Q3 2025 Union Pacific Corp Earnings Call

Speaker #4: Greetings and welcome to Union Pacific's Third Quarter 2020 Earnings Call. At this time, all participants will be in listen-only mode.

Moderator: Greetings, and welcome to Union Pacific Corporation's third quarter 2025 earnings call. At this time, all participants will be in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone today should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded, and the slides for today's presentation are available on Union Pacific's website. At this time, it is now my pleasure to introduce your host, Mr. Jim Vena, Chief Executive Officer for Union Pacific Corporation. Thank you, Mr. Vena. You may now begin your presentation.

Speaker #4: A brief question and answer session will follow the formal presentation . If anyone should require operator assistance during the conference , please press star Zero for your telephone keypad .

Speaker #4: This is a reminder this conference is being recorded and the slides for today's presentation are available on Union Pacific's website at this time .

Speaker #4: It is now my pleasure to introduce your host , Mr. Jim Vena . Chief Executive Officer for Union Pacific . Thank you , Mr. Vena .

Speaker #4: You may now begin your presentation.

Speaker #5: Thank you very much , Rob . Listen , thanks , everyone , for joining us . Beautiful . 36 degree day here in morning in Omaha , Nebraska .

Jim Vena: Thank you very much, Rob. Thank you everyone for joining us. Beautiful 36-degree day here in the morning in Omaha, Nebraska. An absolutely perfect day to be railroading. It is the type of day that I love. Not too hot, not too cold. It's just a slam dunk. Eric and the team should continue to deliver what they've delivered this past quarter. We will get into that in a minute. Here with me, we're going to review the third quarter 2025 numbers. Here with me is Jennifer, our Chief Financial Officer, Eric, our Chief Operating Officer, and Chief Marketing and Sales Officer, Kenny Rocker. As you'll hear from the team this morning, our third quarter results serve as a proof point that we are successfully executing on our strategy. We are focused on driving continued improvements in our pursuit of what's possible.

Speaker #5: Absolutely perfect day to be railroading . It is the type of day that I love . Not too hot , not too cold .

Speaker #5: It's just a slam dunk . So Eric and team should continue to deliver what they've delivered . This past quarter . We'll get into that in a minute .

Speaker #5: So, here with me, we're going to review the third quarter 2025 numbers. Here with me is Jennifer, our Chief Financial Officer, and Eric, our Operations Chief.

Speaker #5: And marketing and sales chief Kenny Rocker . As you'll hear from the team this morning , our third quarter results serve as a proof point that we are successfully executing on our strategy .

Speaker #5: We are focused on driving continued improvements in our pursuit of what's possible . Now let's dig into our results on slide four . Union Pacific Reported 2025 third quarter earnings per share of $3 and one cents , excluding $41 million of merger related costs are adjusted .

Jim Vena: Now let's dig into our results on slide four. Union Pacific reported 2025 third quarter earnings per share of $3.01. Excluding $41 million of merger-related costs, our adjusted earnings per share of $3.08 increased 12% versus last year. Core pricing gains and continued operational efficiencies drove the strong financial results in the quarter. Freight revenue, excluding fuel, grew for the sixth consecutive quarter and set a best-ever record. In addition, we set best-ever quarterly records in workforce productivity, fuel consumption, terminal dwell, and train length. As a result, our third quarter adjusted operating ratio was 58.5%, a 180 basis point improvement versus last year. Importantly, our safety and service results also improved, demonstrating the team's commitment to our goal of running the safest and most reliable railroad in North America.

Speaker #5: Earnings per share of $3.08 increased 12% versus last year . Core pricing gains and continued operational efficiencies drove the strong financial results in the quarter .

Speaker #5: Freight revenue , excluding fuel , grew for the sixth consecutive quarter and set a best ever record . In addition , we set best ever quarterly records in workforce productivity , fuel consumption , terminal dwell and train length .

Speaker #5: As a result , our third quarter adjusted operating ratio was 58.5% , a 180 basis point improvement versus last year . Importantly , our safety and service results also improved , demonstrating the team's commitment to our goal of running the safest and most reliable railroad in North America .

Speaker #5: Next , the team will walk through the third quarter in more detail , and then I'll come back and wrap it up before we go to Q&A .

Jim Vena: Next, the team will walk through the third quarter in more detail, and then I'll come back and wrap it up before we go to Q&A. With that, Jennifer Hamann, you are up.

Speaker #5: And with that , Jennifer Hamann , you are up .

Speaker #6: Thank you , Jim , and good morning , everyone . I'll begin with a walk down of our third quarter income statement on slide six , where our operating revenue of $6.2 billion increased 3% versus last year .

Jennifer Hamann: Thank you, Jim, and good morning, everyone. I'll begin with a walkdown of our third quarter income statement on slide six, where our operating revenue of $6.2 billion increased 3% versus last year. Digging into the top line further, freight revenue totaled $5.9 billion, up 3%. Volume was down slightly in the quarter, driving a 25 basis point reduction in freight revenue. Fuel was also a modest headwind, with surcharge revenue of $602 million down $33 million, as lower fuel prices impacted freight revenue 50 basis points. Strong core pricing combined with a more favorable business mix to drive a 350 basis point improvement in freight revenue versus 2024. Importantly, our ability to yield pricing dollars net of inflation that are accretive to our operating ratio is directly supported by a consistent and reliable service product. Wrapping up the top line, other revenue declined 2% to $317 million.

Speaker #6: Digging into the top line , further freight revenue totaled $5.9 billion , up 3% . Volume was down slightly in the quarter , driving a 25 basis points reduction in freight revenue .

Speaker #6: Fuel was also a modest headwind, with surcharge revenue of $602 million, down $33 million, as lower fuel prices impacted freight revenue.

Speaker #6: 50 basis points . Strong core pricing , combined with a more favorable business mix to drive a 350 basis point improvement in freight revenue versus 2024 .

Speaker #6: Importantly , our ability to yield pricing dollars , net of inflation that are accretive to our operating ratio is directly supported by a consistent and reliable service product .

Speaker #6: Wrapping up the top line , other revenue declined 2% to 317 million , lower revenue from the transfer of Metra operations was partially offset by a favorable comparison to a one time contract settlement of $12 million in 2024 .

Jennifer Hamann: Lower revenue from the transfer of metro operations was partially offset by a favorable comparison to a one-time contract settlement of $12 million in 2024. Switching to expenses, our appendix slides provide more detail, but I'll walk through the highlights as operating expense increased only 1% to $3.7 billion. Compensation and benefits decreased 1%, as 4% lower workforce levels and record productivity more than offset the impact of wage inflation. Compensation per employee increased 2.5% versus last year, and we expect full-year compensation per employee to end up around 3%, which is consistent with the increase we've seen year to date. Fuel expense grew 1%, driven by a 3% increase in gross ton miles, partially offset by a 2% decrease in fuel prices from $2.60 to $2.56 per gallon, and a 1% improvement in the consumption rate.

Speaker #6: Switching to expenses , our appendix slides provide more detail , but I'll walk through the highlights as operating expense increased . Only 1% to $3.7 billion .

Speaker #6: Compensation and benefits decreased 1% as 4% lower workforce levels and record productivity more than offset the impact of wage inflation . Compensation per employee increased 2.5% versus last year , and we expect full year compensation per employee to end up around 3% , which is consistent with the increase we've seen year to date .

Speaker #6: Fuel expense grew 1% , driven by a 3% increase in gross ton miles , partially offset by a 2% decrease in fuel prices from $2.60 to $2.56 per gallon and a 1% improvement in the consumption rate .

Speaker #6: In fact , our fuel consumption rate set a best ever record in the quarter as we yielded benefits from our fuel initiatives , purchased services , and materials expense increased 6% due to merger related costs and equipment , and other rents declined 11% , driven by favorable contract settlements of 13 million .

Jennifer Hamann: In fact, our fuel consumption rate set a best-ever record in the quarter as we yielded benefits from our fuel initiatives. Purchase services and materials expense increased 6% due to merger-related costs, and equipment and other rents declined 11%, driven by favorable contract settlements of $13 million, improved cycle times, and lower car hire related to the year-over-year decline in international intermodal demand. Finally, other expense improved 1% versus last year to $352 million, as lower casualty costs were partially offset by higher state and local taxes. Reported operating income grew 6% to $2.5 billion. Below the line, other income grew 10% to $96 million on real estate gains. Our reported net income totaled $1.8 billion, with earnings per share of $3.01. When you exclude the $41 million of merger costs in the quarter, our adjusted earnings per share totaled $3.08, and our adjusted operating ratio came in at 58.5%.

Speaker #6: Improved cycle times and lower car hire related to the year over year decline in international intermodal demand . Finally , other expense improved 1% versus last year to 352 million , as lower casualty costs were partially offset by higher state and local taxes .

Speaker #6: Reported operating income grew 6% to $2.5 billion , below the line . Other income grew 10% to 96 million on real estate gains .

Speaker #6: Our reported net income totaled $1.8 billion , with earnings per share of $3.01 . When you exclude the 41 million of merger costs in the quarter .

Speaker #6: Our adjusted earnings per share totaled $3.08 , and our adjusted operating ratio came in at 58.5% . Overall , really great quarterly financial results enabled by successfully executing on our strategic priorities .

Jennifer Hamann: Overall, really great quarterly financial results enabled by successfully executing on our strategic priorities. Turning to cash generation in the balance sheet on slide seven, third quarter cash from operations totaled $7.1 billion, up 6% or $381 million versus last year. As we discussed when we announced our merger with Norfolk Southern Corporation, we have paused our share repurchase program. We are prioritizing the reduction of debt and paid down $1 billion in long-term notes during the third quarter. With that, our adjusted debt to EBITDA ratio finished the quarter lower at 2.6 times. Our cash balance ended at just over $800 million after funding our capital program and paying the increased third quarter dividend, our 19th consecutive year of providing our shareholders with an annual dividend raise. As we close out 2025, we expect our cash balance to steadily grow with our strong cash generation.

Speaker #6: Turning to cash generation in the balance sheet on slide seven . Third quarter cash from operations totaled $7.1 billion , up 6% , or $381 million versus last year .

Speaker #6: As we discussed when we announced our merger with the Norfolk Southern , we have paused our share repurchase program . We are prioritizing the reduction of debt and paid down 1 billion in long term notes during the third quarter , with that , our adjusted debt to EBITDA ratio finished the quarter lower at 2.6 times our cash balance ended at just over $800 million .

Speaker #6: After funding our capital program and paying the increased third quarter dividend . Our 19th consecutive year of providing our shareholders with an annual dividend raise .

Speaker #6: As we close out 2025 , we expect our cash balance to steadily grow with our strong cash generation . Looking out to the remainder of the year on slide eight , with just over two months left in the year , we are proud of how we have executed on our strategy this year .

Jennifer Hamann: Looking out to the remainder of the year on slide eight, with just over two months left in the year, we are proud of how we have executed on our strategy this year. We've handled volume growth while improving our service and efficiency. Notably, the third quarter continued this trend as we handled the highest absolute volumes of the year while setting several best-ever operating records. Meanwhile, some of the key economic indicators, like automotive sales and housing starts, are generally softer than when we established our Investor Day targets last September. Against that backdrop, we have achieved very solid results with reported year-to-date EPS growth of 8% and 80 basis points of operating ratio improvement. For the fourth quarter, volumes are currently running down 6% as international intermodal volumes reflect the tough comparison against last year's strong growth.

Speaker #6: We've handled volume growth while improving our service and efficiency . Notably , the third quarter continued this trend as we handled the highest absolute volumes of the year .

Speaker #6: While setting several best ever operating records . Meanwhile , some of the key economic indicators like automotive sales and housing starts are generally softer than when we established our Investor Day targets last September .

Speaker #6: Against that backdrop , we have achieved very solid results with reported year to date EPs growth of 8% and 80 basis points of operating ratio improvement for the fourth quarter .

Speaker #6: Volumes are currently running down 6% as international intermodal volumes reflect the tough comparison against last year's strong growth. This level of decline, plus merger costs and paused share repurchases, obviously creates a headwind to earnings and margin expansion compared to last year's record fourth quarter.

Jennifer Hamann: This level of decline, plus merger costs and paused share repurchases, obviously creates a headwind to earnings and margin expansion compared to last year's record fourth quarter. The team understands the task and is working hard to drive more volume to the railroad in a safe, efficient manner. Despite the somewhat challenging close to the year, we still expect to achieve our three-year EPS CAGR view of high single to low double-digit growth. We also are reaffirming our view on accretive pricing, industry-leading operating ratio, and return on invested capital. It is an exciting time at Union Pacific as we execute on our strategy and deliver for our customers in a way that I have not seen us do in my 30-plus years at Union Pacific. We are absolutely committed to driving further value as a standalone company and when merged with Norfolk Southern Corporation.

Speaker #6: The team understands the task and is working hard to drive more volume to the railroad in a safe , efficient manner . Despite this somewhat challenging close to the year , we still expect to achieve our three year EPs Cager view of high single to low double digit growth .

Speaker #6: We also are reaffirming our view on accretive pricing . Industry leading operating ratio and return on invested capital . It is an exciting time at Union Pacific as we execute on our strategy and deliver for our customers in a way that I have not seen us do in my 30 plus years at Union Pacific .

Speaker #6: And we are absolutely committed to driving further value as a standalone company . And when merged with the Norfolk Southern . Now I'll turn it over to Kenny to provide more details on the business environment .

Jennifer Hamann: Now I'll turn it over to Kenny to provide more details on the business environment.

Speaker #7: Thank you Jennifer , and good morning . We delivered a solid third quarter freight revenue , excluding fuel , grew 4% . And as Jim mentioned , set a best ever quarterly record .

Kenny Rocker: Thank you, Jennifer, and good morning. We delivered a solid third quarter. Freight revenue, excluding fuel, grew 4% and, as Jim mentioned, set a best-ever quarterly record. Eric and the operating team continue to deliver excellent service, enabling our commercial team to lead with confidence and deliver strong pricing results. Let's jump right in and talk about the key drivers for each of these business groups. Starting with our bulk segment, revenue for the quarter was up 7% compared to last year on a 7% increase in volume. Strong core pricing gains were partially offset by lower fuel surcharges and business mix. Strength in coal was driven by strong customer demand due to favorable natural gas pricing and the continuation of lower Colorado River Authority shipments, which started in April.

Speaker #7: Eric and the operating team continued to deliver excellent service , enabling our commercial team to lead with confidence and deliver strong pricing results .

Speaker #7: Let's jump right in and talk about the key drivers for each of these business groups , starting with our bulk segment . Revenue for the quarter was up 7% compared to last year .

Speaker #7: On a 7% increase in volume . Strong core pricing gains were partially offset by lower fuel surcharges and business mix strength , and coal was driven by strong customer demand due to favorable natural gas pricing and the continuation of Lower Colorado River authority shipments , which started in April .

Speaker #7: Lower domestic grain demand was more than offset by strength in export wheat shipments and business development in Mexico , along with increased volumes from new grain products , facilities .

Kenny Rocker: Lower domestic grain demand was more than offset by strength in export wheat shipments and business development in Mexico, along with increased volumes from new grain products facilities. Lastly, increased potash shipments drove favorable year-over-year volumes in the fertilizer market. Turning to industrial, revenue was up 3% for the quarter on a 3% increase in volume and a 1% increase in average revenue per carload. Strong core pricing gains were partially offset by business mix and lower fuel surcharges. Demand and business wins increased petrochemicals, construction, and metal shipments. However, these gains were partially offset by decreased volume in our energy and specialized markets. Premium revenue for the quarter declined 2% on a 5% decrease in volume and a 3% increase in average revenue per car, reflecting business mix and lower fuel surcharges.

Speaker #7: Lastly, increased potash shipments drove favorable year-over-year volumes in the fertilizer market. Turning to industrial, revenue was up 3% for the quarter on a 3% increase in volume and a 1% increase in average revenue per carload.

Speaker #7: Strong core pricing gains were partially offset by business mix and lower fuel surcharges . Demand and business wins increased . Petrochemicals , construction and metal shipments .

Speaker #7: However , these gains were partially offset by decreased volume in our energy and specialized markets . Premium revenue for the quarter declined 2% on a 5% decrease in volume , and a 3% increase in average revenue per car , reflecting business mix and lower fuel surcharges .

Speaker #7: Overall , intermodal volumes were challenged by lower West Coast imports , resulting in a 17% decrease in international volume . However , our domestic segment delivered record breaking volumes this quarter , driven by exceptional service and business wins , reduced auto parts production and OEM quality holds contributed to lower automotive volumes .

Kenny Rocker: Overall, intermodal volumes were challenged by lower West Coast imports, resulting in a 17% decrease in international volume. However, our domestic segment delivered record-breaking volumes this quarter, driven by exceptional service and business wins. Reduced auto parts production and OEM quality holds contributed to lower automotive volumes. Turning to slide 11, we expect continued strength in some of our bulk and industrial segments, which is encouraging. However, it will be outweighed by lower international volumes and tough comparisons. The commercial team's strong focus the first nine months of the year gives us confidence as we move through the remainder of the quarter. Now turning to bulk, we expect coal volumes to continue outpacing 2024, driven by current forecasts for natural gas prices throughout the remainder of 2025 and volume from our partnership with LCRA.

Speaker #7: Turning to slide 11 , we expect continued strength in some of our bulk and industrial segments , which is encouraging . However , we will be it will be outweighed by lower international volumes and tough comparisons .

Speaker #7: The commercial team strong focus , the first nine months of the year gives us confidence as we move through the remainder of the quarter .

Speaker #7: Now turning to bulk , we expect coal volumes to continue outpacing 2024 , driven by current forecasts for natural gas throughout the remainder of 2025 and volume from our partnership with Lcra .

Speaker #7: Our intense business development efforts in grain prices products are helping partially offset market uncertainty in renewable fuels and associated feedstocks , as well as our grain markets where we anticipate year over year challenges with soybean exports moving to industrial , we're positioned to finish strong in our petrochemicals markets .

Kenny Rocker: Our intense business development efforts in grain products are helping partially offset market uncertainty in renewable fuels and associated feedstocks, as well as our grain markets, where we anticipate year-over-year challenges with soybean exports. Moving to industrial, we're positioned to finish strong in our petrochemicals markets. That's driven by the investments we've made in our Gulf Coast franchise and the strength of our service product, which continues to help us win with new customers. In fact, we recently won new petrochemical business that began earlier this month. It's a meaningful addition that reinforces our competitive position in the region. We also anticipate solid performance in the metals and minerals markets, where our team is laser-focused on business development to outperform the market.

Speaker #7: That's driven by the investments we've made in our Gulf Coast franchise and the strength of our service product, which continues to help us win with new customers.

Speaker #7: In fact, we recently won new petrochemical business that began earlier this month. It's a meaningful addition that reinforces our competitive position in the region.

Speaker #7: We also anticipate solid performance in the metals and minerals markets, where our team is laser-focused on business development to outperform the market.

Speaker #7: On the other hand , our energy and specialized markets are expected to remain challenged , primarily driven by fewer petroleum shipments . As we continue to balance volume at the right margins .

Kenny Rocker: On the other hand, our energy and specialized markets are expected to remain challenged, primarily driven by fewer petroleum shipments as we continue to balance volume at the right margins. Wrapping up with premium, year-over-year comparisons remain tough, and we expect lower import volumes to impact international results. Automotive is expected to continue facing challenges, driven by reduced auto parts production and OEM quality holds. As we look ahead, our strategy is clear and our confidence is grounded in our outstanding service performance. Whether it's powering growth in bulk, driving wins in industrial, or unlocking new opportunities in premium, execution is what sets Union Pacific apart. Together, we are building a stronger, faster, and more competitive railroad, and we're just getting started. With that, I'll turn it over to Eric.

Speaker #7: Wrapping up with premium year over year comparisons remain tough , and we expect lower import volumes to impact international results . Automotive is expected to continue facing challenges driven by reduced auto parts production and OEM quality holds .

Speaker #7: As we look ahead . Our strategy is clear and our confidence is grounded and our outstanding service performance , whether it's powering growth in bulk , driving wins in industrial or unlocking new opportunities in premium execution is what sets Union Pacific apart .

Speaker #7: Together , we are building a stronger , faster and more competitive railroad , and we're just getting started . And with that , I'll turn it over to Eric .

Speaker #8: Thank you Kenny , and good morning . Starting on slide 13 , where our results do an excellent job demonstrating the team's unwavering focus on our strategy to lead the industry in safety , service and operational excellence .

Eric Gehringer: Thank you, Kenny, and good morning. Starting on slide 13, where our results do an excellent job demonstrating the team's unwavering focus on our strategy to lead the industry in safety, service, and operational excellence. Our vision is clear, and fundamentally, the railroad is operating exceptionally well, showcasing robust fluidity, consistency, and reliability. Most importantly, we are achieving these results safely. Our safety-first mindset is delivering measurable progress as both personal injury and derailment rates continue to improve versus our three-year rolling average. Rail is the safest land-based freight transportation method, and we will continue doing our part to make it even safer through ongoing investments in our network, employees, technology, and communities. Freight car velocity, the best measure of fluidity on the railroad, improved 8% to 226 miles per day, a third-quarter record.

Speaker #8: Our vision is clear and fundamentally , the railroad is operating exceptionally well , showcasing robust fluidity , consistency and reliability . Most importantly , we are achieving these results safely .

Speaker #8: Our safety first mindset is delivering measurable progress as both personal injury and derailment rates continue to improve versus our three year rolling average .

Speaker #8: Rail is the safest land based freight transportation method , and we will continue doing our part to make it even safer through ongoing investments in our network .

Speaker #8: Employees , technology and communities . Freight car velocity is the best measure of fluidity on the railroad . Improved 8% to 226 miles per day .

Speaker #8: A third quarter record . Further , September marked our best ever . Let me repeat that . Our best ever monthly performance at over 230 miles per day , driving the performance was a record terminal dwell of just over 20 hours , increased train speed and the continued reduction of daily car touches across our network .

Eric Gehringer: Further, September marked our best-ever, let me repeat that, our best-ever monthly performance at over 230 miles per day. Driving the performance was a record terminal dwell of just over 20 hours, increased train speed, and the continued reduction of daily car touches across our network. These improvements are not only driving strong productivity gains within our operations, but also delivering significant efficiencies to our customers, reducing equipment costs, and accelerating the delivery of their products to market. On the service front, both intermodal and manifest service performance improved year over year to 98% and 100%, respectively. These strong results reinforce our strategic approach and underscore the importance of maintaining a proactive buffer of resources. As Kenny and his team bring business to the railroad, we aren't waiting weeks to react.

Speaker #8: These improvements are not only driving strong productivity gains within our operations , but also delivering significant efficiencies to our customers , reducing equipment costs and accelerating the delivery of their products to market .

Speaker #8: On the service front , both intermodal and manifest service performance improved year over year to 98 and 100% , respectively . These strong results our strategic approach and underscore the importance of maintaining a proactive buffer of resources .

Speaker #8: As Kenny and his team bring business to the railroad . We aren't waiting weeks to react . We have the locomotives , crews and freight cars pre-positioned and ready to provide the high quality service .

Eric Gehringer: We have the locomotives, crews, and freight cars pre-positioned and ready to provide the high quality of service we sold our customers. Now let's review our key efficiency metrics on slide 14. As noted earlier, strong network fluidity is continuing to drive productivity across our railroad, and that's evidenced by the results on this slide. Locomotive productivity improved 4% versus last year, reflecting the continued benefits associated with our efforts to reduce locomotive dwell time. Last quarter, our team set a goal to reduce locomotive dwell below 15 hours, and this quarter we delivered, achieving a record 14.9 hours. This underscores our dedication to maximizing asset efficiency. Workforce productivity, which includes all employees, improved 6% and marked an all-time quarterly record. Our active train, engine, and yard workforce decreased 4% against flat volumes versus last year.

Speaker #8: We sold our customers . Now let's review our key efficiency metrics on slide 14 . As noted earlier , strong network fluidity is continuing to drive productivity across our railroad .

Speaker #8: And that's evidenced by the results on this slide . Locomotive productivity improved 4% versus last year , reflecting the continued benefits associated with our efforts to reduce locomotive dwell time .

Speaker #8: Last quarter , our team set a goal to reduce locomotive dwell below 15 hours , and this quarter we delivered , achieving a record 14.9 hours .

Speaker #8: This underscores our dedication to maximizing asset efficiency , workforce productivity , which includes all employees , improved 6% and marked an all time quarterly record .

Speaker #8: Our active train engine and yard workforce decreased 4% against flat volumes versus last year . We remain focused on effectively leveraging technology to optimize our workforce , while also recognizing the importance of balancing our resources as we plan for the future .

Eric Gehringer: We remain focused on effectively leveraging technology to optimize our workforce, while also recognizing the importance of balancing our resources as we plan for the future. Train length in the quarter grew 2% versus last year to just over 9,800 feet, an all-time quarterly record. A remarkable accomplishment when you consider the mixed headwinds associated with softer international intermodal shipments, which were down 17% year over year. We will continue adapting our transportation plan as we harness technology and infrastructure investments to safely generate mainline capacity for future growth. Wrapping up, operationally, the team continues to raise the bar, delivering exceptional results quarter after quarter. It's the perpetual dissatisfaction that I've spoken about before. That's our mindset. It's imperative we continue driving efficiencies while demonstrating consistent and reliable service. This enables Kenny and his team to be more competitive in the marketplace winning new long-term business.

Speaker #8: Train length in the quarter grew 2% versus last year to just over 9800ft , an all time quarterly record . A remarkable accomplishment when you consider the mix headwinds associated with softer international intermodal shipments , which were down 17% year over year .

Speaker #8: We will continue adapting our transportation plan as we harness technology and infrastructure investments to safely generate mainline capacity for future growth . Wrapping up operationally , the team continues to raise the bar , delivering exceptional results .

Speaker #8: Quarter after quarter, it's the perpetual dissatisfaction that I've spoken about before. That's our mindset. It's imperative we continue driving efficiencies while demonstrating consistent and reliable service.

Speaker #8: This enables Kenny and his team to be more competitive in the marketplace , winning new long term business . While we do have a historic opportunity ahead , the focus remains on today further optimizing the best rail franchise in North America .

Eric Gehringer: While we do have a historic opportunity ahead, the focus remains on today, further optimizing the best rail franchise in North America. I'm confident we'll continue improving in the pursuit of industry-leading safety, service, and operational excellence. Jim?

Speaker #8: I'm confident we'll continue improving in the pursuit of industry leading safety , service and operational excellence . Jim .

Speaker #5: Eric . Jennifer . Kenny , thank you very much . Okay . I think you did a great job . But why don't we just turn to slide 16 ?

Jim Vena: Eric, Jennifer, Kenny, thank you very much. Okay, I think you did a great job, why don't we just turn to slide 16? I'd just like to wrap it up before we get to questions. First, as you heard from Jennifer, we are executing our strategy and driving strong financial results. In the third quarter, we handled the highest absolute volumes of the year while setting several best-ever quarterly operating records. Kenny highlighted how the team is focused on outperforming our markets while pricing to the value we're providing our customers. Eric and the team have the network operating extremely well, as evidenced by our record operating results. Over the past several quarters, we've demonstrated agility with our buffer of resources. We will continue driving efficiencies while providing consistent and reliable service to win with our customers.

Speaker #5: I'd just like to wrap it up before we get to questions. So first, as you heard from Jennifer, we are executing our strategy and driving strong financial results.

Speaker #5: In the third quarter , we handled the highest absolute volumes of the year while setting several best ever quarterly operating records . Kenny highlighted how the team is focused on outperforming our markets , while pricing to the value we're providing our customers .

Speaker #5: Eric and team have the network operating extremely well , as evidenced by our record operating results over the past several quarters . We've demonstrated agility with our buffer of resources .

Speaker #5: We will continue driving efficiencies while providing consistent and reliable service to win with our customers . To wrap it up , we are confident in our ability to lead the industry in safety , service and operational excellence in the upcoming weeks , we will hold our special meeting and shareholder vote .

Jim Vena: To wrap it up, we are confident in our ability to lead the industry in safety, service, and operational excellence. In the upcoming weeks, we will hold our special meeting and shareholder vote. We'll also be filing our merger application with the STB. At that time, we will provide more details on the opportunity with Norfolk Southern Corporation to create America's first transcontinental railroad. Our results today demonstrate we are focused on the day-to-day business of optimizing the great Union Pacific franchise. With that, we're ready to take your questions. Rob?

Speaker #5: We'll also be filing our merger application with the STB at that time . We will provide more details on the opportunity with the Norfolk Southern to create America's first transcontinental railroad .

Speaker #5: Our results today demonstrate we are focused on the day to day business of optimizing the great Union Pacific franchise , and with that , we're ready to take your questions .

Speaker #5: Rob .

Speaker #4: Thank you , Mr. Pena will now be conducting a question and answer session . If you'd like to ask a question at this time , please press Star One from your telephone keypad and a confirmation tone will indicate your line is in the question queue .

Moderator: Thank you, Mr. Vena. We'll now be conducting a question and answer session. If you'd like to ask a question at this time, please press star one from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Due to the number of analysts joining us on the call today, we'll be limiting everyone to one question to accommodate as many participants as possible. Thank you. Our first question is from the line of Tom Wadowitz with UBS. Please proceed with your question.

Speaker #4: You may press star two if you'd like to remove your question from the queue for participants that are using speaker equipment , you may be necessary to pick up your handset before pressing the star key's .

Speaker #4: Due to the number of analysts joining us on the call today , we limited everyone to one question to accommodate as many participants as possible .

Speaker #4: Thank you . And our first question is from the line of Tom Wadewitz with UBS . Please proceed with your questions .

Speaker #5: Morning , Tom .

Jim Vena: Morning, Tom.

Speaker #9: Yeah . Good morning Jim . I wanted to see if you could offer some more thoughts on just how you see the , you know , merger application that process of building support from shippers , from unions , just how that you know , how that process is progressing .

[Analyst]: Yeah, good morning, Jim. I wanted to see if you could offer some more thoughts on just how you see the merger application, the process of building support from shippers, from unions, just how that process is progressing. I think the deal you had with Smart, the agreement was a nice win for you. I don't know if you expect any more of those coming, or if you expect kind of any gains on the shipper side, or is it more like we're in a waiting period for the filing? I don't know what you said, a couple of weeks for the filing? Any more kind of just expectation of when that filing will come with STB? Thank you.

Speaker #9: You know , I think the deal you had with smart , the agreement was , you know , a nice win for you .

Speaker #9: I don't know if you expect any more of those coming, or if you expect kind of any gains on the shipper side. Or is it more like we're in a waiting period for the filing?

Speaker #9: And then I don't know , you said a couple of weeks for the filing anymore , kind of just expectation of when that filing will come with with STB .

Speaker #9: Thank you .

Speaker #5: Tom , listen , you're a smart guy . I think you've covered just about everything to do with the merger . In one question , I could we could be up here for 15 minutes .

Jim Vena: Tom, listen, you're a smart guy. I think you covered just about everything to do with the merger in one question. I could be up here for 15 minutes, but let me quickly summarize where we are. When we started at Union Pacific, looking at whether what we do next and what the future looked like, we needed to make sure there were certain things fundamentally that where Union Pacific was as a railroad and how our business was. We needed to have a service level that was high enough that customers could see what we could do and that they were assured that when we merged, we would be able to provide a real high level of service. The entire team, and I give Eric as the leader and everybody from the operating department at Union Pacific, and it takes more than that.

Speaker #5: But let me let's just quick , quickly summarize where we are when we started at Union Pacific , looking at whether what we do next and what the future looked like , we needed to make sure there was certain things fundamentally , that where Union Pacific was as a railroad and how our business was , and we needed to have a service level that was high enough that customers could see what we could do and that they were assured that when we merged , we would be able to provide a real high level of service .

Speaker #5: And the entire team . And I give Eric as the leader and everybody from the operating department at Union Pacific , and it takes more than that .

Speaker #5: It takes fundamentally spending the right money , making the right decisions . So it truly is a company . We are delivering at the levels of service close to 100% .

Jim Vena: It takes fundamentally spending the right money, making the right decisions. It truly is a company. We are delivering at the levels of service close to 100%. You can never get to 100%. You're always going to have some problems, but close to 100%. We have that as a foundation, Tom. On top of that, we wanted to make sure financially we have a company that's in a good place. You could see Jennifer say we paid back $1 billion in debt in the third quarter, and we're down to a 2.6 multiple, which is great, and we'll continue to use the cash or store it instead of buying back shares. When you put the foundation of who we are and on safety, you know, we don't like to talk about it on a time and place number, but I'm going to give you a number.

Speaker #5: Okay . You can never get to 100% . You're always going to have some problems . But close to 100% . So we have that as a foundation .

Speaker #5: Tom . On top of that , we wanted to make sure financially we have a company that's in a good place and you could see Jennifer say , we paid back $1 billion in debt in the third quarter , and we're down to a 2.6 multiple , which is great and will continue to use the cash or store it instead of buying back shares .

Speaker #5: So when you put the foundation of who we are and on safety , you know , our we don't like to talk about it on a time and place number .

Speaker #5: But I'm going to give you a number . We're down into the like the 0.6 , something between 0.6 and 0.7 this year , which is industry leading at this point .

Jim Vena: We're down into the like the 0.6 something, between 0.6 and 0.7 this year, which is industry-leading at this point and the best safety numbers for people that come to work and go home. We needed to have a safe railroad. Our accident numbers have dropped substantially. We needed to be financially in a good place, and then we needed to move ahead. I think what you've seen from the people that truly understand railroading, they understand the value of what we're proposing. The value is, as we look at it not only on what the Surface Transportation Board tells us we have to do and what we have to present, the rules that were set up 20-some years ago, but we feel is it better for our customers.

Speaker #5: And the best safety numbers for people that come to work and go home . So we needed to have a safe railroad or accident numbers have dropped substantially .

Speaker #5: We need it to be financially in a good place , and then we needed to move ahead . And I think what you've seen from the people that truly understand railroading , they understand the value of what we're proposing and the value is , is we look at it not only on what the STB tells us .

Speaker #5: We have to do and what we have to present . Okay , the rules that were set up 20 some years ago , but we feel is it better for our customers and absolutely for the majority of our customers , it is going to improve with the speed and how many assets they're going to have to have and how fast we can move anytime .

Jim Vena: Absolutely, for the majority of our customers, it is going to improve with the speed and how many assets they're going to have to have and how fast we can move anytime anybody that crosses the today hands off. Remember, we hand off a huge percentage of our originations to somebody else to go do the final mile or vice versa. It is good for our customers. Our customers understand that we are competing against the world, Tom. This is not just we compete against Canadian ports. There are going to be five or six or seven trains that come across Canada that should be, and we think they should be handled at U.S. ports. Instead, they're handled at Canadian ports by Canadian railroaders across the country to drop into the U.S.

Speaker #5: Anybody that crosses that today hands off . And remember , we hand off a huge percentage of our of our originations to somebody else to go do the final mile or vice versa .

Speaker #5: So it's good for our customers and our customers understand that we are competing against the world . Tom , this is not just we compete against Canadian ports .

Speaker #5: There is going to be five or 6 or 7 trains that come across Canada . That should be . And we think they should be handled at U.S.

Speaker #5: ports . But instead they're handled at Canadian ports by Canadian railroaders across the country to drop into into the U.S. and if we can become more efficient even than where we are today and more fluid and be able to have a different product , we can move some of that traffic .

Jim Vena: If we can become more efficient, even than where we are today, and more fluid and be able to have a different product, we can move some of that traffic so we have more American jobs and more people working for Union Pacific, the combined company. When I look at everything, what we've done is we've guaranteed jobs for every unionized employee on the day that the merger closes. Why would we do that? We are absolutely sure we can grow the business because of the watershed area of the United States that's underserved and a railroad that is seamless. I'll quote one of the other CEOs when they went through their merger.

Speaker #5: So we so we have more American jobs and more people working for Union Pacific . The combined company . So when I look at everything , what we've done is , is we've guaranteed jobs for every unionized employee on the day that we that the merger closes .

Speaker #5: And why would we do that ? We are absolutely sure we can grow the business because of the watershed area of the United States .

Speaker #5: That's underserved . And a railroad that is seamless . Listen , I'll quote one of the other CEOs when they went through their merger and I'll give you the quote off the top of my head .

Jim Vena: I'll give you the quote off the top of my head, but I could easily pull it up on my phone because it's one of my favorite ones to read whenever I see somebody write from another railroad how it's not real good for us and they're worried. It was, you know, even though Union Pacific has a great franchise coming out of Chicago and it's a great way to get to Mexico, nobody can beat and compete, and they're going to have to compete hard to win with our single line where we don't have to hand off to somebody else. Tom, when you frame that, the Smart TD agreement would just formalize what we had in place that we had already guaranteed. We are in discussion with other unions to formalize it, and I'm more than willing to formalize it.

Speaker #5: But I could easily pull it up on my phone because it's one of my favorite ones to read . Whenever I see somebody write from another railroad , how it's not real good for us .

Speaker #5: And they're worried it was , you know , even though U.P. has a great franchise coming out of Chicago and it's a great way to get the Mexico .

Speaker #5: Nobody can beat . And compete , and they're going to have to compete hard to win with our single line where we don't have to hand off to somebody else .

Speaker #5: So Tom , when you frame that , the smart TD agreement , it would just it formalized what we had in place that we had already guaranteed .

Speaker #5: And we're in discussion with other unions to formalize it . And I'm more than willing to formalize it . So it's not just my word and it's not just my my what we've been saying .

Jim Vena: It is not just my word and it's not just my, my what we've been saying. We're willing to put it on paper and say what we're going to do with our unionized employees. We'll work through that. In fact, Tom, we took this round of negotiations that we wanted to negotiate directly with our unions because our employees are real important to us, and we wanted to make sure that we were doing the right thing so it's a win-win for our employees and ourselves. I can tell you right now, we have an agreement either in principle not yet out for ratification or they're going to go up for ratification with every union. Basically, we have finished this round of negotiations and we have, because the unions understand how beneficial overall this deal is and how it's going to help us move ahead.

Speaker #5: We're willing to put it on paper and say what we're going to do with our unionized employees , and we'll work through that .

Speaker #5: And in fact , Tom , we took this round of negotiations that we wanted to negotiate directly with our unions because our employees are real important to us .

Speaker #5: And we wanted to make sure that we were doing the right things . So it's a win win for our employees and ourselves .

Speaker #5: And I can tell you right now , we have a a , an agreement either in principle , not yet out for ratification or sorry , they're going to go out for ratification with every union .

Speaker #5: So basically we have finished this round of negotiations and we have because the unions understand how beneficial overall this deal is and how it's going to help us move ahead .

Speaker #5: So we're real happy with where we are . So , Tom , listen , unless I missed something and you wanted me to cut in .

Jim Vena: We're real happy with where we are. Tom, listen, unless I missed something and you wanted me to cut in, oh, you talked about the timing. What I can tell you about the timing is, it sure will not take us into January to get this done. We're into getting the deal done as soon as possible. If you ask Jim Vena, I want it in, okay, before the 1st of December, the application. If you talk to some people on the team, they're saying, "Geez, Jim Vena, would you give us a little bit of time?" The answer is no. I'm hoping that we can do everything we can to have it in by the end of November or the latest in early December so that we can have the application in and get that process moving. Tom, hopefully I answered everything there. Sorry for the long answer.

Speaker #5: Oh , you talked about the timing . So what I can tell you about the timing . Is it sure will not take us into January to get this done .

Speaker #5: Okay ? We're into getting the deal done as soon as possible . If you ask Jim Vena , I want it in . Okay .

Speaker #5: Before the 1st of December , the application , if you talk to some people on the team , they're saying , geez , Jim , would you give us a little bit of time ?

Speaker #5: And the answer is no . So I'm hoping that we can do everything we can to have it in by the end of November .

Speaker #5: Or the the latest in early December , so that we can have the application in and get that process moving . So , Tom , hopefully I answered everything there .

Speaker #5: Sorry for the long answer.

Speaker #9: No , on the shipper side , anything new there or is that that's the only thing you didn't hit ? And thanks for all the all the perspective .

Jennifer Hamann: No, you on the shipper side, anything new there, or is that the only thing you didn't hit? Thanks for all the perspective.

Speaker #5: Yeah . Listen , Kenny , why don't you say where we are with the customers and how many letters of support we have already ?

[Analyst]: Yeah. Listen, Kenny, why don't you say where we are with the customers and how many letters of support we have already?

Speaker #7: Yeah , I just want to reaffirm something you said , Jim , you know , about 40% of our business either comes into or moves out of Union Pacific .

Kenny Rocker: Yeah, I just want to reaffirm something you said, Jim, you know, about 40% of our business either comes into or moves out of Union Pacific. We're competing globally. Absolutely, I mean, we have over 1,200 stakeholders. Those are ports, you know, government officials, their short lines. If you just look at the customers, we've got over 400 customers that have sent in a letter of support, and there's still a pipeline behind that. They run the gamut. They represent all the industries that we serve.

Speaker #7: So we're competing globally . But absolutely . I mean , we have over 1200 stakeholders . Those are ports , you know , government officials , there short lines .

Speaker #7: But if you just look at the customers , we've got over 400 customers that have sent in a letter of support , and they're still a pipeline behind that .

Speaker #7: And they run the gamut . They represent all the industries that we serve .

Speaker #5: Okay , Tom , thank you very much .

[Analyst]: Okay, Tom, thank you very much.

Speaker #9: Great . Thank you .

Jennifer Hamann: Great. Thank you.

Speaker #4: The next question is from the line of Ken Hoexter with Bank of America. Please see you for your.

Moderator: The next question is from the line of Ken Hexter with Bank of America. Please proceed with your question.

Speaker #10: Questions .

Speaker #11: Great . Good morning . Hey , Jim . So , Jen , you talked a little bit about sequential or or I guess a fourth quarter .

Kenny Rocker: Morning, Ken.

[Analyst]: Great. Good morning. Hey, Jim. Jen, you talked a little bit about sequential OR, or I guess that fourth quarter, you threw out some initial thoughts there. Can you talk the puts and takes? You mentioned the favorable equipment settlements, the lower mix impact, your revenue thoughts. Maybe just talk about all the puts and takes that we should expect into fourth quarter. If we're starting with volumes down mid-single digits, ultimately, should we see earnings flat, down, up, year over year in the fourth quarter? Thanks.

Speaker #11: You threw out some initial thoughts there . Can you talk the puts and takes . You mentioned the favorable equipment settlements . You know , the lower mix impact the your revenue thoughts .

Speaker #11: So maybe just talk about all the puts and takes that we should expect into fourth quarter . If we're starting with volumes down mid-single digits , ultimately , should we see earnings flat down up year over year in the fourth quarter ?

Speaker #11: Thanks .

Speaker #6: So thanks for the question . And I know this won't surprise you , Ken , but I'm not going to give you specific guidance about the quarter .

Jennifer Hamann: Thanks for the question. I know this won't surprise you, Ken, but I'm not going to give you specific guidance about the quarter. I can give you context around it. You hit many of the high points. When you think about the top line, right now, volumes are down 6%. It's really mostly that international and intermodal piece that we've been talking about and quite frankly expecting all year when we knew against the tough comp that we had against last year. With that, though, we do expect to have, you know, mix was a little bit positive in the third quarter, although we did have very strong intermodal in July. That probably was a little bit of a mixed headwind versus what we would have been expecting coming into the year. I would say fourth quarter, we're certainly seeing a better mix rotation, with the international intermodal coming down.

Speaker #6: But I can give you context around it . And you hit many of the high points . So when you think about the top line , you know , right now volumes are down 6% .

Speaker #6: And that's it's really mostly that international intermodal piece that we've been talking about . And quite frankly , expecting all year when we knew against the tough comp that we had against last year .

Speaker #6: Now with that , though , we do expect to have , you know , mix was a little bit positive in the third quarter , although we did have very strong intermodal in July .

Speaker #6: And so that that probably was a little bit of a mix headwind versus what we would have been expecting coming into the year .

Speaker #6: But I would say fourth quarter , we're certainly seeing a better mix rotation with the international intermodal coming down , but we do still have coal , which is below the system average arc .

Jennifer Hamann: We do still have coal, which is below the system average arc that is going to be very strong in the quarter. We like all our business, you know that, Ken, and we're diligent in making it all profitable, but there's some that contribute more to that top line than others when you're looking at the arcs. Below the line, talk about expenses. We'll continue to have merger costs, probably not quite to the level that we had in the third quarter, but that will be there. Eric and the team, as you've heard, are running very well. We feel very good about the ability to be productive, although productivity, as you know, also is challenged when you have volumes coming down. The team accepts that challenge, knows that they have that there, but that will create a little bit of a headwind.

Speaker #6: That is going to be very strong in the quarter . We like all our business , you know that Ken and we're diligent in making it all profitable .

Speaker #6: But but there's some that that contribute more to that top line than others . When you're looking at the arcs and then below the line , talk about expenses , we'll continue to have merger costs , probably not quite to the level that we had in the third quarter , but that will be there .

Speaker #6: But Eric and team , as you've heard , are running very well . And so we feel very good about the ability to be productive .

Speaker #6: Although productivity , as you know , also is challenged when you have volumes coming down . And so the team accepts that challenge , knows that they have that they're but but that will create a little bit of a headwind .

Speaker #6: And so that's why , you know , when we look at it , would we like to have volumes up and blue blue skies and 37 degrees .

Jennifer Hamann: That's why, when we look at it, would we like to have volumes up and blue skies and 37 degrees, as Jim said, great railroading weather, throughout the quarter, you bet. We will have some challenges, and that's going to make it tough when you think about stacking that up against what was a record quarter for us in the fourth quarter. When you peel all that back and look at how we're running fundamentally, the railroad is running extremely sound fundamentally, and that will absolutely continue in the fourth quarter.

Speaker #6: As Jim said great railroading weather throughout the quarter . You bet . But we will have some challenges and that's going to make it tough .

Speaker #6: When you think about stacking that up against what was a record quarter for us in the in the fourth quarter . But when you peel all that back and look at how we're running , fundamentally the railroad is running extremely sound fundamentally , and that will absolutely continue in the fourth quarter .

Speaker #11: And then specific to the the rent question .

[Analyst]: Specific to the rent question?

Speaker #6: So we just had a couple small I said I called it out 13 million . Some contract settlements . Those were unique to the third quarter .

Jennifer Hamann: We just had a couple small, I called it out, $13 million some contract settlements. Those were unique to the third quarter.

Speaker #12: Okay .

[Analyst]: Okay, thanks. Appreciate the time.

Speaker #11: Thanks . Appreciate the time .

Speaker #5: Thank you .

Kenny Rocker: Thank you.

Speaker #4: Our next question is from the line of Brandon Oglenski with Barclays . Please see you for your .

Moderator: Our next question is from the line of Brandon Iglinski with Barclays. Please receive your question.

Speaker #10: Question .

Speaker #13: Hey , good morning and thanks . Good morning Jim . You know , since you guys announced your merger agreement , it seems like your competitors are maybe collaborating a lot more than they have in the past .

Kenny Rocker: Good morning. Thank you. Good morning, Jim. Since you guys announced your merger agreement, it seems like your competitors are maybe collaborating a lot more than they have in the past. Do you view this as potentially a risk, especially as you know you're going through a pretty complicated process with the STB here?

Speaker #13: Do you view this as potentially a risk , especially as you you're going through a pretty complicated process with the STB .

Speaker #10: Here ?

Speaker #5: No . In fact , I that proves our point about competition . If you take a look at it . I'm surprised they weren't doing it before .

Jim Vena: No, in fact, that proves our point about competition. If you take a look at it, I'm surprised they weren't doing it before if that was out there. What happens is when you have a competitor that you know is going to be stronger and is going to give a better service product and probably at a better price, because of fewer touchpoints that we have, when you remove the touchpoints, everybody else needs to compete. I truly am surprised that it took us announcing a merger for other people to say that they were going to do special moves and cooperate. I think it bolsters our position in front of the STB. Remember what the STB needs to take a look at. They talk about enhanced competition, and this merger provides enhanced competition, and you just see it the way the railroads are reacting.

Speaker #5: If that was out there . So what happens is , is when you have a competitor that you know is going to be stronger and is going to give a better service product and probably at a better price , okay , because of less touch points that we have .

Speaker #5: When you remove the touch points that everybody else needs to compete . But truly am surprised that it took us announcing , okay , a merger for other people to say that they were going to do special moves and cooperate .

Speaker #5: So I think , I think it bolsters our position in front of the STB . Remember what the STB needs to take a look at it .

Speaker #5: They talk about enhanced competition . And this merger provides enhanced competition . And you just see it the way the railroads are reacting .

Speaker #5: Nobody would react in business if it was bad for the railroad . That was merging and good for themselves . Listen , we're competitive .

Jim Vena: Nobody would react in business if it was bad for the railroad that was merging and good for themselves. We're competitive. If anybody thinks that another railroad would come out and be, "Oh, no, UP better not merge," if it was actually worse and better for them, let's put that on the table. There's only one reason that the railroads are complaining, a couple of them, because they see the competition and they need to step up. When we do that, it's helpful. I'm looking forward to this as we go through and work through on the merger. We're covering every point on the merger, and we're very comfortable that the STB is going to see how good it is for America and how it changes the paradigm of railroad versus truck.

Speaker #5: If anybody thinks that another railroad would come out and be , oh no , up , better not merge . If it was actually worse and better for them , let's get let's put that on the table .

Speaker #5: So there's only one reason that the railroads are complaining . A couple of them is because they see the competition . They need to step up .

Speaker #5: When we do that . It's helpful . So I'm looking forward to this as as we go through and and work through . On the merger .

Speaker #5: We're covering every point on the merger and excuse me , and we're very comfortable that the STB is going to see how good it is for America .

Speaker #5: And how it changes the paradigm of railroad versus truck.

Speaker #13: Thank you . Jim .

[Analyst]: Thank you, Jim.

Speaker #5: You're welcome .

Jim Vena: You're welcome.

Moderator: Our next question is from the line of Jonathan Trevelt with Evercore ISI. Please proceed with your question.

Speaker #4: Our next question is from the line of Jonathan Chappell with Evercore ISI . Please proceed with your .

Speaker #10: Question .

Speaker #14: Thank you . Good morning everyone . Good morning Jim . Eric Jennifer just noted in one of her prior answers , Productivity's challenge when volumes are coming down in your prepared remarks , you said you had the locomotives and the labor position for new business wins .

Kenny Rocker: Morning, Jonathan.

Jim Vena: Thank you.

Kenny Rocker: Morning, everyone.

Jim Vena: Morning, Jim. Eric, Jennifer just noted in one of her prior answers productivity's a challenge when the volumes are coming down. In your prepared remarks, you said you had the locomotives and the labor position for new business wins. We look at Kenny's outlook slide, and there's actually more minus signs than positive signs for Q4. When we think about your ability to be nimble, your productivity or efficiency, as you're going through kind of a choppy macro backdrop, with all eyes on the UP and your service during this merger review process, can you be as nimble and reap as much productivity if volumes continue to be weaker than expected, or do you need to have a little bit more slack in the system at the present time?

Speaker #14: We look at Kenny's outlook , slide and there's actually more minus signs than positive signs for for Q . So when we think about your ability to be nimble , your productivity or efficiency as you're going through kind of a choppy macro backdrop , but with all eyes on the up and your service during this merger review process , can you be as nimble and reap as much productivity if volumes continue to be weaker than expected ?

Speaker #14: Or do you need to have a little bit more slack in the system at the present time ?

Speaker #8: Yeah . Thanks , Jonathan , for that question . So you're right in your characterization of what Jennifer mentioned when we are faced for temporary volume being down , we know that playbook .

Eric Gehringer: Yeah, thanks, Jonathan, for that question. You're right in your characterization of what Jennifer mentioned. When we are faced, for temporary volume being down, we know that playbook, and it's important that all of you understand that. You start with what you won't do. What we won't do is sacrifice anything related to our buffers, whether that's locomotives, crews, or rail cars. Could we be a little bit more conscious about that? Honestly, I don't think we are because we do that every single day. We focus on making sure all three buffers are intact and pre-positioned across the railroad. What will we do? Of course, we'll react to the markets. We'll act promptly. You first start with your transportation plan, making adjustments that typically drive productivity in the areas of train starts and crew starts.

Speaker #8: And it's important that all of you understand that . And you start with what you won't do and what we won't do is sacrifice anything related to our buffers , whether that's locomotives , crews or railcars .

Speaker #8: So could we be a little bit more conscious about that ? Honestly , I don't think we are because we do that every single day .

Speaker #8: We focus on making sure all three buffers are intact and pre-positioned across the railroad . Now , what would we do ? Of course we'll react to the markets , we'll act promptly .

Speaker #8: You first start with your transportation plan , making adjustments that typically drive productivity and the areas of train starts and crew starts . Then from there you do as what you said , which is go to your locomotive fleet , make sure you've rightsized your locomotive fleet for the volume and the mix that you have on the railroad .

Eric Gehringer: From there, you do, as what you said, which is go to your locomotive fleet. Make sure you've right-sized your locomotive fleet for the volume and the mix that you have on the railroad. You adjust your car fleet. You've seen us do that many times. Heck, we do that four or five times every single year just due to the seasonality of intermodal business. You go to your hiring, and you look carefully. We go through that process every single month. I'm personally involved in that process. If we were to see volume being weaker in certain markets, certain geographic areas for a prolonged period, we would make adjustments to hiring. I could keep going through the rest of the playbook. I don't even have it in front of me. I know it so well, and so does the team.

Speaker #8: You adjust your car fleet . You've seen us do that many times . Heck , we do that 4 or 5 times every single year just due to the seasonality of intermodal business .

Speaker #8: Then you go to your hiring and you look carefully . We go through that process every single month . I'm personally involved in that process , but if we were to see volume being weaker in certain markets , certain geographic areas for a prolonged period , we would make adjustments to hiring so I could keep going through the rest of the playbook .

Speaker #8: I don't even have it in front of me . I know it so well and so does the team . So we will make adjustments to ensure that we continue to provide the great service we're providing .

Eric Gehringer: We will make adjustments to ensure that we continue to provide the great service we're providing, but also at the lowest cost so we keep Kenny and the team competitive in the market as they go and win volume.

Speaker #8: But also at the lowest cost . So we keep Kenny and the team competitive in the market as they go and win volume .

Speaker #14: Thanks , Eric .

Kenny Rocker: Thanks, Eric.

Speaker #5: Thank you Jonathan .

[Analyst]: Thank you, Jonathan.

Speaker #4: Our next question is from the line of Scott Group Wolfe Research . Please receive .

Moderator: Our next question is from the line of Scott Group with Wolfe Research. Please proceed with your question.

Speaker #10: Your questions . .

Speaker #15: Hey , thanks guys . So maybe just Jim like to ask it more directly . Like Ben is the one rail that seems like publicly opposed to the merger .

Kenny Rocker: Morning, Scott.

[Analyst]: Hey, thanks, guys. Maybe just, Jim, like to ask it more directly, like BNSF Railway is the one rail that seems like publicly opposed to the merger. In the past, maybe that has mattered. Do you think that rail opposition matters today, given all the other sort of puts and takes, as it relates to this merger? Maybe just separately, if I can, Jennifer, the yields ex-fuel were up 3.5%. I know there's maybe a little bit of mix here, but it feels like we're now more clearly in a positive price-cost backdrop. Does that continue? Any reason to think that that isn't sustainable, looking ahead? Thank you.

Speaker #15: Like in the past . Maybe that has mattered . Like , do you think that rail opposition matters today ? You know , given all the other sort of puts and takes as it relates to this merger and then maybe just separately , if I can ?

Speaker #15: Jennifer , the yields X fuel were up 3.5% . I know there's maybe a little bit of mix here , but like it feels like we're like now more clearly in a positive price .

Speaker #15: Cost backdrop . Like does that continue ? Any reason to think that that isn't sustainable ? Looking ahead . Thank you .

Speaker #5: Okay . I might as well start . And then Jennifer you can jump in . Appreciate the double question there Scott I was pretty slick .

Jim Vena: Okay. I might as well start, and then Jennifer, you can jump in. Appreciate the double question there, Scott. That was pretty slick. That's what I like about you. Let's talk about the other railroads, and you specifically talked about BNSF Railway. Listen, BNSF Railway is a great company, has a great franchise, has a long history, and we compete with them every day. We compete hard. If I was in their shoes, if I was the leader of BNSF Railway, or I guess just like Union Pacific Railroad is a subsidiary of Union Pacific Corporation, they're a subsidiary of a behemoth called Berkshire, you know, with $350 billion. They can do whatever they want, whether they want to buy something or not buy something.

Speaker #5: That's what I like about you . So let's talk about the other railroads . And you specifically talked about Ben . And listen Ben is a great company .

Speaker #5: Has a great franchise , has a long history , and we compete with them every day . And we compete hard . And if if I was in their shoes , if I was the leader of Burlington Northern Santa Fe , or I guess just like Union Pacific Railroad's , a subsidiary of Union Pacific Corp.

Speaker #5: , They're a subsidiary of behemoth called Berkshire . You know , with $350 billion . So they can do whatever they want , whether they want to buy something or not buy something .

Speaker #5: And maybe if I was there , I would I would phone up the big boss and say , we need to do this because it's better for the country and better for us .

Jim Vena: Maybe if I was there, I would phone up the big boss and say, "We need to do this because it's better for the country and better for us." If I take a look at it like I started, Scott, they have to react to what we've done. We're the first mover to truly deliver. I would see the benefit if I was outside of this merger. How do I gain the most for myself? That's what BNSF Railway or Berkshire is doing. At this point, they don't want to do anything. They're looking at it as a way, and that's what the other railroads are doing, looking at a way that they can benefit. The problem that they have is this time, it truly is an end-to-end bolt-on. It is not a big overlap. That story of, "I need access to the railroad," just doesn't fit.

Speaker #5: But that's . But if I take a look at it like I started , Scott is they have to react to what we've done .

Speaker #5: We're the first mover , the to truly deliver , and they can I would see the benefit if I was outside of this merger .

Speaker #5: And how do I gain the most for myself . And that's what Burlington Northern or Berkshire is doing is , is at this point , they don't want to do anything .

Speaker #5: So they're looking at it as a way . And that's what the other railroads are doing , is looking at a way that they can benefit the problem that they have is this time , it truly is an end to end bolt on .

Speaker #5: It is not a big overlap . So that story of I need access to the railroad just doesn't fit on top of that , Scott , as an industry too long , we've wanted to open up a coffee shop in Starbucks because we're afraid to spend our own money to build in .

Jim Vena: On top of that, Scott, as an industry, too long we've wanted to open up a coffee shop in Starbucks because we're afraid to spend our own money to build in. Think about that. I want a new coffee shop in New York City, and I'm going to walk over to Starbucks and say, "Seeing as you've got a real nice store, would you let me open up my own counter in your store?" No, open your own counter because if you have enough money, open it across the street if you want, but you pay your expenses. The way we look at it is, when the railroads come up and say very sort of misleading positions, it helps us. The Surface Transportation Board and the members that are there now are very smart. They know we're not going to remove 300 lanes of traffic.

Speaker #5: So you think about that . I want a new coffee shop in New York City , and I'm going to walk over to Starbucks and say , as soon as you've got a real nice store , would you let me open up my own counter in your store ?

Speaker #5: No , open your own counter . Because if you have enough money , open it across the street . If you want , but you pay your expenses .

Speaker #5: So the way we look at it is , is when the railroads come up and save very sort of misleading positions . It helps us .

Speaker #5: The STB and the members that are there now are very smart . They know we're not going to remove 300 lanes of traffic .

Speaker #5: Okay ? They know that we're going to that we're going to have more options for our customers , not less . So at the end of the day , they're fighting a good fight , trying to make the noise .

Jim Vena: They know that we're going to have more options for our customers, not less. At the end of the day, they're fighting a good fight, trying to make the noise, but the STB in our case is so strong that I'm very comfortable that unless they change their strategy, then they actually help us because it doesn't make sense when things are out there that don't add up to fact. Finally, we are more than willing to sit down and have arrangements and have discussions because we have a very small amount of customers that are going to go from two to one. In fact, it's less than 10 customer locations, not even just customers. What we've agreed to is we are going to provide access to those locations to another railroad to give them the optionality that they had before so that nobody in this merger loses anything.

Speaker #5: But the STB and our case is so strong that I'm very comfortable that unless they change their strategy , then they actually help us because it doesn't make sense when things are out there that that don't add up .

Speaker #5: The fact, finally, is we are more than willing to sit down and have arrangements and discussions because we have a very small amount of customers that are going to go from 2 to 1.

Speaker #5: In fact , it's less than ten customer locations , not even just customers . So what we what we've agreed to is , is we are going to provide access to those locations to another railroad to give them the optionality that they had before , so that nobody in this merger loses anything .

Speaker #5: So we'll talk to all the railroads and see who wants to sit down and and have a discussion about it . Finally , Scott and I know I'm being long winded this morning , but it's sort of fun .

Jim Vena: We'll talk to all the railroads and see who wants to sit down and have a discussion about it. Finally, Scott, and I know I'm being long-winded this morning, but it's sort of fun. Isn't this a fun thing to be doing, talking about a great quarter that nobody really is paying attention to? World-class quarter with a world-class team that delivered, but nobody's going to ask us too much about that. Then the merger that we're going to change the industry and move it forward the way we should. Bottom line is I'm very comfortable where we are, and I think that we end up at the right place with the STB because they're smart and they're going to go work through the issues that are on the table.

Speaker #5: Isn't this a fun thing to be doing ? Talking about a great quarter that nobody really is paying attention to . Okay , world class quarter with a world class team that delivered , but nobody's going to ask us too much about that .

Speaker #5: And then the merger that we're going to change the industry and move it forward the way we should. So bottom line is, I'm very comfortable where we are.

Speaker #5: And I think that we end up with a at the right place with the STB because they're smart and they're going to go work through the the issues that are on the table .

Speaker #5: And , and also just the final point , Scott , we haven't even put in our merger . Okay . Application that talks about all the things we're going to do .

Jim Vena: Also, just a final point, Scott, we haven't even put in our merger application that talks about all the things we're going to do, and people are already talking about what we're going to do. Truly amazing. They must be mind readers. They must be looking at our brains here and saying, "I wonder what Eric is going to do and Kenny and Jennifer and Jim and the entire team." We'll wait till we put the merger application in at the end of November, and at that point, we'll sit down and talk to anybody who wants to sit down and talk to us. Sorry for the long answer, Scott. The second part, Jennifer.

Speaker #5: And people are already talking about what we're going to do . Truly amazing . They must be mind readers . They must be looking at our brains here and saying , I wonder what Eric is going to do .

Speaker #5: And Kenny and Jennifer and Jim and the entire team . Okay , so we'll wait till we put the merger application in at the end of the November and , and then at that point , we'll sit down and talk to anybody that wants to sit down and talk to us .

Speaker #5: Sorry for the long answer , Scott . The second part , Jennifer ,

Speaker #6: I've forgotten . No , I'm teasing .

Jennifer Hamann: I forgot. No, I'm teasing.

Speaker #16: Okay , I'll be shorter . I'll .

Jim Vena: I promise you all, we'll speak as many words.

Speaker #5: Speak as .

Speaker #16: Many words. I promise you all.

Speaker #6: I'm sorry . No , you asked about price going forward , Scott . So . And then you referenced the 3.5% the the the price mix yield that we had on our freight revenue in the quarter .

Jennifer Hamann: I'm sorry. No, you asked about price going forward, Scott. You referenced the 3.5% price mix yield that we had on our freight revenue in the quarter. We did get some positive benefit in the third quarter from the mix. As we look forward, we do think, obviously, it will depend on how the business comes through. As we're sitting here today with intermodal going down, we definitely think mix should be a positive in the fourth quarter, tempered maybe a little bit on the coal side. In terms of price, the pricing environment has remained, I'd say, challenging, but Kenny and the team have done a really good job supported by the service to go out there and talk with our customers about the value that we're providing them through faster cycle times, more reliable service, and are doing a good job yielding some very positive price.

Speaker #6: So we did get some positive benefit in the third quarter from the mix . And as we look forward , we do think , you know , obviously it will will depend on how the business comes through .

Speaker #6: But as we're sitting here today with intermodal going down , we definitely think mix should be a positive in the fourth quarter , tempered maybe a little bit on the coal side in terms of price .

Speaker #6: You know , the pricing environment has remained . You know , I'd say challenging , but Kenny and the team have done a really good job , supported by the service to go out there and talk with our customers about the value that we're providing them through faster cycle times , more reliable service and are doing a good job yielding , yielding some very positive price .

Speaker #6: We're not getting any support from the intermodal side of the world . You know , that truck competitive market is still very , very challenging .

Jennifer Hamann: We're not getting any support from the intermodal side of the world. That truck competitive market is still very, very challenging. I would say as we move into the fourth quarter and into the first part of next year, you're going to start to see some tougher comparisons for us on the coal side of the world as well when you think about some of the flexibility we have in those contracts with natural gas. You put kind of some of those, what I'll call, macro factors aside, and you just look at what the team is doing and the combination of driving value to the customers and being very, you know, value-motivated, profit-driven in terms of what we can do for the company and for our customers to grow the business and get solid price, we feel good about that.

Speaker #6: And I would say as we move into the fourth quarter and into the first part of next year , you're going to start to see some tougher comparisons for us on the coal side of the world as well .

Speaker #6: When you think about some of the flexibility we have in those contracts with with natural gas , but you put kind of some of those what I'll call macro factors aside .

Speaker #6: And you just look at what the team is doing and the combination of driving value to the customers and being very , you know , value motivated , profit driven in terms of what we can do for the company and for our customers to grow the business and get solid price .

Speaker #6: We feel good about that .

Speaker #5: Thank you very much , Scott . Sorry for the long answer , but I thought we'd cover off a few points there .

Jim Vena: Thank you very much, Scott. Sorry for the long answer, but I thought we'd cover off a few points there.

Speaker #15: No , that was great . Thank you .

Jennifer Hamann: No, that was great. Thank you.

Speaker #4: Our next question is from the line of Brian Ossenbeck with J.P. .

Moderator: Our next question is from the line of Brian Ostenbeck with JP Morgan. Please proceed with your question.

Speaker #10: Morgan .

Speaker #4: Please with .

Speaker #10: Your questions .

Speaker #5: Good morning .

Kenny Rocker: Good morning.

Speaker #17: , Jim Green's team. Thanks for taking the question. Maybe a quick one for Kenny, then to follow up for Jim.

Jim Vena: Morning, Jim. Good morning, team. Thanks for taking the question. Maybe a quick one for Kenny, then a follow-up for Jim. So Kenny, just looking at the intermodal, it looks like there's some share shift between yourself and another Western competitor if we look at just an originated basis. I know there's a lot of moving parts with international and domestic, but I wanted to see if we're reading that correctly. Jim, you mentioned that the customers are lining up. There's a good amount of support, but one that's been pretty vocal, obviously, maybe this is the Starbucks example you're referring to, but the chemical shippers in the Gulf Coast, they've been a lot more vocal, wanting enhanced competition. Is that something I'm sure we'll hear about in the application, but is that something you can deal with directly?

Speaker #17: So , Kenny , just looking at the intermodal , it looks like there's some share shift between yourself and other Western competitors . If we look at just an originated basis , I know there's a lot of moving parts with international and domestic , but I wanted to see if we're reading that correctly .

Speaker #17: And then , Jim , you mentioned that the customers are lining up . There's good amount of support , but one that's been pretty vocal , obviously .

Speaker #17: Maybe this is the Starbucks example . You're referring to , but the chemical shippers and the Gulf Coast , they've been a lot more vocal wanting enhanced competition .

Speaker #17: Is that something I'm sure we'll hear about in the application ? But is that something you can deal with directly ? Do you take that to the STB and have them weigh on it ?

Jim Vena: Do you take that to the STB and have them weigh on it? Just how should we think about how that progresses since it's a pretty big and important and vocal group? Thank you.

Speaker #17: Just how should we think about how that progresses , since it's a pretty big and important and vocal group ? Thank you . .

Speaker #16: So .

Speaker #5: Kenny , you want to talk about the . Yeah .

Kenny Rocker: Kenny, you want to talk about the profit?

Speaker #7: I'll start off . Thanks for the question . Yeah . We've seen a little bit of market degradation for sure . Those are tough comp comparisons .

Jim Vena: Yeah, I'll start off. Thanks for the question. We've seen a little bit of market degradation for sure. Those are tough comp comparisons. We did see quite a bit that's pulled ahead earlier in the year. At the same time, with all the investments that we've made in our intermodal market, the new markets for international and Arizona, and Twin Cities and some other areas in the service product that we have, we're going to make sure if we move the volume that it's going to move at the margins that reflect both the service, the investments, and the infrastructure that we've made and the overall products. That's what you're seeing. You're seeing both of those right now. Okay.

Speaker #7: We did see quite a bit that's pulled ahead earlier in the year . And at the same time you know with all the investments that we've made in our intermodal market , the new markets for international and Arizona and Twin Cities and some other areas in the service product that we have , we're going to make sure we move the volume that it's going to move at the margins , that reflect both the service , the investments and the infrastructure that we've made in the overall products .

Speaker #7: And so that's what you're seeing . You're seeing both of those right now .

Speaker #5: Okay . So on the associations , the chemical association that you mentioned last time I looked , they don't pay any of our bills .

[Analyst]: On the associations, the chemical association that you mentioned, last time I looked, they don't pay any of our bills. They don't have a direct relationship with us, and we are dealing with our customers. That, for me, is really important. We have to understand what the associations are saying and what they're doing in Washington, D.C., and what their story is. Again, it's truly amazing that they know already. That gives you an idea of where they're coming from, what we're putting into the merger document, and what we're doing with access to CSX, access to BNSF Railway or Berkshire on the way westbound, and access to the other railroads, whether it's the short lines that we operate with and handle, whether it's Canadian National or Canadian Pacific.

Speaker #5: They don't have a direct relationship with us . And we are dealing with our customers . And that for me is really important .

Speaker #5: Do we have to understand what the what the associations are saying and what they're doing in Washington , D.C. and what their story is ?

Speaker #5: But again , it's truly amazing that they know already that gives you an idea of where they're coming from , what we're putting into the merger document and what we're doing with access to CSX , access to Burlington Northern or Berkshire on the way westbound and access to the other railroads , whether it's the short lines that we operate with and handle , whether it's Canadian , National or Canadian Pacific .

Speaker #5: So at the end of the day , you know , we'll deal with them . And we're more than willing to sit down with the associations and explain the benefit and the benefit is 15 to 20% on their merchandise traffic .

[Analyst]: At the end of the day, we'll deal with them, and we're more than willing to sit down with the associations and explain the benefit. The benefit is 15% to 20% on their merchandise traffic, okay? Moving. History will show them that the railroads have not increased price. This is in general for all of the railroads at the same level as the liability issue has crept up and what that would cost us, and also how what we're pricing for the product that they're selling. That's why we like to talk to the big shippers that we have. When we talk to the big shippers, they understand it. You know what? It's a little bit, and especially for the associations, there's a trough out there, and they're trying to see what they can get with it.

Speaker #5: Okay . Moving history will show them that the railroads have not increased price . And this is in general , for all of the railroads at the same level as the liability issue has crept up .

Speaker #5: And what that would cost us , and also how what we're pricing for the product that they're selling . So that's why we like to talk to the big shippers that we have .

Speaker #5: And when we talk to the shippers , they understand it . But you know what ? It's a little bit and especially for the associations is there's a trough out there and they're trying to see what they can get with with it .

Speaker #5: We've spent a lot of time with, and when we explain what we're doing with the political and regulatory people, they start to see.

[Analyst]: We've spent a lot of time with the, and when we explain what we're doing with the political and regulatory people, they start to see. You're talking Jim and Kenny and Eric and Jennifer, so you're saying you're going to be faster, really. They need less cars. They need less expense, less inventory expense. Hold it. You're going to be able to move across the country 15% to 20% quicker. You mean you're going to remove 1,000 trucks of rail to rail or our portion of it in Chicago and other places that today runs on the highway instead of going rail to rail. We have less trucks on the road. You're looking at forward and how we're going to do, okay, to compete against trucks where technology is changing quick.

Speaker #5: So you're talking , Jim , and Kenny and Eric and Jennifer . So you're saying you're going to be faster . Really . So they need less cars .

Speaker #5: They need less expense , less inventory expense . Hold it . You're going to be able to move across the country 15 to 20% quicker .

Speaker #5: You mean you're going to remove a thousand trucks of rail to rail or our portion of it in Chicago and other places that today runs on the on the highway ?

Speaker #5: Instead of going rail to rail . So we have less trucks on the road . Oh , you're looking at forward and how we're going to do .

Speaker #5: Okay to compete against trucks where technology is changing quick . If anybody wants to go take a look at what trucks are doing now to become more autonomous as they move ahead .

[Analyst]: If anybody wants to go take a look at what trucks are doing now to become more autonomous as they move ahead, let's go to Texas. Let's go to places where they're being used right now. If we don't move ahead, the associations will find themselves in a place where they'll be asking us railroads to do what we're doing without their push. That's where I'm at with it. It's complicated, but I don't know, Brian, real interesting that you would come out so strong when you haven't even read what the merger document is. Is the merger application, it makes you wonder where the heck they're coming from. They just must be negative all the time. I guess, you know what? They probably are looking at our third quarter and find some dirt on the third quarter where we've really delivered strong as a company.

Speaker #5: Let's go to Texas . Let's go to places where they're being being used right now . If we don't move ahead , the associations .

Speaker #5: Okay will find themselves in a place where they'll be asking us railroads to do what we're doing without without their push . So that's where I'm at with it .

Speaker #5: It's complicated , but I don't know . Brian . Real interesting that you would come out so strong when you haven't even read what the merger document is .

Speaker #5: Okay . Is merger application is is makes you wonder where the heck they're coming from . They just must be negative all the time .

Speaker #5: I guess . You know what ? They probably are looking at our third quarter and find some dirt on the third quarter where we've really delivered strong as a company .

Speaker #5: Kenny , anything you wanted to add ? Yeah .

[Analyst]: Kenny, anything you wanted to add?

Speaker #7: I just want to say our first approach is to talk directly with customers , not necessarily through the associations . At the same time we have , we've already done and we already have meetings on the books to talk to those customers through those associations .

Kenny Rocker: I just want to say our first approach is to talk directly with customers, not necessarily through the association. At the same time, we've already done, and we already have meetings on the books to talk to those customers through those associations. Again, the main approach is sitting down with our customers, large and small, and talking to them. We're covering it from all angles.

Speaker #7: But again , the main approach is sitting down with our customers , large and small , and talking to them . We're covering it from all angles .

Speaker #17: Jim , the 15 to 20% increase . Just to clarify , that's the speed or throughput . What what does that number refer to ?

Jim Vena: Jim, the 15 to 20% increase, just to clarify, that's a speed or a throughput? What does that number refer to?

Speaker #5: Yeah . So what I'm talking about , Brian , is , is what people miss that don't railroad . Okay . And I'm trying not to be flippant this morning because I woke up just flippant .

[Analyst]: Yeah, so what I'm talking about, Brian, is what people miss that don't railroad, okay? I'm trying not to be flippant this morning because I woke up just flippant. I looked at our numbers, and I was trying to find some dirt on Eric to make sure I pushed him and the team real.

Speaker #5: I looked at our numbers and I was trying to find some dirt on Eric to make sure I pushed him and the team real hard.

Speaker #5: So that's the attitude . I woke up with this morning . After about four hours of sleep last night . Like I was ready to go .

Operator: That's the attitude I woke up with this morning after about four hours of sleep last night. I was ready to go. Let me not be flippant. Bottom line is, if you understand railroading, if you can remove touch points, a touch point through a yard, our average, and we're the best in the industry, is 19.9 hours this month. You're going to add 19.9 hours if you're going to move railcars and have to touch them. We touch them now before we hand them off. On top of that, Brian, we don't build blocks for other railroads because history has always said that railroads always look internal as soon as they get into the slightest bit of trouble. You can't rely on railroads to do what's better when they've agreed to build blocks for you.

Speaker #5: So let me not be flippant . Bottom line is , if you understand railroading , if you can remove touch points , a touch points through a yard , our average and we're the best in the industry is 19.9 hours .

Speaker #5: This month . Okay , so you're going to add 19.9 hours if you're going to move railcars and have to touch them , we touch them now before we hand them off .

Speaker #5: On top of that , Brian , we don't build blocks for other railroads because history has always said that railroads always look internal as soon as they get into the slightest bit of trouble .

Speaker #5: So you can't you cannot rely on railroads to do what's better when they've agreed to build blocks for you . So when you add that up and we've looked at the railcars , that's where that number comes from , 15 to 20% quicker , because when we build the block coming out of Houston for the chemicals , we'll build the block that goes all the way to Philadelphia or build the block that goes all the way to the northeast .

Operator: When you add that up, and we've looked at the railcars, that's where that number comes from, 15% to 20% quicker. When we build the block coming out of Houston for the chemicals, we'll build the block that goes all the way to Philadelphia or build the block that goes all the way to the Northeast. If the new Union Pacific is building a block with lumber coming westbound, we're going to build the block that goes all the way through and remove touch points. We work on touch points every day. That's what I'm talking about, the 15% to 20% on the merchandise business, let alone what everybody looks at and likes to talk about, the intermodal business, which is real important to us that we remove touch points and have speed. Sorry for the long answer, but I'm putting the points out there this morning, Brian.

Speaker #5: If we're if the new Union Pacific is building a block with lumber coming westbound , okay , we're going to build the block that goes all the way through and remove touch points .

Speaker #5: We work on touch points every day , so that's what I'm talking about . The 1,520% on the merchandise business , let alone what everybody looks at and likes to talk about .

Speaker #5: The intermodal business, which is really important to us, requires that we remove touch points and have speed. So, sorry for the long answer, but I'm putting the points out there this morning.

Speaker #5: Brian . Okay , we might not get through everybody . I think there's only room for another handful of people . That's about it .

Operator: We might not get through everybody. I think there's only room for another handful of people. That's about it. Away we go.

Speaker #5: So .

Speaker #17: We appreciate those details . Jim . Thank you .

Moderator: Appreciate those details, Jim. Thank you.

Speaker #5: You're welcome .

Operator: You're welcome.

Speaker #10: Thank you .

[Company Representative]: Thank you. As a reminder, we ask you please limit yourself to one question to allow as many as possible to ask questions. The next question will be coming from the line of Stephanie Moore with Jefferies. Please receive your question.

Speaker #4: As a reminder , we ask that you please limit yourself to one question to allow as many as possible to ask questions . The next question will be coming from the line of Stephanie Moore with .

Speaker #10: Jefferies .

Speaker #4: Please proceed with .

Speaker #10: Your question .

Speaker #18: Hi . Good morning . Thank you . Good morning . You know , when you look at your service metrics , as you noted , they're about the best they've ever been , or at 100% or so .

Moderator: Hi, good morning. Thank you. Good morning. When you look at your service metrics, as you noted, they're about the best they've ever been or at 100% or so. Can you talk about your level of confidence and the steps you can take to implement your service best practices to MSC post-merger? Jim, just the timeline you think realistically for some of these world-class levels to convert over. Thank you.

Speaker #18: Can you talk about your level of confidence and the steps you can take to implement your service ? Best practices to NSC post-merger ?

Speaker #18: And Jim , just the timeline . Do you think realistically for some of these world , world class levels to convert over ? Thank you .

Speaker #5: Eric , why don't you take this ? But real simple is is I think we have a history of doing this . I've been railroad for a long time .

Operator: Eric, why don't you take this? I think we have a history of doing this. I've been in railroading for a long time. You have me and away you go. You answer it.

Speaker #5: You have been away . You go , you answer it .

Speaker #8: Absolutely . And thank you for that question . So you're absolutely right . Definitely . World class levels . Definitely best in the industry .

Jim Vena: Absolutely. Thank you for that question. You're absolutely right. Definitely world-class levels, definitely best in the industry. Now, being able to take that over and partner with Norfolk Southern Corporation inside the merger, that's what we do every day. It's just a bigger scale, right? We look every single day. It doesn't matter if I'm looking at a terminal or a service unit and interchange point. Every single day we're looking for what are the issues or the opportunities, dissecting the performance in an individual terminal. How do we get two hours off a dwell? How do we get the trains out 5% faster? It's going to be the same thing just at a broader scale. I've been working with Norfolk Southern Corporation for nearly 15 years. I've had a relationship with them in lots of different roles. They're good railroaders.

Speaker #8: Now, being able to take that over and partner with the NS inside the merger, that's what we do every day. It's just on a bigger scale, right?

Speaker #8: We look every single day. It doesn't matter if I'm looking at a terminal or a service shoot at an interchange point; every single day, we're looking for what the issues or opportunities are, dissecting the performance of each individual terminal.

Speaker #8: How do we get two hours off of dwell ? How do we get the trains out ? 5% faster ? It's going to be the same thing , just at a broader scale .

Speaker #8: And look , I've been working with the NS for nearly 15 years . I've had a relationship with them in lots of different roles .

Speaker #8: They're good railroaders . Their knowledge of their network and our knowledge of our network combined aligned with the goal of being able to move cars faster .

Jim Vena: Their knowledge of their network and our knowledge of our network combined, aligned with the goal of being able to move cars faster in the most efficient way to be most competitive in the market, that's the job. We all know it. We're all going to do it.

Speaker #8: And the most efficient way to be most competitive in the market . That's the job . We all know it . We're all going to do it .

Speaker #5: Stephanie , I grew up working for CN , did 40 years there , and when I came over to Union Pacific , I didn't know that there was two green rivers .

Operator: Stephanie, I grew up working for CN, did 40 years there. When I came over to Union Pacific, I didn't know that there were two Green Rivers. There's a Green River on our East-West Main, and there's a Green River in Utah. The bottom line is, the way I look at it is, I think you can see from example of real-life examples. We don't make up stories at Union Pacific. We want you to judge us on what we've delivered. You can see since I joined in 2019 what we've been able to do with this operation. We will optimize. They're great railroaders. They're great people. The people I've met at Norfolk Southern. I've always said that every railroad should be able to have their operating ratio within 100 basis points of each other.

Speaker #5: Okay , there's a green river on our east west main , and there's a green river in Utah . So at the bottom line is , is the way I look at it is , is I think you can see from example of real life examples , we don't we don't make up stories .

Speaker #5: Union Pacific , we want you to judge us on what we've delivered . And you can see since I joined in 2019 , what we've been able to do with this operation and we will optimize their great railroaders , their great people , the people I've met at Norfolk Southern .

Speaker #5: But I've always said that every railroad should be able to have their operating ratio within 100 basis points of each other . So I'm looking forward to getting the magic that's at Union Pacific and doing the same magic with all those employees and with them at Norfolk Southern .

Operator: I'm looking forward to getting the magic that's at Union Pacific and doing the same magic with all those employees and with them at Norfolk Southern.

Speaker #4: Our next question is from the line of Jason Seidl with TD .

[Company Representative]: Our next question is from the line of Jason Seidl with TD Cowen. Please receive your question.

Speaker #10: Cowan .

Speaker #4: Please , with .

Speaker #10: Your question .

Speaker #19: Thanks . Operator . Jim and team , good morning . You know , I totally get the perpetual dissatisfaction comment , but hopefully you guys can take it to enjoy some very , very solid results for the quarter .

Moderator: Thanks, operator. Jim and team, good morning. I totally get the perpetual dissatisfaction comment. Hopefully, you guys can take it to enjoy some very, very solid results for the quarter. My question is going to be on yields. Jennifer is going to actually be happy that I'm not looking for guidance here. How should we think about your ability to sort of directionally change domestic intermodal yields if the market starts to inflect on the truckload side, given all the governmental actions taken against foreign drivers right now? Also, when we look into ag, can you help us sort of frame up how to think about near-term ag RPU? How does export RPU compare historically versus domestic ag RPU? Thank you.

Speaker #19: My question is going to be on yields . But Jennifer's going to actually be happy that I'm not looking for guidance here . How should we think about your ability to sort of directionally change domestic intermodal yields if sort of the market starts to inflect on the truckload side , sort of given all the governmental actions taken against foreign drivers right now , and also when we look into AG , can you help us sort of frame up how to think about near-term AG ARPU ?

Speaker #19: And so . How does export ARPU compare historically versus sort of domestic ag ARPU ? Thank you .

Speaker #6: So let me let me start off here , Jason , when you talk about the intermodal side of the world , as you know , when we expanded our portfolio of domestic partners , we did some market based pricing there .

[Company Representative]: Let me start off here, Jason. When you talk about the intermodal side of the world, as you know, when we expanded our portfolio of domestic partners, we did some market-based pricing there. When we see that truck market improve, that will have a direct impact on us. We've also been very successful in converting business even in a very weak truck environment and doing that in a way that has been contributing positively to our bottom line and feel great about those partnerships and our ability to grow that business. It really is service-based. It's market-based with our great reach. As you know, that's an exciting part for us when we look at the Norfolk Southern Corporation merger and their vast intermodal network. When you look at the ag side of things and you ask about export, it really comes down to length of haul.

Speaker #6: And so when we see that truck market improve , that will have a direct impact on us . And we've also been very successful in converting business , even in a very weak truck environment .

Speaker #6: And doing that in a way that has been contributing positively to our bottom line, and I feel great about those partnerships and our ability to grow that business.

Speaker #6: It really is service based . It's market based with our great reach . And as you know , that's an exciting part for us .

Speaker #6: When we look at the Norfolk Southern merger and their their vast intermodal network , when you look at the the ag side of things and you ask about export , you know , it really comes down to length of haul .

Speaker #6: And with some of that business , particularly when it goes to the PNW , that's that's a good length of haul . We're seeing more export today .

[Company Representative]: With some of that business, particularly when it goes to the PNW, that's a good length of haul. We're seeing more export today go to Mexico, and that's a good length of haul. I would say the only caveat to any of that is, particularly when the business is going into Mexico versus the PNW, that does slow the cycle times down somewhat when you think about the turns on those cars and bringing them back. Kenny, anything you want to add?

Speaker #6: Go to Mexico and that's a good length of haul . I would say the only caveat to any of that is particularly when the business is going into Mexico versus the PNW , that does slow the cycle times down somewhat .

Speaker #6: When you think about the turns on those cars and bringing them back . Kenny , anything you want to add ?

Speaker #7: Yeah , just just the fact that we have structurally changed the network and the intermodal , if you look at the ramps and the products , Inland Empire , the South , they're now talked about Phoenix , but then also there are other services .

Jennifer Hamann: Yeah. Just the fact that we have structurally changed the network and the intermodal. If you look at the ramps and the products, Inland Empire that's out there now, I talked about Phoenix. There are other services. I mean, we've added new services. You look at moving out of LA into Kansas City. You look at the West Coast going into Louisville. We've transformed that. You already talked about the portfolio, Jennifer. The only thing I'll say about the grain business is the team has done a heck of a job growing infrastructure inside Mexico through business development, giving us an outlet when there is nothing there on the soybean market. We've been flexible and adaptable.

Speaker #7: I mean , we've added new services . You look at , you know , moving out of LA and the Kansas City . You look at the West Coast going into Louisville .

Speaker #7: So we've transformed that . You already talked about the portfolio , Jennifer . And the only thing I'll say about the grain business is the team has done a heck of a job growing infrastructure inside Mexico through business development , giving us an outlet when there is nothing there on the soybean market .

Speaker #7: So we've been flexible and adaptable .

Speaker #19: Kenny , if I could follow up there , you know , just how do you think about the timing ? Like if the market inflected on the truckload side , is it going to be , you know , a couple months lag ?

Operator: Kenny, if I could follow up there, how do you think about the timing? Like if the market inflected on the truckload side, is it going to be a couple of months lag? Is it going to be a couple of quarter lag with your ability to adjust price on the domestic side?

Speaker #19: Is it going to be a couple quarter lag with your ability to adjust price on the domestic side ?

Speaker #7: Well , I , I can't get into the actual contracts , but what I it is . But but what I'll say is what we're really looking at is , you know , what's happening with truck production .

Jennifer Hamann: I can't get into the actual contracts.

Operator: It's a good question, right?

Jennifer Hamann: It is. What I'll say is what we're really looking at is what's happening with truck production. Truck production is down about 28%. We're waiting for that to turn. We remember this. Since we've added these new portfolio customers, we've been on a flat market. I've said this now for three years. We haven't seen any uplift. When we do, we're going to take advantage of it. Last thing, Jim. The last thing, we've had a record intermodal revenue on the domestic side. We've been flat.

Speaker #7: So truck production is , is down about 28% . We're waiting for that to turn . And we remember this since we've added these new portfolio customers , we've been on a flat market .

Speaker #7: So I've said this now for three years. We haven't seen any uplift, and when we do, we're going to take advantage of it.

Speaker #7: The last thing Jim . The last we've had a record intermodal revenue on the domestic side . So we've been flat record .

Speaker #16: I got it . Listen , I've asked them the same question , okay ? So it it's sometimes .

Operator: I got it, Kenny. Listen, I've asked them the same question, okay? It's sometimes hard to get that out of them. What I do like, and he surprised he didn't come back, is, listen, our revenue is up 3% and all this sort of stuff. Okay, Kenny, you didn't get a better answer than I get, Jason.

Speaker #5: Hard to get that out of them. But what I do like, and he surprised he didn't come back, is, listen, our revenue is up 3%.

Speaker #5: And all this sort of stuff. But okay, Kenny. You didn't get a better answer than I get. Jason.

Speaker #19: I appreciate it anyway . Take care guys .

Moderator: I appreciate it anyway. Take care, guys.

Speaker #5: Thank you .

Operator: Thank you.

Speaker #4: The next question is from the line of Chris Wetherbee with Wells Fargo . Pleased to see you with .

[Company Representative]: The next question is from the line of Chris Weatherbie with Wells Fargo. Please proceed with your question.

Speaker #10: Your question .

Speaker #5: Good morning Chris .

Operator: Morning, Chris.

Speaker #20: Hey . Morning , Jim . Thanks , guys . Maybe sticking with Kenny , I guess I was curious about sort of the pricing environments as we move into next year .

Moderator: Hey, morning, Jim. Thanks, guys. Maybe sticking with Kenny, I guess I was curious about sort of the pricing environment as we move into next year. Do you think as you go through contracting at the end of the year, the pricing is kind of pricing growth is better in 2026 than 2025? Is it kind of the same? I know the backdrop from intermodal really kind of hasn't done or from the trucking environment hasn't done much here just yet. Just kind of curious, generally speaking, the response from customers. I don't know if it's sort of the conversation tones have changed at all in the last couple of months, or are they still relatively constructive as you think about next year? Any thoughts around pricing would be great.

Speaker #20: So I guess , do you think as you go through contracting at the end of the year , that pricing is kind of pricing growth is better in 26 than 25 ?

Speaker #20: Is it kind of the same ? I know the backdrop from intermodal really kind of hasn't or from the trucking environment hasn't done much here .

Speaker #20: Just yet . And then just kind of curious , generally speaking , the response from customers , I don't know if it's sort of the conversation tones have changed at all in the last couple of months , or are they still relatively constructive ?

Speaker #20: And as you think about next year ? So just any thoughts around pricing would be great .

Speaker #7: Yeah . So without talking about 2026 , it really does start with a strong service product . We lead with the metrics both to and from industry and over the industry .

Jennifer Hamann: Yeah. Without talking about 2026, it really does start with a strong service product. We lead with the metrics both to and from industry and over the road industry as we're working through those contract renewals. We're very clear-eyed about the pricing levels that reflect the service that we're delivering and what we sold to customers. I said this in my remarks. We are confident because the service product is so strong. The question about what we're hearing from customers as they look forward, they're still looking for a little bit more clarity on the markets. When we talk to our customers and when we look at our business, we're looking at the current metrics that are out there, the indicators, and we're judging ourselves on how we perform against those. Regardless of what they're seeing, we look at, are we outperforming in those key markets?

Speaker #7: As we're working through those contract renewals . And we're very clear eyed about the pricing levels that reflect the service that we're delivering .

Speaker #7: And we sold to customers . And I said this in my remarks , we are confident because the service product is so strong .

Speaker #7: Now , the question about what we're hearing from customers is they look for they're still looking for a little bit more clarity on the markets .

Speaker #7: You know , when we talk to our customers and when we look at our business , we're looking at the current metrics that are out there .

Speaker #7: The indicators , and we're judging ourselves on how we perform against those . So regardless of what they're seeing , we look at are we outperforming in those key markets ?

Speaker #20: Okay . But sure , I was just kind of yeah , thank you . Just in the context of the service product that you're putting out there , I guess it's a little unclear .

Operator: Thanks for the question.

Moderator: Sure, I was just kind of.

Operator: Yeah, thank you. Just in the context of the service product that you're putting out there, I guess it's a little unclear. Does that drive better pricing sort of conversations as you go into next year? I guess it maybe is kind of what you've been doing for the last couple of months, of course. Chris, let me help, Kenny. This is the way, and we've had this discussion pretty black and white. The entire time I've been a railroader, every Marketing and Sales group will always tell you that the reason they can't go out and price properly and win you business is because the service product is not high enough. Our freaking service product is so high that that should not even be part of the discussion.

Speaker #20: Does that drive better pricing sort of conversations as you go into next year ? I guess it may be is kind of what you've been doing .

Speaker #5: For the last . So , Chris , let me help Kenny . This is the way and we've had this discussion pretty black and white the entire time I've been a railroader .

Speaker #5: Every marketing and sales group will always tell you that the reason they can't go out and price properly , and when you business is because the service product is not high enough .

Speaker #5: Well , our service product is so high that that should not even be part of the discussion . There might be 1 or 2 customers out of the whole thing that could say , listen , you're not perfect , but at the end of the day , it's high .

Operator: There might be one or two customers out of the whole thing that could say, "Listen, you're not perfect." At the end of the day, it's high. That's their challenge. That's why we have a Marketing and Sales department, is they go out there and go get business, bring new business online because we have a great service product, and price it at the value that we're giving the customer. Go ahead, Kenny. Any disagreement with me on that point?

Speaker #5: So that's their challenge . That's why we have a marketing and sales department is they go out there and go get business , bring you business online because we have a great service product and price it at the value that we're giving the customer .

Speaker #5: So go ahead , Kenny . Any disagreement with me on that point ?

Speaker #7: Not at all . And all I want to say is absolutely the service product helps us . So we appreciate that . And we're we're pricing based on that service product that , that we're delivering .

Jennifer Hamann: Not at all. All I want to say is absolutely, the service product helps us. We appreciate that, and we're pricing based on that service product that we're delivering.

Speaker #5: Chris, how would you like to work for me?

Operator: Chris, how'd you like to work for me?

Speaker #20: Good characterization of the service product. Appreciate it, guys. Thank you very much.

Moderator: Good characterization of the service product. Appreciate it, guys. Thank you very much.

Speaker #5: Okay .

Operator: Okay.

Speaker #4: The next question is from the line of David Vernon with Bernstein . Please do see with .

[Company Representative]: The next question is from the line of David Vernon with Bernstein. Please proceed with your question.

Speaker #10: Your questions .

Speaker #21: Hey good morning guys , and thanks for fitting me in here . So so Kenny , a couple months ago up in Norfolk , put out some marketing material around enhanced collaboration in the network .

Moderator: Hey, good morning, guys, and thanks for fitting me in here. Kenny, a couple of months ago, Union Pacific and Norfolk Southern Corporation put out some marketing material around enhanced collaboration in the network. I was wondering if you could maybe talk a little bit about how those changes are being made and how that level of integration would compare to maybe a post-merger world. If you have any comments on what you're thinking about doing with the UMax program longer term, we'd love to hear some more perspective from you on that. Thanks.

Speaker #21: I was wondering if you could maybe talk a little bit about how those changes are being made and how that that that level of integration is , is would compare to maybe a post-merger world .

Speaker #21: And then if you have any comments on , on , on kind of what you're thinking about doing with the Umax program , longer term , we'd love to hear kind of some more perspective from you on that .

Speaker #21: Thanks .

Speaker #7: Yeah . So let me just first off and say , you know , we have alliances that we're working with , with all the rail players .

Jennifer Hamann: Yeah. Let me just first off say, you know we have alliances that we're working with with all the rail players. I mean, we have a Falcon out there with Canadian National that's working well. We have the same lanes, same markets with the CSX that we do with Norfolk Southern Corporation. I want to make sure that's clear. We aren't doing anything prior to the actual merger that takes place. Having said that, at the same time, yes, we are able to look at new markets out there. We talked about, or I talked about just recently, the market into Louisville. Again, that's all aimed at over-the-road traffic that we're trying to win. We have the same approach with all the rails. The second thing is, and I want to be crystal clear on this, absolutely, we want to make sure our customers have optionality.

Speaker #7: I mean , we have the Falcon out there with Canadian National that's working well . We have the same lanes , same markets that with the CSX that we do with Norfolk and Southern .

Speaker #7: So I want to make sure that's clear . And we aren't doing anything prior to the actual merger . That takes place . Having said that , at the same time , yes , we are able to look at new markets out there .

Speaker #7: We talked about or I talked about just recently , the market into Louisville . Again , that's all aimed at over the road traffic that we're trying to win .

Speaker #7: We have the same approach with all the rails , the second thing is , and I want to be crystal clear on this , absolutely .

Speaker #7: We want to make sure our customers have optionality . We're going to completely support you , Max . That product is a strong , viable product that our customers are utilizing today .

Jennifer Hamann: We're going to completely support UMax. That product is a strong, viable product that our customers are utilizing today. That's not going away. We see it as a viable option in the marketplace.

Speaker #7: That's not going away. And we see it as a viable option in the marketplace.

Speaker #5: Thank you very much. Thanks for the question.

Operator: Thank you very much. Thanks for the question.

Speaker #4: The next question is from the line of Walter Spracklin with RBC Capital .

[Company Representative]: The next question is from the line of Walter Spracklin with RBC Capital Markets. Please proceed with your question.

Speaker #10: Markets .

Speaker #4: Please review their questions .

Speaker #22: Walter .

Moderator: Morning, Walter.

Speaker #5: .

Speaker #22: Good morning . Yeah , thanks for the detail today . I just want to double click a little bit on on next year .

Kenny Rocker: Good morning. Thanks for the detail today. I just want to double-click a little bit on next year. I know, Jennifer, you don't have guidance out there, but you do have that S4 document that we normally wouldn't have this time of year. The numbers are out there. They are below. You reiterated your high single-digit, low double-digit multi-year guide today. Those numbers are notably below that range. My question here is whether you can give us some context on how we characterize what you put in that document, what's changed or what's different from the assumptions that might underpin them. Again, because you did reiterate the guide, and those numbers are below straight. I'd love to hear any color you can provide there.

Speaker #22: And I know Jennifer you don't have guidance out there . But you do have that S-4 document that we normally wouldn't have this time of year .

Speaker #22: And the numbers are out there . The they are below , you know , you reiterated your high single digits , low double digit multi-year guide today .

Speaker #22: Those numbers are notably below that range. I guess my question here is whether you can give us some context on how we characterize what you put in that document.

Speaker #22: What's changed or what's different from the assumptions that might underpin them ? Again , because , you know , you did reiterate the guide and and those numbers are below Street .

Speaker #22: So I’d love to hear any color you can provide there.

Speaker #6: So thank you , Walter , for that . You know , one of the things that is I think stated very explicitly in the S-4 is that those numbers are not guidance .

[Company Representative]: Thank you, Walter, for that. One of the things that is, I think, stated very explicitly in the S4 is that those numbers are not guidance. Those are guidelines. Those are, particularly when you look at the out years, what I would call unstressed financials. I mean, we're looking at market indicators. We're looking at kind of run rates, those types of things. It is by no means what I would call a detailed look, talking with Kenny Rocker's team about where are you getting new customer wins, where are you getting greater penetration. It's not doing a deep dive with Eric Gehringer's team to say, with that business overlaid, how can you drive greater productivity. I could take you on through the list. It is directional, certainly.

Speaker #6: Those are our guidelines and those are particularly when you look at the out years , they're what I would call unstressed financials . I mean , we're looking at market indicators .

Speaker #6: We're looking at , you know , kind of run rates , those types of things . It is by no means what I would call a detailed look .

Speaker #6: Talking with Kenny's team about where are you getting new customer wins , where are you getting greater penetration ? It's not doing a deep dive with Eric's team to say , with that business overlaid , how can you drive greater productivity ?

Speaker #6: And I could take you on through the list so you know , it's directional . Certainly , but it's also something that didn't include merger costs .

[Company Representative]: It is also something that didn't include merger costs when you think about particularly some of the 2025 numbers, considering that we were still doing share repurchases. It is directional. Beyond that, I would not try to extrapolate from that S4 numbers.

Speaker #6: When you think about particularly some of the 2025 numbers , it considered that we were still doing share repurchases . So it's it's directional , but beyond that I would I would not try to extrapolate from from that S-4 numbers .

Speaker #22: Okay. Fair enough. Thank you very much.

Kenny Rocker: Okay, fair enough. Thank you very much.

Speaker #5: Thanks , Walter .

[Company Representative]: Thanks, Walter. The next question comes from the line of Jennifer Hamann with Deutsche Bank. Please receive your question.

Speaker #4: The next question comes from the line of Rick Harmon with Deutsche Bank . Please receive with your .

Speaker #23: Question .

Speaker #5: Good morning , Rick .

Moderator: Good morning, Rica.

Speaker #24: Hey , Jim . Hi , everyone . So you know , Jim , you said that no one's really talking about this world class quarter .

Eric Gehringer: Hey, Jim. Hi, everyone. Jim, you said that no one's really talking about this world-class quarter. I guess after that, a couple of people did. Maybe we can tie a bow on it. This past quarter results were pretty remarkable. You managed 12% EPS growth with virtually no volume help. Labor productivity continues to be a strong driver. I think you had like another 3.5% drop in headcount. You're coming in ahead on comp per employee. I think, Jennifer, you said 3% for the year. Last quarter, you guided at 3.5%. Eric, you talked about the overall records and various measures of productivity. I think, is this really the pricing lever starting to kick in, Jennifer, that you've talked about in earnest in the past around repricing contracts? Kenny, the work you're doing to reflect the good service you guys are introducing? If yes, what inning are we in there?

Speaker #24: I guess after that , a couple people did . But maybe we can tie a bow on it . You know , this past quarter results were pretty remarkable .

Speaker #24: You managed 12% EPs growth with virtually no volume help . Labor productivity continues to be a strong driver . I think you had like another 3.5% drop in headcount .

Speaker #24: You're coming in ahead on comp employee I think , Jennifer , you said 3% for the year and last quarter you guided a three and a half .

Speaker #24: Eric , you talked about the overall records in various measures of productivity . But you know , I think is it is this really the pricing lever starting to kick in , Jennifer , that you've talked about in earnest in the past around repricing contracts like Kenny , the work you're doing to reflect the good service you guys are introducing .

Speaker #24: And if yes , you know , what inning are we in there ? And then just like , why shouldn't the high end of your long term high single digit to low double digit EPs target be more appropriate , especially into 2026 ?

Eric Gehringer: Why shouldn't the high end of your long-term high single-digit to low double-digit EPS target be more appropriate, especially into 2026? That 12% on 0% volume growth really stands out. Thank you.

Speaker #24: Again , that 12% on 0% volume growth really stands out . Thank you .

Speaker #6: Thanks . You did a great job summarizing our quarter and some of our very strong results . You know , when we laid out our targets back in September of last year , we put some baseline macroeconomic numbers that underpinned that .

[Company Representative]: Thank you. You did a great job summarizing our quarter and some of our very strong results. You know, when we laid out our targets back in September of last year, we put some baseline macroeconomic numbers that underpin that. We said that if we reached those numbers from a macro standpoint, we expected to be kind of at the low end, at that high single-digit kind of range, and that it would take a better macro environment to be at the double-digit side. Unfortunately, a lot of those macro indicators I called out, the housing starts and the auto sales on the call, have actually gotten a little bit worse. The good thing about Union Pacific and our great franchise is, and the way that we are running today and the way that we're executing on the fundamentals, we're being very agile.

Speaker #6: And we said that if we reached those numbers from a macro standpoint , we expected to be kind of at the low end .

Speaker #6: So at the high single-digit kind of range, and that it would take a better macro environment to be at the double-digit side.

Speaker #6: Unfortunately , a lot of those , those macro indicators , I called out the housing starts and the auto sales on the call have actually gotten a little bit worse .

Speaker #6: You know , the good thing about Up and our great franchise is and the way that we are running today and the way that we're executing on the fundamentals is we're being very agile .

Speaker #6: We're taking advantage of every opportunity that comes our way , and we're pushing ourselves daily . And whether it's improving on the safety front , whether it's driving greater service , working with our customers to drive more value to them , and then pricing for that value .

[Company Representative]: We're taking advantage of every opportunity that comes our way. We're pushing ourselves daily. Whether it's improving on the safety front, whether it's driving greater service, working with our customers to drive more value to them, and then pricing for that value, what you're seeing is us executing on all of those fronts. The end result is great financial results. That is our mindset. That's what we're going to keep doing. There is a macro backdrop that underpins that that we're fighting against a little bit right now, which is, you know, heard Kenny say, it's kind of year three of a freight recession to an extent. That truck market is just weak. I feel great about our year-to-date results, plus 8% EPS, 80 basis points of OR improvement. We're going to keep pushing.

Speaker #6: What you're seeing is us executing on all of those fronts, and the end result is great financial results. And so that's our mindset.

Speaker #6: That's what we're going to keep doing . But there is a macro backdrop that underpins that that we're fighting against a little bit right now , which is , you know her Kenny say it's kind of three year , three of a of a great recession to an extent .

Speaker #6: That truck market is just weak . And so I feel great about our year to date results plus 8% EPs , 80 basis points of or improvement .

Speaker #6: And we're going to keep pushing. But we also have to do that within the context of where the economy is at and how we're performing against that.

[Company Representative]: We also have to do that within the context of where the economy is at and how we're performing against that.

Speaker #12: Yeah .

Speaker #5: Thank you very much for the question.

Operator: Thank you very much for the question. Appreciate it.

Speaker #12: It .

Speaker #4: The next question is from the line of Bascome majors with Susquehanna . Please proceed with your .

[Company Representative]: The next question is from the line of Bascom Majors with Susquehanna. Please proceed with your question.

Speaker #23: Question .

Speaker #5: Morning , Bascome .

Moderator: Morning, Bascom.

Speaker #25: Good morning, Jim. One for Jennifer here. You've got a little over $2 billion of debt maturities between now and the first half of '27.

Kenny Rocker: Morning, Jim. One for Jennifer here. You've got a little over $2 billion of debt maturities between now and the first half of 2027. Call it $10 to $15 billion in debt to raise to fund the deal when it hopefully is approved and closes. You don't have an MAE potential on financing. You're on the hook to go through that no matter how the capital markets play out between now and then. How do you think about sort of hedging your bets on managing the balance sheet for that capital need between now and in 2027? If you could just kind of walk us through debt pay down and do it all at once versus kind of opportunistically chip away at that over time, I think that would be helpful. Thank you.

Speaker #25: Call it 10 to 15 billion in debt to raise to to to fund the deal when it hopefully is approved and closes and you don't have a may potential on financing .

Speaker #25: So you're on the hook to to go through that no matter how the capital markets play out between now and then . And so how do you think about sort of hedging your bets on managing the balance sheet for for that capital need between now and in 2027 ?

Speaker #25: If you could just kind of walk us through, you know, debt paydown and do it all at once versus kind of opportunistically chip away at that over time, I think that would be helpful.

Speaker #25: Thank you .

Speaker #6: So thanks for that question . So there's a number of things that we're looking at and planning towards over the next year as we progress through the application period and move towards having having the merger approved .

[Company Representative]: Bascom, thanks for that question. There are a number of things that we're looking at and planning towards over the next year as we progress through the application period and move towards having the merger approved. You mentioned paying down debt. We're certainly going to do that. As debt comes due, that is our intent. We'll do that with the available cash that we're generating. We'll also be looking at, because to your point, when the day comes, we're going to need to come up with that cash. What are the different levers that we can pull to protect ourselves on the interest rate side? What can we do in terms of facilities to be ready to be able to access the cash? When you look at the calendar and you consider different blackout windows, etc., we are not going to be able to control exactly when that time is.

Speaker #6: You mentioned , you know , paying down debt . We're certainly going to do that as debt comes due . That is our intent .

Speaker #6: We'll do that with the available cash that we're generating . We'll also be looking at because to your point , when , when , when the day comes , we're going to need to come up with that cash .

Speaker #6: So what are the different levers that we can pull to protect ourselves on the interest rate side ? What can we do in terms of facilities to be ready to be able to access the cash ?

Speaker #6: Because , you know , when you look at the calendar and you consider different blackout windows , etc. , we're not going to be able to control exactly when that timing is .

Speaker #6: So we're planning for that. We're making sure that we have the cash available to us to close that, working closely with our bank groups, and feel very good about the plans that we have underway there.

[Company Representative]: We're planning for that. We're making sure that we have the cash available to us to close that, working closely with our bank groups, and feel very good about the plans that we have underway there. Also, structuring it to, I think, the last part of your question, in a way that will allow us to quickly pay down some of that debt so that we can get back into a position when we're in the market and repurchasing shares. We believe that we'll be able to do that sometime in year two, which for us, looking at it based on when we believe the transaction will be approved, will be in 2028. That's how we're looking at it. That's our plan. We feel very comfortable about our ability to execute that.

Speaker #6: But then also structuring it to, I think the last part of your question, in a way that will allow us to quickly pay down some of that debt so that we can get back into a position when we're in the market and repurchasing shares.

Speaker #6: And we believe that we'll be able to do that sometime in year two , which for us , looking at it based on when we believe the transaction will be approved , will be in 2028 .

Speaker #6: So that's how we're looking at it . That's our plan . And we feel very comfortable about our ability to execute that .

Speaker #5: Thanks for the question, Bascome.

Operator: Thanks for the question, Bascom.

Speaker #4: The next question is from the line of Ari Rosa with Citigroup. Please assist with your.

[Company Representative]: The next question is from the line of Ari Rosa with Citigroup. Please proceed with your question.

Speaker #23: Question .

Speaker #5: Ari .

Operator: Morning, Ari.

Speaker #26: Hey , good morning Jim . Team . Congrats on the strong network performance . Really to really impressive to see up running so well .

Moderator: Hey, good morning, Jim. Team, congrats on the strong network performance. Really impressive to see UP running so well. Jennifer, you were talking about some of the weakness in some of these macro indicators, housing starts, and other things. I'm just curious to hear your perspective on kind of the overall economy, where you see risks. Specifically, I wanted to hear, is there any kind of level of deterioration in the macro that would cause you to either reassess your synergy targets for the NS or even, I mean, in kind of an extreme scenario, is there any level of deterioration where you would think about walking away from the deal? Thanks.

Speaker #26: So Jennifer , you were talking about some of the weakness in some of these macro indicators . Housing starts and other things . I'm just curious to hear your perspective on kind of the overall economy where you see risks .

Speaker #26: And specifically I wanted to hear , is there any kind of level of deterioration in the macro that would cause you to either reassess your synergy targets for the NS or even , I mean , in kind of an extreme scenario , is there any level of deterioration where you would think about walking away from the deal ?

Speaker #26: Thanks .

Speaker #5: One of the few of us gets into that. Okay, real quick, you always have that are going to be up and down.

Operator: One of the few of us, go get into that, okay, real quick. You always have markets that are going to be up and down. We look at what the consumer overall is doing, and so far, the consumer is staying in a pretty good place. We're very comfortable. Now, there's some specific markets underneath. Automobile and parts have gone up and down, whether that's been positive or not. There's going to be changes with what's happening as far as where production is going to happen, that's going to change. At the end of the day, we're very comfortable. We don't see anything that changes our idea of what's possible at Union Pacific Corporation.

Speaker #5: We look at what the consumer overall is doing, and so far, the consumer is staying in a pretty good place. So we're very comfortable now.

Speaker #5: There's some specific markets underneath automobile and auto parts have gone up and down . Whether it's been positive or not . There's going to be changes with with what's happening as far as where the where production is going to happen , that's going to change .

Speaker #5: So at the end of the day , we're very comfortable and we don't see anything that changes our idea of what's possible at Norfolk Southern , we think the merged company I know , I think personally on the operating side , there's a lot of value that we can drive .

Operator: We think the merged company, I know, I think personally on the operating side, there's a lot of value that we can drive, okay, productivity and value for the combined company just because of its combined network. Why don't I let Jennifer and Kenny jump in and talk about the overall market and where you see the economy?

Speaker #5: Okay , productivity and value for the combined company . Just because of it's a combined network . But why don't I let Jennifer and Kenny jump in and talk about the overall market and where you see the economy ?

Speaker #6: Yeah , I mean , you know , we're still working through our plan for 2026 , but just to build on Jim's point , I mean , you know , this $85 billion investment that we're looking to make is for the long term , that's for , you know , our generation and the generations to come .

[Company Representative]: Yeah, I mean, we're still working through our plan for 2026. Just to build on Jim's point, this $85 billion investment that we're looking to make is for the long term. That's for our generation and the generations to come. It's not based on a short-term economic play. Certainly, long term, I think American industry, American manufacturing, there's just tremendous potential there. The near term will be what it will be, and we'll work with that. As I said, we're still putting our 2026 plan together, but we will control the fundamentals of how we run our railroad, which is very productively, very efficiently, and very safely.

Speaker #6: It's not based on a short term economic play . And certainly long term , I think

Speaker #6: American industry , American markets manufacturing , there's just tremendous potential there . So the near term will be what it will be . And we'll we'll work with that .

Speaker #6: As I said , we're still putting our 2026 plan together . But we will control the fundamentals of how we run our railroad , which is very productively , very efficiently and very safely .

Speaker #7: Yeah , I'll just say that . Because of our franchise , there are some natural benefits . When you combine that with a strong service product to go out there and win , whether it's the Rock network , whether it's our Petrochem network , whether it's everything that we're doing investing in intermodal that gives us a lot of confidence .

Jennifer Hamann: Yeah. I'll just say that because of our franchise, there are some natural benefits when you combine that with a strong service product to go out there and win. Whether it's the ROC network, whether it's our Petrochem network, whether it's everything that we're doing investing in intermodal, that gives us a lot of confidence. Again, remember, we're out there trying to penetrate and create our own wins, whether it's putting new facilities on our network or going out there and selling where we've invested. We want to control what we can control. To Jennifer's point, we'll see what happens with housing start. We'll see what happens with autos. We're excited that we've got a strong network and a strong portfolio of customers that once, and it will change, but once it does, we feel confident that we'll be able to capitalize on it.

Speaker #7: And again , remember , we're out there trying to penetrate and create our own wins , whether it's putting new facilities on our network or going out there and selling where we've invested , we want to control what we can control .

Speaker #7: To Jennifer's point , we'll see what happens with housing start . We'll see what happens with autos . We're excited that we've got a strong network and a strong portfolio of customers that once , and it will change .

Speaker #7: But once it does , we feel confident that we'll be able to capitalize on it .

Speaker #12: Yeah .

Speaker #5: And the final point I would add is, listen, the economy is going to give us what the economy gives us.

Operator: Yeah. The final point I would add is, listen, the economy is going to give us what the economy gives us. We need to also have a railroad that operates efficiently and has the capability to flex up and down properly so that we win in the marketplace at a high service level. We want to win market share for sure, standalone until we have the approval mid-next year, hopefully, of the merger. I know our Chief Legal Officer is looking at me sideways right now when I said mid-next year. That's my dream, but it could be a little bit later. At the end of the day, that's a win on both sides for us. That's fundamentally who we are at Union Pacific. Ari, thank you very much.

Speaker #5: We need to also have a railroad that operates efficiently and has the capability to flex up and down properly so that we win in the marketplace at a high service level .

Speaker #5: So we want to win market share for sure, stand alone until we have the approval mid next year, hopefully of the merger.

Speaker #5: I know our Chief Legal officer is looking at me sideways right now when I say mid next year . So that's my dream .

Speaker #5: But it could be a little bit later . But at the end of the day that's a win on both sides for us .

Speaker #5: And that's fundamentally why who we are at Union Pacific . Ari , thank you very much .

Speaker #23: Thank you .

[Company Representative]: Thank you. Our last question is from the line of Brady Lairs with Stephens. Please proceed with your question.

Speaker #4: Our last question is from the line of Brady Lehrer's with Stephens . Please proceed with your .

Speaker #23: Questions .

Speaker #27: Great . Thanks . Morning , everyone . Kenny , in your fourth quarter volume outlook slide , you know the word business win or contract win or just really win in general is used a couple of different times .

Kenny Rocker: Great. Thanks. Morning, everyone. Kenny.

Operator: Morning.

Kenny Rocker: In your fourth quarter volume outlook slide, the word business win or contract win or just really win in general is used a couple of different times. Can you help us understand what's driving these wins, particularly at a time of economic and trade uncertainty? How does your pipeline of wins per se look as we start to turn our attention to 2026? Do you think these wins can drive volume growth in 2026 even without help from the macro? Any clarity there would be helpful. Thank you.

Speaker #27: Can you help us understand what's driving these wins . You know , particularly at a time of economic and trade uncertainty . And you know , how does your pipeline of wins per se look , as we start to turn our attention to 2026 , you know , do you think these wins can drive volume growth in 26 , even without help from the macro ?

Speaker #27: Just any clarity there would be . It would be helpful . Thank you .

Speaker #7: Yeah . Appreciate that . Some of those wins are actually wins that occurred a few years ago . We're realizing them as you have plant expansions .

Jennifer Hamann: Yeah. I appreciate that. Some of those wins are actually wins that occurred a few years ago. We're realizing them as you have plant expansions. We had a couple plant expansions that took place in the last part of 2024 that have helped us in 2025. We've had a few this year that have come on. Some are immediate, just wins that we've gone out because we have a very strong network and the infrastructure is there for us. The other part of that, and we've talked about it, I talked a little bit about it at the investor day, is that the team has done a really good job of adding new facilities onto our network. In some markets that are mature, like the grain markets, you call it over the last couple few years, 20 new facilities.

Speaker #7: We had a couple plant expansions that took place in the last part of 2024 that have helped us in 2025 . We've had a few this year that have come on , and some are immediate just wins that we've gone out because we have a very strong network and a and the infrastructure there for us .

Speaker #7: The other part of that , and we've talked about it , I talked a little bit about it at at the Investor Day .

Speaker #7: Is that the team has done a really good job of adding new facilities onto our network . In some markets that are mature , like the grain markets , you call it , over the last couple , few years , 20 new facilities on the renewable side , you know , over the last few years , 18 different facilities .

Jennifer Hamann: On the renewable side, you know over the last few years, 18 different facilities. That's how we're creating that value. That's how we're creating that revenue. As we look ahead and look at the pipeline, it's still a strong pipeline as we look at the facilities that are set up to come on and expand. That's encouraging to us.

Speaker #7: So that's how we're creating that value . That's how we're creating that revenue . As we look ahead and look at the pipeline , it's still a strong pipeline .

Speaker #7: As we look at the facilities that are set up to come on and expand, that's encouraging to us.

Speaker #5: Thank you very much .

Operator: Thank you very much.

Speaker #23: Thank you .

[Company Representative]: Thank you. This will conclude our question and answer session. I'll turn the call back over to Mr. Vena for closing comments.

Speaker #4: This will conclude our question and answer session . I'll turn the call back over to Mr. Vena for closing .

Speaker #23: Comments .

Speaker #5: Great . Listen , Rob , thank you very much . Pretty exciting times here at Union Pacific . Love the fundamentals of what everybody delivered .

Operator: Great. Listen, Rob, thank you very much. Pretty exciting times here at Union Pacific. Love the fundamentals of what everybody delivered. I have to give our team the accolades. It's not one person. It's the entire team that delivers. Operationally, on the marketing sales, I know I like pushing Kenny, but he does need to go get us more business. At the end of the day, Jennifer and the entire team and what everybody's done. What are some key dates and what we see coming up? Fourth quarter is what the fourth quarter is. We'll deliver as good a quarter as we possibly can with everything that's in the mix. We've talked about that. Next year, truly, we have an opportunity to put together a franchise with the great team over at Norfolk Southern Corporation. I've spoken to Mark, George, a few times.

Speaker #5: And I and I have to give our team the accolades . It's not one person . It's the entire team that delivers and operationally on the marketing sales I know I like pushing Kenny , but he does need to go get us more business .

Speaker #5: But at the end of the day , in juniper and the entire team and what everybody's done , so what's some key dates and what we see coming up ?

Speaker #5: Fourth quarter is what the fourth quarter is . We'll deliver as good a quarter as we possibly can with everything that's in the mix .

Speaker #5: And we've talked about that . And next year , truly , we have we have an opportunity to put together a franchise with the great team over at Norfolk Southern .

Speaker #5: I've spoken to Mark George , a few times . You know , we need to legally keep it high level . I never tell them what to do , but at the end of the day , they're focused , they're on it .

Operator: You know we need to legally keep it high level. I never tell them what to do. At the end of the day, they're focused. They're on it. They know what they have to do, generate cash, and be able to run a real good railroad so that we can show everybody what the combined railroad is going to look like to win. We're very excited about that. Next big date is November 14th, special meeting with our shareholders and see where the vote comes in. We're very confident that the vote will come in to support this. There's no reason shareholders will have any problem with it. With that, let's tie up this call. Fantastic job by our team. Thank you very much for the good questions. I apologize for the length of my answers. I was ready to go this morning, okay?

Speaker #5: They know what they have to do , generate cash and be able to run a real good railroad so that we can show everybody what the combined railroad's going to look like to win .

Speaker #5: And we're very excited about that . So next , the next big date is November 14th . Special meeting . And with our shareholders and see where the vote comes in .

Speaker #5: We're very confident that the vote will come in to support this . There's no reason shareholders will have any problem with it . So with that , let's tie up this call .

Speaker #5: Fantastic job by our team. Thank you very much for the good questions. I apologize for the length of my answers.

Speaker #5: But I was ready to go this morning . Okay . And you could tell by where I was at . So November 14th I'm sure we'll you can listen in or ask us questions once we put out where the vote ended up .

Operator: You could tell by where I was at. November 14th, I'm sure you can listen in or ask us questions once we put out where the vote ended up. Thank you very much, everyone. Have a great day.

Speaker #5: Thank you very much, everyone. Have a great day.

Speaker #4: Ladies and gentlemen . Thank you for your participation . This does conclude today's teleconference . You may now disconnect your lines and have a wonderful .

[Company Representative]: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may now disconnect your lines and have a wonderful day.