Canadian Pacific Kansas City - Q4 2015
January 21, 2016
Transcript
Operator (participant)
Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to Canadian Pacific's fourth quarter 2015 conference call. The slides accompanying today's call are available at www.cpr.ca. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, please press the pound key. I would now like to introduce Nadeem Velani, Vice President, Investor Relations, to begin the conference call.
Nadeem S. Velani (VP of Invester Relation)
Thanks, Chris. Good morning, and thanks for joining us. I'm proud to have with me here today, Hunter Harrison, our Chief Executive Officer, Keith Creel, President and Chief Operating Officer, Mark Erceg, our Executive Vice President and Chief Financial Officer. Before we begin, I want to remind you that this presentation contains forward-looking information. Actual results may differ materially. The risks, uncertainties, and other factors that could influence actual results are described on slide 2 in the press release and in the MD&A filed with Canadian and U.S. regulators. This presentation also contains non-GAAP measures outlined on slide 3. The formal remarks will be followed by Q&A. In the interest of time, we would appreciate if you limit your questions to one. Also, if you have specific modeling questions, please follow up with us after the call. It is now my pleasure to introduce our CEO, Hunter Harrison.
E. Hunter Harrison (CEO)
Thanks, Nadeem. And good morning to everyone. Thanks for joining us. We're gonna provide initially this morning a kind of an abbreviated version of what we normally do, because I think there's gonna be a lot of interest in the Q&A activity. And I trust you have seen our press release. But there's a couple of areas that I'd like to spend a little time highlighting. And I... You know, if you look at our fourth quarter results year-over-year and look at the OR of 59.8, which I was very pleased with what Keith and his team was able to achieve there. Some of their operating metrics are pretty outstanding and really gonna serve us well as we go forward.
And, you know, I would just remind you, some of you that, that have been on board since the, initial proxy contest back, going back to, to, 2012. You know, we talked about that we were going to, to 65 by mid-2016. A lot of you said it couldn't be done. Well, I'm very pleased that we're ahead of schedule, and the, certainly not over yet. In spite of the fact that we've got some challenging times here, with, with everything that, that affects the top line. And we're gonna try to do as good a job as we think we can in providing some level of, of, of guidance today.
We also have talked to you about that we're making a some pretty significant reductions, which is not all necessarily related to economic conditions to, to the capital spend. I think we'll be down, Mark will probably touch on this further, but in the range of $400 million below what we have, our run rate has, has been. I think will give us much stronger, free cash flow, that you can, look forward to. I think if you look, just spend a moment on full year 2015, the OR came in at 61% and our earnings at $10.10, which was up about 19% year-over-year.
I think for the last 3 years, we have been by far the strongest in EPS growth year-over-year performance, which will serve us well going forward. So let me just spend a couple of moments about some guidance in advance, because I don't want it to get lost in once again in some of the Q&A activity. I think we're looking forward to in 2016 an operating ratio below 59, and there's some, you know, there's some wild cards there that says how far below? I think we're still, in spite of the fact of tremendous pressure on the top line, double-digit EPS growth, and continued reduced capital expenditures. So I think some of the initiatives that Keith and his team have initiated are starting to kick in.
There's some exciting things going on there that I'm very, very pleased about. So some continued efficiency and productivity improvements we're looking forward to in 2016. I think, you know, I've talked before about this model of ours, that I think it outperforms the competition... maybe even more so in hard times than it does good times. So I think that's one of the reasons that we will be able to sustain some performance that others think cannot be achieved. Overall, you know, there's a lot of, there's a lot of unanswered questions out there in the market. We're happy to share with you, Mark can, at the appropriate time, some of our assumptions, and if you think our assumptions are wrong, you can adjust accordingly.
But overall, I'm very pleased with the performance, given some of the challenges that we've been through and the challenges that have been extending themselves. And one more point I would make, if you remember back once again to the proxy contest, and we talked about the two plans then. And one of the things that I was concerned about was that my plan, if you will, quote, was pretty conservative on top line revenue growth, and the company's was very aggressive. And I'm sorry to say, I happen to be right there. But I think there's some light at the end of the tunnel. Don't ask me where, but it's there, okay?
With that, let me turn it over to Keith for a moment to give some highlights on the operating performance.
Keith E. Creel (President and COO)
Okay, thanks, Hunter. I'll be brief in my comments as well. So the operating metrics that that we've shared with the group this morning, certainly this is a story of recognizing upfront the things you can't control, which is the economy, and then doing something about those that you can, which obviously is our operating performance day to day. We finished 2015 in the face of a weak economy in the fourth quarter, very strong. Year-over-year, very strong. This operating performance obviously is a testament to the operating model that we execute day in and day out, and also a testament to the people that execute it across this company. It's a story of continually adjusting your assets, sizing the assets versus demand.
It's about blocking and tackling across all facets of the operating department, as well as in the headquarters and the support function. It isn't complicated, but it requires an understanding of the model first, and then disciplined execution, day in and day out. You know, essentially, simply said, less demand. When you put that in conjunction with continued step improvements in productivity, must produce an environment where you've got fewer assets, fewer locomotives, fewer cars, fewer people across the board. That's what drives an ability to continue to improve productivity, lower costs, provide service, and that's why we were able to reduce headcount in the workforce in 2015, about 12%, in an environment where we saw about a 3% volume decline.
That's why today we sit roughly with about 600 locomotives stored, which obviously is a significant delay for future capital, take us beyond 2018. In the meantime, we're going to enjoy much lower maintenance costs as we move through the horizon. And all this sets the stage for, to Hunter's point, a very strong operating performance in 2016. Again, focusing on what we can control, which is cost control, gives me a very strong point of view and line of sight and confidence in producing a sub-59 operating ratio. On the revenue side, obviously, clearly a very different picture. This is a reflection of what we can't control. It's a similar story we've seen in the last three quarters of 2015.
The economic headwinds across all business segments itself for a couple of bright spots in forest products and Canadian grain. But a strong U.S. dollar, combined with low commodity prices, obviously weighed heavily against that in bulk, energy, and metals. Intermodal growth, being impacted obviously by a slowdown in the Canadian economy, as well as increased trucking capacity in our short-haul lanes. On the pricing side, excluding the impact of our regulated grain in 2015, we came in, as we expected, the low end of our targeted range of 3%.
Looking forward, obviously, we see strong headwinds with the economy first half of the year, 2016, but with a continued focus on our cost control, improving our service for our customers, and developing our bench strength in our team, we're going to be able to convert what the economy does provide us, employs ourselves for a strong bounce back when the economy comes back. So with that said, I'll turn it over to Mark for his comment.
Mark Erceg (EVP and CFO)
Thanks, Keith. Good morning, everybody. As Keith just mentioned, you know, revenues were down 4%, but as is customary, the team dug deep and found additional cost savings opportunities, which did allow us to tie last year's record OR of 59.8%. And I'd have to say that while a sub sixty OR during a quarter in which revenues are down is notable, you know, in and of itself, when you consider the fact that the lag on our fuel surcharge program added about a point to OR, and we had 2 points of OR headwind from higher pension expense and lower land sales, then this accomplishment is even more impressive and really speaks to the power of CP's Precision Railroading model in both good times and bad.
Now, before I touch on a couple of the key operating expense areas, please note that I'll be speaking on an FX-adjusted basis because FX has been so volatile as of late. So with that understanding, comp and benefits were $333 million. That was flat versus a year ago. Within that, pension expense was a $24 million headwind, and higher stock-based comp and wage inflation were each up about $10 million.
...as Keith mentioned, employee productivity was up sharply, with our end-of-period workforce being 12% lower, which represents a decrease of nearly 1,800 employees. The positive trend of increased employee productivity is expected to continue going forward. From a modeling perspective, you should expect comp and benefits to be lower in 2016, behind additional workforce reductions, lower stock and incentive-based comp, and a nice tailwind on the pension front, where strong asset returns, lower headcount, and a slight increase in the discount rate should result in pension income on our DB plans of approximately $90 million this year, versus what you'll recall was about a $32 million expense item last year. Fuel expense was $166 million during the quarter. That was down 43% year-over-year.
Lower volumes accounted for $21 million of the reduction, and fuel productivity accounted for an additional 12. But as with last quarter, lower fuel prices themselves accounted for the lion's share of the reductions at $97 million. Purchased services was $272 million, and as is typically the case, there were a number of puts and takes within this line item. But in a nutshell, the efficiencies generated through our focus on cost control outweighed the headwind of a tough land sale comp during the quarter. Now for 2016, and again, for your modeling purposes, we do expect land sales of approximately $75 million, which is roughly in line with our 2015 land sale number. And this reflects our progress in monetizing our real estate portfolio.
So wrapping up on our quarterly P&L results, reported net income was down 29%, but when you remove the non-cash loss on US dollar-denominated debt and look just at the adjusted diluted earnings per share, we were up 1% at $2.72 per share. Moving quickly to cash flow and the balance sheet, I think it's important to note that for the full year, we generated record free cash flow of nearly $1.2 billion. That was an increase of nearly 60% versus last year, and the increase was primarily driven by higher cash from operations and proceeds from asset sales, only partially offset by higher CapEx of $1.5 billion. Now, as you start modeling 2016 cash flow, two things that you should keep in mind.
First, with our large program spend largely behind us, train speed and other operating improvements ahead of schedule, and a softer demand environment, we can now responsibly dial back on our CapEx spending. So you should expect to see about $1.1 billion spent on CapEx during 2016. Second, our cash tax payments will be roughly $370 million higher in 2016. Now, I know that's a big number, but this is because during 2015, the company generated full taxable income, which was not offset by loss carryforwards in Canada for the first time since 2007.
So from a cash flow standpoint, this means we'll effectively be paying two years worth of cash taxes in 2016, because our 2015 Canadian taxes are payable in 2016, and we'll be submitting estimated monthly payments throughout the year. With regards to the balance sheet, we've taken advantage of our improved credit rating and made significant improvements to our debt portfolio. Specifically, we've extended our weighted average maturity from 12 to 26 years, while at the same time reducing our weighted average coupon from 6.25 to 5.625. Finally, the last thought I'd like to leave you with today is that as CFO, I take a great comfort in knowing the company's balance sheet is in very good regard.
We have $650 million of cash on hand, no material refinancing requirements until 2018, and an undrawn $2 billion credit facility. So the company has plenty of liquidity and financial flexibility available to us as we start the new year. And with that, let me turn the call back over to Hunter.
E. Hunter Harrison (CEO)
Okay, thanks, Mark and Keith and Chris, we'll be happy to address questions now the group might have.
Operator (participant)
Thank you, sir. If you would like to ask a question, simply press star, the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. As previously highlighted, please limit your questions to one. There will be a brief pause while we compile the Q&A roster. Your first question comes from the line of Fadi Chamoun from BMO. Your line is open.
Fadi Chamoun (Managing Director and Senior Equity Research Analyst)
Yes, good morning. Good results, guys, and also good guidance, given the context that we're working with. I wanted to delve a little bit more into the volume assumption you have in your outlook for 2016. If you can walk us through a little bit, what is implied in terms of volume, for 2016? And I also have a question about coal and Teck as well.
Keith E. Creel (President and COO)
Fadi, I would say that, number one, tremendous amount of uncertainty, but our assumptions, modestly down. We're taking a very conservative approach. I don't, I don't see, I don't see any shining stars out there in the economy, but if you know something more than I do, then please share it with me. But that's the assumption that, we're making, so modestly down versus 2015.
Fadi Chamoun (Managing Director and Senior Equity Research Analyst)
Okay. Modestly, modestly down, I guess we should understand that to be low single digit, basically, 1 or 2%?
Keith E. Creel (President and COO)
... Yeah, I think it's fair.
Fadi Chamoun (Managing Director and Senior Equity Research Analyst)
Okay. As far as Teck goes, I mean, there's a lot of uncertainty about coal, obviously. Has there been any conversation with Teck about volume pricing as we move into 2016, 2017, and the challenges on their business? You know, is it easing at this point?
Keith E. Creel (President and COO)
You mean volume pricing relative to pressure on us to drop the price?
Fadi Chamoun (Managing Director and Senior Equity Research Analyst)
Yeah.
Keith E. Creel (President and COO)
No, no, we haven't had those discussions. As far as, you know, as far as guidance from Teck, I think they'll come out with their true guidance in February, but right now we're moving a lot of coal. Similar, we're assuming similar first quarter as last year, which is about 6 million metric tons, and right now, that's really all I can tell you. We're gonna do, we're gonna do well by them. Cycle times are down. We're hitting all record lows as far as cycle times. The service record's there, which is controlling the operating side of the cost and giving them a reliable supply source. And then the other encouraging fact is I understand that they're diversifying their, their book of business, so not as dependent upon China with sales that they're sending over to Europe. So that's encouraging from my standpoint.
Fadi Chamoun (Managing Director and Senior Equity Research Analyst)
Okay, thank you.
Operator (participant)
Your next question comes from the line of Thomas Wadewitz from UBS. Your line is open.
Thomas Wadewitz (Managing Director and Senior Analyst)
Yeah, good morning. I wanted to see if you could give some comments on productivity and headcount. You know, I guess when you've had such strong improvement over the last couple of years, and certainly a lot of improvement in 2015 in the operating metrics and then big reductions in headcount, you know, everything kind of moving the right way in terms of the productivity. How, how much further is there to go in 2016? I don't know if that's a kind of, you know, maybe velocity comment, but also headcount, if you look sequentially, where you are in the fourth quarter, you know, how much more that can go down when you look into 2016.
E. Hunter Harrison (CEO)
Tom, let me make some comments on that, and then Keith maybe can add to it if he would choose. There are. If you go back once again where we started with the proxy contest, we've taken, I think, between 6,000 and 7,000 people out of the count, which has been predominantly done a high percentage in the high 90s through attrition, because we typically have an older workforce. I think with some of the operating initiatives that Keith mentioned earlier, we feel like that through some productivity gains and efficiencies, there are probably close to a 1,000 additional heads to come out potentially in 2016. So there's still room there. There's still more to accomplish.
And the real emphasis here is, as Keith said, what we're focusing on is what we can control, which is execution, which is running a safe, efficient railroad that provides good service, and that's gonna serve us well, but there's still opportunities that you, that you mentioned there.
Keith E. Creel (President and COO)
The only thing I would add, Tom, is, I mean, this, again, it's a similar, similar story. We invest in the railway to, 1, protect the safe operation, and 2, to strategically increase our productivity across the Board. So, you know, you said it, speed is one. Velocity, speed are our success. As we drive train speed up through our investments, we run fewer trains, longer trains, faster trains. You create capacity, you reduce your operating expense, and you reduce your need on locomotives. You reduce your need on the folks that have to maintain those locomotives. You reduce your need on assets that drive the bottom line. So there are several things that we've invested in or accomplished in 2015, which will pay benefits for us in 2016.
Investments in the physical plant, some progressive agreements we told the market about that we signed late 2016, or 2015, that will start converting in 2016. Some advancements even where we don't have agreements signed. We did a consolidation agreement in Chicago that allows us to benefit from utilizing prior Soo employees with prior DM&E employees, which work in and through the Chicago terminal, where in the past, we have been isolated to only using Soo employees, which means that if you run out of one, you can't depend upon the other. It's just not a very optimal recipe for success from controlling cost or sustaining reliable service. So that's an area that we'll be able to mine in 2016.
So there's several more, and obviously, every year there will have to be, but that's all about improving, doing more with what you have, which means you need less from a productivity standpoint. And then, of course, if demand reduces, then obviously I don't need the same amount of assets on a reduced demand. So it's just understanding those levers and executing and converting them day in and day out. And that's how you drive this continual improvement in synergies and cost control.
Thomas Wadewitz (Managing Director and Senior Analyst)
Is there, Hunter, you said 1,000 people. Is that something that's not already started to come in in fourth quarter? And is that spread across the year, or is that something that happens pretty quickly in terms of timing?
E. Hunter Harrison (CEO)
It's certainly not a hockey stick. It's front end loaded, if you will. I mean, we have, you know, we have determined, given what we see happening through the year, what we need, and we've taken into account, as Keith mentioned, the changes in the labor agreement. And this is across the board. This is labor management and, and everywhere. So I would think that, you know, most of that will have kicked in. There's always a little lag, but it's kicked in by the mid-second quarter, for sure.
Thomas Wadewitz (Managing Director and Senior Analyst)
Okay. Great. Thank you for the time. Appreciate it.
E. Hunter Harrison (CEO)
Thanks, Tom.
Keith E. Creel (President and COO)
Thanks, Tom.
Operator (participant)
Your next question comes from the line of Steve Hansen from Raymond James. Your line is open.
Steve Hansen (Managing Director and Senior Analyst)
Yeah, good morning, guys. Just a question on the reallocation of capital going forward. With the free cash flow being quite strong and CapEx coming down, just curious about the, you know, your perspective on the share repurchases going forward here, I guess, in the context of some M&A talks still ongoing, and you've been relatively strong through the back half of the year. Just wanting to get a sense for how that'll continue going forward and whether that's accounted for at all in your guidance outlook.
Mark Erceg (EVP and CFO)
Yeah, it's a good question. I would offer a couple things, you know, for your consideration. Obviously, you've seen throughout the year 2015, we were aggressive buyers of our shares. We believe we were buying shares, you know, well below our intrinsic value. Clearly, there's been a little bit of market dislocation as of late, but that doesn't change our fundamental view of where this railroad can get to and will go, and therefore, it doesn't fundamentally change our view on intrinsic value. Recently, you'll see that we've had, you know, suspended our share repurchase program, so to speak, temporarily as we've been in discussions. That's the appropriate thing and the correct thing to do. We still have about 500,000 shares left under our existing authorization, which runs through the end of March.
I think after that point in time, you know, we would likely put forward a recommendation to the Board for their consideration. Obviously, having not done that yet, it wouldn't really be appropriate for us to say much more than that, other than the fact that we are very confident that, you know, our share purchase program will serve us well and our shareholders well over the long term.
Steve Hansen (Managing Director and Senior Analyst)
Okay, helpful. That's my one. Thanks.
Operator (participant)
Your next question comes from the line of Chris Wetherbee from Citi. Your line is open.
Chris Wetherbee (Director and Senior Research Analyst)
Hey, great. Thanks. Good morning, guys. Wanted to talk a little bit about sort of the EPS growth outlook. And as you guys think about the cadence of that, I'm guessing it's probably a little bit back half loaded, but wanted to get sort of a rough sense of sort of how you're thinking about that and maybe how the currency kind of adjusts to that as we go forward through the year.
Mark Erceg (EVP and CFO)
Yeah, again, I would offer a couple of things. You know, currency's been all over the, all over the map as of late. You know, as recently as April of fifteen, you know, we're at, like, 1.2. I think we're around 1.4 or 5 as we sit here today. You know, we didn't give a lot of, you know, specifics on the year's guidance because the, you know, uncertainty out there is, is fairly acute. So I think it'd be somewhat irresponsible for us to try and be more exacting, on the quarters. I would simply say that we have, you know, a balanced plan. We do have some land sales, you know, that were in Q1 of fourteen.
And so there's some other things that will kind of come into play, that might cause a few little kinks here and there, but we're going to run the railroad every day, as efficiently as possible, every single day. But for us to try and give quarterly guidance in this environment, we don't think that's very helpful, so.
Chris Wetherbee (Director and Senior Research Analyst)
Yeah. No, that's, that's helpful. And just a point of clarity on that, just when you think about for the full year, any sense what you're using? I apologize to Nadeem for the somewhat modeling question. How you think about the benefit of FX within that context of double-digit EPS growth? Thanks.
Mark Erceg (EVP and CFO)
Yeah, it's a good question. Again, I wouldn't want to be overly specific because, you know, we believe that FX is tied to crude, and, you know, obviously, it's involved with the fuel surcharge program as well. And so as different elements move up, other things move down. So again, I don't think it's our intention today to be overly exacting in that regard. If you have some specifics, you want to follow up with me or Nadeem on, you know, after this call, please feel free to do that.
E. Hunter Harrison (CEO)
Yeah, I'd-
Chris Wetherbee (Director and Senior Research Analyst)
Thanks for the time, guys.
E. Hunter Harrison (CEO)
FX is going to be more of a benefit. We assume kind of current levels in the first half than it will be in the back half. And clearly, the front half volumes are going to be tougher comps in the first half than the back half.
Chris Wetherbee (Director and Senior Research Analyst)
Appreciate it.
Operator (participant)
Your next question comes from the line of Brandon Oglenski from Barclays. Your line is open.
Brandon Oglenski (VP and Senior Equity Analyst)
Hey, good morning, everyone. It's pretty amazing we haven't gotten a question on M&A yet, and I'm actually going to ask one about your business, too, as much as I'd like to ask one on the other topic. But I guess, you know, Hunter or Keith, maybe about a year ago or maybe a little bit more, we were talking about how as you improve velocity and service on the network, you can get to much better growth levels in your business and, somewhat macro agnostic. I mean, at what point do you think you've reached that service level where you can start to capture greater share in your markets, even though we're in this very difficult macro backdrop for commodities and the changes in currencies?
E. Hunter Harrison (CEO)
Well, we're probably awfully close as we speak. You know, we have not, we have not taken any action, pricing action. Our, our margins are up. And as we look out going forward, we'll have to, you know, take into consideration the net-net bottom line effect if we took some of that action that we talked about earlier. So I think that, you know, I think everything is working like we had seen. Going forward, the only thing is the economy ran out on us. And, but I think that's, you know, that's something that we'll be continually reviewing as we go forward.
Keith E. Creel (President and COO)
And I would add to that, you know, some of this business is locked up in contracts, so as I know that we're having more and more contracts with, or discussions on contracts with business that we haven't enjoyed in the past that is service sensitive. The caution, though, that I'm pushing our marketing team with is, while they have to sell service, I'm not interested in getting locked up into contracts that are going to lock me into this downward economic cycle. So we're pushing more to tariff pricing, which we can adapt and adjust to the market and let the market set the rate, and we've lowered our cost. And if there's a buck to be made, then we'll be playing in it. We got the service offering, we got the cost structure. That's pretty compelling.
Brandon Oglenski (VP and Senior Equity Analyst)
Okay. Thank you.
E. Hunter Harrison (CEO)
Thank you.
Operator (participant)
Your next question... Oh. Your next question comes from the line of Ken Hoexter from Bank of America. Your line is open.
Ken Hoexter (Managing Director and Senior Research Analyst)
Hey, great. Good morning. Maybe just talk a little bit about intermodal, where it looks like volume has accelerated to the downside. Is that more just a factor of the Canadian economy, or are there still share shifts that you're seeing? And I guess it's highlighted on the domestic side, so it's not more on the international changing of contracts. Maybe you could talk a little bit about that, or is that just transitioning to the trucking loose capacity industry?
Keith E. Creel (President and COO)
It's the excess capacity in the industry exaggerating a comp, a very tough comp. You got to think about our story and what's happened in domestic intermodal the previous 2 years, very strong growth. So it's a mix of the two. Expressway is the biggest driver of that, which, of course, is our service between Montreal and Toronto, short haul. Obviously, if we make a buck in it, we wouldn't do it, but it's not the most lucrative business that we enjoy. We've got some very creative things we're going to be doing in 2016, though, converting service. There's lanes that we haven't enjoyed a lot of business in, domestic cross-border business, that we're putting a very compelling service offering out to the marketplace, both from service and the cost of doing business.
So we're on the verge of some pretty exciting stuff there, which is going to help us on the domestic side grow the business in 2016.
E. Hunter Harrison (CEO)
Ken, I would only add that, you know, I think that one of the things that's been missed a little bit in the model, for example, the potential of any kind of change in structure, M&A activity-wise, is the opportunity that we see to take business off the highway through a conversion there. People have kind of missed that. Not something that's going to happen overnight, but I think if we're able to encourage a model that allows us to be more even pro-competitive, that it would, it could have some significant impacts on our competitive, vis-a-vis the highway, but not necessarily intermodal business.
Ken Hoexter (Managing Director and Senior Research Analyst)
So Hunter, just to understand that answer a little bit, has the M&A discussion frozen activity in terms of management, you know, I guess, frozen between where they should move, march forward on yours and Keith's direction versus maybe the, just the concept of what could happen in M&A? Or is that, is this just purely economic? Just to understand the answer.
E. Hunter Harrison (CEO)
Well, I guess it's a little bit of both.
Ken Hoexter (Managing Director and Senior Research Analyst)
Okay.
E. Hunter Harrison (CEO)
Obviously, there have been... There's a lot of moving parts going on here. There have some things that have happened and almost happen daily that we certainly did not anticipate. And I'm sure that all of you have seen our press release asking to the Justice Department, asking for a review, and I don't need to comment any further beyond that, that I think it's appropriate that they review what took place. And as a result, I think of also this becoming, in my view, more of a political process that I didn't anticipate, things have changed. And so, will that change potentially some of our strategy? Absolutely, because we've got to respond to that.
I would say that, when you try to anticipate what we might do, you're probably going to get ahead of us a little bit. Because one of the things I said early on in this exercise is, look, if nothing happens, we've got a wonderful franchise here in Canada. We have not fallen in love with any deal, and we can make this happen. We felt like there was an opportunity to make a positive contribution to the North American network that would be potentially transformational, but other people see it differently. So, maybe all of our strategy changes.
Ken Hoexter (Managing Director and Senior Research Analyst)
Great. Keith, Hunter, appreciate the insight.
E. Hunter Harrison (CEO)
Thanks, Ken.
Operator (participant)
Your next question comes from the line of Scott Group from Wolfe Research. Your line is open.
Scott Group (Analyst)
Hey, thanks. Morning, guys. So Hunter, let's follow up on that if we can, when you talk about changing your strategy. Maybe just at a high level, is your appetite for M&A or confidence in your ability to do M&A or get M&A approved, is that wavering in any way? And when you talk about changing strategy, are you suggesting maybe a proxy campaign is less likely? Is it thinking about approaching other rails? I'm... What do you mean when you say changing strategy?
E. Hunter Harrison (CEO)
That's a six-part question you said. Let me see if I can answer it. The, we remain steadfast in our initial reaction. That has, by the way, not been opportunistic. It's been our view for public for 10-15 years, that we think in the long term, M&A is gonna happen, and it should happen. It's just a matter of time. Now, whether that's a year or 10 years, I can't tell you, but we still remain there. Now, having said that, I also understand that when you're playing the game and somebody changes the rules on you, you have to review your strategies as far as going forward. And the rules are moving on us as we speak. I have never, for example, never heard an argument.
I mean, when this was rewritten in the early 2000, and, you know, it talked about in the public interest, that's a pretty broad statement. And when people start saying that if you put two cultures together, it's unsafe, I've never heard that argument in my life. So if this is a political contest, and we're gonna forget about the process that was designed, and we're gonna let the legislative branch take over, the rules all change. And what is right for our shareholders, the CP shareholders, change. And so we will respond accordingly. And I'm not trying to be ambiguous here. I'm not trying to dodge any questions. I'm just telling you to...
I think those of you that think you've got this figured out of what we're gonna do, you ought to let me know, because I haven't figured it out quite yet.
Scott Group (Analyst)
So, just to follow up on that, you know, are there things that you think you can do to start winning that political discussion, and are you do you want to engage in that? And then maybe more specifically, just on that last point of, we think we know what you're gonna do. Like, it seems like there's certainly an expectation of a proxy fight. In your mind, is that something that we should be reconsidering and something that's less likely now?
E. Hunter Harrison (CEO)
Well, you know, I'm gonna make comments, you'll have to draw conclusions. You know, there's as I've said, you know, the rules have changed. You know, I've been through, and I have a little history in this industry. And as I said in one of the earlier calls, there's been 144 times trusts have been asked for, and 144 times they've been granted. And all of a sudden, we raised an issue about the trust, and it's all inappropriate and unethical and borders on illegal, and I quite don't understand those arguments. So look, we understand something. If the deck is stacked, okay, and if somebody's got an ace up their sleeve and are not playing by the rules, then we understand that, and we have to adjust accordingly.
So I don't think, you know, I've said to this group that we would take our message to the shareholders, and we have done that. In one of the cases, with one of the roads that we've talked a lot about, I think I have personally spoken to their, over 50% of their owners or reps of their owners. And all indications is they would be in support of, but they don't call all these shots. So I think, my only advice would, don't get ahead of us.
Scott Group (Analyst)
Okay. All right. Thank you.
Operator (participant)
Your next question comes from the line of Benoit Poirier from Desjardins. Your line is open.
Benoit Poirier (Managing Director and Senior Equity Research Analyst)
Yeah, good morning, gentlemen, and thanks for taking my question. Just with respect to your, to your, 2018 target, I was just wondering whether the current environment, how does it impact your guidance for 2018?
Mark Erceg (EVP and CFO)
Again, I think what I'd say is, you know, it's gonna be hard to ascertain with any real certitude where 2016 will land. So to try and leapfrog out to 2018, I think, again, isn't something that would be responsible for us to comment on, just now. I think, you know, both Hunter and Keith have talked about the fact that we believe we have a lot of runway still to work. We have a lot of efficiency still to realize, a lot of synergy to be gained through our own internal operations, and we're very confident that we're gonna continue to pace the group, as far as having, you know, best-in-class earnings progression, out over the horizon.
But to make some specific comments about 2018 at this point, I don't think again is responsible in this uncertain environment.
E. Hunter Harrison (CEO)
... I think we could say, we could maybe add a little bit of flavor, Mark, to this group. I think, Benoit, all the things that we've talked about in 2018, as far as OR and operating efficiencies and a lot of those things, we're ahead of schedule for. Clearly, the question mark is the economy and the top line, and what happens to the dollar and what happens to Asia and, you know, all those other issues. Now, you know, and I start to answer the question of saying, well, you know, if the dollar stays weak, and it pumps our revenues up. But look, we've got to understand and be mature enough to understand what is best for the overall North American and maybe global network now. So I think we're pretty well there. Mark is exactly right.
If, I wish we knew more about the top line, I wouldn't be sitting here, I'd be doing something else. But, you know, we happen to be railroaders and pretty good at it, but, when it starts to predicting revenue and the economy and so forth, we're a little weak.
Benoit Poirier (Managing Director and Senior Equity Research Analyst)
Okay, thanks for the time.
E. Hunter Harrison (CEO)
Yes, sir.
Operator (participant)
Your next question comes from the line of David Vernon from Bernstein. Your line is open.
David Vernon (VP and Senior Analyst)
Hi, good morning, and, thanks for taking the question. The reduction in CapEx levels to about $1.1 billion, is that a number that we should expect, kind of, going forward, absent a material improvement in the volume of the economy? Or is this a temporary cutback that's going to spring back a little bit in 2017, 2018?
Mark Erceg (EVP and CFO)
I think what we would say is, you know, we have completed a lot of the infrastructure upgrades that were required from years of underinvestment. So at this point, we think that's probably a reasonably sustainable level. Obviously, it might grow a little bit with the overall economy or overall business. But we do think that's more of a sustainable run rate going forward based on all the good work that's been done to date.
Keith E. Creel (President and COO)
Yeah. What we scaled back was capacity capital. Obviously, if we don't have the volumes to support it, we're not going to put the rails and ties and ballast in the ground and start eating the depreciation expense. So we'll bring it in lockstep with the business.
David Vernon (VP and Senior Analyst)
and there's not-
Keith E. Creel (President and COO)
If the business doesn't come, then you can expect pretty steady state.
David Vernon (VP and Senior Analyst)
And with regards to some of the stuff you're looking at on the intermodal side, is there some additional capacity investment associated with that, or is that more about service design and marketing?
Keith E. Creel (President and COO)
No, it's about marketing using existing assets. There's no investment involved in that at all.
David Vernon (VP and Senior Analyst)
Excellent. Thanks a lot for your time.
Keith E. Creel (President and COO)
Thank you.
Operator (participant)
Your next question comes from the line of Walter Spracklin from RBC. Your line is open.
Walter Spracklin (Analyst)
Thanks very much. Good morning, everyone.
Keith E. Creel (President and COO)
Good morning.
Walter Spracklin (Analyst)
I just want to start really on pricing just first, a housekeeping. You targeted price and mix together. Could you break that apart in terms of core pricing for fourth quarter?
Keith E. Creel (President and COO)
On that, you're talking about 3% or our 3%?
Walter Spracklin (Analyst)
Yeah. So 3% for the quarter was your core, core price?
Keith E. Creel (President and COO)
Yes.
Walter Spracklin (Analyst)
Okay.
Keith E. Creel (President and COO)
Correct.
Walter Spracklin (Analyst)
And, and-
Keith E. Creel (President and COO)
We just backed out the adverse impact of-
Walter Spracklin (Analyst)
Of mix
Keith E. Creel (President and COO)
... Canadian grain adjustment, because fuel is such a large piece of that. I mean, that was, that alone is about 1%. So excluding that, that's where you get to 3% same store price for the fourth quarter.
Walter Spracklin (Analyst)
Okay. And as we look forward, I know we've been hearing that, you know, there's a little bit of pressure on the pricing side, that perhaps the historical 3%-5%, you might be at the lower end of that going forward. I think that was what you communicated last time, Keith. Has there been any shift in that with the weaker environment? Are we seeing any, in particular, as you mentioned, the trucking, competitive trucking environment, are we seeing pricing in intermodal on a core basis dipping down at all year-over-year? And as a result, is there a risk that we may trend below the 3% core pricing level for 2026, for 2016?
Keith E. Creel (President and COO)
Well, there's obviously headwinds there because there's excess capacity. So that is the place that we're seeing the most pressure, more so from the truck. So, you know, there's some risk there. We're not going to dip it down too much, though. At the end of the day, the market sets the rate. There's going to be some things that are wins for us and some negatives for us. But at the end of the day, we're not going to get into pricing more. We're going to be responsible about it and strive for that 3%.
Walter Spracklin (Analyst)
And just-
E. Hunter Harrison (CEO)
Well, I might describe it as a different way. I think that if you peel back surcharge and the Canadian grain and the regulated, the margins have held up well.
Keith E. Creel (President and COO)
Yep.
E. Hunter Harrison (CEO)
Continue to increase. So you, if you just hone in on price, you could say there's some pressures there. But once again, if you look at the productivity improvements and look at the margins, the margins have held up awful well in this kind of environment.
Mark Erceg (EVP and CFO)
Yeah, the contribution is what drives the bottom line. That's the key word and a key principle.
Walter Spracklin (Analyst)
Okay. That's my one question. Thank you very much.
Mark Erceg (EVP and CFO)
Thank you, Walter. Take care.
Operator (participant)
Your next question comes from the line of Jason Seidl from Cowen and Company. Your line is open.
Jason Seidl (Senior Research Analyst and Managing Director)
Thank you very much, and good morning, gentlemen. Hunter, you made a comment, you said about the deck being stacked against you. I was wondering if you could elaborate on that a little bit in terms of M&A. Do you mean the deck stacked against you from the terms of more politically and from a governmental standpoint with the Surface Transportation Board? Or are you getting a sense that maybe some investors might not want this as well? I just love to hear your thoughts.
E. Hunter Harrison (CEO)
No, it's more politically in nature. I don't want to point out any one group. I just think that when, you know, when a group of congressmen in Chicago get together, and we hadn't even announced the transaction to start acting against it, and they're concerned about jobs in Canada, you know, I quite frankly don't understand that. And then when two other congressmen come out against it, and we hadn't even made a proposal yet, and they don't know what's going to be in there, and they're opposed. And then some of the other actions that are taking place, and I do think that my personal view is that when the judge shouldn't be talking about the case before he's got the case, okay?
We're bordering on that, of people giving hypotheticals, and I just think that, I think that, in my view, is inappropriate. We said early on that we were very happy to let the process work as it should, through the Surface Transportation Board, and we had perfect confidence that they would reach the right decision, and we would abide by their decision, and we're moving away from that model. And now there's more, there's more political pressures, if you will. And I would only say there's more to come on that.
Keith E. Creel (President and COO)
And if I... I can't resist making this comment, Hunter. These are the same constituents or people that in the face of when the Senate goes into gridlock, they're the same ones demanding solutions and answers on how we're going to fix it. I guess they have a better solution than I do. I'm the operator, they're the politician. I guess they're going to figure it out. Because it's going to happen again.
Jason Seidl (Senior Research Analyst and Managing Director)
Well, I appreciate all that, Hunter . That was great, guys. If I could turn it around in terms of your own employees, obviously, a news of a pending transaction would mean at least some form of change. And the longer this goes on, has there been any consternation among your rank-and-file employees in terms of what may or may not happen?
E. Hunter Harrison (CEO)
You know, I'm sure maybe there's a little bit, but I think that our people, generally speaking, are pleased with where this railroad stacks up vis-a-vis the others. They're proud to be a part of the organization. I'm very proud that, with one exception, we have made some very progressive, unprecedented, longer-term labor agreements. We were not successful with the Teamsters in Canada, but that's the-- we're the outliers or they're the outliers. But I think overall, they understand that our interest, number one, are serving our shareholders, our owner of the company, and that's why we are trying to give guidance.
Because I think it's inappropriate if you say to your owners of the business, "We don't know what's going to happen, and we're not providing any guidance to you or anybody or your representatives." So we're trying to do the best we can there. No, but I think our people know that the better. And this is the point I would like to leave with, if I don't have any other message to say. The thing we can do, and I say that we focus on every day, is execution, serving the customer and doing it efficiently and productively, and we will be served well. And if we all do that, then we don't have to worry about job security and M&A and a lot of other things. Things will happen like before.
If we don't, there's other challenges.
Jason Seidl (Senior Research Analyst and Managing Director)
Gentlemen, I appreciate the time as always.
E. Hunter Harrison (CEO)
Thanks.
Operator (participant)
Your next question comes from the line of Allison Landry from Credit Suisse. Your line is open.
Allison Landry (Senior Equity Research Analyst)
Thanks. So looking at the balance sheet, you're close to 3x levered on a growth basis. And setting aside M&A, are you comfortable at this level? And thinking about your earlier comments, the expectation for improved free cash flow in 2016, do you have a targeted leverage ratio in mind by the end of the year?
Mark Erceg (EVP and CFO)
Yeah, what I'd say is that we are very comfortable with these levels. I mean, if you look at our interest coverage ratios, you know, they're very, very strong. Like we have a, you know, a lot of liquidity, available to us. You know, we, we are, you know, going to maintain our, our investment-grade credit ratings, you know, strong investment-grade credit ratings. And we're very comfortable, in this environment, even with all the uncertainty that's out there, you know, that we're going to be able to, to do that. You know, if we were to, you know, recommend another share repurchase program to the Board, you know, in March, maybe when our current program expires, obviously, it would be, you know, a responsible program that, balances a lot of different, constituencies.
One is our value as it relates to intrinsic. One would be our credit rating metrics. But I can assure you that the company's balance sheet has really never been stronger. And again, it's the interest coverage ratios I would encourage you to look at more than just the leverage itself.
Allison Landry (Senior Equity Research Analyst)
Got it. But any target as far as the end of this year?
Mark Erceg (EVP and CFO)
As far as the end of 2016, again, there's a lot of uncertainty that's out there. You know, we're going to maintain a, you know, strong investment-grade credit rating. You know, that's probably the best way for me to, you know, couch the answer.
Allison Landry (Senior Equity Research Analyst)
Okay. Thank you.
Mark Erceg (EVP and CFO)
Thanks, Allison.
Operator (participant)
Your next question comes from the line of Matt Troy from Nomura. Your line is open.
Matt Troy (Executive Director)
Thank you. Hey, everybody. Just wanted to get a quick question.
... on roadmap, obviously, in the last update you gave us in terms of the acquisition approach, you had anticipated a condensed due diligence session with a potential filing early in 2016, a three-month review period, and something hopefully done by March. Obviously, due to a lack of cooperation or even engagement by the target, you know, perhaps that time frame has been pushed back. Without showing your hand, I just want to know tactically, what does the roadmap look like? Have we been delayed in terms of expectations of timing relative to what was laid out just a few weeks ago, just due to the political environment that you guys have noted today?
E. Hunter Harrison (CEO)
Yeah, I think there's no doubt there's a delay going to kick in here. I don't know, you know... I can't anticipate what the Justice Department's going to do or what their review is going to say or what, how others will respond. But I would sense that would probably delay things some from what maybe our original roadmap, if we had been able to lay it out and it had all worked perfectly.
Matt Troy (Executive Director)
Which is logical. I guess my follow-up would be, your stock has been caught up in the downdraft of the other railroads. You know, you're off more than 50% on a U.S.-listed basis. Is there a point at which you decide to fish or cut bait, given the value of your own stock relative to where it's been, where it just becomes a much easier and frictionless value proposition to pursue your own stock as opposed to a merger that politically may raise the hackles of a lot of constituents? That can always be revisited. Your stock might not always be at $99.
E. Hunter Harrison (CEO)
Absolutely. And I think that, you know, that's one of the things that we're reviewing. These things change daily, almost. But certainly one of the potential reactions could be just exactly what you described, and we could pursue, and would recommend to the Board, an aggressive repurchase and, and run this railroad. And that's, that'd work well for us, and life goes on.
Matt Troy (Executive Director)
Understood. Thank you, Hunter.
E. Hunter Harrison (CEO)
Yes, sir.
Operator (participant)
Your next question comes from the line of Steven Paget from FirstEnergy Capital. Your line is open.
Steven Paget (Director and Senior Research Analyst)
Good morning, and thank you. Could I ask what major labor negotiations or contracts might come due this year, and what progress you might expect to make on them?
Keith E. Creel (President and COO)
Nothing major this year at all, Steven. We still, you know, I'm cautiously optimistic, but I think we've got more work to do in the U.S. properties. But as far as anything major across the board, nothing to see here.
Steven Paget (Director and Senior Research Analyst)
The nature of the work on the U.S. properties would be?
Keith E. Creel (President and COO)
Be on the running train side and a little work on the signal side as well.
Steven Paget (Director and Senior Research Analyst)
All right. Thank you, Keith.
Keith E. Creel (President and COO)
Thank you.
Operator (participant)
Your next question comes from the line of David Tyerman from Canaccord Genuity. Your line is open.
David Tyerman (Analyst)
Yes, so just two things. On the guidance for 2016, the share repurchase assumption, what is the assumption there? And also, what is the tax rate assumption that you're using in there?
Mark Erceg (EVP and CFO)
Tax rate's pretty easy. We'd be using the normalized, you know, 27.5%. As far as, you know, share repurchase, again, I simply mentioned that under our existing authorization, we've about 500,000 shares that we're still authorized to purchase. Beyond that, as I said, you know, we have the opportunity to bring forward a recommendation to the Board at the appropriate time, and we'll give proper consideration to that. So I guess as far as your specific question, I mean, I would tell you that it's a little bit open-ended. I think for modeling purposes, it's probably reasonable to assume that we would complete the, you know, the residual balance of our existing program at some point.
But again, given where we are with the M&A, at this point, we have not been buying shares, you know, on advice of counsel, which is appropriate.
David Tyerman (Analyst)
So, from the answer, I don't really understand in terms of the, is there anything beyond the 500, or is there even anything baked into your guidance?
Mark Erceg (EVP and CFO)
Not yet. No, we have not done that specifically, but what I would tell you is, as we contemplate double-digit EPS growth, you know, in this very uncertain environment, you know, it'll be through a combination of means and mechanisms, perhaps.
David Tyerman (Analyst)
Okay. I'm still not clear, but anyway.
E. Hunter Harrison (CEO)
Well, that would be if we did an additional repurchase, that would be additive to the guide.
David Tyerman (Analyst)
Okay. That's clear. Thank you.
Operator (participant)
Your next question comes from the line of Jeff Kauffman from Buckingham Research. Your line is open.
Jeff Kaufman (Analyst)
Thank you very much. My question on share repurchase was answered, but let me shift gears a little bit. Talk about products. I'm thinking more about potash and fertilizer, given what's going on. Can you talk about how the Canadian grain market is moving differently than the U.S. grain market in terms of acreage? And talk a little bit about what's going on globally in some of the potash markets.
Keith E. Creel (President and COO)
Canadian grain, you know, strong, strong year in 2015. So obviously, you know, a couple of things we don't know. We don't know what the harvest is gonna be second half. What we do know is we don't have a strong carryover, so that could be a bit of a headwind, and we're assuming as much. Just don't know where to put the needle exactly in 2016. And on the potash side, obviously, we had a pretty strong 2015 as well on potash. Canpotex is saying it's gonna be a similar year in 2016. Obviously, some of those contracts haven't been resolved yet. For the Chinese, that's a big piece of that. I think that's gonna happen after the Chinese New Year, probably sometime in the second quarter. So obviously, there's risk there.
But at the same time, with the latest announcement on the Canadian side, with PCS shutting down that facility out in Nova Scotia, there's a chance, you know, if that's gonna be sourced from Canpotex, and obviously, we're the primary carrier for Canpotex, there might be some upside there. So again, it's like everything else, some uncertainty. We're taking a modest approach to it. You know, that's what's given us what we shared as far as, what we see. You know, we see, again, modest single-digit reduction in carloads. Mix is gonna matter, you know, maybe a little bit more on the RTM side because that carload headwind is gonna be on crude and obviously, some of the bulk. So, you know, I'd say modest single digit on carloads and maybe mid-single digit on RTM basis.
Jeff Kaufman (Analyst)
Okay, Keith, thanks so much.
Keith E. Creel (President and COO)
Thank you.
E. Hunter Harrison (CEO)
Thank you.
Operator (participant)
Your next question comes from the line of Alex Vecchio from Morgan Stanley. Your line is open.
Alex Vecchio (VP and Equity Research Associate)
Good morning, thanks for taking the question. Hunter, at the earlier part of the call, you had emphasized that your longer-term views on M&A were the same, that you believed it should happen, and it will happen in the long term. That being said, obviously, the political challenges were greater than you had foreseen. So I guess my question is, what actually gives you the confidence? I think we can all agree that on the merits of M&A itself, but what gives you the confidence that even in the long term, M&A can be accomplished in this industry, if we still have this kind of political situation that could obstruct it?
Or do you assume at some point, you know, that the politics involved, they'll, they'll come to their senses, or is there some kind of a change in the landscape that you think will, will occur, that, that would actually make folks more convinced that, that M&A actually is in the best interest of, of all the shareholders in the industry?
E. Hunter Harrison (CEO)
Well, let me give you the choices. Right now, if you go back to 2014, this industry was criticized severely for not having enough infrastructure to handle the business and had damaging effects on North American economy, both U.S. and Canada. I could go on and on. I would remind you that we don't make choices about crude and so forth. We have a common carrier obligation, and we have to haul it by law, no choice. So we know, I think, at a point, the economy is gonna bounce back, and there's gonna be pressure on the infrastructure from the Mississippi River east. Tremendous. Now, as we try to add infrastructure, communities are opposing and fighting us because they don't want rails coming through their backyard. They don't want crude moving through it.
There's gonna-- not gonna be any pipeline, and we're gonna run out of rail capacity, and we can't add infrastructure. I don't know what the opposition's suggestion is as to what we do in the future, longer range. And I'm not talking about, you know, our shareholder tomorrow. I'm talking about for my grandchildren and great-grandchildren, what are they gonna do? What's gonna be the solution? Who's gonna look at this a little bit longer range in a more mature fashion and say, "What are we gonna do?" God forbid, that something happened in Chicago in this environment we're in. Could you imagine what would happen? So I think, in my view, some people are just sticking their heads in the sand. And so, as a concerned citizen, I think that that should be reviewed. Now, maybe, is the timing wrong today? Maybe.
But until there's other solutions, given where we are today with no pipelines, no more infrastructure, not in my backyard, but you gotta haul it, but no M&A. I've been in this business 50 years, I can tell you one thing, that formula doesn't work.
Keith E. Creel (President and COO)
In Chicago alone, the traffic is gonna double in the next 10 years. That, you know, that's not a very long timeframe in my mind. You know, what are you, what are you gonna do? Unless you believe that the economy is not gonna grow, unless you believe that population is not gonna grow, unless you believe that the need for rail transportation is gonna drastically reduce, you know, I don't like to say the word train wreck, but it's coming. That's exactly what we're talking about. So pain and suffering, these same politicians, that it's easy to say it's the wrong time now, when their constituents can't get the goods that the railroads support to produce. When we can't move the nation's economy, then those same politicians are gonna be challenged with and charged with solving this problem. And you're not gonna build new railroads. This is the only...
Rational solution to increasing capacity in this country to be able to handle the future of freight growth. So it's now or later. And I, I tend to come from a school that I recognize that maybe the pain and suffering is what makes people understand and wake up and open their eyes. But I'd much rather manage this in a time of, a time of calmness than a time of craziness, in a time of meltdown, which we suffered back in 2014. I just don't think that's the rational and the, and the pragmatic and the right way to manage this.
E. Hunter Harrison (CEO)
Let me just finish up this. If you look at some of the opposition and their views are pretty well across the board. One says that stop mergers at all costs after they have merged into one of the largest systems in the U.S., okay? And made up of multi mergers. But when they're through, not for anybody else. The other folks say that, "Look, transcontinental merger could make some sense. Timing's not right." The other folks say, "I don't think mergers are really, they're probably destructive," which is a new. And the others don't say anything. So you get four. Those are not very. You put those arguments together, and it's not very stimulating, saying we're gonna come out with the right answer. So that's why we asked for some help and assistance.
Alex Vecchio (VP and Equity Research Associate)
Okay, that makes sense. Thanks very much for the thoughtful responses, gentlemen.
Keith E. Creel (President and COO)
Thank you.
E. Hunter Harrison (CEO)
So that concludes the Q&A. We appreciate you joining us, and hopefully, we all look forward to better times on the top line and being able to see you in a few months here. Thanks.
Operator (participant)
This concludes today's conference call. You may now disconnect.