KSU - Earnings call transcript Q2 2020

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Operator

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

Ashley Thorne

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

by those Before materially I of expect, plan, as contains identify such but the or limited June forward-looking report quarterly words. Act we words in anticipated this similar statements ended amended. anticipate, these statements differ combination XXXX in that of Form quarter to XXth, the begin, as results identified well, the December XXXX. Actual for factors forward-looking within number believes, want forward-looking to of as year and statements or the use on other can such may, projects, a meaning Readers risks for the including from Report factors, by not our ended Exchange with reports SEC, our you Securities could the XX, us usually XX-K remind of presentation filed likely, should, including Annual the by

statements to Forward-looking KCS any information. developments only undertake other date the statements not does are of obligation which or as they any reflect on future made. forward-looking to events, the update reflect information

that, President be introduce with now should measures can Pat to in found Kansas and results to release the In be financial most financial U.S. and measures financial U.S. the accordance these GAAP disclosing a for CEO, U.S. calculated results accompanying And not our a pleasure City liquidity substitute GAAP website. supplement earnings my as reconciliations and in accordance of in and financial directly reconciliations with our viewed be GAAP addition Southern's Ottensmeyer. These with the non-GAAP and to GAAP, with non-GAAP contains on should carefully performance All presentation and results accordance results. it's evaluated. calculated from measures presented to comparable and U.S.

Pat Ottensmeyer

over the turn Oscar come and here, quarter head part of usual comments of for in José On we're -- to that of I'll end working with over transition the that brief our in are, have and have -- the the Okay. more Zozaya. in Ashley, for today at I will a the with that some we the you Cueto, make crowd year Mexico this we Del of about are that see the folks position -- I of everyone. you, call Oscar half, before Oscar most feel José slide the introducing Thank last a four, leadership business. morning, for it comments transition we several been Oscar of exception quarters prepared my side-by-side smooth very the the and that the last has and to a talk the good on colleagues.

bit introduce again, to happy So, little a I'll about Oscar, say that end. more at the and

Moving on decreased than basis quarter, in tough what the drop adjusted at ratio XXX to slide five, volumes, last revenue a point ratio XX%, second look operating quarter XX.X%, year. worse operating really of overview, XX%

ahead. XX% be quarter, a horrible, good earnings was per so adjusted you'll sounds there particularly some year, of positive the minutes, again few bit during for developments the Second optimistic news of the is from to reasons and over a which all certainly very next quite decrease side, the cost on the period pretty of that of quarter see diluted course share, as last $X.XX, so but

later to were really a We organizational intended changes Xst; also maintain a made the streamline some with saw you half, the year thunder stealing of that organizational release and changes PSR activities that really focus of some announced we and July internally some comments press Sameh, our hear we have and that improvement last over and or you savings the Mike from significant the sustain without and and focus demonstrated Upchurch's on.

lot period see are work. lot then this we of June. a XXXX and and stable is anyone but news, began so recovery increasing in You'll volume for quickly beyond, related level know levels and ever quickly, right call to so don't also We month late a for estimates short our in responded just, to stayed early I responded May. where describe, and a the think cost of savings good then April so recovered a we has extremely an of time responded that thereafter. hard and well later well unprecedented the dropped verb a what period volumes on of don't on May the precipitous to side seen we saw significantly drop in PSR I that XX% XX-day for relatively at business And extremely that throughout

So recovery like on our on as feel I toes. well downside team on the side we was really and extremely And their the responded well.

it's Looking not terms fairly thin provide. going ahead, in regarding so to we're and that guidance of our we're here going the guidance, to practice change attitude

hit for to We XXX expenditure $XXX million. our then flow XXXX of confident the million still our year ability will stick cash in target, and our to very cash free guidance feel capital of flow target

that, will to about performance. our I Jeff call operating with some open So Songer the make for comments

Jeff Songer

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

social program controls ensure manage in last to quarter, is our able equipment continuity Safety business and protocols. use today have pandemic CDC place minor we extensive aligning of distancing, priority, the been number safety and our of one and mentioned personnel quarantine have to impacts As protective to resources. continue the and with and with we employees, an around implementing relatively guidance

to as and remains and monitor adjust continue required. we workforce Our stable

improved XX.X quarter, year-over-year initiatives. improvement for us XX% for our sequentially. provided of XX.X the worse have Moving X% dwell hour, X% year-over-year X% operating in to per miles velocity during was and key continue Rapid the improved metrics volume unique of changes and sequentially, quarter to operating hours opportunities

volume, now July on resources focused on rapid adjust the focused right-sizing quarter gains. sequential and while modifying the decline and to starts of half first June train have The in for

at aligned quarter. service We start with retain volumes, to to made we with ensure expected and outlooks, customers time, changes train have is work the have continue to we some through seen their closely cost the the the while formalizing service business understand same of offering benefits to our

Turning discuss annual to the volumes on slide I'll the column in categories. We saw we have across Noting over X. in board metrics improved performance already and improvement our sequentially. year some right, as current prior the quickly July PSR exceeded our have goals

improvement. per a improvement function to We length to July, volumes. quarter, reduced during fuel show related velocity of while have impact in in and train continued to Sequential key the is metrics accelerated seen velocity, some miles car sequential dwell day and of part efficiency

QX, velocity Train function train July continue XXXX it we to is current of is stabilize and better and Current XX% average, QX steady While than anticipate adjusting a dwell state a improvement this trails our month path. will and our moving Of on note, length to TSP. additional provide this these XXXX continue our a continues we great initiatives. initial forward. starts goal opportunity and optimizing see details Sammy outperform as to

presented unprecedented Sammy. many cost turn remain us now pleased will challenges, to QX allowed controls levels, ensure to our ships maintaining model service presentation and the operating time during has solid that While very of flexible the over are volume. while strong in new I we

Sameh Fahmy

XX% QX. to Thank the hard, and now did the the we February adjusted full worked know to give volumes able higher very, to when back. decreases there. levels. significant be you, are starts, starts, We that And that fuel only progress we taken in volumes they back that and made XX% whole morning. pre-COVID less volume we Essentially, very will Jeff. very Right getting it and We extremely of ran get in fast we do below would I'll come we the very bottom-line know on Good better less X% PSR year. coming we less a can then to of normally efficiency do team, February. now, and a lot we and train have X% fast are than got work with when did lengths and the I how XX% completely crew they you meet explain we'll we XX% close train locomotives,

We explain we reacted consolidating mentioned got we mid-March, the started is and there. said I bottom-line around as this and Beginning that. also So I'll trains. Jeff -- fast how we

So take the the We traffic. products, doesn't it from some has it's South example. refined trains, to grain to mix trains. been matter. manifest, strategy And Mexico an Whether on all intermodal, mix originations automotive, as take we

tight then North U.S., in traffic goes which it's it – the the is that and happening in get in is direction, yard when dwell of is we we small make in which through to City; in year-over-year. when cars okay? the been of thing X% which Toluca, is Vanegas, has fast, time So split in of of been morning scheduling. And extra our and Silao the go again the and don't all with San yard, we that dwell, Sanchez, calls and trains have, the in that weighting I SLP we on and the connection it traffic Potosi, so goes get with consolidation out in -- that consolidations from take like San of in lot opposite South, which we to that with large destinations of the Sanchez, from the a consolidate yards, that's What come trains large we velocity did we which been did in yard anyway. lot sacrificing window, large Mexico, through great And Mexico Mexico And go we discipline, windows Sanchez Mexico, Luis Louisiana. that last it the precision warning a very then the trains San Lázaro not And we to our done in that has is we in precision. true we a the and from are various Escobedo Escobedo, that, is Southeast; we The before Saltillo that it large Carretero to successful. PSR next West. without so build did Now lot do a velocity train Potosí, all is intensity is consolidate and have to Potosí, mean, for also that's arrive we opposite which U.S. coming been Luis because the these spite three yard in has we through these various affect connect. heading trains XX% manufacturing of months split and without destinations It within a consolidations the in have the is the are are with to in the route Dwell goes And yards, of area executed Shreveport every traffic the to already then and area in. interesting Mexico Venegas. a very lot sacrificing Luis the up it that up

we been eye have keen So service. that has customer on and very achieved, a

compliance So handy we them months traffic. for they and constantly building first we ago, couple plan started metrics for time are trip the now, are particularly monitoring of because coming in very and a time-sensitive

So equal XX% better we the are about compliance, plan which time. or is trip pre-COVID at than

consolidation, lengths, of in get train has significantly during train XX, numbers XX% I'll and now the the about down to the So increased by starts trough. have which on slide the train come spite in here the

when area right X% equal XX, and that's did we'll about only saying the was we attacked not on you're starts that When X%. slide the XXXX. by We And service. lengths, maintain attack attacked earlier that you or XX% hard only of traffic a down are that X%. in see becomes Phase that growth. the XX%. we're they levels. saying down that And PSR, is of which in This up train XX% X We pre-COVID an believe attacked is I train was to up reduction we volume We velocity. side very why Now in

of better. trip by XX, Now you a that we three a because – significantly definition, couple you are starts, which When now slide while all started. a starts, we for reduce lengths, to four along train crew do reduce complementing or you starts, crew with is that you maybe you go getting train train

and So We thing. you and went XXX Mexico. XXX between crew XXX about see U.S. the from down like starts same day, a

we even and we we we about And the will like go now significantly. at not at at and volumes The believe come XXX it, before the are improvement XXX, monitor The come started April, we the again, went watch we when we trough, locomotives, down recall, around X,XXX. and than to Now XXX, actually which and that When is than the that down to – it's higher down XX, any and about have morning, if we you to that were the don't XXX May. XX maintaining XX% COVID, we and get when every closer the XXX, at PSR allow XXX. went locomotives were back.

are Now again efficiency It's pre-COVID. is more And long heavy the trains, X% Fuel to by than have okay? up are X% in about we which point. locomotives. trains, less the efficiency, like again, improvement. the than are we carloads XXX, XX% locomotives XXX you this fuel And down at when beautiful, improvement is only getting

We from way are we still long a can be. where

X.X, where was railroads at running before, we're two have the that I X.XX even been and at associated before, are We about I with maybe X.XX.

because is and to that, that are the cars an that to network. hire that's the a keeping dropped The And online were cars way, TTX there. car of are returned lease. on we important, we cars have online railroads, that eye on look affects velocity and on the other at we that about expense -- the always the the and really important, XXX to So of pay that, foreign function plus, XX%, have by room cars we and we still and go by

And So money a crew look displace the the in you the that operating X% translate only there. My XX%. about we a using work they expense. that last in it February. by these improvement, was the the slide, when and into crews, down staffing XX% June down and U.S. down active at had expense, to time the below from that costs chipped mechanical volumes last money went maintenance we by what The lot transportation day. whatever also are the is optimizing the mechanical to in we X,XXX the all went of from end The reduces of down count in. It same are went The lot Engineering And again, X,XXX. it gangs about XX%. have maintenance, saving year. of X% contractors, was at

Upchurch So we here overall, my this. to going the line build point and And translate money. is is Mike that improvements, that, significant to are on bottom really going into last

the sticking, we did are that that cost-cutting only XX% months it's And we that in So, being not sacrificing savings had the sticking. without we that the because last we know is source absorbed it. above on that know putting and that, we going siding these did. lengths, are extensions, to are in length But over these pursue train that because build we money and strategy. Example, we train

You have a lot less trains.

where But congestion. locations they at meet, less have you when train So, they meet lengths. have that you specific

of So, we the company. of in are envelope extending sidings capital spite reducing the

in not feet. we We extending XX,XXX now money we are are are spending. to the focused only And

train to at more We XX,XXX running prediction are the are railroads lengths extending other improvement, of feet XX,XXX. because in

very distance is and area that. heavy X,XXX Saltillo to So be. get that want trains can went from XX the yes, got But X,XXX, grades is tracking thinking we mountains to very very We day a and the a in direction every The we a we This curves. to about area kilometers pursue where to area are XX KCS. in want slow proud we in and in of future. each of area. be It's where double an we for with about

our on dynamic. get solution, that, the bridge. be we all it. want have to windows the is six U.S. last and we for but Bottom-line, to focused And this Matamoros, we we are And each. trains out bridge, of of the my Mexico trains, want best-in-class. we working really improve the make majority of and and something static The on it hours and We that's are very found significantly except between So, bridge point, that some can things. where international go,

it very are and Executive to We And that that turn note, to I that working hard do Mike on believe get there. Naatz, Commercial. Mike? VP, we we'll will

Mike Naatz

know, products. for level interesting most I'll pretty AAR morning thank April, is May Sameh. a accelerating a finally on follow of began and Good resulted and you all through about demand and we've with Hey, profound in very business many in off Volumes decrease already you Well, begin time data March you, of COVID-XX production spent and believe Since throughout volumes I'll the talking as page everybody. the in second brief comments conditions I businesses Beginning begin because a good did a as the amount communities my quarter. our reopen. to and of in update half performance. on quarter, QX XX.

As overall reduction you say, down on a Pat in revenue XX% was heard volume. year-over-year XX%

our look revenue of and right-hand prices chart, lower the To phenomenon. fuel this quarter-to-date each of that, you'll help at and primary our volume Looking segments. the portion in behind can business drivers generally declines see were declines upper slide, the outpaced the see you FX in impacts that explain

know, Of offset revenues and similarly, impact revenues fuel, course, and to revenue the we price for operating pay a by as environment. well down pricing less in we would very offset the costs. challenging lower were you up on which of Overall, been helped peso-based held have largely FX was XX% core to FX the If constant, instead hold decline in fuel about our XX%.

a improved, pace, the situation. albeit special a Our COVID-XX delays rate with slower requests contract associated bit negotiation and given pricing of at

provide pricing We discipline to good and continue are to maintaining win-win work we our with solutions. customers

were business, with at Looking line detail, economic the QX impacts in our unit volumes assessment. the business to revenues and largely our

breweries non-essential fewer each. at plants. consumption in revenues for resulted the more resulted Mexico in down restaurants, disruption, As and amount idled supply in considered eating being approximately grain i.e., least anticipated, with of including those Also, some people shipments our chain experienced which X% versus food Changes some ag home patterns, min business volumes unit businesses, were changes. to

in were America. an plants automotive were as the QX. the On across about the down reduction other of idled carloads extraordinary in side volumes Year-over-year automotive experienced industry equation, North XX%

including auto and Of consumer, and and rippled petroleum chemical plant course, shutdowns business intermodal, the many other segments, industrial into our units.

Turning to to a position in a demonstrate provide volumes page we're while daily are how recovering. moment to did guidance, want take XX, not to I our

very in to a about fair are hitting we're growth some across in that healthy a direction. consumer our units, continued not key overall weakness, recovery say have it's While our the in we volumes May, recovered business increased have absolutely bottom Despite moving areas. Since right completely XX%. we of carload all economic of our couple seeing and early

franchise lower left-hand see up cross-border category. business, its Energy July, portion you slide, XXXX still from only in X% in our the XX% and we're low up from and that early year-over-year month on its Reform, May actually of trough of the XX% of is run which down the the example, June this Mexico basis. impressive June X% is Month-to-date, an a year-over-year about For business month ended up XXX% in off basis. on while up rates, a point ended

XX% associated of origins. make noting, volume seeing up despite It's changes the month, our products about So this probably in at with our far this XX% that loss given we're business LPG Mexico of trends, our reform worth refined similar year-over-year, business falling carloads about time. energy

up its metals the business unit, business to industrial Looking lows. now surprisingly, page, the consumer continue from business XXXX chart plants, at remains a may and well automotive nicely, segments XX% to intermodal below remain and In opening auto the of business levels. last is the weak. our of Admittedly, on couple our recovering the given

outlooks, indicate excess our months in which production the shipments steadily will by encouraged reduced. and as customers' are we However, inventories coming pickup,

to the not business, crude On side the we in near-term. of the shipments are energy return expecting

expected development Development on However, to our continues XXXX. in facility to of property the, the that report half Port I schedule. that second And be operational U.S. Arthur am happy Group's is of

predict very certainly associated and it's the future, with risks the difficult there While to COVID-XX resurgence. are

in The trucking improving. that seeing The well recovery. We bodes market continue the are economy also with inventories optimistic improvement. produced for We're government stimulus U.S. will pricing. is and has meaningful steady continued and sectors, sequential declining improved tightening capacity packages many

hold close importantly, tensions continue trade from believe our to handle and COVID-XX Upchurch. to things I'll and with the as comments. concludes learnings continued continue it the the near-shoring turn With Given over my will remain our contact to long chain to CFO, business opportunities customers, in ready run. promise most we in we be Mike And with And that, China them, supply efficiently situation, their returns. that

Mike Upchurch

I'm majority Pat The the going let this quarter to on results Thanks, been circumstances, costs second consolidating starts a think addressed against Mike, start that, and but good acted slide our to I volumes. the on down slide comments XX% have by XX. actions, my other morning, drive of taking summarized of already crew Mike, me challenging under KCS scale and everyone. backdrop highlight trains, by costs reducing quickly decline in to and

I for sequentially. our We in cost highlighted volumes are believe particularly of well that up set extremely to results pleased with year, section. reductions the the remainder variable us as the improve continue XQ Sameh his And

Although, work incredible hard XX%, given $X.XX. ratio was dropped and an fuel credit We of focus been KCS result, favorable intense quarter across $X.XX, men quarter women but post EPS of EPS, operating a presented these Reported I'd challenges favorable helped revenue operating and entire the this during FX, adjusted the to to results pandemic. impact second to as special KCS' have like a team, this the incredibly thanks delivering and an adjusted of during who view the actions, organization, along the with and give XX.X.

restructuring separation Our the the program will in This reported of associated $XX.X and the implemented, costs voluntary $X.XX severance result our quarter. or reductions we the share, X% of management $XX to includes expect per million. in approximately charge second with savings a workforce annualized to EPS result million related primarily of during reduction program

that, you'll XX cost slide savings. drive we're to PSR significant see Moving structural to our and continuing savings. On

reaction during we we second train make on our progress quickly in excellent as the PSR changes quarter As accelerated implemented and that progress declines. Sameh continue starts to mentioned, initiatives COVID-XX to in volume

rebound. to indicated, As continue Sameh volumes

by XXXX heavier a cost to longer $XX that year-over-year due trains, now savings savings, despite million expecting coupled is to of of comps PSR year million achieve XX% reduction more to are related declines our permanent savings the projecting train $XX running starts savings $XX Not excess previously of savings reduce an million a and than in approximately us Accordingly, should $XX $XX structure are or and volume in of a by XXXX COVID-XX. comprised and included in million XXXX in in with to goal VSP net million than be XX starts and which to million in increase in realized allow purchase incremental of $X is Our PSR in January savings from annualized savings $XXX we approximately $XX anticipated better to locomotives the benefit completed our lease program million of this year. million in

our to slide XX%. expenses expense Adjusted declined operating on Moving XX. on detailed

expense entire reductions management other than depreciation year-over-year all business cost the experienced by expense across declines. and Our strong driven were and amortization categories

themselves purchase and I benefits; decline XX% in and materials think XX% the results in in decline in and clearly speak services decline with XX% comp for equipment; XX% other. decline

note like the driven I'd $X offset impacts our by million to reductions, One to these expense operations. to is COVID-XX higher of

as $X in to pandemic we and decline to keep along expense this health-related Mexico's million employees the would and costs other safe in another by quarter, year those driven incurred here. approximately compensation exit we the cleaning, sanitizing our During stay-at-home with expect $X expenses we decree, during million

headcount lower to and by declined benefits driven XX%, from and Comp hours. Moving reduction work XX. million a slide primarily $XX

in headcount employees comp And response from employees experience down the volumes. work environment. not volume benefits as not actions U.S. while primarily Our by a calling did to we X%, declining to furlough taken in average decline expense driven furlough at the we Mexico, was declining from in KCSM frequently and in XX% quarterly did

scale ability ben and So our KCSM at comp we the have clearly operation. to

helped As we throughout and our volumes. flex with headcount lower an and in with and costs, have variable investors, structure taken reduction decisive excellent declining to presentations actions we address cost this comp actions earnings swift to and benefits from and hours QX in those of is have example how previewed our work the quarter

year-over-year on $XX Finally, executed moving free us we flow million outlook up achieve lease to our to million in cash flow XXXX. that our January, at in capital XX of XX% free keeping of a in buyout slide allocation, was locomotive cash year-to-date despite least $XXX track

CapEx a was in down by drop had locomotive that of primarily Our in first the driven we year-to-date XX%, half XXXX. purchases

in to by return XX%, repurchases. year-to-date up XXX% shareholders share Finally, is increase driven a

temporarily noted the conserve March call, quarter share we As program our cash first to a repurchase uncertainty. of paused earnings on during period in extreme

However, in sustainably out our early second and felt we that volumes as bottoming resumed we the quarter in May. repurchases after share more April improving were comfortable

call Once back program. uncertainty better billion. Pat. to I'll we a is the approximately retain Looking going $X.X repurchase continue still pattern demand of there this strong our fair consistent And expect of with that, in during while reconsider we forward, of liquidity around clarity over shares forward, will have position amount turn the outlook, we operating a will increasing repurchase the pandemic, our to to cadence but

Pat Ottensmeyer

Okay. Thanks Mike.

served beginning. company has aren't call. his He's these years Mexico. adequate back executive speaking final something today. and what the been not over just with has XX to our that is well has words our our you a Jose over Mexico, to just are or up comments. have on distinction contributed Zozaya This officials never always for our success reputation our contributed but an to has all Jose contributed. that open years describe been the role employees, I'll have earnings adequately calls, I unions. recognize and had position, been his and to our levels, He gotten describe visible to on XX there Jose of Again, as call, to in very years, at hasn't I'll with couple the with know some Jose. has position we in KCSM our call what relationship make Before of just go those a relationship at to with want Jose government words Jose the

on I Mexico. And year about him. going has calls these will a talk then years, regular Del years railroad Oscar the little a in be participant the for bit half. Oscar recognize industry also to on XX in and transition for company XX So Cueto has been with to been forward. Oscar, a going want This

I'm have and fill, will this shoes So suited into not extremely well-positioned beat well and Oscar we that to Oscar, be confident to But is you as say. miss they hard -- and a big role move effective. extremely

Upchurch I to this we service with a saw period. seen short the our an well, that substantial on unprecedented rapid and compromising our this in that saw up actions, pleased any of rapidly were these to of we that of that on and pretty with of just employees have future customers, don't company recovering again, did Again, recovery quarter, to proud XX said, comments time. trough a as want and a cost made women we KCS. just and over XX-day savings And decisive face declining is the productivity and we of these years. out for hard. -- as we a lot of to the ran savings, mentioned I needed without a improvements we what over from great heard the saw all certainly produce gains of want and be service. going Mike do on an of June as the period horrible. and couple Mike and pick-up last the their toes more in again, sure X,XXX So efficiency cost provide of I recovered, José that took and a And things. his a contributions last comment part volumes know eye I in us But of swift XX% these would I we was and toward headline performance and calls think several for outstanding for such sustainable that Sammy our listen the be we recovery employees keep of minutes, over into enormous making for economies real levels showing May pattern just men recognize making to decline and and We business lot just you being really the when made doing plus couldn’t as about in all

of very, very So the for difficult questions. company time. the that, and up this your way open With we'll represented call we're the thank and you very you pleased have efforts for over proud

Operator

[Operator Landry the The We go Credit Allison ahead. begin will of from question Please Instructions] session. comes now Suisse. first question-and-answer

Allison Landry

morning. Good Thanks.

making decent so on given a considering the significant starting basis the to that you in Do you're the that just you show train the you. some progress volumes increased So particularly second that think half the to derivative as lengths, year, and with are in train can PSR and improvement. starts the half? do look Thank second second OR year-over-year you of think you that improve reduction

Mike Upchurch

is not Allison, I we're this giving guidance. Well, Mike. mean,

tempted as I'm much very that try answer to to as So positively.

taking This record quarter, delivered in are savings. and believe were negative I the right think those is second cost explained, our that cost we're cause will permanent here. first the we we now volume credit But to our very, savings result in impact volumes because do sitting structure plants very a think of as permanent be those feel do biggest actions continue a environment, a This positioned what results that infections And we to should return that here be could if we ability company concern the any better I is generate of wave even we where what incremental for margins cost structural shutdown. going as savings isn't as to in in confident volume cost the to extremely Sameh carry-forward than is of and strong. drops. think the

So, at I'll that. leave it

Allison Landry

Thank you.

Operator

comes Please go of ISI. Chappell Evercore Jon ahead. question from Next

Jon Chappell

scenario you. morning, a Sameh. everyone. for bit My analysis is Thank of question Good a

the if say train greater a pace X% really volumes XX%. that back dream levels, to, pre-COVID meet get view think then on XX%. even need it, increase quicker the starts that upside catch-up even if the cost recover you would call to lagging starts do down the But the Is where up in the you to or by a keep just crew we're what carloads train to starts capacity can I and there and you in increase interesting dream it's that scenario? crew at and and

Sameh Fahmy

changed stick. to will -- it, and get year we as The had have use use now also of increase or these The the volume Kansas to X% exceed we stick, we have contractors on our San of focused that going U.S. has in the City last for made in Luis service is were -- trains. way we the cost they exceed that our mechanical we reductions whether will supplement do volume to Mexico. has increase, more hope example. the engineering it, shops to that been Potosí to shop unproductive schedule closed work been and we now times hope a Freeport design on shops, The for an an they are the stick. like and have we volume That trains. effort Well, example, field a changed displays or we the production changed The and maintenance go in XX% whether we as to forces

manifest would is again mixing So, others and intermodal that something and the stick.

maintain I in and just has stronger may are sticking levels. it XX%, is didn't scale strong calculation, getting the pre-COVID in of is you can or people by the and I calculation, we changes that it's that. starts not was it important was and January, -- applies now was going keep months but but the of train same the ago, year element XX% locomotives half volume it about, very of the the reduction team but like crew all it three can more as you didn't a definitely but the important, a even up can will of it not and message -- is above to it didn't XX% you very, what the and and -- culture, is level ago. the team it's very, the gave I'm something do talk February, So, getting mindset revenue This do goes be as stronger. this at X% is and I presentation, that in very be an the had same when even my changed may giving the reduction is but my starts I reduction -- to beginning XX% instead

need sharper are have have getting solid to and And sharper. team sharper and I we now move that forward. the guys We that we think

Jon Chappell

you, That’s Thank very helpful. Sameh.

Operator

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

Chris Wetherbee

Sameh, from it's morning. as volume on the some see you Yes. volume the are What Let's feel train on made the move looking you're Hey, of focus you Good and potential on of Maybe period PSR opportunities cost the forget environment, about from maybe going of side. wanted volatile think and start understand, all incremental crew savings. benefits the opportunities, sticking us the the be like are OpEx on to out annualized you sort Maybe total then about, you opportunities of, thanks. big XXXX? key you're this from into When same help fuel it I theme, have? you more the XXXX sort but what whether still still into and guess sort buckets a the time side. that of comments as you you of XXXX. that about through perspective I if accruing maybe, kind could of

Sameh Fahmy

is Chris. much we I the tables, locomotive of minutes excellent some for And can a table out we That's efficiency was Tula can of improvement Fuel Acámbaro, present in time that, to like these changed just looked understated, slides. it have tonnage-wise. about that kind are hour the and in tonnage fuel very we do Fuel, which okay? corridors, City just grades. like after doing measured we we the didn't we we and Like call tonnage to We what Benjamin It conservative we at Mexico, have rating I -- what just look at are Méndez excellent given on steep in and before of think and question, half next it pull getting measured how where okay? speak I'm X% the in Mexico a an District, itself, and fuel. was between we recent. June, Leal, Example, very in and question,

retired for when locomotives are grades. to So, up you the cycle. locomotives simple bring going So the PSR the down And you are going was the past he progress did was and not week brought, every quantified now coming to stuff. on this who at is excess my we and okay? shut The PSR was calculation, down, But being locomotives the back, updates that that on to back team have guy million, gentleman keep be $X really found it And to next guy who you that update the locomotives. shut are you're did just guy we we who do a -- these add that. the we still have And this Wednesday, a locomotives CN. going, the noticed we that to when the

So another here is opportunity.

starts. you about Now talk crew

XX-some had have a we a called, Benjamin stopping of to if But amount think, to have get had, rid at us of Leal. place at change are a way a significant crews labor We from crew able crew Méndez we a reduction would forces Leal, agreement the to -- the labor base Our at without of make all okay? Leal. trains We can Sanchez, go to percent, agreement starts. I

me net we maybe crews like can couple highlighted a million too. -- is yesterday of you $X waste he to that. a we who it put of million money locomotives, in-charge and that things call alone, and reviewed cost, his dollars, the is So, we of saving transportation it on And often name a a Glide a and that of time have Nick okay, year, young who be that just lot one that, gentleman, let's [ph],

now talked Chris, them feet. to who all of the XX,XXX of plenty there they to from beginning have So, to feet, are CN, now about railroads Like, Well colleagues lengths, the we many X,XXX I still other opportunities. for from X,XXX. in shoot are happy very train is originated my XX,XXX gone

by feet XX%. them starts reduced very are are another if proud by need XX%. we only reduce imagine take have can -- So I feet, or can of trade build the that was that you a can that sidings now limit. I -- accommodate XX,XXX I Maybe is to Then XX,XXX the I sky these can that train

have It's so some of in injecting to inject the million in have next Now I big some sure talking these to long that year; yard. about, year spite money and was can so capital not about that configuration, yards sidings and where have train. we make envelope have million Potosi for $X.X the sure San money, we're I that make Luis that in pull that's I money. the I a It's $X this you needs.

long train because then you tracks to don't You it over two to one and have on fit cannot track. pull a in three want double it or

these things. So adjusting start you

talked So the there opportunity. track. area, of Saltillo about still double lot I a is

the about mean, miles. imagine you if that. trains steep kilometers, at when of XX can even we XX have running I do per and You talking very hour because grades I'm not That's curves. miles

XX pull miles make You it's how per park other we a you to now long these hump. kilometers, have you guys meet. trains can Well, guy in XX one and finally track the mean, of imagine hour the takes to to it for only turn all I and at can if siding. come wait double out before

closed are the about has minutes six-hour the windows like get that northbound you And and say, always okay. examples northbound train So followed by you ferry. have when your window southbound, there and let's six-hour a get after bridge, the bridge you I a -- I get your talked XX

there You XX minutes and the left get ferry just ago.

happens. what know You

per of think X, have we mile I of dynamic; eliminate Chris. it okay? hour you we we And So expand that sides So customs opportunities, when give increase we to the we on August per and both have I'm for on in, velocity, and first that, mile always a working with it are and working we it's the an that a out simple our on on first make are border, us if of very on solution and the scheduled two can think lots for webcast hour, that. going

Chris Wetherbee

Good. Yes.

Thanks Looking for so it. that. forward to much Appreciate it.

Sameh Fahmy

you. Thank

Operator

Next Justin question Long of Please go comes ahead. from Stephens.

Justin Long

good morning. and Thanks

Pat Ottensmeyer

Justin. Yes. morning, Good

Justin Long

a when any could revenue talked decline that to fourth. because guys just better gotten talked cases more in I much thoughts for it's so a guidance. scenario you're quarter analysis. you And sense recovery last referenced optimistic your just the want about get update a sequentially, less quarter, in wondering X% providing the about question back morning. Maybe are But know you provide revenue I XX% in detailed Good have if it's or you decline forecast. know the about you Mike. I around not I third tricky for, was a volumes but and now – are on rising. a you COVID if half. that, the

Mike Upchurch

in two Justin, somewhere end call, been all what cash we revenue is bit the look constructive have in during environments, here I volume said, the a to going is Yes. we do on our the you going to and reductions that tell would still we're challenging. more a there side goalposts But up view think have The there. I to put like, But mean, did flows, between particularly what I EBITDA back we than continues we then. be first think bit the challenging, quarter overall obviously, XQ. out a expense for year

very still difficult So, environment. volume

updates a are provided have still dozen, out detailed as there put the will applicable today. continue And scheduled. that here I were know, tracking, we do in revenues quarter our you we half where we think as to quarter goalposts throughout third those very on updates probably the investor

Justin Long

that's Okay. helpful. Great, appreciate the time. I

Mike Upchurch

you. Thank

Operator

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

Allison Poliniak

morning. Good guys. Hi,

Sameh Fahmy

Good morning.

Allison Poliniak

the the an notable of, longer has term here? in with your network, opportunity light journey, anything PSR on come addressed opportunity with given progress PSR, or that be either an either combined issue or obviously, dynamic incremental could volume the Just to shorter or environment, sort

Sameh Fahmy

the Are if I'm infrastructure-wise, not sorry, there asking, clear I'm are or... on opportunities, question. you

Allison Poliniak

Well, anything.

could this else accelerated, of and come dynamic as light that opportunity for obviously, clearly maybe PSR lot weren't you thinking here? a you that PSR your were Did know an Just to you plan for of environment had QX. original those be opportunities anything in journey was expectations your incremental volume the

Sameh Fahmy

before what is finding. about -- we the that did with actually I XX%, of that, my biggest we it even of biggest That, train the biggest I hesitant we or -- was finding yards or such was get are there is improvement an comprising can thing, can do is And that we we did sense in finding short train without time. dream service. and urgency we that a velocity And it customer frankly, is a our in have. lengths, And here, we pushed, guess were it. the because would we say dual in never we customer we lengths. were on mind

Allison Poliniak

Thank Great. you.

Operator

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

Scott Group

thanks. Hey, guys. Good morning,

then, sequentially, of think relative how to couple volumes any don't up, labor With the know, the mix, some a XX%, view fuel, take, just of to in of And costs? Mike color third on, give how second? quarter. FX yields, to the components quarter about XX% on So, I Any Thank think things. the in about or third you.

Mike Upchurch

Yeah.

saw between that the here as firm that think happens here, think I'm trains. predict unit fill leverage equation, I XQ. to what cost what FX are correlation costs those length. revenue seen doing. mix, isn't think we may already what side up. fuel on tremendous per Sammy covered the think our on Hard is revenue at with to side you about similar about strong we saw I ratio. of out We've the we a operating that, in going and you up believer think going as obviously, But there a And some of to increases. we end great

even of X,XXX incremental rest those the a $XXX maybe every profit intermodal containers for to take the for one of we're great as base, we adding relative container So, at we'll It's us. can.

the we labor I that but down Mexican you costs. clear U.S. volume crews in made drive in of furloughed we here message point I do costs consolidation, quarter. that -- that, XX% In the didn't in the labor while Mexico, get had in costs, the labor terms train environment, the of through to we're continuing second light think were down

obviously, our be here. I dependent of going is, on train some here. involved bit always There's But out costs a back to business. of we down think how labor that volumes length in build this the a we quickly to as bounce can continue drive stair-step

train and train on have you us But drive to in few you're Sammy some should goals labor As a the said, back volume starts place. our going growth, that give put length as costs. continued leverage absolutely, are, to have

Scott Group

Thank you, guys.

Operator

comes The from Please David Ross next ahead. question of go Stifel.

David Ross

morning, Good Yeah. everyone.

consolidation in for consolidations, more et is, another talked And high? way mixing in with and do you're on to become then to more keeping growth difficult manifest, efficiency, or You consolidations it Do down better easier? the increased easier that keeping while volume anyway put the harder one trains that intermodal, velocity about doing type those cetera. any does make dwell commodity or

Sameh Fahmy

train sufficient trains don't need get consolidate best between two your coal that's I that Coal the efficient fine. to There the to utility. mean, they trains, not point example are no the are They consolidated Don't most you them. need you I can is are from mean, around nice. They to fool switching, you If because to point, mine that's volume, other there that trains. nothing. is trains is with with get. are beautiful.

go don't or Interpuerto a -- U.S., to intermediate enough mean, example, Victoria -- switch to can as as mean, have if enough traffic traffic don't you train. it Los full get you two you if that's volume, between have at like planes Chicago fine. in Luis that Potosí, enough and passengers that example, Interpuerto you Angeles that's airlines, intermodal, Salinas you the enough or So I and I grows cities then that have have the you exactly fine. to It's -- you from have you if an have San or is that can have airports. can

that's volumes the back, okay. So come if

this have actually trains you your will is case, not of switching and anything. reduce losing can PSR, which in You and another principle be

for would a train be volume volume to You're intermodal. manifest, the a consolidation of not have actually don't of but full up to -- situations, consolidating, train is not or fundamentally you full a have you I make for mean, enough but

negate to a volumes, We not can a train worry without does the having it's it's between consolidation. you and build an the intermodal, if origin and and all one So great. about other, destination, have

David Ross

than commodity there's or into mix car consolidation difficult But no more are others? a types types to that

Sameh Fahmy

behind question. a consolidation, one a Well, that's about position do mix that's have thinking operating the is train a good train the have you the to empties? of very loads do very train train empty that. want action, very I have mean, because You the rules. in important why I the you we and if on and on thing, the cars stopping cars start handling mean, if you tail locomotives of it part can at strict locomotive back loads and you don't derail. rules Why for between end

are that. for call be units, there rules have to So, cushing with you them. cars, on obviously, them, with very Automotive careful we

none just apply them it. are is you the and disciplined there yes, of rules you So, that, for but be rules have like -- about to insurmountable,

Pat Ottensmeyer

to of previous the adding and on and is the saw an part the look comment getting also but at levels, back made that's that recovery part important and and getting here back on at intermodal intermodal comment in and where and a to picking automotive, look slide an XX of track. we're just to growth pre-COVID the Upchurch question and business make a V-shaped we I'll up go just area question that on and kind presentation back a Sameh's Mike of Naatz' response Mike getting dramatic that train starts

done to business rapidly to and a landscape. a talked cost changing we've about business improve and So, and to things furloughing respond environment, we lot other our profile very rapidly a consolidating that quickly

a a that throughout on service shelf changed automotive, the on very to sure two So, we’re my get the level that produced again so to but starting months as downside upside, going the on on catchphrase -- can now keep the as we trains focused that hopefully volumes to case business at efficiencies back service last sure that we’re but heard that the probably allows have that dramatically. in couple to now and making and the that dramatically, of track believe of went or this is growth because And and business months, presentation three make fell begets that kind or we back for of have you've over just additional first few weeks growth our focused the in to we result we very of achieve. intermodal us see

than roaring Our it and auto in is almost XXX%, by two and back. months, now May fell over in XX% business April less

The get of level going and trains. we're have is key the we So, add not back pre resource allocation to COVID. to to to had cost same that

level out making going we We’ve sure things if provide that that mentioned. weren't we service deteriorate a the required. can there could do Sameh we've growth growing to customer is and stick. We’ve XXXX, can those prepared changes But we something learned of are we on differently customer lot. service So, on our and get are very do that some we in volumes under -- saw didn’t focused as sustain and we doesn't that's the stress the think done -- or of done back that track to that we maybe did know

Operator

Brandon comes The go next Barclays. Oglenski ahead. question from of Please

David Zazula

David This the morning for thanks for taking on Good and Zazula Brandon. is question.

Pat Ottensmeyer

welcome. You're

David Zazula

mean, The net of flow kind be about free rough math our on cash based income last from guidance, says I would that. down year XX%

maybe given Now have you guidance, might speak your you we not floor for upside leaving about I'm you're what scenario you're you like? and asking revenue outlook more saying, could But that certainty around much understand cost, place in floor. look changed an how that's why talk and about a generally, do haven't in

Mike Upchurch

working of and we're to CapEx, the with revenue, million-plus. lots $XXX is time around around with around there's going is for $XXX stick capital. going a around cost, our being. horse, Mike. levers Taxes, always stick We're dark This to here Obviously, Yes.

David Zazula

Thanks.

Operator

from The Please Ossenbeck of JPMorgan. next question comes ahead. Brian go

Brian Ossenbeck

Hey, good Thanks morning. for the taking question.

on to products, Just on in into problem, seems if how get ago, congestion continue the like of seeing big the just within to of with PEMEX getting on recovery, maybe as a as the nearly unfortunately. especially, a border that, rail, not I situation parts crossings? at update in going moving in Thank the Mexico over as your benefit been of maybe broader wanted was you couple all refined cases any the COVID border. the months the terms Mexico, and automotive quarter, And It any it you're went what's that's of see only the then increase. the volumes potential a some as in slowdown Obviously, instead and, actually update latest with the it might stuck you. ports or just

Patrick Ottensmeyer

auto do Mike to and question? Naatz, the you want PEMEX address

Mike Naatz

Sure. Happy to.

Let auto. me start the with

know, you business automotive As has back. the we've bounced about talked and

vehicles going be demand for for to global that changes XX may so is in a completely cars going is, low have terms to Certainly, automotive those that for auto or to while. outlook our Mexico think in are there been production, I the and It of what's continue months is where recover. take for made. being

look little So those what probably bit or a like. perform we'll forecasts at below

and side producing the diesel PEMEX. market what of look they're they're PEMEX production flat Their less. refined We their selling share to is interesting. more but the of overall decline, and selling, is On continues at it's house, gas down. to of

looking to beneficiary on from than according through other May. basis a see imports, and have I to a continuing of we're absolutely we're the data about XX% to continue should believe from year-over-year seeing others that. -- be increase, imports increased we at, that those, non-PEMEX PEMEX, what is So we're

Mike Upchurch

Hey, Brian, it's Mike Upchurch.

Typically, U.S. hard than of up bit better own us a it's for worse But here aggregate, less If just I in couple virus constructive than to we that, And had at containing Let a which Mexico. in there. know COVID experience the hard you've thoughts offer harder hit Mexico, just little is Mexico. in the cases, sit to been say understandable. downturns, in that it's our we've U.S. me you. get had and during the for more than been we've say look has we Mexico. on

pretty U.S.. staggering data there the in think is I the

a a trough, and it's little U.S., Our was at of lot than a too. volume decline down back Mexico heck but bounced stronger, more bit the in

in in So It's those growing issues. Refined of month product the through June. you think July. grew may again to want

trajectory Plastics on be strong played after a in growth leverage has to back to operating back relatively we're tremendous got we work. us. out went So And people Mexico. for

will place for business continue we place think for us us a business. a great do to So do and is to be great Mexico to

Brian Ossenbeck

Thank Got you. it.

Operator

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

Jason Seidl

I you. for And much good you COVID a touched to you the But maybe the everyone. a a – it how little your some Mexican Thank chat going about do in people. little on government. put XXXX could your those XXXX wondering beyond? relationship agreement has on of chatter you of view of also some with about morning, out Hey, a the of and bit near-shoring, outlook maybe plans how And reexamination bit it know guys been Wanted with lease bit. there has Mexico for them? throw pause

Pat Ottensmeyer

government at as with we very, some And José moving I will maybe ago place the X.X could new new at take now of in for really side we into into from of and the ask relationship that José situation I the was X.X a AMLO is the that to getting José middle the thinking had But years that positive. people, decision-makers administration strong, where about years this be first that administration, make power, the to on, transition Oscar have beginning so very exactly very avoiding shot by with had position that and Mexican administration. that comments. then Kind went not the our the intentional. was we very moved knowing mentioned, point in very a this side of know Oscar transition the

strong. deal levels a all -- we're are it of big our we relationship I'd extremely think but I way, I are say we this government is Mexico. with So mean, in

Mexico and because to being dark happen There deal have going over Sometimes, the three little in -- or has America near-shoring not two we're to the that headliner would and relationships. huge The our about of uncertainty for a are USMCA there. removed. agreement no in North biggest. question we We're we bite but cloud big place. been the opportunity there function with or we in in U.S. the terrific not Long in the have a trade bit years lip just a is a your what has of is as that resolved, doubt NAFTA and existed opportunity general,

another with improved your the We doubt global relationship China. that favoring have chains, extended a and of chain between U.S. And just take out. leaders guys to this you that China you and other supply coverage deal. to companies, an while North That's supply strained, particularly and any see in certainty are there's going play think couple the of and America don't all years. XX I for being It's

projects So got shovel-ready long a of I that you investments. tell can't and we've list

COVID to the pandemic the -- some we'll through get this, think resolve to I positive term, climate got terms in profile in through of of things well has all Mexico. And Mexico a and we We've to but that those. points get have issues slowed investment in down. longer very is as there,

nice the exclusivity, and the correctly. you Jason, a that of order competition, put a other I make just to then what remedy in think the that determine is. and piece it really concession in the in through characterized to or have There's out effective as environment open doesn't process an access day, far would to there you the and result As lack that a someone XXXX case is This go XXXX.

that and you competition of So, how people all, we're to don't trackage most trackage understand call, situation. remedy this I work. rights afraid lack rights work of on a how not And as think

agency, agency the Mexico, regulatory the think in head understands particularly I regulatory of the that.

work. over kind rights that And in host. very how in for the consistent he's of rights So, I theory, the a the difficult model, guest knowing is situation the a railroad and framework eyes develops to think somewhat trackage even manner in with Canadian the terms have regulatory an U.S. of got clear it's trackage if advantage in

framework and regulatory if providing the and of COFECE, with some antitrust the the ask significant to and customers agency, José have had exposure. we've do can everything value develops, on term. our that's recent all José don't the sure things to changer the agencies. José? those -- way service, But we we'll franchise the limit the value, of And that a more our just very of comment or see we to make that been the to regulatory might our the we're of end agencies day, that longer I risk franchise So, as those the the Oscar to game to close conversations at

José Zozaya

already thing José. so is And comments, to are one is This through pass to point Pat. rights, that important to Yes, everyone Yes. to of when Those think to just been exclusivity, consider on José. This a And another to implemented consider. original – trackage granted has the rights. wants add granting also term figure to not to it's and that's concessionary. important That's to added that the to concessionaries, and be tracks. granted, an truckage those our I has the your

So it's explain if considering maybe don't to with on you also know I in something concessionaries happen that wanted the more are to authorities that? Mexico. now

Pat Ottensmeyer

No.

Thank you. I think that's Jose. good,

Jason Seidl

guys. color for Thanks the

José Zozaya

Okay.

Operator

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

Tom Wadewitz

Yeah. Good morning.

you south, magnitude charts, cause clearly from offer you're level at a you You brief the if in in growth if then that the that this just half? showed thought as on freight seen, also you've could you and rebound offer would directly, the the what think to you've how could you in to further the And might risk about -- how increase off that thoughts infections I'm Thank you. risk a about some on could you seen large to second you pretty in wondering of rise about further for provided sharp impact talked just what be think the if volume which or COVID some related now any look infections? that. catalyst increase

Pat Ottensmeyer

take I'll the one. second

know, you just Tom, to it's as very difficult Just predict.

So how learned what our we to are to And the think toes. be respond. on through April, May lot we've a I to downturn do, continuing

team comments. is mentioned learned We've think lot. a The stronger. Sammy in his getting it I

see accordingly lot at have as mindset, maybe the ability We downturn, to we'll the well, know. what in respond the we better, culture, that know another we least the that happens, if and have a confidence team do for event that don't perform to the of but

safe and mean, keep insisted. As far do we as haven't need just core and our protect business to doing we to employees our we I to the things stopped. haven't operations continue that continuity,

home. from the We beginning. terms in guidelines to continued of sanitary back to use are that We've brought the very working from and haven't we same office that the practices people procedures did

that's we're that to those not that, -- had good assuming of, in for continue practices do that in things. and us, happen place just So to we're going really outcomes kind we've we're, have going the resulted to

there's the doubt no part question, as far As your first of intermodal. that

see good growth We continue to products. refined there,

profile outlook then of on trade, years into service I provide customers, and that And couple think the growth opportunities confident the oversized the and all growth asset And good for the reliability about here. there. talked given provide to very comment are of about back feel before longer and opportunities term. we profile previous areas kind toward on we've to made agreement that that longer about of attitude if growth those Asia, tap we Mexico we growth. the we of utilization, for the that I then term service begets we the can we're feel last question China very that, can think the COVID those And we that still the getting that, mindset and downturn, long-term realize still the to consistency, value continue and resolution of cost

Tom Wadewitz

you. Thank Great.

Pat Ottensmeyer

welcome. You're

Operator

Bank ahead. Hoexter Merrill from America Lynch. Please of Next Ken question of comes go

Ken Hoexter

got Great. Thanks. return tell the say, the about if or Mike I PSR of concern not. enthusiastic to in Good Mexico. as this about still demand I But can't morning. just a Sameh, stuff you're industrial lot of

if Mike thanks seeing Thanks. intermodal. more any But you're can USMCA, for maybe on are thoughts at on cross-border, post peso give shifts your and So, there. thoughts any? some the How things progressing you Lázaro, the thoughts impact

Mike Naatz

Sure. I guess…

Mike Upchurch

Go ahead, Mike Naatz.

Mike Naatz

Yeah.

Mike Upchurch

Mike ahead, Go Naatz.

Mike Naatz

Okay.

So, and I fairly think, we consumer are piece the industrial well. watching

like earlier, mentioned business us. on of I As for it's area weakness side looks the the of primary metal the there

of turning down business getting part us, on around think also begin indicate moving the Intermodal, growth metal parts. as inventories. the retail are of those producers for you into they going feedback We Mexico, in automotive but work I nicely from that, respect to because has have out moving With in cross-border to then here been that returning that's and positive

grow. to So, should Intermodal continue

should I -- continue cross-border the the grow. or think to intermodal

of and remains difficult going bit be is of more of bit to Lázaro to a obviously, truck that's available. to the the be a continue because a value the the capacity a think with peso, position intra-Mexico readily And option. I continue a attractive

it. that situation, to how currently So, that's at but we'll looking evaluate we're continue

Ken Hoexter

Thanks Great. Mike.

Mike Naatz

Sure. Thank you.

Operator

Majors go question comes next from Susquehanna. Bascome Please of ahead. The

Bascome Majors

thanks for taking my Yeah, question.

back other partners a the surge you interchanges Just network? to North particular just to be traffic, see points any in might have in With fix key nodes need step taking the with or pinch the be interchange maybe added KCS not your beyond seen emerge whether are either pockets that. your resources trying network, Thank be to you. American where where could capacity there constrained, that

Sameh Fahmy

the partners. have the of see to surge, seeing like, we been blip. couple City, like took, And have we to are of it was to very same, all is on about a recover car And are cars seeing the ready them three-day the okay? a and same from from -- steady from and adjust noise, go we number time. at must state. typical our cars were team are Kansas I time a back as here, not I some thing shift. earning interchange days And past had like and name to all car. called to after of switched mean, day we of coming, we one ramp-up yard the three, pockets had and as to example the to then give We believe, normal with actually be seeing focus. You that, resilient in two to listening to that XX%, that. the old did key of in manual a did our are it strong, It the I'm interchange now. adjust we to you have with you in coming it, we is We bound feel talk being the The two, an And they you And double calls. some go the a at two-or same that, is and this I of a Canopy. of flood are partners a -- when result, I transmission, we

moves. it pockets from So [indiscernible] Meridian the to City. line The move Kansas and

diagnose and railroads, Sanchez the And Before of the that, now or days the of triples. we a A that had felt before that tightness we had noise, you that locomotives. get is an team before where thing actually the doing place issue that, in is with few noise key cause one different the week bridge. because the we we from

you you have sure don't look at to make the So symptoms.

and an train root, in, adding going TSP, more an address you it or trains the the adding locomotives. You to resist slowing and starts look temptation more find old it root schedule falling back the and and and you fix old at of you of back you

better So the it. answer and better your it true. at is and But point, to is team that trick the getting yes, is

partners are it And interchange things same it's going they down. with as settle us, as us. subside having the to You see thing and like

Bascome Majors

you, Sameh. Thank

Sameh Fahmy

Thank you.

Operator

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

Ravi Shanker

call. If I the OR just of can kind operating much. follow and very Thanks earlier on in up Great. the leverage discussion,

starts leverage down your down should significant crew if So in X% guys the seen back and you a of you the saw carloads second quarter. increase the your XQ, exiting half XX% pretty in have operating

if do same in you saw you you or who XQ, XQ do, do forward think also, like confirm into and crews give that be but in to wanted sub-XX might able a think like and guidance XQ? print? gap might will, not or between were to just it you don't And the So, and if you that's want knows that volumes what I if know OR hold, XX to the starts to

Mike Upchurch

with I the performance we expense items guidance to actually of in on from for we but absolutely late you June net providing some ratio the operating line we see our might you bit where out you’ll giving probably a to quarter, better in May indicated. around that the And and up that the April exact going am were quarter, little Yeah, May, a stop to saw ended for fact, number, reasons labor Ravi, specific side. favorability

definitely of you're that saw operating of Some what and also some that incentives, was leverage favorability we in referring to. but

Ravi Shanker

should quarter? of a OR in continues XQ, much you you that second for printed in position that leave what kind As better than

Mike Upchurch

-- second I quarter, would or better suggest a in third that we will have operating second ratio yes. the quarter given some of operating than that leverage, quarter

Ravi Shanker

Thanks. great. Okay,

Operator

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

Amit Mehrotra

we I me, forgive -- to been Mike, a a question. these late, answer few quarterly rapid-fire asked have before, OR I questions. if definitely got Thanks. have you dialed I that but so have in few

those, make you drive that to around of need they there as where attrition The I growth, were higher expand there in in either receiving around bit the a that if companies your some volumes, rise quickly is on – opportunities much. work obviously acquisition. what but about are, ability private and of wanted deny is, from question quick to question some can I for matters were talk the higher Mexico or real could you how inbounds me and address maybe And First you, within impact your risks just just lot you but can address And hours I Mexican understand to the unfortunately. that just you And little on guys the very other money, one, about rapid acquisition that or a COVID for risks sensitive have a media an that interview an the how I reports in think equity-like about strategic referring getting the were last enough the workers that? you of obviously workforce? that? fire And weeks may And are context did few execute in demand? aren't hours Thank that the those Pat, cases. higher you ranks, talked the does in Mexico understand comment context well? think to in you not own either ago, I if declined, on you employee immediate

Pat Ottensmeyer

media base a the And take of about will I'll Jeff second prepared COVID the because of profile London be lot that for saw the on we've be Songer other obviously, things A possibility we attrition. a for ago. comment the Europe question the got of lot that someone the few a employee coming right. is, story answer like questions plan. a that. or deal. of opportunities. behind preparing then to is yes, But and and KSU seemed a out outstanding the then We've noise standard easiest was one. And our terrific got But weeks about no that's All

in that's very an have in We successful growth. for independent number and of as a job. that's runway company. well. moving before mind, been into traded is focus doubt got no We're my job to this We've years of a lot going There run what commercial publicly have And a do. we're stand-alone our having the executing to

us we give like because Our customers them options.

COVID of other and the long with relationships value we runway creating for successful as great got shape. of just lot getting, do on Mexico? we great this shareholder and kind terrific that's focus. a given impact railroads think, want adequacy staffing? do as Jeff, will I our is attrition a public have in to that, company of I be and you're comment think we as the what and a our again the impact in at run, our And We then independent you

Jeff Songer

about really on headcount, the our think seen I border. mentioned U.S., both in cases, we But furlough XX%, sticking Sameh Pat, Yes, kind talked slight of sure. we've have still. COVID, the got tick-up a COVID earlier, under Yes. the as sides roughly of we’ve XX%

as think, for I needed. But if job. we've So that adequate great have to about needed, done two We've a we talked return quarters. resources

were same way Mexico, that numbers we about potential earnings very think, And know aggressive our starts thus think up for manageable reduced. observation employees Very have very I on thinking front. attacking I has as reduce been train the again, far. this for you some good we're

rate, yesterday. financial in we a reviewed just attrition view Our this

we're on for to normal T&E attrition. X% think workforce the X% I here

accelerate, see letting that. train start and we're So, I And that think as could things additional drive that consolidations you that play potentially some out. would

to to down and our there In them. things addition, with we these group as labor hard working recognize always, capitalize continue, on

stable. some change appropriately we So think, opportunities TSP again, for our attrition I workforce We've additional our with managed it is as models.

Amit Mehrotra

All right. it. weekend good Great. Have Thank everybody. you. Appreciate a

Pat Ottensmeyer

Thank you.

Operator

back question-and-answer our remarks. to concludes for to closing would Ottensmeyer over I session. This conference like Mr. any turn the

Pat Ottensmeyer

you Okay. Terrific. Thank all.

I got swing good for incredible volumes we stick. good the of and very can, all under this the And wild will savings our way think feel cost we in. very about we through just These feel we're questions of circumstances, positioned performed where about future.

the the performing well. team culture, extremely the As Sameh mentioned, mindset, is

are We have great wave we see begin to that assuming to don't together another days. with to weekend. going forward Thank you in a and setback that XX have we're second growth confident getting return, and look all, COVID big

Operator

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

You may now disconnect.

Kansas City Southern (KSU) 17 Jul 202020 Q2 Earnings call transcript