executive Vice President and Chief Marketing Officer. The formal remarks will be followed by Q&A. In the interest of time, we'd appreciate if you limit your questions to one.

Speaker Change: With me here today is Keith Creel, our President and Chief Executive Officer, Nadeem Velani, our Executive Vice President and Chief Financial Officer, and John Brooks, our Executive Vice President and Chief Marketing Officer.

Keith E. Creel: The formal remarks will be followed by Q&A. In the interest of time, we'd appreciate it if you limit your questions to one. It is now my pleasure to introduce our President and CEO , Mr. Keith Creel. Thanks, Chris, and good afternoon. Listen, before we get into the results, on behalf of our CPKC family, I want to extend our heartfelt prayers.

Unknown Executive: The formal remarks will be followed by Q&A. In the interest of time, we'd appreciate it if you limit your questions to one. It is now my pleasure to introduce our president and CTO, Mr. Keith Creel. Thanks, Chris. And good afternoon. Listen, before we get into the results, on behalf of our CPKC family, I want to extend our heartfelt prayers and condolences to Pat Otzmaier's family and friends. Our family mourns his tragic passing.

Keith Creel: It is now my pleasure to introduce our President and CEO, Mr. Keith Creole. Thanks, Chris, and good afternoon. Listen, before we get into the results, on behalf of our CPKC family, I want to extend our heartfelt prayers and condolences to Pat Ott's Mars family and friends. Our family mourns its tragic passing. We extend our deepest condolences to Ciance, Vienna, this entire family, as well as the many friends and former colleagues. And if you had the honor to enjoy the friendship with Pat as I did, words will never capture what a class gentleman in him being he was.

Keith E. Creel: and condolences to Pat Otzmaier's family and friends. Our family mourns his tragic passing. We extend our deepest condolences to his fiancée, Deanna, his entire family, as well as many friends and former colleagues.

Keith E. Creel: We extend our deepest condolences to his fiancée, Deanna, his entire family, as well as the many friends and former colleagues. Pat's vision and leadership played a monumental role in the great history of Kansas City Southern, and he helped reshape the railway industry. We've lost a truly remarkable leader and a cherished friend. All who knew him as a professional and a railroader had nothing but respect and admiration for the material impact he made across the country.

Speaker Change: Past vision and leadership played a monumental role in the great history of Kansas City Southern and he helped reshape the railway industry. We've lost a truly remarkable leader and a cherished friend. All who knew him as a professional and a railroader had nothing but respect and admiration for the material impact he made across Kansas City.

Keith E. Creel: So many aspects of our industry, and if you had the honor of having enjoyed a friendship with Pat as I did, words will never capture what a class gentleman and human being he was. Pat's legacy lives on. It can be seen in the work we do every day at CPKC. I'm also pleased to be hosting this call in Kansas City at our brand new, state-of-the-art U.S. operations headquarters at Nokia Yard. This facility is just one small example of what would never have been possible without Pat's vision and strength as a leader. His contributions as a railroader and as a person will never be forgotten.

Speaker Change: So many aspects of our industry, and if you had the honor to have enjoyed a friendship with Pat as I did, words will never capture what a class gentleman and human being he was.

Keith Creel: Pat's legacy lives only can be seen in the work we'll do every day at CPKC.

Keith Creel: I'm also pleased to be hosting this calling Kansas City that our brand new state-of-the-art US operations headquarters at Nokia Art. This facility is just one small example of what would have never been possible without Pat's vision and strength as a leader. This contributions as a railroader is a person will never be forgotten.

Speaker Change: Pat's legacy lives on. It can be seen in the work we'll do every day at CPKC. I'm also pleased to be hosting this call in Kansas City at our brand new state-of-the-art U.S. Operations Headquarters at Nokia Yard. This facility is just one small example of what would have never been possible without Pat's vision and strength as a leader.

Keith Creel: Moving on to the quarter, I'd like to first start by thanking the 20,000 strong CPKC families for their efforts in the second quarter. As a leader, it's always my honor to represent the results. We're going to cover on behalf of this team, which I'm extremely proud of. In the second quarter, the family delivered revenues of 3.8 billion, which is up 8%, strong volume growth, and increased 6%. Operating ratio of 61.8, which is a 280 basis point improvement versus last year, an EPS of a dollar five, a 27% increase. Certainly, extremely pleased with these results. I can tell these numbers that I just walked through do not happen by accident, but through execution.

Keith E. Creel: Moving on to the quarter, I'd like to first start by thanking the 20,000-strong CPKC family for their efforts in the second quarter. As a leader, it's always my honor to present the results we're going to cover on behalf of this team, which I'm extremely proud of. In the second quarter, the family delivered revenues of $3.8 billion, which is up 8%, strong volume growth, an increase of 6%, an operating ratio of 61.8, which is a 280 basis point improvement versus last year, and EPS of $1.05, a 27% increase. I am certainly extremely pleased with these results. I can tell these numbers that I just walked through did not happen by accident but through execution.

Speaker Change: This contribution to the railroad as a person will never be forgotten.

Speaker Change: Moving on to the quarter, I'd like to first start by thanking the 20,000 Strong CPKC family for their efforts in the second quarter. As a leader, it's always my honor to represent the results we're going to cover on behalf of this team, which I'm extremely proud of.

Speaker Change: In the second quarter, the family delivered revenues of $3.8 billion, which is up 8%, strong volume growth, an increase of 6%, operating ratio of 61.8, which is a 280 basis point improvement versus last year, and EPS of $1.05, a 27% increase.

Speaker Change: Certainly.

Speaker Change: Extremely pleased with these results. I can tell these numbers that I just walked through do not happen by accident, but through execution. So on the operating front, I applaud Mark and his operating team for their continued strong operating performance across this network. They deliver significant improvement across a number of our key operating metrics.

Keith Creel: So, on the operating front, I applaud Mark and his operating team for their continued strong operating performance across this network. They deliver significant improvement across the number of our key operating metrics.

Keith E. Creel: So on the operating front, I applaud Mark and his operating team for their continued strong operating performance across this network. They deliver significant improvement across a number of our key operating metrics. Unfortunately, Mark had an unexpected eye procedure done yesterday, so he's not with us today. So I'm gonna cover his results and his body of work. Average terminal dwell declined 9% in the quarter.

Keith Creel: And, fortunately, Mark had an unexpected aggregate procedure he had done yesterday, so he's not with us today. So, I'm going to cover his results in his body of work. average term rolled well, decline 9% in the quarter, average strain speed improved 6%, locomotive productivity up 10%, and fuel efficiency improved 2%. All of these results reflect a network that's fluid, that's running well and delivering strong service to our customers as we carry that momentum into the second half. And from a safety perspective, train exits were down 4%, and personal injuries an astounding 38% improvement. I'm extremely proud the teams continue focused on safety each and every quarter.

Speaker Change: Unfortunately, Mark had an unexpected eye procedure he had done yesterday, so he's not with us today, so I'm going to cover his results and his body of work.

Keith E. Creel: Average train speed improved 6%. Locomotive productivity was up 10%. And fuel efficiency improved 2%. All of these results reflect a network that's fluid, that's running well, and delivering strong service to our customers as we carry that momentum into the second half. And from a safety perspective, train exits were down 4%, and personal injuries were an astounding 38% improvement. I'm extremely proud that teams continue to focus on safety each and every

Speaker Change: Average terminal dwell declined 9% in the quarter, average train speed improved 6%, locomotive productivity up 10%, and fuel efficiency improved 2%. All of these results reflect a network that's fluid, that's running well and delivering strong service to our customers as we carry that momentum into the second half.

John: And from a safety perspective, train exits were down 4% and personal injuries an astounding 38% improvement. I'm extremely proud the team's continued focus on safety each and every quarter. Commercially, John and his team continue to bring on business that's going to fit our network well, working in close collaboration with our operating and service design team.

John Brooks: Commercially, John and his team continue to bring in business that's gonna fit our network well, working in close collaboration with our operating and service design team. And the team continues to prize the value of the service that this new network uniquely offers. The team's executing on the vision we had when we first proposed putting these networks together, and it's leading us to a differentiated outcome. Well, it's been well publicized.

Keith Creel: Commercially, John and his team continue to bring all business that's going to fit our network well, working in close collaboration with our operating and service design team. And the team continues to price the value of the service that this new network uniquely offers. The team's executing on the vision we have, and we first propose putting these networks together, and it's leading us to a differentiated outcome. Well, that's been well publicized. The freight environment continues to be challenging. We're not making excuses. We're leaning into the challenge; we're creating own opportunities that are uniquely enabled by this new network.

John: And the team continues to price the value of the service that this new network uniquely offers. The team is executing on the vision we had when we first proposed putting these networks together, and it's leading us to a differentiated outcome.

Keith E. Creel: The freight environment continues to be challenging. We're not making excuses. We're leaning into the challenge. We're creating opportunities that are uniquely enabled by this new network. So in closing, let me say I'm extremely pleased with the first half of the year and even more excited about what the second half holds.

Speaker Change: Well, it's been well publicized, the freight environment continues to be challenging, we're not making excuses, we're leaning into the challenge, we're creating opportunities that are uniquely enabled by this new network.

Keith Creel: So, in closing, let me say I'm extremely pleased with the first half of the year, even more excited about what the second half holds. We're in a position of strength. We're carrying momentum to the second half that we're going to build on. As I said in January, we're positioned to deliver an exciting year of value creation. And that is exactly what this team is delivering. We're uniquely positioned to deliver strong value in 24 and, more importantly, for years to come.

Speaker Change: So, in closing, let me say I'm extremely pleased with the first half of the year, even more excited about what the second half holds. We're in a position of strength. We're carrying momentum into the second half that we're going to build on.

John Brooks: We're in a position of strength. We're carrying momentum into the second half that we're going to build on. As I said in January, we're positioned to deliver an exciting year of value creation, and that is exactly what this team is delivering. We're uniquely positioned to deliver strong value in 24, and more importantly, for years to come. So with that said, John, I'm gonna hand it over to you to provide some color on the markets, and then Nadeem will elaborate on the numbers. All right, thank you, Keith, and good afternoon, everyone.

Speaker Change: As I said in January , we're positioned to deliver an exciting year of value creation, and that is exactly what this team is delivering. We're uniquely positioned to deliver strong value in 24, and more importantly, for years to come.

John Brooks: So that said, John, I'm going to hand over to you to provide some color on the markets, and the next game will elaborate on the numbers. All right, thank you, Keith, and good afternoon, everyone. Extremely pleased with the strong top line growth the team delivered this quarter. This franchise is creating the unique opportunities we've talked about since day one. Our operations are strong and we're pricing to the value of the differentiated service we are providing our customers. Now, looking at our results on a combined basis, we delivered freight revenue growth of 8% on a 6% increase in our TMS. Since our TM was up 2% with strong pricing and a slight tailwind from FX, partially offset by mix.

Speaker Change: So with that said, John , I'm going to hand it over to you to provide some color on the markets, and then Nadeem will elaborate on the numbers.

John Brooks: I'm extremely pleased with the strong top-line growth the team delivered this quarter. This franchise is creating the unique opportunities we've talked about since day one. Our operations are strong, and we're pricing to the value of the differentiated service we are providing our customers. Now looking at our results on a combined basis, we delivered freight revenue growth of 8% on a 6% increase in RTM. Cents per RTM was up 2% with strong pricing and a slight tailwind from FX, partially offset by NIC.

John: All right, thank you Keith and good afternoon everyone. I'm extremely pleased with the strong top-line growth the team delivered this quarter.

John: This franchise is creating the unique opportunities we've talked about since day one. Our operations are strong and we're pricing to the value of the differentiated service we are providing our customers.

John: Now, looking at our results on a combined basis, we delivered freight revenue growth of 8% on a 6% increase in RTMs.

John: Cents per RTM was up 2% with strong pricing and a slight tailwind from FX, partially offset by mix.

John Brooks: Now taking a closer look at our second quarter revenue performance, I'll speak to an FX adjusted result on a CPKC combined basis. Starting with Bolt, grain revenues were up 17% on 15% RTM growth. U.S. grain volumes grew 17 percent over the prior year.

John Brooks: Now, taking a closer look at our second quarter revenue performance, I'll speak to an FX adjusted results on a CPKC combined basis. Starting with bulk, grain revenues were up 17% on 15% RTM growth. US grain volumes grew 17% over prior year. Our franchise is benefiting from strong shipments of corn to the PNW, Mexico, and Alberta, along with increased shipments of soybeans and wheat to Mexico, which remains a strong area of synergy growth for CPKC. Canadian grain volumes were up 13% on the quarter. As we saw a stronger than expected spring and summer sales program emerge, if farmers reduce their on-farm inventory in preparation of the upcoming harvest.

John: Now, taking a closer look at our second quarter revenue performance, I'll speak to an FX-adjusted result on a CPKC combined basis.

John: Starting with Bolt, grain revenues were up 17% on 15% RTM growth.

John Brooks: Our franchise is benefiting from strong shipments of corn to the PNW, Mexico, and Alberta, along with increased shipments of soybeans and wheat to Mexico, which remains a strong area of synergy growth for CPK. Canadian grain volumes were up 13% in the quarter, as we saw a stronger than expected spring and summer sales program emerge as farmers reduce their on-farm inventory in preparation of the upcoming harvest. Now looking forward, early indications are that this harvest will be more in line with our five-year average, or if not, stronger. That, coupled with our regulated grain pricing of approximately 6.5%, has us well positioned in Canadian grain.

John: U.S. grain volumes grew 17% over prior year. Our franchise is benefiting from strong shipments of corn to the PNW.

John: Mexico and Alberta, along with increased shipments of soybeans and wheat to Mexico, which remains a strong area of synergy growth for CBKC.

John: Canadian grain volumes were up 13% on the quarter as we saw a stronger than expected spring and summer sales program emerged as farmers reduced their on-farm inventory in preparation of the upcoming harvest.

John Brooks: Now, looking forward, early indications are that this harvest will be more in line with our five-year average or, if not stronger. That couple with our regulated grain pricing of approximately 6.5% have us well positioned in Canadian grain. Now moving on to podcast revenue grew up 24% on 11% volume growth. We moved higher volumes of pot-ass with camper-tex to their Portland Terminal as we laughed the impact of their ship loader outage back in April of 23. Now looking forward, pot-ass supply chain is performing very well and export demand is sold out for the second half of the year.

John: Now, looking forward, early indications are that this harvest will be more in line with our five-year average, or if not, stronger.

John: That, coupled with our regulated grain pricing of approximately 6.5%, has us well positioned in Canadian grain.

John Brooks: Now moving on to PODAS, revenues are up 24% on 11% volume growth. We moved higher volumes of potash with Campitex to their Portland terminal as we lapped the impact of their shiploader outage back in April.

John: Now moving on to PODAS, revenues are up 24% on 11% volume growth.

John: We moved higher volumes of potash with Campitex to their Portland terminal as we lapped the impact of their shiploader outage back in April of 23.

John Brooks: Now looking forward, the potash supply chain is performing very well, and export demand is sold out for the second half of the year. We are on pace to set a record all-time tonnage with Campa, Texas here. Coal revenue was up 3% on a 2% decline in volume.

John: Now, looking forward, Potash Supply Chain is performing very well, and export demand is sold out for the second half of the year. We are on pace to set a record all-time tonnage with Campa, Texas, here.

John Brooks: We are on pace to set a record all-time tonnage with Camper-Tex this year. We can demand for our US coal franchise, and that weekly weakness was partially offset by more export Canadian coal to Vancouver and Thunder Bay. On the merchandise side, energy chemicals and plastics revenue grew 10% on a 14% volume growth. The volume growth in the quarter was driven by higher crude as we laughed the impact of some outages last year and growth from synergies across just about all of the ECP portfolio, including LPGs, plastics for renewable diesels, and refined fuels. We are excited about the wins we've captured in this space as we are connecting markets from Alberta to the Gulf Coast and into Mexico with our single line haul service.

John Brooks: Lower natural gas prices weakened demand for our US coal franchise, and that weakness was partially offset by more export of Canadian coal to Vancouver and Thunder Bay. On the merchandise side, energy, chemicals, and plastics revenue grew 10% on 14% volume growth. Volume growth in the quarter was driven by higher crude as we lapped the impact of some outages last year, and growth from synergies across just about all of the ECP portfolio, including LPGs, plastics, renewable diesel, and refined fuels.

John: Coal revenue was up 3% on a 2% decline in volume.

John: Lower natural grass prices weakened demand for our U.S. coal franchise, and that weakness was partially offset by more export Canadian coal to Vancouver and Thunder Bay.

John: On the merchandise side, energy, chemicals, and plastics revenue grew 10% on a 14% volume growth.

Speaker Change: The volume growth in the quarter was driven by higher crude as we lapped the impact of some outages last year, and growth from synergies across just about all of the ECP portfolio, including LPGs, plastics, renewable diesels, and refined fuels.

John Brooks: We are excited about the winds we've captured in this space as we are connecting markets from Alberta to the Gulf Coast and into Mexico with our single line haul service. Looking forward to the ongoing ramp-up of these synergies, we are set up for a solid second half of 2024 in ECP. In the forest products area, we were down 1% in revenues on a 1% decline in volume.

Speaker Change: We are excited about the winds we've captured in this space as we are connecting markets from Alberta to the Gulf Coast and into Mexico with our single line haul service.

John Brooks: Looking forward, the ongoing ramp up of these synergies, we are set up for a solid second half of 24 and ECP. In the forest products area, we are down 1% revenues on a 1% decline in volumes. Forest product volumes continue to be challenged by a soft macro environment impacting both our paper and lumber products. However, we are largely offsetting this headwind with synergy growth and extended line haul, shipping more lumber from Canadian producers down to our franchise in Texas and the Gulf markets. Metals, minerals and consumer products, revenue was down 3% on a 9% volume decline.

Speaker Change: By looking forward to the ongoing ramp-up of these synergies, we are set up for a solid second half of 2024 in ECP.

Speaker Change: In the forest products area, we were down 1% revenues on a 1% decline in volumes.

John Brooks: Force product volumes continue to be challenged by a soft macro environment impacting both our paper and lumber products. However, we are largely offsetting this headwind with synergy growth and extended line haul, shipping more lumber from Canadian producers down to our franchise in Texas in the golf market. Metals, Minerals, and Consumer Products revenue was down 3% on a 9% volume decline.

Speaker Change: Force product volumes continue to be challenged by a soft macro environment impacting both our paper and lumber products.

Speaker Change: However, we are largely offsetting this headwind with synergy growth and extended line haul, shipping more lumber from Canadian producers down to our franchise in Texas in the Gulf markets.

Speaker Change: Metals, Minerals, and Consumer Products revenue was down 3% on a 9% volume decline.

John Brooks: Volumes in the quarter were impacted by weakness and frax and driven by the lower natural graphs prices, but also a labor destruction we had at our Sormatel Steel Facility in Mexico. Looking forward, although we expect the weakness and frax to continue, the labor destruction has ended and we expect Arthler to ramp up production in the back after the year. In automotive, we produced another record quarter with revenues of 28% on 21% volume growth and exceptional performance by this team. Our auto franchise is benefiting from higher, longer haul volumes out of Mexico as their closed loop model service solution only continues to ramp up.

John Brooks: Volumes in the corridor were impacted by weakness in frac sand, driven by lower natural gas prices, but also by the labor disruption we had at the ArcelorMittal Steel Facility in Mexico. Now looking forward, although we expect the weakness in frac sand to continue, the labor distraction has ended, and we expect Arthler to ramp up production in the back half of the year. In automotive, we produced another record quarter with revenues up 28% on 21% volume growth, an exceptional performance by this team.

Speaker Change: Volumes in the corridor were impacted by weakness in track sands, driven by the lower natural gas prices, but also a labor destruction we had at ArcelorMittal Steel Facility in Mexico.

Speaker Change: Now, looking forward, although we expect the weakness in frack to continue, the labor distraction has ended and we expect Arthler to ramp up production in the back half of the year.

Speaker Change: In automotive, we produced another record quarter with revenues up 28% on 21% volume growth, an exceptional performance by this team.

John Brooks: Our auto franchise is benefiting from higher, longer haul volumes out of Mexico as our closed-loop model service solution only continues to ramp up. I'm also pleased to share that our new Dallas auto compound, located at our Wiley, Texas, Intermodal Terminal, opened in late June.

Speaker Change: Our auto franchise is benefiting from higher, longer haul volumes out of Mexico as our closed-loop model service solution only continues to ramp up.

John Brooks: I'm also pleased to share that our new Dallas auto compound located at our Wiley Texas Intermodal Thermal opened in late June. This compound is part of our playbook that unlocks an entirely new supply chain model for the OEMs, giving them new competition. Service and capacity certainty like they've never had before. Our auto business continues to deliver differentiated growth, and we expect a strong performance as we move through the second half of the year. Now, on the other side, revenue was down 7%, and a 3% volume decline. Starting with domestic intermodal, volumes were up 3%, despite a soft base demand environment.

Speaker Change: I'm also pleased to share that our new Dallas auto compound located at our Wiley, Texas, Intermodal Terminal opened in late June .

John Brooks: This compound is part of our playbook that unlocks an entirely new supply chain model for the OEMs, giving them new competition, service, and capacity certainty like they've never had before. Our auto business continues to deliver differentiated growth, and we expect a strong performance as we move through the second half of the year. Now, on the intermodal side, revenue was down 7% and 3% volume decline.

Speaker Change: This compound is part of our playbook that unlocks an entirely new supply chain model for the OEMs.

Speaker Change: giving them new competition, service, and capacity certainty like they've never had before.

Speaker Change: Our auto business continues to deliver differentiated growth, and we expect a strong performance as we move through the second half of the year.

Speaker Change: Now on the intermodal side, revenue was down 7% and a 3% volume decline.

John Brooks: Starting with domestic intermodal volumes, which were up 3% despite a soft base demand environment, our MMX or 180-181 cross-border service continues to perform extremely well in what I would consider a very challenging domestic market. Volumes on this service are up 50% since our exit rates at the end of 2023, and we have a strong pipeline of opportunities stacked up for the back half of the year. This includes new wholesale opportunities, new retail opportunities, temp control service operation, and new joint line routes into both the Southeast U.S. and the Ohio Valley market. Moving on to the international side, volumes were down 9%, primarily related to the timing of the impact of lingering strike uncertainty and the timing of some share shifts in business.

Speaker Change: Starting with domestic intermodal, volumes were up 3% despite a soft base demand environment.

John Brooks: Our MMX or 180-181 cross-border service continues to perform extremely well in what I would consider a very challenging domestic market. Volumes on this service are up 50% since our exit rates at the end of 2023, and we have a strong pipeline of opportunities stacked up to the back half of the year. This includes new inter-hole sale opportunities, new retail opportunities, 10th control service operators, and new joint line routes into both the Southeast US and the Ohio Valley markets. Moving on to the international side, volumes were down 9%, primarily related to the timing of the impact of lingering strike uncertainty and the timing of some share shifts in business.

Speaker Change: Our MMX or 180-181 cross-border service continues to perform extremely well in what I would consider a very challenging domestic market.

Speaker Change: Volumes on this service are up 50% since our exit rates at the end of 2023, and we have a strong pipeline of opportunities stacked up for the back half of the year.

Speaker Change: This includes new wholesale opportunities, new retail opportunities, temp control service operating, and new joint line routes into both the Southeast U.S. and the Ohio Valley markets.

Speaker Change: And moving on to the international side, volumes were down 9%, primarily related to timing of the impact of lingering strike uncertainty and the timing of some share shifts in business.

John Brooks: With new business ramping up and a solid outlook for demand, we are well positioned across all our ports for the second half of the year. To close, volumes in the first half came in slightly better than we expected and were off to a strong starting Q3. With a macro-remain challenging in some areas, overall demand has stabilized, and more importantly, we continue to have line-of-sight strong differentiated growth from synergies, self-help initiatives, and discipline pricing. The operations team is delivering reliable, resilient service to our customers, and my team is laser-focused on selling into that service and taking advantage of our expansive new network.

John Brooks: With new business ramping up and a solid outlook for demand, we are well positioned across all our ports for the second half of the year. To close, volumes in the first half came in slightly better than we expected, and we're off to a strong start in Q3. Well, the macro environment remains challenging in some areas, overall demand has stabilized, and more importantly, we continue to have line of sight, strong differentiated growth from synergies, self-help initiatives, and disciplined pricing. The operations team is delivering reliable, resilient service to our customers.

Speaker Change: With new business ramping up and a solid outlook for demand, we are well positioned across all our ports for the second half of the year.

Speaker Change: To close, the volumes in the first half came in slightly better than we expected, and we're off to a strong start in Q3.

Speaker Change: Well, the macro remains challenging in some areas. Overall demand has stabilized, and more importantly, we continue to have line of sight, strong differentiated growth from synergies, self-help initiatives, and disciplined pricing.

Nadeem S. Velani: And my team is laser focused on selling into that service, taking advantage of our expansive new network. I'm excited about what we have accomplished so far this year and even more about the opportunities we have ahead of us. So with that, I'll stop and pass it over to Nadeem.

Speaker Change: The operations team is delivering reliable, resilient service to our customers and my team is laser focused on selling into that service.

John Brooks: I'm excited about what we have accomplished so far this year, and even more for the opportunities we have ahead of us.

Speaker Change: and taking advantage of our expansive new network. I'm excited about what we've accomplished so far this year and even more for the opportunities we have ahead of us.

Nadine Velani: So if that'll stop, then pass it over to Nadine. Well, thanks, John. It's a great report. So let me start by sharing my enthusiasm for the strong performance for the quarter. Our success is driven by the hard work and dedication of CPKC's railroads, and I'm proud of what the team is accomplishing. Looking at the quarter, CPKC's reported operating ratio was 64.8%, and the core adjusted combined operating ratio came in at 61.8%. Earnings per share was 97 cents, and core adjusted combined earnings per share was $1.5, up 27%, 27%.

Nadeem S. Velani: Well, thanks, John. That's a great report. So, let me start by sharing my enthusiasm for the strong performance for the quarter. Our success is driven by the hard work and dedication of CPKC's railroaders, and I'm proud of what the team has accomplished. Looking at the quarter, CPKC's reported operating ratio was 64.8%, and the core adjusted combined operating ratio came in at 61.8%. Earnings per share was $0.97, and core adjusted combined earnings per share was $1.05, up 27%.

Speaker Change: With that, I'll stop and pass it over to Nadeem. Well, thanks, John . That's a great report. So let me start by sharing my enthusiasm for the strong performance for the quarter. Our success is driven by the hard work and dedication of CPKC's railroaders, and I'm proud of what the team is accomplishing.

Nadeem: Looking at the quarter, CPKC's reported operating ratio was 64.8%, and the core adjusted combined operating ratio came in at 61.8%.

Nadeem: Earnings per share was $0.97 and core adjusted combined earnings per share was $1.05, up 27%.

Nadine Velani: Similar to what we shared in previous quarters, our combined operating expenses in 2023 illustrate the effects of the acquisition for the second quarter. Is that the acquisition closed on January 1, 2022. I will speak to effects adjusted combined operating insults in these prepared marks. Now, taking a closer look at our income statement, reported operating expenses provided on slide 11 in combined operating expenses on slide 12, where I'll focus my comments. Excluding adjustments, COPIN benefits expense was $610 million. The year-over-year decline in COPIN benefits was driven by reduced stock-based compensations, as well as efficiency gains from reduced over time, improved fluidity, and engineering productivity gains.

Nadeem S. Velani: Similar to what we shared in previous quarters, our combined operating expenses in 2023 illustrate the effects of the acquisition for the second quarter, as if the acquisition closed on January 1, 2022. I will speak to FX Adjusted Combined Operating Results in these prepared, Now, taking a closer look at our income statement, reported operating expenses are provided on slide 11 and combined operating expenses on slide 12, where I'll focus my comments. Looting Adjustments, Comp, and Benefits Expense was $610 million.

Speaker Change: Similar to what we shared in previous quarters, our combined operating expenses in 2023 illustrate the effects of the acquisition for the second quarter, as if the acquisition closed on January 1, 2022. I will speak to effects-adjusted combined operating results in these prepared remarks.

Nadeem S. Velani: The year-over-year decline in comp and benefits was driven by reduced stock-based compensation, as well as efficiency gains from reduced overtime, improved fluidity, and engineering productivity gains. This is partially offset by inflation, volume-driven increases from higher GTMs, and higher current service costs from our DB pension plan due to a lower discount rate at year-end 2023. Looking to the rest of 2024, we continue to expect average headcount to be roughly flat on a year-over-year basis, driving further labor productivity gains as we grow volume. Fuel expense was $466 million, up 9%.

Speaker Change: Now taking a closer look at our income statement, reported operating expenses provided on slide 11 and combined operating expenses on slide 12, where I'll focus my comments.

Speaker Change: Excluding adjustments, comp and benefits expense was $610 million. The year-over-year decline in comp and benefits was driven by reduced stock-based compensations as well as efficiency gains from reduced overtime, improved fluidity, and engineering productivity gains.

Nadine Velani: This was partially offset by inflation, volume-driven increases from higher GCMs, and higher current service costs from our DB pension plan, due to a lower discount rate at year-end 2023. Looking for the rest of 2024, we continue to expect average headcounts to be roughly flat on a year-over-year basis, driving further labor productivity gains as we grow volumes. Fuel expense was 466 million, up 9%. The increase was primarily driven by a 24 million or 4% increase in fuel price, along with volume-driven increases from higher GCNs. Increases from price and volume are partially offset by a 2% improvement in fuel efficiency, which resulted in a $9 million savings.

Speaker Change: This was partially offset by inflation, volume-driven increases from higher GTMs, and higher current service costs from our DB pension plan due to a lower discount rate at year-end 2023.

Speaker Change: Looking to the rest of 2024, we continue to expect average headcount to be roughly flat on a year-over-year basis, driving further labor productivity gains as we grow volumes.

Nadeem S. Velani: The increase was primarily driven by a $24 million, or 4% increase in fuel price, along with volume-driven increases from Clier GTM. However, increases from price and volume are partially offset by a 2% improvement in fuel efficiency, which resulted in $9 million in savings. Another area where we are seeing network efficiency gains translate directly into margin improvement, excluding adjustments, materials expense was $95 million. The decline in the quarter was driven primarily by the timing of locomotive and freight car maintenance, as activity schedules across the network are aligned. Equipment rents were $82 million, down 5% year-over-year.

Speaker Change: Fuel expense was $466 million, up 9%. The increase was primarily driven by a $24 million, or 4%, increase in fuel price, along with volume-driven increases from higher GTMs.

Speaker Change: Increases from price and volume are partially offset by a 2% improvement in fuel efficiency, which resulted in $9 million in savings, another area where we are seeing network efficiency gains translate directly into margin improvement.

Nadine Velani: Another area where we are seeing network efficiency gains translate directly into margin improvement. Excluding adjustments, material expense was 95 million. The decline in the quarter was driven primarily by timing of locomotive and freight car maintenance, as activity schedules across the network are aligned. Equipment rents were 82 million, down 5% year-over-year. The decline was driven by reduced car hire payments and receipts, along with efficiency gains from improved cycle times and increased network velocity. Appreciation expense was up 6%, resulting from a higher asset base. Excluding adjustments, purchase services and other expense was 581 million. Cost inflation and terminal service costs were partially offset by a year-over-year decline in casual state expense.

Speaker Change: Excluding Adjustments, Materials Expense was $95 million.

Speaker Change: The decline in the corridor was driven primarily by timing of locomotive and freight car maintenance as activity schedules across the network are aligned.

Nadeem S. Velani: The decline was driven by reduced car hire payments and receipts, along with efficiency gains from improved cycle times and increased network velocity. However, depreciation expense was up 6%, resulting from a higher... Including adjustments, purchase services, and other expenses, the total amount was $581 million.

Speaker Change: Equipment rents were $82 million, down 5% year-over-year. The decline was driven by reduced car hire payments and receipts, along with efficiency gains from improved cycle times and increased network velocity.

Speaker Change: Depreciation expense was up 6% resulting from a higher acid base.

Speaker Change: Excluding adjustments, purchase services and other expense was $581 million.

Nadeem S. Velani: The cost of inflation and terminal service costs were partially offset by a year-over-year decline in casualties. So overall, top line growth in the quarter coupled with strong cost control and execution resulted in a 17% increase in core adjusted combined operating income and a 280 basis point improvement in our core adjusted combined operating ratio to 61.8%. Moving below the line on slide 13.

Speaker Change: Cost of inflation and terminal service costs were partially offset by a year-over-year decline in casualty expense.

Nadine Velani: So overall top line growth in the quarter, coupled with strong cost control and execution, resulted in a 17% increase in core adjusted combined operating income and a 280 basis point improvement in our core adjusted combined operating ratio to 61.8%. Moving below the line on slide 13, other income was 40 million, driven by higher equity income, along with a gain on some debt repurchases in the quarter. Other components of net periodic benefit recovery was 88 million in Q2. This reflects the lower discount rate compared to 2023 and partially offsetting the headwinds of common benefits benefits from current service cost.

Speaker Change: So overall, top-line growth in the quarter coupled with strong cost control and execution resulted in a 17% increase in core adjusted combined operating income and a 280 basis point improvement in our core adjusted combined operating ratio to 61.8%.

Nadeem S. Velani: Other income was $40 million, driven by higher equity income, along with a gain on some debt repurchases in the quarter. Other components of net periodic benefit recovery were $88 million in Q2. This reflects a lower discount rate compared to 2023 and partially offsetting the headwinds of comp and benefits from current service. Net interest expense was $200 million, or $195 million excluding the impact of the purchase account. The decline was driven by a reduced debt. Income tax expense was $292 million, or $328 million on a core adjusted combined basis.

Speaker Change: moving below the line on slide 13

Speaker Change: Other income was $40 million, driven by higher equity income, along with a gain on some debt repurchases in the quarter.

Speaker Change: Other components of net periodic benefit recovery was $88 million in Q2. This reflects a lower discount rate compared to 2023 and partially offsetting the headwinds of comp and benefits from current service costs.

Nadine Velani: Net interest expense was 200 million, or 195 million excluding the impact of purchase accounting. The decline was driven by reduced debt balance. Income tax expense was 292 million or 328 million on a core adjusted combined basis. We still expect that CPKC core adjusted expected tax rate to be approximately 25% for the year.

Speaker Change: Net interest expense was $200 million or $195 million excluding the impact of purchase accounting.

Speaker Change: The decline was driven by a reduced debt balance.

Speaker Change: Income tax expense was $292 million or $328 million on a core adjusted combined basis.

Nadeem S. Velani: We still expect the CPKC core adjusted expected tax rate to be approximately 25% for the year. Turning to slide 14, we are generating strong cash flow and cash provided by operating activities of $1,278,000,000 in Q2. Capital investments in safety and growth remain our priority. In this quarter, we reinvested $808 million, in line with our expectation to invest approximately $2.75 billion in 2024. We continue to make strategic investments in capacity across our network, positioning us to continue efficiently absorbing the growth that the merger has enabled. For the quarter, we generated $526 million in adjusted combined free cash flow and continue to repay debt.

Speaker Change: We still expect the CPKC core adjusted expected tax rate to be approximately 25% for the year.

Nadine Velani: Turning the slide 14, we are generating strong cash flow and cash provided by operating activities of 1,278 million in Q2. Capital investments in safety and growth remain our priority. In this quarter, we reinvested 808 million in line with our expectation to invest approximately 2.75 billion in 2024. We continue to make strategic investments in capacity across our network, positioning up the continued efficiently absorbing the growth that the merger has enabled. On the quarter, we generated 526 million and adjusted combined free cash flow and continue to repay debt. Our leverage ratio is 3.2 times, and we still expect to reach target leverage in early 2025.

Speaker Change: Turning the slide 14, we are generating strong cash flow and cash provided by operating activities of $1,278,000,000 in Q2.

Speaker Change: Capital investments in safety and growth remain our priority. In this quarter, we reinvested $808 million, in line with our expectations to invest approximately $2.75 billion in 2024.

Speaker Change: We continue to make strategic investments in capacity across our network, positioning us to continue efficiently absorbing the growth that the merger has enabled.

Speaker Change: On the quarter, we generated $526 million in adjusted combined free cash flow and continue to repay debt. Our leverage ratio is 3.2 times, and we still expect to reach target leverage in early 2025, at which point we will evaluate shareholder returns with our board.

Nadeem S. Velani: Our leverage ratio is 3.2 times, and we still expect to reach target leverage in early 2025, at which point we will evaluate shareholder returns with our board. In review of the quarter, the team delivered another strong volume growth ahead of expectation, along with continued discipline on price and cost control. Synergies are continuing to ramp up, and the network is performing well. We continue to gain momentum on our expense synergies, improvements in velocity as well as locomotive and car productivity are generating operating savings.

Nadine Velani: At which point we will evaluate shareholder returns with our board. and Review of the Quarter, the team delivered another strong volume growth ahead of expectations, along with continued discipline on price and cost control. Synergies are continuing to ramp, and the network is performing well. We continue to gain momentum on our expense synergies, improvements in velocity, as well as locomotive and car productivity, or generating operating savings. We're also gaining procurement savings through consolidating agreements across the company, as well as savings and GNA through combining processes and functions.

Speaker Change: In review of the quarter, the team delivered another strong volume growth ahead of expectations, along with continued discipline on price and cost control.

Speaker Change: Synergies are continuing to ramp as the network is performing well.

Speaker Change: We continue to gain momentum on our expense synergies, improvements in velocity, as well as locomotive and car productivity are generating operating savings.

Nadeem S. Velani: We're also gaining procurement savings through consolidating agreements across the company, as well as savings in G&A through combining processes. We are well on track to deliver double-digit core adjusted combined earnings growth, growth driven entirely from the business and without any help from shareholder returns. This network is delivering strong and profitable growth, and I'm excited for the opportunities we have ahead. With that, let me turn it back to you.

Speaker Change: We are also gaining procurement savings through consolidating agreements across the company, as well as savings in G&A through combining processes and functions.

Nadine Velani: We're well-entracked to deliver double-digit core, just to combine earnings growth, growth driven entirely from the business and without any help from shareholder returns. This network is delivering strong and profitable growth, and I'm excited for the opportunities we have ahead.

Speaker Change: We're well on track to deliver double-digit, core-adjusted combined earnings growth.

Speaker Change: Growth driven entirely from the business and without any help from shareholder returns.

Keith Creel: With that, let me turn it back to you over to you, Keith. That's great, guys.

Speaker Change: This network is delivering strong and profitable growth, and I'm excited for the opportunities we have ahead. With that, let me turn it back over to you, Keith. That's great, guys. Let's open it up for questions.

Keith E. Creel: Over to you, Keith. That's great, guys. Let's open it up for questions. Thank you, Mr. Creel. Ladies and gentlemen, if you would like to ask a question, simply press the Star-Pad.

Bo: Let's open it up for questions. Thank you, Mr. Creel. Ladies and gentlemen, if you would like to ask a question, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, again, press star two. As previously highlighted, please lend yourself to one question.

Speaker Change: Thank You Mr. Creel. Ladies and gentlemen if you would like to ask a question simply press star then the number 1 on your telephone keypad. If you would like to withdraw your question again press star 2. As previously highlighted please limit yourself to one question. We go first this afternoon to Chris Wetherbee with Wells Fargo.

Chris Weatherby: We go first this afternoon to Chris Weatherby with Wells Fargo. Thanks, good afternoon, guys, and condolences to the CPKZ family and certainly to Pat and his family as well. It'll be missed.

Operator: If you would like to withdraw your question, again, the press has previously highlighted. Go first this afternoon to Chris Wetherbee. Hey, thanks. Good afternoon, guys. And condolences to the CPKC family and certainly to Pat and his family, Pat's family as well. He'll be missed.

Christian F. Wetherbee: Hey thanks good afternoon guys and condolences to the CPKC family and certainly to Pat and Pat's family as well. You'll be missed.

Christian F. Wetherbee: Um, you know, if I could maybe start a little bit on the synergy side, the revenue synergy side, maybe we could get a sense of how that's kind of progressing. And as we think about the back half of the year, could we see an acceleration of sorts of activity, you know, get a sense of kind of what we're thinking about in terms of revenue, revenue, synergy, progress, and maybe what we think the exit rate could look like as we get through the end of 24? Yeah, Chris, so it's John here.

John Brooks: If I could maybe start a little bit on the synergy side, the revenue synergy side, maybe if we could get a sense of how that's kind of progressing, and as we think about the back half of the year, could we see an acceleration sort of activity? I just get a sense of kind of what we're thinking about in terms of revenue synergy progress and maybe what we think the exit rate could look like as we get through the end of 24.

Christian F. Wetherbee: Um, you know, if I could maybe start a little bit on the synergy side, the revenue synergy side, maybe if we could get a sense of how that's kind of progressing. And as we think about the back half of the year, could we see

Speaker Change: and acceleration sort of activity, I just get a sense of kind of what we're thinking about in terms of revenue synergy progress and maybe what we think the exit rate could look like as we get through the end of 24.

John Brooks: Yeah, Chris. So it's John here. Super pleased with progress. We came out of the gates really strong last year and a number of announcements and piled up a pretty good, you know, exit rate in that 350 range, which we've talked about at the end of 2023. And I mean, maybe just to get to the point, I fully expect, you know, we said we double that, but I fully expect that we're on a run rate that could get us closer to that 800 million type number as we exit 2024. And if you think about that, it's really spread pretty evenly across our book. Just to give you a sense, about half of that I would bump in area of international domestic automotive.

John Brooks: I'm super pleased with the progress. We came out of the gates, you know, really strong last year with a number of announcements and piled up a pretty good exit rate in that 350 range, which we talked about at the end of 2023. And I mean, maybe just to get to the point, I fully expect, you know, we said we'd double that, but I fully expect that we're on a run rate that could get us closer to that 800 million-type number as we exit 2024. And if you think about that, it's really spread pretty evenly across our book.

Speaker Change: Yeah, Chris, so it's John here. Super pleased with the progress. We came out of the

Speaker Change: The Gates were really strong last year and a number of announcements and piled up a pretty good exit rate in that 350 range which we've talked about at the end of 2023.

Speaker Change: And I mean, maybe just to get to the point, I fully expect, you know, we said we'd double that, but I fully expect that we're on a run rate that could get us closer to that $800 million.

Speaker Change: Type number as we exit 2024. And if you think about that, it's really spread pretty evenly across our book. Just to give you a sense, about half of that, I would

Christian F. Wetherbee: Just to give you a sense, about half of that, I would, bump in the area of intermodal, so international domestic automotive. And then the other half, maybe split pretty evenly between our bulk franchise, as we've really seen here this summer, our grain shipments down into Mexico accelerate. And then the other half of that being our ECP merchandise business. So I'm quite pleased with where we sit so far here. And I expect, again, a pretty good ramp-up as we move through the second half of 24. Thanks very much.

Speaker Change: in the area of intermodal, so international domestic automotive.

John Brooks: And then the other half maybe split pretty evenly between our bulk franchise as we've really seen here this summer, our grain shipments down in the Mexico accelerate, and then the other half of that being our ECP merchandise business. So I'm quite pleased with where we sit so far here. And I expect again, a pretty good ramp up, as we move through the second half of 24. Thanks very much.

Speaker Change: And then the other half, maybe split pretty evenly between our bulk franchise, as we've really seen here this summer, our grain shipments down into Mexico accelerate, and then the other half of that being our ECP merchandise.

Speaker Change: Business. So, I'm quite pleased with where we sit so far here, and I expect, again, a pretty good ramp up as we move through the second half of 24.

Chris Weatherby: Appreciate it. Yep.

Chris Weatherby: Thanks, Chris.

Speaker Change: Great. Thanks very much. Appreciate it.

Walter Spracklin: Thank you. We go next now to Walter Spratlin at our BC capital markets. Yeah, thanks very much.

Chris: Yep, thanks Chris.

Walter Noel Spracklin: I appreciate it. Yep. Thanks, Chris. Thank you. We go next now to Walter Spracklin at RBC. Thanks very much. Good afternoon, everyone.

Speaker Change: Thank you. We go next now to Walter Spracklin at RBC Capital Markets.

John Brooks: So, John, sticking with you, you spent a bit of your time there in your prepared remarks talking about the Dallas auto compound opening and some of the opportunity there. Can you talk a little bit about the capacity there? How much you could ramp it up? How quickly it could come on?

Walter Spracklin: I can't forget everyone. So John, it's taking with you. You spent a bit of your time there on the, on your prepared remarks, talking on the Dallas AutoCombound opening and some of the opportunity there. Can you talk a little bit about the capacity there? How much you could ramp it? How quickly it could come on? And, and if you could frame the quantitatively even better, but just here is to hear what the upside there is on the on that particular light. Yeah, Walter, so I'm really excited about this one. You know, this is an opportunity, you know, similar to the play Looking Canada where we identified the land available down and widely and aggressively got after that opportunity.

Walter Noel Spracklin: Thanks very much. Good afternoon, everyone. So, John , sticking with you, you spent a bit of your time up there on your prepared remarks, talking on the Dallas auto compound opening and some of the opportunity there. Can you talk a little bit about

Walter Noel Spracklin: the capacity there, how much you could ramp it, how quickly it could come on, and if you could frame it quantitatively even better. But just curious to hear what the upside there is on that particular lane.

John Brooks: And if you could frame it quantitatively, even better. But just curious to hear what the upside there is on that particular lane. Yeah, Walter, so I'm really excited about this one. You know, this is an opportunity, similar to the playbook in Canada, right? We identified the land available down in Wylie and aggressively went after that opportunity.

John: Yeah, Walter, so I'm really excited about this one.

Speaker Change: You know, this is an opportunity.

Speaker Change: You know, similar to the playbook in Canada, where we identified the land available down in Wylie and aggressively got after that opportunity.

John Brooks: You know, in terms of capacity, we're looking at a facility that will do, let's say, 160,000 to 180,000 VINs annually. You know, we utilize about 35 acres or so there. Right now, we've got three OEMs that are signed on and actively shipping into the facility. You know, my sense is those three, at full run rate, Walter, will get us to 75% capacity, roughly, in that neighborhood. And then we've got two or three fish on the line that I'm pretty excited about that I can see coming on, maybe even towards the end of this year, but certainly into 2025.

John Brooks: You know, in terms of capacity, we're looking at a facility that'll do, let's say, 160 to 180,000 VINs annually. You know, we utilized about 35 acres or so there. You know, right now we've got three OEMs that are signed on and actively shipping into the facility. You know, my sense is those three probably a full run rate, Walter, get us to 75% capacity, roughly in that neighborhood. And then we've got two or three fish on the line that I'm pretty excited about that I can see coming on and maybe even towards the end of this year, but certainly in the 2025.

Speaker Change: In terms of capacity, we're looking at a facility that will do, let's say, 160,000 to 180,000 VINs annually. We utilized about...

Speaker Change: 35 acres or so there. You know, right now, we've got three OEMs that are signed on and actively shipping into the facility.

Speaker Change: You know, my sense is those three probably at full run rate. Walter, get us to 75% capacity roughly in that neighborhood.

Speaker Change: And then we've got two or three fish on the line that I'm pretty excited about that I can see coming on, maybe even towards the end of this year, but certainly into 2025.

John Brooks: And you know, if you look to the future, this the great thing about that location is it's expandable. We can add some capacity there, and it's really going to provide a pretty unique solution. I also think, as you see the production grow in the eastern U.S. With connections to the NF in CFX, that becomes a pretty big opportunity for the future. Yeah, I would I would just say that that that entire opportunity, as well as we execute, is well beyond our investor; they got it wasn't in the base plan. You've got 430 acres left, Walter, to expand into, so we have the capacity.

John Brooks: And, you know, as you look to the future, the great thing about that location is that it's expandable. We can add some capacity there. And it's really going to provide a pretty unique solution, I also think, as you see the production grow in the eastern U.S. with connections to the NS and CSX, that becomes a pretty big opportunity for the future. Yeah, I would just add to that, that entire opportunity, as well as we execute, is well beyond our investor day guidance. It wasn't in the base plan.

Speaker Change: And, you know, if you look to the future...

Walter Noel Spracklin: The great thing about that location is it's expandable.

Walter Noel Spracklin: We can add some capacity there.

Walter Noel Spracklin: and it's really going to provide a pretty unique solution, I also think, as you see the production grow in the eastern U.S.

Speaker Change: with connections to the NS and CSX, that becomes a pretty big opportunity for the future. Yeah, I would just add to that, that entire opportunity, as well as we execute, is well beyond...

Keith E. Creel: You've got 430 acres left, Walter, to expand into, so we have the capacity, we have the land. I think we're going to have business opportunities. We've got great partners with CSX and with NSX to reach all other markets and feed traffic into that Dallas market and then down to Mexico. So I think it complements this network that we're optimizing uniquely. And if anyone's going to be in Dallas in September, we're going to be doing a tour there.

Speaker Change: farm yesterday got it. It wasn't in the base plan.

Speaker Change: You've got 430 acres left.

John Brooks: We have the land. I think we're going to have the business opportunities. We've got great partners with CSX and within us to reach all their markets and feed traffic into that Dallas market and then down to Mexico. So I think it compliments uniquely this this network that we're optimized.

Speaker Change: Walter to expand into so we have the capacity we have the land I think we're gonna have the business opportunities We've got great partners with CSX and with NS

Speaker Change: to reach all other markets and feed traffic into that Dallas market and then down to Mexico. So I think it complements uniquely this network that we're optimizing.

John Brooks: And if anyone's going to be in Dallas in September, we're going to be doing a tour there. Yeah, we're happy to show that facility off in September.

John Brooks: Yeah, we're happy to show that facility off in September. All right. Thank you very much.

Speaker Change: And if anyone's going to be in Dallas in September , we're going to be doing a tour there. Yeah, we're happy to show that facility off in September .

Walter Spracklin: All right, thank you very much for your time. Thanks, Walter.

Walter Noel Spracklin: Appreciate the time. Thanks, Walter. Thank you. We go next now to Fadi Chamoun at BMO Capital. Yeah, good, he's taking my question. Keith, maybe can you give us an update?

Speaker Change: All right. Thank you very much.

Fadi Chamoun: Thank you. We go next now to Foddy Channel at BMO Capital Markets. Yeah, good. For taking my question, Keith, maybe can you give us an update?

Walter Noel Spracklin: Thanks, Walter.

Speaker Change: Thank you. We go next now to Fadi Chamoun at BMO Capital Markets.

Speaker Change: Y'all are good.

Fadi Chamoun: Thanks for taking my question. Keith, maybe, can you give us an update?

Fadi Chamoun: Patient, and I wanted to ask you, John, typically, your second half does end up being a little bit stronger than the first half from a volume perspective, like just typical seasonality, I guess. But how are you seeing some of the diversion issues that we have? Experienced in the second quarter, and you're experiencing now that stabilizing effect. Do you think that there's potential for more? Kind of headwind on that front as we look into the third and fourth quarters? Hey, Fadi, you cut out on the question to Keith. Can you just repeat, please, for the first part?

Fadi Chamoun: And I wanted to ask you, John, like, you know, typically your second half does end up being a little bit stronger than the first half from a volume perspective. It's just difficult to even out here, I guess, but how do you see the diversion issues that we have. experienced in the second quarter and you're experiencing now the stabilizing, do you think that there's potential for more kind of headwind on that front that we look into the third and fourth quarter? Hey Fadi, you cut out on the question to Keith. Can you repeat, please, for the first part?

Fadi Chamoun: I wanted to ask you, John , typically your second half does end up being a little bit stronger than the first half from a volume perspective, just typical seasonality, I guess. But how are you seeing some of the diversion issues that we have?

Fadi Chamoun: experienced in the second quarter and you're experiencing now that it's stabilizing. Do you think that there's potential for more kind of headwind on that front as we look into the third and fourth quarter?

Speaker Change: Hey Fadi, you cut out on the question to Keith, can you just repeat please for the first part?

Keith Creel: Oh, the first part is just about an update on the labor situation as you can give up your latest thoughts on that. Okay, well, as we all know, we've been trying our dead level best to make sure we keep our customers updated and all key stakeholders. The CRIB took hold of a question that the Minister of Labor challenged relative to potential threat to Canadian safety. We're waiting for a ruling on that question. They've committed to how that really come out by August the night. What we've asked for in return is essentially a little bit of time for our customers to plan so they can responsibly wind down their operation and not just out mass chaos. Because you can imagine the impact, obviously, both railroads of the nation being shut down.

Operator: Oh, the first part is just about an update on the labor situation. If you can just give us your latest thoughts on, Okay, well, as we all know, we've been trying our dead level best to make sure we keep our customers updated and all key stakeholders. The CRIB took hold of, a question that the Minister of Labor challenged relative to a potential threat to Canadian safety.

Fadi Chamoun: Oh, the first part is just about an update on the labor situation if you can just give us your latest thoughts on that.

Speaker Change: Okay, well as we all know we've been trying our dead-level best to make sure we keep our customers updated and all key stakeholders. The CRIB took hold of

Speaker Change: A question that the Minister of Labor challenged relative to potential threat to Canadian safety. We're waiting for a ruling on that question. They've committed to have that ruling come out by August the 9th.

Keith E. Creel: We're waiting for a ruling on that question. They've committed to have that ruling come out by August 9th. What we've asked for, in return, is essentially a limited time for our customers to plan so they can responsibly wind down their operation and not just have mass chaos. Because you can imagine the impact, obviously, both of Railroads of the Nation being shut down. That said, you know, the parties, although we stay at the table, we're far apart.

Speaker Change: What we've asked for in return is essentially a little bit of time for our customers to plan so they can

Speaker Change: wind down their operation and not just have mass chaos.

Keith Creel: That said, you know, the parties, although we stay at the table for far apart, I'm just, I'm just being transparent, honest. It's it's it's going to be a challenge. You know, we've offered to enter to binding arbitration, given we understand the potential damage to the Canadian economy, we understand the damage and the pain in suffering on our employees, even those that might be out on strike, as well as those that are out on strike. So it's not a good outcome for anyone, but that said, at this point, I'll remain cautiously optimistic. It's most probable that we'll have a work stoppage both railroads.

Speaker Change: Railroads of the Nation being shut down. That said, you know, the parties, although we stay at the table, we're far apart. I'm just, I'm just being transparent and honest. It's...

Keith E. Creel: I'm just being transparent and honest; it's going to be a challenge. You know, we've offered to enter into binding arbitration given we understand the potential damage to the Canadian economy. We understand the damage and the pain and suffering on our employees, even those that might be out on strike, as well as those that aren't out on strike. So it's not a good outcome for anyone.

Speaker Change: It's going to be a challenge. You know, we've offered to enter into binding arbitration given we understand

Speaker Change: The potential damage to the Canadian economy, we understand the damage and the pain and suffering on our employees, even those that might be out on strike, as well as

Keith E. Creel: But that said, at this point, I'll remain cautiously optimistic. It's most probable that we'll have a work stoppage, both railroads, my guess is best guess. They released the parties by the night.

Speaker Change: Those that aren't out on strike. So it's not a good outcome for anyone. But that said, at this point, I'll remain cautiously optimistic. It's most probable that we'll have work stoppage, both railroads. My guess is, best guess,

John Brooks: My guess is best guess. They released the parties by the night that would put a work stoppage probably sometime the end of the month, is what I would be guessing at and planning for, but again, we won't know until that ruling comes out from the CRIB. At or on the later than off tonight based on their commitment. Yeah, I'm fatty. You know, few things here, I would say, you know, certainly I feel better, but where I thought was going to be at this point of the year, and I do have quite a bit of an optimism around the run rate.

Speaker Change: They released the parties by the night. That would put a work stoppage probably some time.

Keith E. Creel: That would put a work stoppage probably sometime. The end of the month is what I would be guessing at and planning for, but again, we won't know until that ruling comes out from the CRIB at or on the later than August 9th, based on their commitment. Yeah, Fadi, you know, a few things here. I would say, certainly, I feel better about where I thought I would be at this point in the year.

Speaker Change: The end of the month is what I would be guessing at and planning for, but again, we won't know until that ruling comes out from the CRIB at or on the later than August the 9th, based on their commitment.

Keith E. Creel: And I do have quite a bit of optimism around the run rate if you think about the back half of the year. Now, that being said, I'll tell you, we still have to, as Keith just spoke to, get through what is likely going to be a strike that brings a certain level of uncertainty. Of course, we've got an election year; we've got, you know, a macro environment that is still not great in some areas.

Speaker Change: Yeah, Fadi, you know, a few things here I would say, you know, certainly

Speaker Change: I feel better about where I thought I was going to be at this point of the year, and I do have quite a bit of optimism around the run rate, if you think about the back half of the year. Now, that being said, I'll tell you, we still got a

John Brooks: If you think about the back half of the year, now that being said, I'll tell you we still got to keep just spoke to we got to get through what is likely going to be a strike that brings a certain level of uncertainty. Of course, we've got an election year. We've got, you know, a macro environment that, you know, still not great in some areas. So, you know, that being said, you know, maybe the counterbalance of that is, as I said, I think we're shaping up for a pretty good grain season. And we are really well positioned in the Western Corridor in terms of our capacity and in being able to provide the service our green shippers need in that region.

Speaker Change: Keith just spoke to, we got to get through what is likely going to be a strike that brings a certain level of uncertainty. Of course, we've got an election year, we've got, you know, a macro environment that

John Brooks: So, you know, that being said, maybe the counterbalance to that is, as I said, I think we're shaping up for a pretty good grain season. And we are really well positioned in the Western Corridor in terms of our capacity to provide the service our grain shippers need in that region. In addition, I'm super excited about what we've been able to do in the US and bringing Mexico into our portfolio of destinations.

Keith: That, you know, is still not great in in some areas. So, you know, that being said, you know, maybe the counterbalance to that is, as I said, I think we're shaping up for a pretty good grain season.

Speaker Change: And we are really well positioned in the Western Corridor in terms of our capacity in being able to provide the service our grain shippers need in that region.

John Brooks: So I definitely see the bulk accelerating, I think, in a pretty sizable way as we move through the back half of the year. We're going to keep plugging along on the domestic intermodal front. I'm pleased with the growth, but it's a tough, it's a tough market out there. There's no doubt about it.

John Brooks: In addition, I'm super excited about what we've been able to do in the US and bringing Mexico into our portfolio of destinations. So, I definitely see the bulk accelerating; I think in a pretty sizable way as we move through the back half of the year. You know, we're going to keep plugging along in the domestic intermodal front. I'm pleased with with the growth, but it's a tough it's a tough market out there. There's no doubt about it. So, so we'll see how that unfolds. I'm excited about some things we have ramping up in that business unit.

Speaker Change: In addition, I'm super excited about what we've been able to do in the U.S. and bringing Mexico into our portfolio of destinations. So, I definitely see the bulks accelerating, I think, in a pretty sizable way as we move through the back half of the year.

Speaker Change: We're going to keep plugging along on the domestic intermodal front. I'm pleased with the growth, but it's a tough market out there. There's no doubt about it.

John Brooks: So we'll see how that unfolds. I'm excited about some things we have ramping up in that business unit. And frankly, some of those merchandise areas, you know, kind of present a little bit of a mixed headwind. And in some of those opportunities, as you know, that carload area is pretty strong sense for RTM, but that's an area where in forest products and steel and some of those areas where we're definitely not counting on a rebound in the back half of the year. So, hopefully, that's a little bit more color.

Speaker Change: So we'll see how that unfolds. I'm excited about some things we have ramping up in that business unit. And frankly, some of those merchandise areas, you know, kind of

John Brooks: And frankly, some of those merchandise areas, you know, kind of present a little bit of a mixed headwind in some of those opportunities. As you know, that carload area is a pretty strong sense for RTM, but that's an area where in the forest product and steel and some of those areas where we're definitely not counting on a rebound the back half of the year. So, so hopefully that's a little bit more color. I think Fatty does one more thing.

Speaker Change: Present a little bit of a mixed headwind and in some of those opportunities if you know that carload areas is

Speaker Change: Pretty strong sense for RTM, but that's an area where in the forest products and steel and some of those areas where

Keith E. Creel: Yeah, I think, Fatty, there's one more thing. I think it's important that everyone takes away. Our guidance assumes the work stoppage. So, unless it's one of long duration, when I say long, more than two weeks.

Speaker Change: We're definitely not counting on a rebound the back half of the year, so hopefully that's a little bit more color. Yeah, I think, Fadi, there's one more thing I think is important that everyone takes away. Our guidance is assuming a work stoppage, so unless it's one of long duration, when I say long, more than two weeks.

Keith Creel: I think support that everyone takes away our guidance is assuming the workshop is so unless it's one of long duration when I say long, more than two weeks. We're anticipating that we're planning for that, and it's not going to impact our guidance once we get beyond that. I think we'll be in a very good position to have a better, a better, more responsible side to the end of the year. We'll see how the labor situation plays out. We'll have a good picture of grain. I think by then and then we'll look at if we need to change it out.

Keith E. Creel: We're anticipating that, we're planning for that, and it's not going to impact our guidance once we get beyond that. I think we'll be in a very good position to have a better, more responsible line of sight at the end of the year. We'll see how the labor situation plays out. We'll have a good picture of grain, I think, by then, and then we'll look at if we need to change it or not.

Fadi Chamoun: We're anticipating that, we're planning for that, and it's not going to impact our guidance once we get beyond that.

Speaker Change: I think we'll be in a very good position to have a better, more responsible line of sight at the end of the year. We'll see how the labor situation plays out. We'll have a good picture of grain, I think, by then, and then we'll look at, if we need to, changing our outlook.

Fadi Chamoun: Thank you.

Fadi Chamoun: I appreciate you.

Steve Hansen: Thank you. We go next now to Steve Hansen with Raymond James. Yeah, good afternoon, guys. Thanks for the time.

Keith E. Creel: Thank you. I appreciate it. Thank you. We go next now to... Yeah, I got it for you guys, thanks for the time. Look, if I'm listening to your recap, it's almost like you weren't operating in the Western Corridor, has talked about a lot of congestion problems in the West, and it raises a lot of questions. University of Colorado Boulder.

Speaker Change: Thank you. I appreciate it.

Speaker Change: Thank you. We go next now to Steve Hansen with Raymond James.

Steve Hansen: Look, if I'm listening to your recap this evening, it's almost like you weren't operating in the western corridor. One of your peers talked about a lot of congestion problems in the West, and it raises a lot of questions about, you know, ultimate capacity at West here and how that's serviceable. Into the keyboard or the key port terminals out here, I mean, how do you feel that you were able to escape the congestion issues that the other faced? And you know, do you feel like the capacity into the key jurisdiction here is still sufficient for you?

Steven P. Hansen: Yeah, good afternoon, guys. Thanks for the time. Look, if I'm listening to your recap this evening, it's almost like you weren't operating in the Western Corridor. One of your peers talked about a lot of congestion problems in the West, and it raises a lot of questions about, you know, ultimate capacity out West here and how that's serviceable into the key corridor, the key port terminals out here. I mean, how do you feel that you were able to escape the congestion issues that the other faced? And, you know, do you feel like the capacity into the key jurisdiction here is still sufficient for you? Any comments around that would be super helpful.

Unknown Caller: We appreciate it. I mean, how do you feel? Yeah, Steve, let me focus our comments on CPKC. And, you know, I've said this all along: you can't oversubscribe your network, you've got to understand your capacity, you've got to understand your limitations, and you sell on the strength of your franchise. You don't oversell it, you don't oversubscribe it, you got to have the right number of locomotives, the right number of cars, the right number of crews, you got to understand what the business is coming up on. If you let your aspirations get ahead of your capacities, then, ultimately, I know that we would get in trouble.

Keith Creel: Any comments around that would be super helpful.

Keith Creel: Yes, Steve, let me focus our comments on CBC, and you know, I've said this all along. You can't over subscribe your network. You've got to understand your capacity. You've got to understand your limitations, and you sell to the strength of your franchise. You don't oversell it. You don't over subscribe it. You got to have the right number of locomotives, right number of cars, right number of crews. You got to understand what the business is coming on that entered our railroad. We focus intently in a very disciplined fashion and making sure that we right size our assets and we sell to that capacity.

Steven P. Hansen: Yes, Steve, let me focus our comments on CPKC and...

Steven P. Hansen: You know, I've said this all along, you can't oversubscribe your network, you've got to understand your capacity, you've got to understand...

Steven P. Hansen: You sell to the strength of your franchise. You don't oversell it. You don't oversubscribe it. You've got to have the right number of locomotives, the right number of cars, the right number of crews. You've got to understand when the business is coming on and at our railroad.

Steven P. Hansen: We focus intently, in a very disciplined fashion, on making sure that we right-size our assets and we sell to that capacity. That's a discipline, you know.

Keith Creel: That's a discipline, you know. If you let your aspirations get ahead of your capacities, then ultimately I know that we would get in trouble, and as an operating CEO, I'm intently focused on that routinely. It's a discipline that's woven into our DNA, and as long as I have anything to do with this railroad, into or anyone that I train and work with has anything to do with this railroad. That's the way CTC will be running Canada, the US, and Mexico. It's the recipe for truly running a true precision scheduled railroad that provides great service, controls cost, allows earned margins, and allows it to be sustainable for your customer.

Steven P. Hansen: You let your aspirations get ahead of your capacities, then, ultimately, I know.

Keith E. Creel: And as an operating CEO, I'm intently focused on that routinely. It's a discipline that's woven into our DNA, and as long as I have anything to do with this railroad and or anyone that I train and work with has anything to do with this railroad, that's the way CTKC will be running in Canada, the U.S., and Mexico with earned margins and allows it to be sustainable for your customers because they're making their decisions based on our ability to keep our word and do what we say we And the last thing I want to do is destroy that credibility because they have a very short memory.

Steven P. Hansen: That we would get in trouble and as an operating CEO , I'm intently focused on that

Steven P. Hansen: routinely.

Steven P. Hansen: It's a discipline that's woven into our DNA, and as long as I have anything to do with this railroad, and or anyone that I train and work with has anything to do with this railroad, that's the way CTKC will be running Canada, U.S., and Mexico. It's the recipe for truly running a true...

Steven P. Hansen: Precision Scheduled Railroad that provides great service, controls cost, allows

Keith Creel: Because they're making their decisions based on our ability to keep our word and do what we say we're going to do. And the last thing I want to do is destroy that credibility because they have very short memories.

Steven P. Hansen: earned margins and allows it to be sustainable for your customer because they're making their decisions based on our ability to keep our word and do what we say we're going to do and the last thing I want to do is destroy that credibility because they have very short memories.

Steve Hansen: Very helpful. Thank you.

Speaker Change: Very helpful, thanks.

Tom Wade: We go next now to Tom Wade with UBS. Good afternoon.

Operator: We go next now to Tom. Yeah, good afternoon. Keith, I wanted to ask you how you think about, or John, how you think about the capacity of some of the services you have and also maybe how you think about the potential for 2025 to be a strong margin expansion year. I guess I think of, it's just one example, but the, you know, 180, 181 that you probably still have a good amount of capacity, so you see some growth that should be pretty strong, incremental margins.

Speaker Change: Thank you. We go next now to Tom Wadewitz with UBS.

Keith Creel: Keith, I wanted to ask you how you think about or John, how you think about capacity as some of the services you have and also maybe how you think about the potential for 2025 to be a strong margin expansion year. I guess I think of it's just one example, but that you know 181 81 that you probably still have a good amount of capacity. So you see some growth. It should be pretty strong. Incarnal margins, you know, you've had some noise this year, kind of, I guess, anticipating the labor issue and so forth. So I just wonder if you have a kind of a broad thought that you know potentially set up for a pretty strong margin expansion year next year and how you think about available capacity on some of the services you have.

Thomas Richard Wadewitz: Yeah, good afternoon.

Thomas Richard Wadewitz: Keith, I wanted to ask you how you think about, or John , how you think about capacity of some of the services you have.

Thomas Richard Wadewitz: And also maybe how we think about the potential for 2025 to be a strong margin expansion year. I guess I think of, it's just one example, but the, you know, 180-181 that you probably still have a good amount of capacity. So you see some growth that should be pretty strong, incremental margins.

Operator: You know, you've had some noise this year, kind of, I guess, anticipating the labor issue and so forth. So I just wonder if you have a kind of a broad thought that could potentially set up for a pretty strong margin expansion year next year and how you think about available capacity on some of the services you have. Thank you. You know, we're well positioned from a capacity standpoint, Tom. It's a great question. 181 is a perfect example.

Speaker Change: You know, you've had some noise this year kind of, I guess, anticipating the labor issue and so forth. So I just wonder if you have a kind of a broad thought that, you know, potentially set up for a pretty strong margin expansion year next year and how you think about available capacity on some of the services you have. Thank you.

Keith Creel: Thank you. You know, we're well positioned from a capacity standpoint. Tom, you know, it's a great question. 181 81 is a perfect example. You know, we're eating some margin because we got that service out there. But to John's point, it's up 50% year since the beginning of the year that trains running at half train. So we still have additional capacity to sell into in the margins, only approved once you got the base cost covered in that train start. So again, all across this network, all these lanes that we're selling, we said this to the SDD, and I'll say it again and again and again.

Keith E. Creel: You know, we're eating some margin because we've got that service out there. But to John's point, it's up 50% here since the beginning of the year. That train's running at half train length.

Speaker Change: We're well positioned from a capacity standpoint, Tom.

Keith E. Creel: So we still have additional capacity to sell into, and the margins are only approved once you get the base cost covered in that train start. So again, all across this network, all these lanes that we're selling, we said this to the SBB, and I'll say it again and again and again, we're building this network out to match these synergies so that we can onboard this business, not deteriorate our service offering, not deteriorate our car cycle times, our locomotive productivity, all those things that allow us to run a successful business to be able to continue That's the recipe. It's not rocket science.

Speaker Change: Eating some origin because we've got that service out there, but to John's point, it's up 50% here since the beginning of the year. That train's running at half train length.

Speaker Change: So we still have additional capacity to sell into and the margins only improve once you get the base cost covered in that train start.

Speaker Change: So, again, all across this network, all these lines that we're selling, we said this to the SBB, and I'll say it again and again and again.

Keith Creel: We're building this network out to match these synergies so that we can onboard this business, not deteriorate our service offering, not deteriorate our car cycle times, our local motor productivity, all those things that allow us to run the successful business to be able to continue to pour records. It's a massive amount of capital into the network so they can grow in a responsible way that rewards the shareholder as well as provides the customer the reliable service they need. That's the recipe. It's not rocket science. The issue is having the disc to index. Executive, and if you do that, you're going to continue to put yourself in a position of success that, frankly, is proven to be very unique in this industry.

Speaker Change: We're building this network out.

Speaker Change: to match these synergies so that we can onboard this business.

Speaker Change: not deteriorate our service offering, not deteriorate our car cycle times, our locomotive productivity, all those things that allow us to run a successful business to be able to continue to pour records amount of capital.

Speaker Change: Thank you.

Keith E. Creel: The issue is having the discipline to execute. And if you do that, you're going to continue to put yourself in a position of success that, quite frankly, has proven to be very unique in this industry. Do you think the available capacities are fair to think they're broader than that particular service that you would have it across, you know, kind of multiple areas in the network? I would say we're not capacity constrained in any way. That's probably the best way to say it.

Speaker Change: And if you do that, you're going to continue to put yourself in a position of success that, quite frankly, has proven to be very unique in this industry.

Keith Creel: Do you think the available capacity is fair to think it's broader than that particular service that you would have it across, you know, kind of multiple areas in the network? I would say we're not capacity and strain in any lane. That's probably the best way to say it, and think about the capital that we're spending. In line with the rest of the submission, we're going to spend about 275 million. We're well in our way. We've got seven eight side exam. We've got the bridge of the radio that's about to be completed. I've been just looking at the progress of it a couple of hours ago.

Speaker Change: Do you think the available capacities, it's fair to think it's broader than that particular service that you would have it across, you know, kind of multiple areas in the network?

Speaker Change: I would say we're not capacity constrained in any way, that's probably the best way to say it. And think about the capital that we're spending.

Keith E. Creel: And think about the capital that we're spending. In line with our STB submission, we said we'd spend about $275 million. We're well on our way. We've got seven, eight sidings in.

Speaker Change: In line with our STB submission, we said we're going to spend about $275 million. We're well on our way. We've got seven, eight sidings in. We've got the bridge at Laredo that's about to be completed. I was just looking at the progress of it a couple of hours ago.

Keith E. Creel: We've got the bridge at Laredo that's about to be completed. I was just looking at the progress of it a couple of hours ago. It will be done, and it will be online.

Keith Creel: It'll be done. It'll be online. We've got six or seven capital projects. We did not even plan that we added into the capital envelope in Mexico based on the learnings of last year when we put that task force down there that haven't came online yet. So they're at what I would call critical capacity points. Once that capacity comes online, you're going to see locomotives move faster. You're going to see cars move faster. You're going to see costs come down. And guess what? You're going to create capacity for more growth. So again, this network is not capacity constrained.

Keith E. Creel: We've got six or seven capital projects we did not even plan that we added to the capital envelope in Mexico based on the learnings of last year when we put that task force down there that haven't come online yet. So they're at what I would call critical capacity points. Once that capacity comes online, you're going to see locomotives move faster. You're going to see cars move faster. You're going to see costs come down. And guess what?

Speaker Change: It'll be done. It'll be online. We've got six or seven capital projects we did not even plan.

Speaker Change: that we added into the capital envelope in Mexico based on the learnings of last year when we put that task force down there that haven't came online yet. So they're at what I would call critical capacity points.

Speaker Change: Once that capacity comes online, you're going to see locomotives move faster, you're going to see cars move faster, you're going to see costs come down, and guess what? You're going to create capacity for more growth.

Keith E. Creel: You're going to create capacity for more growth. So again, this network is not capacity constrained. It's our job to make sure that we don't get in that position.

Keith Creel: It's our job to make sure that we don't get in that position as long as our customers were close with us. They give us a good forecast. Now I'm not going to say that we can go back to March of this year and we had a 40% increase the business on the west coast of Vancouver. And it over subscribed that the force that actually did we took decisions we took steps responsibly responding to that in March to make sure we weren't over subscribed. We allow contracts. Calls is to be relaxed so the traffic could be diverted so that our customers could still continue to meet their customers' expectations.

Speaker Change: So again, this network is not capacity constrained. It's our job to make sure that we don't get in that position. As long as our customers work closely with us, they give us good forecasts. Now I'm not going to say that we can go back to March of this year and we had a 40% increase of business on the West Coast of Vancouver.

Keith E. Creel: As long as our customers work closely with us, they give us good forecasts. Now, I'm not going to say that we can go back to March of this year, and we had a 40% increase in business on the West Coast of Vancouver, and it oversubscribed that. But it actually did.

Keith E. Creel: We took decisions. We took steps responsibly, responding to that in March to make sure we weren't oversubscribed. We allowed contracts to be relaxed so the traffic could be diverted so that our customers could still continue to meet their customers' expectations. We also allowed contracts to shift early in anticipation of the strike because we knew at that time we thought the strike was going to happen in May.

Speaker Change: and it oversubscribed that

Speaker Change: supports. It actually did. We took decisions, we took steps responsibly responding to that in March to make sure we weren't oversubscribed. We allow contracts

Speaker Change: causes to be relaxed so the traffic could be diverted so that our customers could still continue to meet their customers' expectations. We also allowed contracts shifting to occur early in anticipation of the strike because we knew at that time we thought the strike was going to happen in May.

Keith Creel: We also allowed contracts shifting to occur early in anticipation of the strike because we knew at that time we thought the strike was going to happen in May. And it was our responsibility to make sure we protected our capacity so that we could deliver for our customers and bounce back from that strike in a very good fashion. And that's exactly the rhythm and the disment that we've applied as we go forward. Rather, the strike happens in August, September, October, God help us. It doesn't. We need to get this uncertainty over, but this railroad is going to deal with what we can deal with control, which you control.

Keith E. Creel: And it was our responsibility to make sure we protected our capacity so that we could deliver for our customers and bounce back from that strike in very good fashion. And that's exactly the rhythm and the discipline that we've applied as we go forward. Whether the strike happens in August, September, or October, God help us if it doesn't, we need to get this uncertainty over.

Speaker Change: And it was our responsibility to make sure we protected our capacity so that we could deliver for our customers and bounce back from that strike in very good fashion. And that's exactly the rhythm and the discipline that we've applied as we go forward.

Speaker Change: The strike happens in August , September , October , God help us it doesn't. We need to get this uncertainty over. But this railroad is going to deal with what we can deal with, control what you can control, and you're going to have a very...

Keith E. Creel: But this railroad's going to... Deal with what we can deal with, control what you can control, and you're going to have a very Differentiated Outcome if you do that. And, Tom, let me just add, we laid out a year ago guidance for 2024 to 2028 of high single-digit revenue growth. And we're right on track for that in year one, and we have plenty of capacity to support that revenue growth. And we're going to bring it on at a low incremental cost. Great, thank you for the time. Thank you, Tom. I'll go next to Scott now.

Keith Creel: And you're going to have a very differentiated outcome if you do that.

Nadine Velani: And Tom, let me just add, we laid out a year ago guidance for 2024 to 2028 of high single-digit revenue growth. And we're right on track for that in year one, and we have plenty of capacity to support that revenue growth. We're going to bring it on at a low incremental cost.

Thomas Richard Wadewitz: Differentiated outcome if you do that. And Tom, let me just add, we laid out a year ago guidance for 2024 to 2028 of high single-digit revenue growth.

Speaker Change: And we're right on track for that in year one, and we have plenty of capacity to support that revenue growth, and we're going to bring it on at a low incremental cost.

Nadine Velani: Great.

Nadine Velani: Thank you for the time.

Scott Group: Thank you, Tom.

Scott Group: We're going to next now to Scott Group with little research. Hey, thanks. Afternoon, and I echo the condolences on Pat from earlier. The beginning of the year, you talked about an inflation sort of catch up. Can you just give us an update on how that's playing out and same store price trends. And then maybe just John just some thoughts like the RTM carload spread is just so wide right now. I think it was like 10 points in the second quarter, similar spread in third quarter. Is this the right way to think about the business sort of going forward with the synergies, or is there something sort of unusual?

Thomas Richard Wadewitz: Great, thank you for the time.

Thomas Richard Wadewitz: Thank you, Tom.

Scott H. Group: Hey, thanks for the afternoon, and I echo the condolences on Pat from earlier. Nadeem, at the beginning of the year, you talked about inflation sort of catching up. Can you just give us an update on how that's playing out and on same store price trends? And then maybe, John, just some thoughts like the RTM carload spread is just so wide right now. I think it was like 10 points in the second quarter, and a similar spread in the third quarter.

Speaker Change: We'll go next now to Scott Group with Wolf Research.

Scott H. Group: Hey, thanks afternoon and I echo the condolences on Pat from earlier.

Scott H. Group: Nadeem, at the beginning of the year, you talked about an inflation sort of catch-up.

Scott H. Group: Can you just give us an update on how that's playing out?

Speaker Change: and same store price trends and then maybe just John just some thoughts like the RTM carload spread is just so

Nadeem S. Velani: Is this the right way to think about business sort of going forward with the synergies, or is there something sort of unusual just given commodity dynamics? How should we think about this? What's the right spread, I guess, going forward? Scott, you're right on. We highlighted that there was going to be an opportunity for some pricing catch up, just the way the contracts, the nature of the contracts, and just the way that cost inflation has surged so much in the previous 18 months, 24 months.

John: I think it was like 10 points in the second quarter, similar spread in third quarter.

John: The business sort of going forward with the synergies or is there something sort of unusual Just given commodity dynamics. How should we think about this? What's the right spread I guess going forward?

Nadine Velani: Just given, come out, come out. I actually think about this. What's the right spread I guess going? Howard. Scott, you know, you're right on. I mean, we highlighted that there's going to be an opportunity to have some pricing catch up just the way the contracts, the nature of the contracts, and just the way that cost inflation has served so much in the previous fall at 18 months, 22, and 24 months. So we're starting to see on the cost side inflation moderate, you know, kind of in that mid-trees, three and a half percent kind of level.

Speaker Change: Scott, you know, you're right on. I mean, we highlighted that there's going to be an opportunity to...

Scott H. Group: to have some some pricing catch up just the way the contracts, the nature of the contracts, and just the way that cost inflation surged so much in the previous, call it, 18 months, 22, 24 months, so

Nadeem S. Velani: So we're starting to see, on the cost side, inflation moderate, kind of in that mid-3s, 3.5% level. We're seeing the strength of our service being rewarded in the marketplace, and we're seeing kind of the same sort of pricing in that north of 5, so that spread of pricing versus inflation is widening, and I don't see that changing. In fact, I see that accelerating to an extent, more so because I see inflation moderating further.

Scott H. Group: We're starting to see, on the cost side, inflation moderate, you know, kind of in that mid-3's, 3.5% kind of level. We're seeing the strength of our service being rewarded in the marketplace, and we're seeing kind of...

Nadine Velani: We're seeing the strength of our service being rewarded in the marketplace, and we're seeing kind of the same sort of pricing in that north of five. So that spread of pricing versus inflation is widening, and I don't see that changing. In fact, I see that accelerating to an extent more so because I see inflation moderating further. I mean, we've seen that across the board of whether that's on the material side. You know, labor has been a bit higher, but again, that's going to moderate over the next year, and so I think we're going to see the benefits of strong pricing and lower inflation.

Scott H. Group: The same sort of pricing in that north of five so that spread of pricing versus inflation is is widening and I don't see that changing in fact I see that that accelerating to an extent

Scott H. Group: More so because I see inflation moderating further. I mean, we've seen that across the board, whether that's on the material side, you know, labor has been a bit higher. But again, that's going to moderate over the next year. And so I think we're going to see the benefits of...

John Brooks: I think that's going to be helpful to our margin story. In Scott, on the RTM and Carlotes question, I mean, RTM Sue us will be paid for. They're the most important metric. Even more so with this new expanded length of haul network. So what you're seeing in the spreads today is accentuated or exaggerated because we haven't yet left that loss of the short haul low-profit business that left us, I guess, was fourth quarter of last year, or what are magnitude. That's 170,000 carloads. So if you get caught up in the carloads, you're going to miss the power of what's really occurring.

Scott H. Group: Strong Pricing and Lower Inflation, and I think that's going to be helpful to our margin story. And Scott, on the RTM and car loads question, I mean, RTMs to us, what we get paid for, they're the most important metric.

Nadeem S. Velani: I mean, we've seen that across the board, whether it's on the material side, labor has been a bit higher, but again, that's going to moderate over the next year, and so I think we're going to see the benefits of strong pricing and lower inflation. And I think that's going to be helpful to our margin story. And Scott, on the RTM and car loads question, I mean, RTMs to us, what we get paid for, they're the most important metric, even more so with this new expanded length of haul network.

Nadeem S. Velani: So what you're seeing in the spreads today is accentuated or exaggerated because we haven't yet left that loss of the short haul, low profit business that left us. I guess it was the fourth quarter of last year. By order of magnitude, that's 170,000 car loads. So if you get caught up in the car loads, you're going to miss the power of what's really occurring. Every car load that we have with converting length of haul, whether it's 30% longer, 40%, or 50, your models aren't going to catch it.

Speaker Change: Even more so with this new expanded length of haul network. So what you're seeing in the spreads today is accentuated or exaggerated.

Scott H. Group: because we haven't yet lapped that loss of the short-haul, low-profit business that left us, I guess it was fourth quarter of last year, order of magnitude.

Scott H. Group: That's 170,000 carloads. So if you get caught up in the carloads, you're going to miss the power of what's really occurring. Every carload that we have with converting length of haul, whether it's 30% longer, 40%, 50, your models aren't going to catch it. So again, RTM should be the Holy Grail when it comes to this railroad, nice carloads.

John Brooks: Every carload that we have with the birding length of haul, whether it's 30 percent longer, 40 percent, 50, your models aren't going to catch it. So again, RTM should be the holy grail when it comes to the trail road. Nice carloads.

John Brooks: So again, RTM should be the Holy Grail when it comes to this railroad, not car loads. Makes sense. And just so I understand your point, Nadeem, even if even with the new labor deal coming, you still feel good about... Labor, inflation, overall inflation, Sloan. I do. I do.

Nadine Velani: Makes sense. And just so I understand your point, Nademe, even with the new labor deal coming, you still feel good about labor inflation, overall inflation slowing. I do. I think we've been accruing at what we anticipate a fair ruling and a fair kind of win-win situation between us and labor. And so I'm not concerned about that. I mean, in the near term, we're going to have a bit of a headwind. We had significant casualty costs that we've faced in July that we're going to feel in the third quarter. That being said, there's still two months left in the quarter.

Scott H. Group: And just so I understand your point, Nadeem, even with the new labor deal coming, you still feel good about...

Scott H. Group: I think we've, you know, we've been accreting to what we anticipate a fair ruling and a fair kind of win-win situation between us and labor. And so I'm not, I'm not concerned about that. I mean, near term, you know, we're going to have a bit of a headwind. We had a significant casualty cost that we faced in July that we're going to feel in the third quarter. That being said, you know, there are still two months left in the quarter, and we're going to keep them on the rail, and we can help mitigate some of those costs.

Nadeem: labor inflation, overall inflation slowing.

Nadeem: I do. I do. I think we've, you know, we've been accruing at what we anticipate.

Speaker Change: A fair ruling and a fair win-win situation between

Speaker Change: I'm not concerned about that, I mean in the near term.

Speaker Change: We're going to have a bit of a headwind. We had a significant casualty cost that we faced in July that we're going to...

Speaker Change: Field in the third quarter. That being said, you know, there's still two months left in the quarter and and we're going to keep them on the rail and and we can help mitigate some of those costs and I think we've seen some additional

Nadine Velani: And we're going to keep them on the rail. And we can help mitigate some of those costs. And I think we've seen some additional stock-based comp costs that we're going to feel in Q3 year over year. Outside of that, the way the network's running and the operating leverage that I see in front of us, I think more than offset some of those costs. And I think we're going to have a very strong backup half of the year.

Nadeem S. Velani: And I think we've seen some additional stock-based comp costs that we're going to feel in Q3 year over year. Outside of that, the way the network's running and the operating leverage that I see in front of us, I think it more than offsets some of those costs, and I think we're going to have a very strong backup half of the year.

Speaker Change: stock-based comp costs that we're going to feel in Q3 year-over-year. Outside of that, the way the network's running and the operating leverage that I see in front of us, I think it more than offsets

Nadeem S. Velani: So, you know, perhaps not sequential improvement in the OR in Q3 because of some of those headwinds I just mentioned, but I think in Q4, we're set up to have a record operating ratio for CPKC, and I think it's going to be a very strong finish to the year.

Nadine Velani: So, perhaps not sequential improvement in the OR and Q3 because of some of those headwinds I just mentioned. But I think in Q4, we're set up to have a record operating ratio for CPKC. And I think it's going to be a very strong finish to the year. And it's going to set us up for a 2025 that I think could be a very powerful earnings model.

Speaker Change: Some of those costs and I think we're going to have a very strong backup half of the year so, you know, perhaps not sequential improvement in the OR in Q3 because of some of those headwinds I just mentioned, but I think in Q4, we're set up to have a record operating ratio for CPKC and I think it's going to be a

John Brooks: And it's going to set us up for 2025 that I think could be a very powerful earnings model. And Scott, just maybe just want to comment on the Carlos and RTMs, like just to give you an example, like, right now, I think Q2, our average length of haul is up about 6%. But if you look at our domestic intermodal, it was up over double digits on average length of haul.

Speaker Change: A very strong finish to the year and it's going to set us up for a 2025 that I think could be a very powerful earnings model.

John Brooks: in Chicago. Just one of the common on the Carlos and RTMs, just to give you an example. Right now, I think Q2, our late average length of haul was up about 6%. But if you look at our domestic intermodal, it was over double digits on an average length of haul. And again, that's just indicative of what exactly keep described on that shift in business. And frankly, as I look out to the second half of the year, as I see some strength in, and I think our international franchise, there's a really good chance we can play catch up and kind of you'll start to see that that deviation come closer together as we move through Q4.

Scott H. Group: And again, that's just indicative of what Keith described as that shift in business. And frankly, as I look out to the second half of this year, as I see some strength in, I think our international franchise, there's a really good chance we can play catch up and kind of you'll start to see that deviation come closer together as we move through Q4. Very helpful, guys. Thank you. Yeah, he's got it.

Speaker Change: And Scott, just maybe, just one other comment on the Carlos and RTMs, like, just to give you an example.

Scott H. Group: Right now, I think Q2, our average length of haul is up about 6%, but if you look at our domestic intermodal...

Scott H. Group: It was up over double digits on an average length of haul.

Speaker Change: And again, that's just indicative of what exactly Keith described on that shift in business. And frankly, as I look out to the second half of the year,

Speaker Change: As I see some strength in I think our international franchise, there's a really good chance we can play catch up and kind of you'll start to see that deviation come closer together as we move through Q4.

John Brooks: Very helpful guys.

Brandon Oglinski: Thank you.

Speaker Change: Very helpful, guys, thank you.

Brandon Oglinski: We'll go next now to Brandon Oglinski at Barclays.

Brandon Robert Oglenski: I'll go next now to Brandon Oglenski at, Thanks for taking the question. And again, condolences to Pat and family and friends. Keith, or maybe John, I guess, you know, when you speak about the Laredo bridge expansion, maybe we're overemphasizing how much capacity that adds to the system. But how do you approach that, you know, with a balanced outlook for growth with customers but also balancing the need to keep consistent service?

Speaker Change: We'll go next now to Brandon Oglenski at Barclays.

John Chappell: Thanks for taking the question. And again, condolences to Pat and family friends. Keith or maybe, John, I guess, you know, when you speak about the Laredo Bridge expansion, maybe we're overemphasizing how much that adds to the system.

Speaker Change: Thanks for taking the question, and again, condolences to Pat and family and friends.

Brandon Robert Oglenski: And where do you think we're going to see the results from that expansion most immediately in 2025? Well, you're going to see the results, to me, would be about train speed and train velocity. You know, it's going to be singles and doubles. There's not going to be any big home runs. You know, you think about it today; you're running four hour windows.

Brandon Robert Oglenski: Keith or maybe John , I guess when you speak about the Laredo Bridge expansion, maybe we're over-emphasizing how much capacity that adds to the system.

John Brooks: But how do you approach that, you know, with a balanced, you know, I look for growth with customers, but also balancing the need to keep consistent service? And where do you think we're going to see the results from that expansion, most immediately in 2025? But you're going to see the results to me would be about strength, speed, and train velocity. You know, it's going to be singles and doubles. There's not going to be any big home runs. You know, you think about it today. You're running four-hour windows. So it's sub-optimal when it comes to trains.

Speaker Change: But how do you approach that, you know, with a balanced, you know, outlook for growth with customers, but also balancing the need to keep consistent service, and where do you think we're going to see the results from that expansion most immediately in 2025?

Speaker Change: Well, you're going to see the results to me would be about...

Speaker Change: Train Speed and Train Velocity. You know, it's going to be singles and doubles. There's not going to be any big home runs. You know, you think about it today. You're running four hour windows.

Keith E. Creel: So it's suboptimal when it comes to trains. You've got a number of trains that are going to be in queues, could be in queue for an hour, could be in queue for four hours before it gets to change. All that goes away. The queue disappears.

John Brooks: You've got a number of trains that are going to be in Q. Could be in Q for an hour, could be in Q for four hours before it gets to change. All that goes away. The Q disappears. We get to make meats on the bridge. We'll work well with U.P. U.P. He's going to work well with us. It's going to be a smooth transition. We're working out the details now for U.P. to have a crossover coming off that second bridge. So again, we're both co-located on the bridge. We both will do better. The velocity is going to improve, and our assets are going to turn faster.

Speaker Change: So it's suboptimal when it comes to trains, you've got...

Speaker Change: A number of trains are going to be in queue, could be in queue for an hour, could be in queue for four hours before it gets to change. All that goes away. The queue disappears. We get to make meets on the bridge. We'll work well with UP. UP is going to work well with us.

Keith E. Creel: We get to make meat on the bridge. We'll work well with UP. UP is going to work well with us. It's going to be a smooth transition. We're working out the details now for UP to have a crossover coming off that second bridge. So again, we're both co-located on the bridge.

Speaker Change: It's going to be a smooth transition. We're working out the details now for UP to have a crossover coming off that second bridge. So again, we're both co-located on the bridge. We both will do better. The velocity is going to improve and our assets are going to turn faster.

Keith E. Creel: We both will do better. The velocity is going to improve, and our assets are going to turn faster. So, again, it'll be baked into the metrics. There won't be any home runs, but it makes a meaningful difference in today's operation and, most especially, in tomorrow's growth. Honestly, it just adds to that capability that differentiates us against other routes in and out of Mexico, and that's a strong selling point for our customers. Thank you both. I'll go next to John Chappell now.

John Brooks: So again, it'll be baked into the metrics. There won't be any home runs. It makes a meaningful difference. And today's operation in most especially in tomorrow's growth.

Speaker Change: So, again, it will be baked into the metrics. There won't be any home runs, but it makes a meaningful difference.

John Brooks: And Brandon, it's a differentiator in the marketplace. It is what my team is using to sell. To the customers, expanding down in Mexico and really feeding that cross-border service. It's about security. It's about service. It's about capacity. And the second bridge, honestly, just adds to that capability that differentiates us against other routes in and out of Mexico. And that's a strong selling point to our customers.

Speaker Change: in today's operation and most especially in tomorrow's growth.

Speaker Change: And Brandon, it's a differentiator in the marketplace. It is what my team is using to sell to the customers expanding down in Mexico and really feeding that cross-border service. It's about security. It's about service. It's about capacity. And the second bridge

Brandon Robert Oglenski: Honestly, just adds to that capability that differentiates us against other routes.

Brandon Robert Oglenski: in and out of Mexico. And that's a strong selling point to our customers.

John Chappell: Thank you both.

John Chappell: We'll go next now to John Chappell at Evercore ISI. Thank you. Kind of staying with that theme, John. We're getting a lot of, I think, concern or maybe even excitement depending on who you are on potential tariffs and what that means, especially into Mexico. What are your customers telling you about potentially front-end loading or being more proactive? As it relates to import. If you do the West Coast of Canada or to Mexico. And then also, where does the service stand right now? I know there were some maybe hiccups at the initial stages of the integration.

Speaker Change: Thank you both.

Speaker Change: We'll go next now to John Chappell at Evercore ISI.

Jonathan B. Chappell: Sticking with that theme, John, we're getting a lot of, I think, concern or maybe even excitement, depending on who you are about potential tariffs and what that means, especially in New Mexico. What are your customers telling you about potentially front-end loading or being more proactive as it relates to imports, either to the West Coast of Canada or to Mexico? And then also, where does the service stand right now?

Jonathan B. Chappell: Thank you. Kind of sticking with that theme, John , we're getting a lot of, I think, concern or maybe even excitement, depending on who you are, on potential tariffs and what that means, especially in New Mexico. What are your customers telling you about potentially front-end loading or being more proactive as it relates?

Speaker Change: to imports, either the West Coast of Canada or to Mexico. And then also, where does the service stand right now? I know there were some maybe hiccups at the initial stages of the integration. I know Mark and his team made a lot of headwinds, or a lot of progress there. Where does the service stand on Mexico if there is a surge in the coming months?

John Brooks: I know Mark and his team made a lot of progress there. Where does the service stand on Mexico if there is a surge in the coming months? Service has never been better, what would you judge? Honestly, John, we just ran a number of test loads, imports through Lazaro up into the Houston market. I think they're on our rails for three and a half days. That excludes time and time at the port in that really good customer experience. I would say it's been, up to your point, it's been a vlog; it's been educating about, you know, what import export freight can look like through Mexico.

John Brooks: I know there were some hiccups at the initial stages of the integration. I know Mark and his team made a lot of headwinds, or a lot of progress there. Where does the service stand in Mexico if there is a surge in the coming months? Service has never been better.

Keith E. Creel: Over to you, John. Honestly, John, we just ran a number of test loads, imports through Lazaro into the Houston market. You know, I think they've been on our rails for three and a half days. You know, that excludes time at the port and that really good customer experience. I would say it's been, to your point, it's been a slug.

Mark: Service has never been better, over to you, John .

Speaker Change: Honestly, John , we just ran a number of test loads, imports through Lazaro up into the Houston market.

Speaker Change: You know, I think they're on our rails for three and a half days.

Speaker Change: You know, that excludes time at the port in that.

Speaker Change: really good customer experience. I would say it's been a, to your point, it's been a slug. It's been educating about, you know, what import-export freight can look like through Mexico.

John Brooks: We've been educating them about, you know, what import-export freight can look like through Mexico. So, it's been a pretty big learning curve with the customers, but we're starting to produce some results. And I'll just give you an example, and you've probably seen some of this, but we've actually had five new service calls recently announced at Lazaro. A couple of new merit services, an O&E, an MSC, and a CMA.

John Brooks: So it's been a pretty big learning curve with the customers, but we're starting to produce some results.

Speaker Change: So it's been a pretty big learning curve with the customers, but we're starting to produce some results. And I'll just give you an example, and you've probably seen some of this, but we've actually had five new service calls.

John Brooks: And I'll just give you an example, and you've probably seen some of this, but we've actually had five new service calls recently announced at Lazaro, a couple of new MERS services, the O&E, MSC, a CMA. And I think what we're seeing is we're building confidence. The service level is key set is strong and we're demonstrating that. And frankly, there's good demand in for Mexico, but that intramexico demand brings with it the opportunity for space on those boats to then flourish and provide capacity for cross-border. And in you're right, you know, we certainly have some pending labor issues that could take place on the East Coast.

Speaker Change: recently announced.

Speaker Change: at Lazaro, a couple of new mare services, an O&E, an MSC, a CMA.

John Brooks: And I think what we're seeing is we're building confidence. The service level, as Keith said, is strong, and we're demonstrating that. And, frankly, there's good demand intra-Mexico. But that intra-Mexico demand brings with it the opportunity for space on those boats to then flourish and provide capacity for cross-border. And you're right.

Speaker Change: And I think what we're seeing is we're building confidence, the service level, as Keith said, is strong and we're demonstrating that.

Speaker Change: And frankly, there's good demand intra-Mexico, but that intra-Mexico demand brings with it the opportunity for space on those boats.

Speaker Change: to then flourish and provide capacity for cross-border. And you're right, you know, we certainly have some pending labor issues that could take place.

John Brooks: You know, we certainly have some pending labor issues that could take place on the East Coast. And combined with these new services, we think it sets us up well for, you know, continuing to grow that Lazaro opportunity in the back half of this year into 2025. Thanks, John. I'm going to go next now to Ken Hoexter at, Hey, great.

John Brooks: And combined with these new services, we think it sets us up well for, you know, continuing to grow that Lazaro opportunity, the back half of this year in the 2025. Thanks, John.

Speaker Change: on the East Coast, and combined with these new services, we think it sets us up well for continuing to grow that Lazaro opportunity, the back half of this year, into 2025.

Ken Hoexter: We'll go next now to Ken Hoxter at Bank of America. Hey, great.

Kenneth Scott Hoexter: Good afternoon. And again, my condolences to the CPKC and Pat's family. I've known Pat for over 20 years, and she always brought smiles to the room.

Speaker Change: We'll go next now to Ken Hoexter at Bank of America.

Nadine Velani: Good afternoon, and again, my condolences to the CPKC and Pat's family. Known Pat for over 20 years and always brought definitely smiles to the room. Just to clarify, Nadeem, on your OR improvement, where I guess you're not looking for OR improvement in the third quarter. And I think you said a significant improvement. Is that like maybe 300 plus basis points to get to sub 60 in the fourth quarter, to get to your double digit earnings? Does that sound right? And then is there clarification on the level of stock-based comfort turn that comes back?

Ken Hoexter: Hey, great. Good afternoon. And again, my condolences to the CPKC and Pat's family. I've known Pat for over 20 years and always brought definitely smiles to the room.

Ken Hoexter: Just to clarify, Nadeem, on your O.R. improvement, or I guess you're not looking for O.R. improvement in the third quarter, and I think you said significant improvement. Is that like maybe 300-plus basis points to get to sub-60 in the fourth quarter to get to your double-digit earnings? Does that sound right?

John Brooks: And then lastly, just a quick one for John. It looks like the grain crop. I think you've got an average crop built in. It looks like we've got a decent one shaping up. Any thoughts on the size scale of the market at this point?

Speaker Change: Is there clarification on the level of stock-based comp return that comes back? And then lastly, just a quick one for John . It looks like the grain crop, I think you've got an average crop built in. It looks like we've got a decent one shaping up. Any thoughts on the size scale of the market at this point?

Nadine Velani: As of Ken, just sequentially, I don't see necessarily improvements in the OR. It's given, like I said, some Zorelma costs in July and some additional stock-based confidence in this quarter, relative to a year ago and higher versus Q2. As far as Q4, we had a very strong Q4 operating ratio in 2023, and I see year-over-year improvements in the OR, Q4, 2024 versus 2023, which puts you at a very, very good operating ratio.

Kenneth Scott Hoexter: Just to clarify, Nadeem, on your OR improvement, or I guess you're not looking for OR improvement in the third quarter. And I think you said significant improvement. Is that like, maybe 300 plus basis points to get to sub-60 in the fourth quarter to get to your double digit earnings? Does that sound right?

Speaker Change: So Ken, just sequentially, I don't see...

Nadeem S. Velani: And then, is there clarification on the level of stock-based comp return? That comes back. And then lastly, just a quick one for John, it looks like the grain crop, I think you've got an average crop built in. It looks like we've got a decent one shaping up. Any thoughts on the size scale of the market at this point? So Ken, just sequentially, I don't necessarily see improvements in the OR, just given, like I said, some derailment costs in July and some additional stock-based comp in this quarter relative to a year ago and higher versus Q2.

Ken: necessarily improvements in the OR just given like I said some derailment costs in July and some some additional stock-based comp in this quarter relative to a year ago and higher versus Q2.

Nadeem S. Velani: As far as Q4, you know, we had a very strong Q4 operating ratio in 2023, and I see year-over-year improvements in the OR Q4 2024 versus 2023, which puts you at a very, very good operating ratio. Yeah, Ken, you know, being a grain guy, it's never made till it's in the bin.

Speaker Change: As far as Q4, we had a very strong Q4 operating ratio in 2023, and I see year-over-year improvements in the OR, Q4 2024 versus 2023, which puts you at a very good operating ratio.

John Brooks: Yeah, Ken, you know, being a grain, guys, it's never made till it's in the bin, but we are pretty optimistic in Canada. And I think what we're particularly optimistic about is you think about last year's crop and even going back to the 21-22 drought crop. You know, our growing territory felt more of the effects of that. And as we sit here today, we certainly see significant improvement in the CPKC growing territory in the southern part of the provinces. You know, in terms of projections, you know, we've kind of settled in it in our mind and are modeling at about a 73 million metric ton or so.

Speaker Change: Yeah, Ken, you know, being a grain guy, it's never made until it's in the bin.

John Brooks: But we are pretty optimistic in Canada, and I think what we're particularly optimistic about is if you think about last year's crop and even go back to the 21-22 drought crop. Our growing territory felt more of the effects of that, and as we sit here today, we certainly see significant improvement in the CPKC growing territory in the southern part of the provinces. In terms of projections, we've kind of settled in, in our minds, in our modeling, at about 73 million metric tons or so, but customers are talking about possibly 75 to 78 million metric tons of this type of crop.

Speaker Change: We are pretty optimistic in Canada, and I think what we're particularly optimistic about is, if you think about last year's crop, and even going back to the 21-22 drought crop,

Speaker Change #100: You know, our growing territory felt more of the effects of that.

Speaker Change #100: And as we sit here today, we certainly see significant improvements.

Speaker Change #100: in the CPKC Growing Territory in the southern part of Canada.

Speaker Change #100: of the Provinces.

Speaker Change #100: You know, in terms of projections...

Speaker Change #100: You know, we've kind of settled in, in our mind, in our modeling, at about a 73 million metric ton or so.

Ken Hoexter: But you know, I'm customers are talking about possibly 75 to 78 million metric ton type crop. So we'll see we got a little bit time left to go. And, but certainly optimistic that it could be a strong rainfall. Great. Thanks for the touch and time. Appreciate it. Yep.

Speaker Change #100: But, you know, customers are talking about possibly $75 to $78 million.

Kenneth Scott Hoexter: So we'll see. We've got a little bit of time left to go, but we're certainly optimistic that it could be a strong rainfall. Great. Thanks for your attention and time.

Speaker Change #100: So we'll see, we've got a little bit of time left to go, but certainly optimistic that it could be a strong rainfall.

Kenneth Scott Hoexter: I appreciate it. Yep. Thanks again.

Brian Ossenbeck: Thanks again.

Speaker Change #101: Great. Thanks for the Hudson time. Appreciate it. Yep. Thanks, Ken.

Nadine Velani: We'll go next month to Brian Ossenbeck at JP Morgan. Hey, afternoon. Thanks for taking the question. Maybe Nadeem, just to follow up on the OR commentary. I mean, that seems pretty reasonable that it would deteriorate if you're expecting a labor disruption, you know, here in the quarter.

Brian Ossenbeck: We'll go next now to Brian Ossenbeck at, Hey, afternoon. Thanks for taking the question. Maybe, Nadeem, just to follow up on the OR commentary, I mean, that there was a labor disruption, you know, here in the quarter. So I just wanted to clarify that or if maybe the derailment is a bit bigger. Thought.

Speaker Change #101: We'll go next now to Brian Ossenbeck at J.P. Morgan.

Brian Ossenbeck: Hey, afternoon. Thanks for taking the question. Maybe, Nadeem, just to follow up on the OR commentary. I mean, that seems...

Brian Ossenbeck: It's pretty reasonable that it would deteriorate if you're expecting...

John Brooks: They just wanted to clarify that, or maybe the real months that bigger than that we thought. And then just for John, if you can give us some context around the end markets that are potentially affected by the peso. You know, we've seen a pretty big swing both selections, probably a little bit more volatile in the coming quarter. So to have an impact on those calls at Lazaro. Be able to offset that with other maybe cost improvements or maybe praise it on a dollar basis. Like how do you how do you work for that volatility and where the customers looking for?

Jonathan B. Chappell: a labor disruption, you know, here in the quarter. So just wanted to clarify that or if maybe the derailment is a bit bigger than we thought. And then just for John , if you can give us some context around the end markets that are potentially affected by the...

John Brooks: And then just for John, if you can give us some context around the end markets that are potentially affected by the peso. You know, we've seen a pretty big swing post-elections, and it's probably gonna stay a little bit more volatile in the coming quarter. So that impact on those calls at Lazaro, be able to offset that, other cost improvements or price it on a dollar basis. How do you work through

Speaker Change #103: The Peso, you know, we've seen a pretty big swing post-elections.

Speaker Change #104: probably going to stay a little bit more volatile in the coming quarter. So, to have an impact on those calls at Lazaro, be able to offset that with other maybe cost improvements or maybe price it on a dollar basis. Like, how do you work through that volatility and what are the customers looking for?

John Brooks: Well, Brian, you know, honestly, I don't know if we felt the whole lot of effect at this point or at least I can differentiate what would be. You know, just sort of broader macro softness in some of the areas in and out of Mexico that Carlo business, particularly like some of our steel business down in that area. You know, I honestly, because we don't have a what I would consider regular cross-border import export. Business at this point in Lazaro, I haven't really felt much on that. And frankly, I would say just the opposite, the customers.

Brian Ossenbeck: Well, Brian, honestly, I don't know if we've felt a whole lot of effect at this point, or at least I can differentiate what would be, you know, just sort of broader macro softness in some of the areas in and out of Mexico that carload business, particularly like some of our steel business, down in that area. You know, I honestly, because we don't have what I would consider a regular cross-border import-export business at this point in Lazaro, I haven't really felt much on that. And Frankly, I would say just the opposite.

Speaker Change #104: Well, Brian , you know, honestly, I don't know if we felt a whole lot of effect at this point, or at least I can differentiate.

Speaker Change #128: What would be, you know, just sort of broader macro softness in some of the areas in and out of Mexico that carload business particularly like some of our steel business.

Speaker Change #104: Down in that area, you know, I honestly, because we don't have a, what I would consider a regular cross-border import-export.

John Brooks: The customers, the steamship lines we're working with, because of the strength of intramexico that we're seeing right now, have actually been pretty excited about what the cross-border opportunity could present. You know, I don't know if that's just forward-thinking, Brian, in terms of, you know, expectations on the peso to moderate some or not. But nothing I can really call out to you right now that has materially impacted our cross-border flows. And Brian, just reiterate on the OR.

Speaker Change #104: Business at this point, and Lazaro, I haven't really felt much on that, and frankly, I would say just the opposite. The customers...

John Brooks: The seam ship lines we're working with because of the strength with intramexico that we're seeing right now have actually been pretty excited about what the cross border opportunity could present. You know, I don't know if that's just forward-thinking Brian in terms of, you know, expectations on the peso to moderate some or not.

Speaker Change #105: The seamstress lines we're working with.

Speaker Change #105: because of the strength with Intra-Mexico.

Lazaro: that we're seeing right now have actually been pretty excited about what the cross-border

Lazaro: Opportunity could present. You know, I don't know if that's just forward thinking, Brian , in terms of, you know, expectations on the peso to moderate some or not.

John Brooks: But, but nothing I can really call out to you right now that has materially impacted our cross-border flows.

Speaker Change #107: But nothing I can really call out to you right now that has materially impacted our cross-border flows.

Nadine Velani: And Brian, just reiterate on the on the OR. Yeah, we had, you know, near term, additional costs associated with some casualty that is going to be a step up in costs and the core. And then, yeah, I mean, reasonably, we think we're going to have a labor disruption, and that's going to have an impact on the OR. So I think from our perspective, I think it's responsible to highlight the fact that there's going to be a cost. So what we think can occur near certain keep mentioned that's maybe end of August that that's a likely event.

Nadeem S. Velani: Yeah, we had, you know, near-term additional costs associated with some casualty, that is going to be a step-up in cost in the quarter. And then, yeah, I mean, reasonably, we think we're going to have a labor disruption, and that's going to have an impact on the OR. So, from our perspective, I think it's important to highlight the fact that there are going to be costs associated with what we think is going to occur.

Lazaro: and Brian .

Speaker Change #108: reiterate on the on the OR yeah we had you know near-term additional costs associated with some some casualty that is going to be a step up in costs in the quarter and then yeah I mean reasonably we think we're going to have a labor disruption and that's going to have an impact on the OR so I think from our perspective I think it's responsible to highlight the fact that there's going to be costs associated with what we think is going to occur.

Nadeem S. Velani: Near term, Keith mentioned that maybe the end of August, that that's a likely event. And so factoring that into what we think is going to be our margins in Q3 is responsible. You're going to get me in trouble with Tony Hatch for talking about the OR so much.

Speaker Change #108: You mentioned that maybe end of August that that's a likely event and so factoring that into what we think is going to be our margins in Q3 is responsible.

Nadine Velani: And so factoring that into what we think is going to be our margins in Q3 is response. School.

Nadine Velani: You're going to get me in trouble with Tony Hans for talking about the OR, so my dean.

Nadine Velani: All right, guys, thanks very much.

Speaker Change #109: You're going to get me in trouble with Tony Hatch for talking about the OR so much.

Brian Ossenbeck: All right, guys, thanks very much. Thank you. We'll go next now to Kevin Cheung at CIP. Hey, thanks for taking my question. Good afternoon, everyone. I'm just wondering, with the FMC halting this Gemini alliance, does that have any near or medium-term implications in terms of some of the growth you envisioned, either later this year or into 2025? Yeah, you know, it's a really good question, Kevin.

Nadine Velani: Thank you.

Speaker Change #111: Alright guys, thanks very much.

Kevin Chiang: We'll go next now to Kevin Chiang at CIBC.

Speaker Change #110: Thank you.

Kevin Chiang: Hey, thanks for taking my question.

Speaker Change #112: We'll go next now to Kevin Cheung at CIBC.

Kevin Chiang: You're going to have to introduce everyone. I'm just wondering, with the FNC halting this Gemini Alliance, does that have any near or medium term implications in terms of some of the growth you envisioned? Either later this year or into 2025? Yes, you know, it's a really good question, Kevin. You know, since, frankly, since COVID, the international business unit is the volatility in some of those traits and pork flows, as Keith spoke to earlier, that we experienced in March, April, has presented more challenges. And I can tell you, we are strategically, as much as we say, very much into picking our partners and how we align, rethinking in a lot of areas, how do we think about that international space?

Kevin Cheung: Hey, thanks for taking my question here. Good afternoon, everyone. I'm just wondering, with the FMC halting this Gemini alliance, does that have any near or medium-term implications in terms of some of the growth you envisioned either later this year or into 2025?

Kevin Cheung: You know, since, frankly, since COVID, the International Business Unit, the volatility in some of those Freight and port flows, as Keith spoke about earlier, that we experienced in March-April, has presented more challenges. And I can tell you we are, strategically, as much as we say, very much into picking our partners and how we align, rethinking in a lot of areas, how we think about that international space. Certainly, HAPAG is one of our largest customers and our most trusted partners.

Speaker Change #114: Yeah, you know, it's a really good question, Kevin. You know, since, frankly, since COVID, the international business unit is the volatility in some of those

Speaker Change #114: freight and port flows, as Keith spoke to earlier that we experienced in March-April.

Speaker Change #114: has presented more challenges. And I can tell you, we are strategically, as much as we say, very much into picking our partners and how we align, rethinking in a lot of areas, how we think about that international space. You know, certainly HAPAG is one of our largest customers, the most trusted partners.

John Brooks: You know, certainly HAPAG is one of our largest customers, the most trusted partners. We also have a significant business with Merisk. So I would tell you, generally speaking, I'm excited about it. I think it presents opportunities for us, for us coast to coast, both Vancouver. And then Porta St. John. And certainly then with APM Terminals operating down at Lazaro and, frankly, Merisk announcing tuning services or actually a new service and revised service where they're calling on Lazaro. They had a man's meal. I think presents a really good opportunity for us. Now, we'll see that it's not all done yet.

John Brooks: We also have a significant business with Maersk, so I would tell you, generally speaking, I'm excited about it. I think it presents opportunities for us coast-to-coast, both Vancouver and the Port of St. John. And certainly then with APM Terminals operating down at Lazaro, and Frankly, Maersk announcing two new services, or actually a new service and a revised service, where they're calling on Lazaro ahead of Manzanillo, I think it presents a really good opportunity for us. Now, we'll see.

Speaker Change #114: We also have a significant business...

Speaker Change #114: with Maersk. So I would tell you, generally speaking, I'm excited about it.

Speaker Change #114: I think it presents opportunities for us coast-to-coast, both Vancouver and in Port of St. John .

Speaker Change #114: and certainly then with APM Terminals operating down at Lazaro and frankly Mariska announcing tuning services.

Speaker Change #114: or actually a new service and revised service where they're calling on Lazaro, the head of Manzanillo, I think presents a really good opportunity for us. Now we'll see that it's not all done yet.

Kevin Cheung: It's not all done yet. I know they're working through a lot to get that completed. But if, in fact, that does what we think it could, it could present a good opportunity in the international space in 2025. That's great. Thank you for taking my question. I'm going to go next now to... Hi, good afternoon.

John Brooks: I know they're working through a lot to get that completed, but if in fact that does what we think it could, it could present a certainly good opportunity in the international space in 2025.

Speaker Change #114: I know they're working through a lot to get that completed, but if in fact that does what we think it could, it could present a certainly a good opportunity in the international space in 2025.

Stephanie Moore: That's great. Thank you for taking my question.

Speaker Change #114: That's great. Thank you for taking my question.

Stephanie Moore: We'll go next now to Stephanie Moore with Jeffries. Hi, everyone. Thanks for the question. I apologize if this is asked earlier, but it's just kind of looking at the most recent weekly kind of RTN data. It does look like you're standing apart from maybe some of your peers as of late. So just curious if you're seeing anything kind of specific, maybe having to do with some new term dynamics, fire strikes, the like. Just kind of curious who just seem to stand out a little bit or just have to do with maybe a big jump in Mexico.

Unknown Caller: Thanks for the question. I apologize that this was asked earlier, but I'm just kind of looking at the most recent weekly kind of RTM data. It does look like you're standing apart from maybe some of your peers as of late.

Speaker Change #115: We'll go next now to Stephanie Moore with Jeffreys.

Stephanie Moore: Hi Daphne, thanks for the question.

Speaker Change #117: I apologize that this is after earlier, but it's just kind of looking at the most recent weekly kind of RTM data. It does look like you're

Stephanie Moore: Standing apart from maybe some of your peers as of late. So just curious if you're seeing anything kind of specific, maybe having to do with some near-term dynamics.

John Brooks: So just curious if you're seeing anything kind of specific, maybe having to do with some near-term dynamics, fire strikes, the like. Just kind of curious because it does seem to stand out a little bit, or it just has to do with maybe a big jump in Mexico. But maybe, if anything, you can speak to just some of the early 3Q performance on the RTM front. Thank you. Yeah, I mean, we are lapping the port strike from a year ago, and that's been beneficial.

Speaker Change #118: Firestrikes, the like, I'm just kind of curious because it does seem to stand out a little bit or it just has to do with maybe a big jump in Mexico, but maybe if anything you can speak to just some of the early 3Q performance on the RTM front. Thank you.

John Brooks: But maybe, if anything, you can speak to just some of the early, early three Q performance and RTM. Thank you. Yeah, I mean, we are lapping the ports right from a year ago. That's been beneficial, but certainly, I mean, we're seeing strength across the board. And what have been some macro challenges, if you think about it's a Mexican or model, for example, that's turned into a positive. We're starting to see confidence in the new grain crops of grain is strong year over year. So I think across the board. You know, I think we're almost 14% our TMS quarter quarter to date.

John Brooks: But certainly, I mean, we're seeing strength across the board. And what have been some macro challenges, if you think about domestic intermodal, for example, that's turned into a positive. We're starting to see confidence in the new grain crop. So grain is strong year over year.

Speaker Change #119: Yeah, I mean, we are lapping the port strike from a year ago, that's been beneficial, but certainly

Speaker Change #120: I mean, we're seeing strength across the board. And what have been some macro challenges, if you think about Mesquite and Mogul, for example?

Speaker Change #121: That's turned into a positive. We're starting to see confidence in the new grain crops. Grain is strong year over year. So I think across the board...

John Brooks: So I think across the board, You know, I think we're up almost 14% RTMs quarter to date. Now that's going to slow a little bit as we lap this strike benefit year over year or strike comp, but I think we're still set up for a very strong Q3 and back half of the year. So I agree with you. We are kind of setting ourselves apart from some of our peers.

Speaker Change #121: You know, I think we're up almost 14% RTMs quarter to date. Now that's going to slow a little bit as we lap this strike benefit year over year or strike comp. But I think we're still set up.

John Brooks: Now that's going to slow a little bit as we lap this strike benefit year over year or strike comp. But I think we're still set up for a very strong Q3 and back half of the year. So I agree with you. We are kind of setting ourselves apart from some of our peers. Now, if you think about it.

Speaker Change #121: for a very strong Q3 and back half of the year. So I agree with you, we are kind of setting ourselves apart from some of our peers. If you think about...

John Brooks: Bill. This transaction and what it provided, we kind of did things a little bit backwards. We saw the benefits of synergies on the front end in an environment where the macro was weak. Now we're going to continue to see the synergies ramp up. John talked about the exit rate closer to 800 million on the top line. But now we're also starting to see the base business that was weak in the, you know, last year and a half, start to rebound. So, you know, Canadian grain is a big part of our franchise. We're starting to see that recover on the near modal side.

Nadeem S. Velani: If you think about this transaction and what it provided, we kind of did things a little bit backwards. We saw the benefits of synergies on the front end in an environment where the macro was weak. Now we're going to continue to see the synergies ramp up. John talked about the exit rate closer to $800 million on the top line.

Speaker Change #121: This transaction and what it provided, we kind of did things a little bit backwards. We saw the benefits of synergies on the front end in an environment where the macro was weak. Now we're going to continue to see the synergies ramp up. John talked about the exit rate closer to $800 million.

Nadeem S. Velani: But now we're also starting to see the base business that was weak in the last year and a half start to rebound. Canadian Grain is a big part of our business. We're starting to see that recover. On the air modal side, we're starting to see the benefits of our domestic franchise and some of our market share wins, and we're starting to see the macro improve. So that's going to start being a tailwind.

Jonathan B. Chappell: On the top line, but now we're also starting to see the base business that was weak in the, you know, last year and a half start to rebound.

Jonathan B. Chappell: So, you know, Canadian Grain is a big part of our franchise.

John Brooks: We're starting to see the benefits of our domestic franchise and some of our market share wins, and we're starting to see the macro improve. So that's going to start being a tailwind. So some of the base business and I can go on with coal and polish is starting to recover. And so, as that base comes on with synergies, you're seeing kind of that double effect of outsize growth that we talked about at our investor day last year. And I think that is going to create a lot of operating leverage and allow us to get back growth to the bottom line.

Jonathan B. Chappell: We're starting to see that recover.

Jonathan B. Chappell: On the immobile side, we're starting to see the benefits of...

Jonathan B. Chappell: of our domestic franchise and some of our market share wins and we're starting to see the macro improve.

Nadeem S. Velani: So some of the base business, and I can go on with coal and potash, is starting to recover. And so as that base comes on with synergies, you're seeing kind of that double effect of outsized growth that we talked about at our investor day last year. And I think that is going to create a lot of operating leverage and allow us to get that growth to the bottom line. That's why we're so excited about 2025 and beyond. I got it.

Jonathan B. Chappell: So, that's going to start being a tailwind. So, some of the base business.

Jonathan B. Chappell: and I can go on with coal and potash.

Jonathan B. Chappell: is starting to recover. And so as that base comes on with synergies.

Jonathan B. Chappell: You're seeing kind of that double effect of outsized growth that we talked about at our investor day last year. And I think that is going to create a lot of operating leverage and allow us to get that growth to the bottom line. That's why we're so excited about 2025 and beyond.

John Brooks: That's why we're so excited about, you know, 2025 and beyond. Got it. So you wouldn't necessarily call out any kind of short-term dynamics that you're seeing the last couple of weeks because of some kind of outside event that is fake. This is kind of you're running the playbook as you outlined. Yeah, a little bit of the comps you're over your easy comps from the strike that occurred a year ago at West Coast port in Canada. That's the benefit. But on set of that, no.

Unknown Caller: So you wouldn't necessarily call out any kind of short-term dynamics that you're seeing the last couple weeks because of some kind of, some kind of outside event, so to speak. This is kind of you running the playbook as you Yeah, a little bit of the comps year over year, easy comps from the strike that occurred a year ago at the West Coast Ports in Canada. That's, that's the benefit.

Speaker Change #122: Got it. So you wouldn't necessarily call out any kind of short-term dynamics that you're seeing in the last couple weeks because of some kind of...

Speaker Change #123: Some kind of outside event, so to speak. This is kind of, you're running the playbook as you outlined.

Speaker Change #124: Yeah, a little bit of the comps year-over-year, easy comps from the strike that occurred a year ago at the West Coast ports in Canada, that's the benefit, but outside of that, no.

John Brooks: But outside of that, Okay, really appreciate the time. Thanks, guys. Thanks. I'm going to go next now to Cherilyn Radbourne. Thanks very much, good afternoon.

John Brooks: Okay, really appreciate the time. Thanks, guys.

Cherilyn Radbourne: Thanks. We'll next now to Sheryl and Radborne of PD Cowan. Thanks very much. Good afternoon. Thanks for squeezing me in.

Speaker Change #125: Okay, I really appreciate the time. Thanks guys.

Speaker Change #126: Thanks, everyone.

Speaker Change #126: We'll go next now to Cherilyn Radbourne of TD Cowen.

Cherilyn Radbourne: Thanks for squeezing me in, John. I was just hoping that we could dig in a little bit more on the exit run rate on the revenue synergies, which sounds like it could be up to $100 million higher than originally expected. Could you talk about where you're seeing that outperformance from an end market perspective and whether that's as evenly balanced as synergies overall? Yeah, Cherilyn.

Cherilyn Radbourne: John was just hoping that we could dig in a little bit more on the exit run rate on the revenue synergies, which sound like it could be up to $100 million higher than originally expected. Could you talk about where you're seeing that outperformance from an end market perspective and whether that's is evenly balanced as synergies overall? Yeah, Sheryl. So a couple of things: you know, when we originally built this two, three years ago, like the world has changed and evolved. Now, as we sit here today. And I've talked a lot about that. You know, a lot of those was an area initially we thought would be a longer term story.

Cherilyn Radbourne: Thanks very much. Good afternoon.

Cherilyn Radbourne: Thanks for squeezing me in. John , I was just hoping that we could dig in a little bit more on the exit run rate on the revenue synergies, which sound like it could be up to $100 million higher than originally expected. Could you talk about where you're seeing that outperformance from an end market perspective and whether that's as evenly balanced as synergies overall? Yeah. Absolutely. Absolutely.

John Brooks: So a couple things. You know, when we originally built this two, three years ago, the world has changed and evolved now, as we sit here today, and I've talked a lot about that. Autos was an area that, initially, we thought would be a longer-term story, but actually, with our Wiley compound and some of the opportunities out of Mexico, it has actually pulled ahead to be an early story. If you think about the intermodal business, and I'm going to say largely domestic intermodal and autos, that's making up roughly, I'm going to say about half, slightly below half of the synergies.

Cherilyn Radbourne: Yeah, Cherilyn. So, a couple things.

Jonathan B. Chappell: When we originally built this two, three years ago, the world has changed.

Jonathan B. Chappell: and evolve now as we sit here today. And I've talked a lot about that.

John Brooks: But actually is with our widely compound and some of the opportunities out of Mexico is actually told the head to be in an early story. If you think about the modal business, and I'm going to say largely domestic in a modal and also that's making up roughly, I'm going to say about half, slightly below half of the synergies. And then the other half is split between our bulk and our merchandise, ECP franchises. Now, you know, in area, I'll call out that we didn't expect to be quite as strong at this point with some of our grain into Mexico. But I'll give you an example.

Jonathan B. Chappell: Autos was an area initially we thought would be a longer-term story, but actually is, with our Wiley compound and some of the opportunities out of Mexico, has actually pulled ahead to be.

John Brooks: And then the other half is split between our bulk in our merchandise ECP franchises. Now, you know, an area I'll call out that we didn't expect to be quite as strong at this point, with some of our grain going into Mexico, but I'll give you an example last month, in July here, we ran, I think, 15 trains between corn, wheat, soybeans, off of our traditional legacy CP franchise, whether it be southern Canada, North Dakota, Minnesota, down into Mexico. I think the prior month was nine, the So we're seeing a nice ramp up in that bulk friend franchise that may be coming on a little, little stronger than I initially anticipated. I hope that that helps. That's perfect.

Jonathan B. Chappell: In an early story, if you think about the intermodal business, and I'm going to say largely domestic intermodal, and autos, that's making up roughly, I'm going to say about half, slightly below half of the synergies.

Jonathan B. Chappell: And then the other half is split between our bulk and our merchandise ECP franchises.

Jonathan B. Chappell: Now, you know, an area I'll call out.

Jonathan B. Chappell: That we didn't expect to be quite as strong at this point with some of our grain into into Mexico, but I'll give you an example last.

John Brooks: This month in July here, we've run, I think, 15 trains between corn, wheat, soybeans off of our traditional legacy, CP franchise, whether it be Southern Canada, North Dakota, Minnesota, down into Mexico. I think the prior month with nine, the prior month of that was six, if my memory calls. So we're seeing a nice ramp up in that bulk franchise that may be coming on a little stronger than I initially had anticipated. Thank you.

Jonathan B. Chappell: This month, in July here, we've run, I think, 15 trains between corn, wheat, soybeans off of our traditional legacy CP franchise, whether it be southern Canada, North Dakota, Minnesota.

Jonathan B. Chappell: down into Mexico. I think the prior month was nine, the prior month of that was six, if my memory calls. So we're seeing a nice ramp up in that bulk franchise.

John Brooks: I hope that helps. That's perfect.

Jonathan B. Chappell: that may be coming on a little stronger than I initially had anticipated.

Konark Gupta: Thank you. With the next now to Konark Gupta at Scotia Capital. Thanks and good afternoon. Thanks for speaking, man. John, I think you alluded to earlier on the call about some international into models, shifts. There was some market shares shipped as well as some new ones. Can you please elaborate, and then the Dean, I think you mentioned about some constant factors. You see any early sense on the magnitude of those two items, casual D install this file. Thanks.

Cherilyn Radbourne: Thank you. Thank you. Konark Gupta.

Jonathan B. Chappell: Thank you. We go next now to Konark Gupta at Scotia Capital.

Konark Gupta: Thanks, and good afternoon. Thanks for squeezing in. John, I think you alluded earlier in the call to some international intermodal shifts. There was some market share shift as well as some new wind. Can you please elaborate?

Konark Gupta: Thanks, and good afternoon. Thanks for squeezing in. John , I think you alluded to earlier on the call about some international intermodal shifts. There was some market share shift as well as some new wins. Can you please elaborate? And then, Nadeem, I think you mentioned about some cost impact in Q3. Any early sense on the magnitude of those two items, casualty and stock-based firm? Thanks.

John Brooks: And then, Nadeem, I think you mentioned some cost impact in Q3. Any early sense on the magnitude of those two items, casualty and stock-based farm? Thanks.

John Brooks: Yeah, Kar, just on the share piece, just call it like it is. We shifted Costco partially out of our franchise at Vancouver. And we brought on, you know, a corresponding piece of O&E business. And again, this goes back to what I was talking around, really right-sizing our partners at the Port of Vancouver. And also with an eye to what these partners can do with us across our entire franchise. So St. John Lazaro. And as we kind of rework this book, you know, there might be more to come in how we do that. But, but, but rest assured, we're hydrating the overall franchise value of the book with those shifts and doing it with an eye towards using our entire network.

Nadeem S. Velani: Yeah, just on the share piece, just call it like it is. We shifted Costco partially out of our franchise in Vancouver, and we brought on, you know, a corresponding piece of O&E business. And again, this goes back to what I was talking about, really right-sizing our partners at the Port of Vancouver and also with an eye to what these partners can do with us across our entire franchise. So St. John, Lazaro.

Konark Gupta: Yeah.

Jonathan B. Chappell: Just on the share piece, just call it like it is. We shifted Costco partially out of our franchise at Vancouver, and we brought on a corresponding piece of O&E business. And again, this goes back to what I was talking around, really right-sizing our partners.

John Brooks: And as we kind of rework this book, you know, there might be more to come in how we do that. But rest assured, we're grading the overall franchise value of the book with those shifts and doing it with an eye toward using our entire network. Now that we have the leverage of CPKC and Konark, just on the stock-based comp, I mean, as you know, we mark to market each month. So that amount is still to be determined.

Speaker Change #130: at the Port of Vancouver, and also with an eye to what these partners can do with us across our entire franchise, so St. John , Lazaro, and as we kind of rework this

Jonathan B. Chappell: This book, you know, there might be more to come in how we do that, but rest assured we're high-grading the overall franchise value of the book.

Jonathan B. Chappell: with those shifts and doing it with an eye towards using our entire network now that we have the leverage of CPKC.

Nadine Velani: Now that we have the leverage of CPKC. In Coronark, just on the stock base comp, I mean, you know, we mark to market each month. So, that amount is still to be determined. We'll see what, what occurs on, you know, September 30th when the quarter ends.

John Brooks: We'll see what occurs on, you know, September 30, when the quarter ends. And on the casualty side, you know, we have one incident alone that occurred in July earlier this month that was in the neighborhood of $45-$50 million worth of cost.

Coronar: And Konark, just on the stock-based comp, I mean, as you know, we mark-to-market each month, so that's...

Coronar: That amount is still to be determined. We'll see what what occurs on, you know, September 30th when the when the quarter ends.

Nadine Velani: And on the casualty side, you know, we have one incident alone that was in July, earlier this month, that was in the neighborhood of $45, $50 million worth of cost. So that's why I highlight just how, how this is going to be a headwind. And so, you know, like I said, there's an opportunity to maybe avoid costs in the main part of the quarter. That's our goal and intent to keep them on the rails. But, but just given this cost occur, I wanted to make sure I highlighted it.

Nadeem S. Velani: So that's why I highlight just how this is going to be a headwind. And so, you know, like I said, there's an opportunity to maybe avoid costs in the main part of the quarter. That's, that's our goal and intent to keep them on the rails. But, but just given this cost occurred, I wanted to make sure I highlighted it. Thank you. You're welcome. Next now is Ravi Shankar.

Speaker Change #132: And on the casualty side, you know, we have one incident alone that was in July earlier this month that was

Speaker Change #132: in the neighborhood of $45, $50 million worth of costs. So that's why I highlight just how.

Speaker Change #132: [inaudible]

Nadine Velani: Thank you.

Speaker Change #132: I highlighted it.

Speaker Change #133: Thank you.

Ravi Shanker: We'll next now to Robbie Shanker at Morgan Stanley.

Speaker Change #134: You're welcome.

Unknown Executive: Thanks enough, everyone, and our thoughts are also with the CBGC family as well. Just kind of on that point, Nadeem, thank you for clarifying the size of those two items. If I can ask you as well, you said there are some strike-related cost items in the guidance or in the OR walk as well. Is that purely kind of a cost thing, or are you also trying to quantify any diversion of volumes away that you're seeing right now and in the future?

Ravi Shanker: Thanks to not very one and our thoughts are also at the CPKC company as well. Just on that point at the end, thank you for clarifying the size of those two items. If I can ask you as well, you said there are some strike-related cost items in the guidances or in the, or walk as well. Is that purely going to cost thing, or are you also trying to quantify any diversion of volumes away that you're seeing right now and to come? And also on that diversion, is that something that snaps back in a right after you have resolution, or does that take longer like it was last year, but the port strikes, or how do you see that playing out?

Speaker Change #133: Next now to Ravi Shankar at Morgan Stanley

Unknown Executive: Thanks enough everyone and our thoughts are also with the CBJC family as well. Just kind of on that point, Nadeem, thank you for clarifying the size of those two items. If I can ask you as well, you said there are some strike related cost items in the guidance or in the OR walk as well. Is that purely going to be a cost?

Unknown Executive: And also on that diversion, is that something that snaps back in a write-off where you have a resolution, or does that take longer, like it was last year with the port strikes, or how do you see that playing out?

Speaker Change #136: Are you also trying to quantify any diversion of volumes away that you're seeing right now and to come and also on that diversion, is that something that snaps back in a right after you have resolution or does that take longer like it was last year with the port strikes or how do you see that playing out?

Nadine Velani: No, so we've already faced some revenue headwinds in May before the labor disruption was delayed, if you will. You know, I'm not factoring necessarily into the commentary about a no-wire sequential headwind related to that. So anything types of revenues. I think, you know, it's going to be a delayed revenue if anything. So I think it's a cost elements. I think we're going to start, you know, we will see the network be brought to a halt, and then to ramp back up, it takes some cost, it takes time. You know, you have these inefficiencies over a period of whatever, you know, the 72-hour notice and then whatever period that the company is out.

Nadeem S. Velani: So, we've already faced some revenue headwinds in May before the labor disruption was delayed, if you will. I'm not necessarily factoring into the commentary about an OR sequential headwind related to that. Anything tied to revenues, I think it's going to be delayed revenue, if anything. So, I think it's a cost element. I think we're going to start... We will see the network be brought to a halt, and then it will ramp back up. It takes some cost, and it takes time.

Speaker Change #137: No, sorry

Speaker Change #138: We've already faced some some revenue headwinds in May before the

Speaker Change #139: The labor disruption was delayed, if you will. You know, I'm not factoring necessarily into the commentary about an OR sequential.

Speaker Change #140: Headwind related to that. So anything tied to revenues, I think, you know, it's going to be a delayed revenue, if anything. So I think it's a it's a cost element. I think we're going to start, you know, we will see the network

Speaker Change #140: be brought to a halt and then to ramp back up, it takes some cost, it takes time.

Nadeem S. Velani: You have these inefficiencies over a period of whatever, the 72-hour notice period, and then whatever period that the company is out. So, that's how I would highlight the cost headwind associated with the strike. You can't put a number to it.

Speaker Change #140: You know, you have these inefficiencies over a period of whatever.

Nadine Velani: So that's how I would highlight the cost of headwind associated with the strike.

Speaker Change #140: the 72-hour notice and then whatever period that the company is out. So, that's how I would highlight the cost headwind associated with the strike.

Nadine Velani: and that. You can put a number to it. To me, Dean's point, domestic intermodal can be tracked, and certainly we'll face some of that, but the rest is kind of, as he said, delayed. And it'll push volume, certainly into Q4 and likely into Q1 of next year, depending on how long the top it would be. And the uniqueness of this time is that we've got both railroads, right? That creates a very different scenario than we've faced over the last 20 years, and so it puts a different pressure on the supply chain, and it has a different dynamic as far as the recovery for the supply chain as per Canada as a whole, post labor disruption.

John Brooks: To Nadeem's point, domestic intermodal can be trucked, and certainly we'll face some of that. But the rest is kind of, as he said, delayed, and it'll push volume certainly into Q4 and likely into Q1 of next year, depending on how long the stoppage would be. And the uniqueness of this time is that you've got both railroads, right?

Speaker Change #140: You can't put a number to it, to Nadeem's point, you know.

Speaker Change #141: Domestic and mobile, right, can be trucked and certainly we'll face some of that.

Nadeem: but the rest is kind of as he said delayed and and you know it'll it'll push volume certainly into Q4 and and likely into Q1 of next year if depending on how long the stoppage would be.

Nadeem: And the uniqueness of this time is that it's got both railroads, right? That creates a...

Nadeem S. Velani: That creates a very different scenario than we've faced over the last 20 years. And so it puts different pressure on the supply chain, and it has a different dynamic as far as the recovery for the supply chain, as per Canada as a whole, post-labor disruption. Understandable. Thank you. Thanks for having me, Ben Nolan.

Nadeem: A very different scenario than we've faced over the last 20 years, and so it puts a different pressure on the supply chain, and it has a different dynamic as far as the recovery for the supply chain for Canada as a whole post-labor disruption.

Nadine Velani: Hunter said, "thank you."

Nadine Velani: Thanks, Ravi.

Speaker Change #142: Understood. Thank you.

Ben Nolan: And we're going to now to Ben Nolan with Stifled.

Speaker Change #143: Thanks for having me.

Ben Nolan: Oh, thanks. I appreciate you guys getting in.

Unknown Executive: I appreciate you guys getting in. I wanted to go back a little bit to pricing. I know that it has, and you alluded to this a little bit ago, but there were still some legacy contracts pre-merger that were set to be repriced, and I think you were doing some of that in the third quarter. Curious if all of that has been worked through, or if there might be a little bit more juice to squeeze on some of those contracts.

Speaker Change #143: And we'll go next now to Ben Nolan with FIFO.

Ben Nolan: I wanted to go back a little bit to pricing. I know that it had, and you alluded to this a little bit ago, but there were still some legacy contracts, pre-merger, that were set to be reprised. And I think you were doing some of that in the third quarter, curious. If all of that has been worked through, if there might be a little bit more juice to squeeze on some of those contracts. You know what? We are getting into the late innings of the base book. There's probably one big one out there that remains. But for the most part, we have worked through just timing-wise.

Ben Nolan: Oh, thanks. I appreciate you guys getting in. I wanted to go back a little bit to pricing. I know that it has, and you alluded to this a little bit ago, but there was still some legacy.

Ben Nolan: contracts pre-merger that were set to be repriced. And I think you were doing some of that in the third quarter. Curious if all of that has been worked through, if there might be a little bit more more juice to squeeze on some of those contracts.

Unknown Executive: You know what? We are getting into the late innings of the base book. There's probably one big one out there that remains. But for the most part, we have worked through just timing wise. They didn't have a lot of multi-year contracts. Most of them are annual. We've been at this now for now going on close to a year and a half or whatever, since April 23.

Speaker Change #145: You know what? We are getting into the late innings of the base book. There's probably one big one out there that...

Speaker Change #146: That remains, but for the most part, we have worked through, just timing-wise, they didn't have a lot of multi-year contracts. Most of them were annual. We've been at this now going on close to a year and a half or whatever.

John Brooks: They didn't have a lot of multi-year contracts. Most of them were annual. We've been at this now going on close to a year and a half or whatever since April of 23. So we've rolled a lot of that over. Now is the direct answer. All right. Thank you. Yep.

Speaker Change #146: since April of 23. So we've rolled a lot of that that over now is is is the direct answer.

Ben Nolan: So we've rolled a lot of that over now, and now is the direct answer. All right. Thank you. Yeah. Next now to Benoit Poirier of Desjardins.

Benoit Poirier: That's bad.

Speaker Change #147: All right, thank you.

Benoit Poirier: And we'll go next now to Benoit Porier of Desjardins Capital Markets. Yeah. Thanks very much.

Speaker Change #147: Yep, that's Ben.

Ben Nolan: Yeah, thanks very much. Good afternoon, everyone. Could we maybe come back on the overall labor issues and whether you believe it puts Canada's reputation at risk? And do you feel that there's a lot of business on the sidelines that could come back in light of the labor resolution? And also, if we look in the US, there's the port workers. The contract with the ILA port workers is set to expire in September 2024.

Speaker Change #148: And we'll go next now to Benoit Poirier of Desjardins Capital Markets.

Benoit Poirier: Good afternoon, everyone.

Keith Creel: Could we maybe cut back on the overall labor issues and whether you believe it's put Canada's reputation at risk? Do you feel that there's a lot of business on the sideline that could come back in life of labor resolution? And also if we look in the U.S. there's the port workers that contract with the ILA port workers that is set to expire in September 2024. And I was just curious to see whether you see any potential benefits in light of positive cargo diversion. Thank you. Benoit, take the reputational damage. It's undeniably present. You know, you think about what Canada is going through: the port strike last year.

Benoit Poirier: Yeah, thanks very much. Good afternoon, everyone. Could we maybe cut back on the overall labour issues and whether you believe it puts Canada's reputation at risk?

Benoit Poirier: Do you feel that there's a lot of business on the sideline that could come back in light of the labor resolution? And also, if we look in the U.S., there's the port workers, the contract with the ILA port workers that is set to expire in September 2024. And I was just curious to see whether you see any potential benefits in light of the positive cargo diversion. Thank you.

Ben Nolan: And I was just curious to see whether you see any potential benefits in light of the positive cargo diversion. Benoit, I'll take the reputational damage that's undeniably present, you know, you think about what Canada is going through, the port strike last year. How long that lasted, how much pain and suffering that caused for customers, how much credibility impact, some of that traffic hasn't come back to the West Coast. So, undeniably, fast forward to this, you have both railroads shut down at some point, customers as much as they need our products in Canada. They're going to get labor unrest fatigue. So, we have to get beyond this. You know, I don't have a magic bullet for this. I don't know what the secret answer is.

Speaker Change #150: Benoit, I'll take the reputational damage. That's undeniably present. You know, you think about what Canada's going through, the port strike last year.

Keith Creel: How long that lasted and how much pain and suffering that caused for customers, how much credibility impact some of that traffic's not came back to the west coast. So undeniably fast forward to this. You have both railroad shut down. At some point, customers as much as they need our products in Canada, they're going to get. Labor unrest fatigue. So we got to get beyond this. You know, I don't have a magic bullet for this. I don't know what the secret answer is. All we can do is continue to be at the table. We had figured out how to negotiate successfully with every other collective agreement we have in Canada.

Speaker Change #151: How long that lasted, how much pain and suffering that caused for customers, how much credibility impact. Some of that traffic's not came back to the West Coast. So undeniably, fast forward to this, you have both railroads shut down. At some point, customers, as much as they need our products in Canada,

Keith E. Creel: All we can do is continue to be at the table. We have figured out how to negotiate successfully with every other collective agreement we have in Canada. This is the only group, TCRC, that... We just can't get there.

Speaker Change #151: They're going to get labor unrest fatigue.

Speaker Change #151: So we got to get beyond this. You know, I don't have a magic bullet for this. I don't know what the secret answer is. All we can do is continue to be at the table. We have figured out how to negotiate successfully with every other collective agreement we have in Canada. This is the only group, TCRC, that...

Keith Creel: This is the only group TCRC that we just can't get there. So we're going to not give up. We're not going to do a bad deal either. I'm not going to punish this company and let this company suffer because we don't have the discipline to say no and do it's in the best long term interest for all employees. It's fair across all employees, including the TCRC.

Keith E. Creel: So we're not going to give up, remain cautiously optimistic, but we're not going to do a bad deal either. I'm not going to punish this company and let this company suffer because we don't have the discipline to say no and do what's in the best long-term interest for all employees. It's fair across all employees, including the TCRC. Benoit, I'd say the answer's yes to your question there regarding the East Coast, you know, potential strike.

Speaker Change #151: We just can't get there. So we're going to not give up, remain cautiously optimistic, but we're not going to do a bad deal either. I'm not going to...

Speaker Change #151: Punish this company and let this company suffer because we don't have the discipline to say no and do what's in the best long-term interest for all employees that's fair across all employees

Keith Creel: Then I'd say the answer is yes to your question there regarding the East Coast. You know, potential strike. There's ongoing dialogue with the, with the, with the Steenship Limes on alternatives and frankly direct with BCOs that are, that are looking for. I'd say we're, we're kind of early earnings, but some of these tests that I talked about over, over Lazaro were specifically designed with the intent of traffic that, that is going through the canal and, and using these coast today that, you know, could this be an opportunity to do something a little more permanent, Lazaro?

Speaker Change #151: including the TCRC.

Speaker Change #151: Benoit, I'd say the answer is yes to your question there regarding the East Coast.

Keith E. Creel: There's ongoing dialogue with the steamship lines on alternatives, and frankly, directly with VCOs that are looking for alternatives. I'd say we're kind of in the early innings, but some of these tests that I talked about over Lazaro were specifically designed with the intent of traffic that is going through the canal and using the East Coast today, you know, could this be an opportunity to do something a little more permanent at Lazaro? And I also do believe it presents a potential opportunity up at Port of St. John. So we'll have to see how that plays out.

Speaker Change #152: you know, potential strike, there's...

Speaker Change #152: [inaudible]

Speaker Change #153: or Lazaro were specifically designed with the intent of traffic that is going through the canal and using the east coast today that, you know, could this be an opportunity to do something a little more permanent at Lazaro? And I also do believe it presents a potential opportunity up at Port of St. John .

Keith Creel: And I, and I also do believe it presents a potential opportunity up at Port of St. John. So we'll, we'll, we'll have to see how that, that plays out. Thank you very much for the time.

Speaker Change #153: So we'll have to see how that plays out.

Keith Creel: Thank you.

John Brooks: Thank you very much for that. Ladies and gentlemen, we have reached our allotted time for, and I would now like to turn the conference back on. Hey, listen. Let me close by thanking you for your time. I hope the comments provided some color on this unique network and this unique value creation that we're unlocking. You know, I think back, especially now in light of Pat's passing, and I think about what we committed to and what we agreed to do.

Bo: And ladies and gentlemen, we have reached our lot of time for Q&A.

Speaker Change #154: Thank you very much for the time.

Keith Creel: I would not like to turn the conference back to Mr. Keith Creole. Hey, well, listen, let me close by thanking you for your time. I hope the comments provided some color on this unique network and this unique value creation that we're unlocking.

Keith E. Creel: Pat and I combined these networks to enable growth and create competition and unlock unique value for all stakeholders across the entire supply chain. That means good-paying jobs for our employees. That means great service for our customers. That means rail network capacity for our nation to grow, for all three nations to enjoy prosperity, and for trade to increase together. And we're doing exactly that. So we look forward to sharing another chapter in that growth story when we report our Q3 results. And until then, stay safe. Thank you, Mr. Creel. Ladies and gentlemen, that does conclude today's CPKC second quarter earnings call. Again, thanks so much for joining us, everyone, and we wish you all a great evening.

Speaker Change #155: Thank you. And ladies and gentlemen, we have reached our allotted time for Q&A. I would now like to turn the conference back to Mr. Keith Creel.

Speaker Change #156: Hey listen, let me close by thanking you for your time. I hope the comments provided some color on this unique network and this unique value creation that we're unlocking. You know, I think back especially now in light of past passing, I think about what we committed to and what we agreed to do.

Keith Creel: You know, I, I think back, especially now in light of past passing, I think about what we committed to, and what we agreed to do. Pat and I combine these networks to enable growth and to create competition and unlock unique value for all stakeholders across the entire supply chain. That means good paying jobs for our employees. That means great service for our customers. That means real network capacity for our nation to grow for all three nations to enjoy prosperity and to increase trade together. And we're doing exactly that.

Speaker Change #156: Pat and I combine these networks to enable growth and to create competition.

Speaker Change #156: and unlock unique value for all stakeholders across the entire supply chain. That means good paying jobs for our employees.

Speaker Change #156: That means great service for our customers, that means rail network capacity for our nation to grow, for all three nations to enjoy prosperity and to increase trade together, and we're doing exactly that. So we look forward to sharing another chapter in that growth story when we report our Q3 results, and until then, stay safe.

Keith Creel: So we look forward to sharing another chapter in that growth story when we report our Q3 results. And until then, stay safe.

Bo: Thank you, Mr. Creole. Ladies and gentlemen, that does conclude today's CPKC second quarter earnings call. Again, thanks so much for joining us, everyone.

Speaker Change #157: Thank you, Mr. Creel. Ladies and gentlemen, that does conclude today's CPKC second quarter earnings call. Again, thanks so much for joining us, everyone, and we wish you all a great evening. Goodbye.

And we wish you all a great evening. Goodbye.