Margin Expansion Outlook
Q: How will margins expand in 2024 with volume growth?
A: Management aims to expand margins by growing profitably, operating safely, and running an efficient railroad. They expect headwinds in the first quarter to ease in the second, leading to strong incremental margins in the second half of 2024.

Coal Revenue and Volume Outlook
Q: What's the outlook for coal RPU and volumes in 2024?
A: The coal market is healthy but volatile; management has a conservative outlook for coal revenue per unit (RPU) but hopes for upside. Export markets may offset domestic weakness, and they remain optimistic about coal volumes despite potential industry declines.

Cost Outlook and Unusual Q4 Items
Q: Will costs stabilize or decrease going forward?
A: Unusual items totaling $30–35 million in Q4, including a $15 million vacation and sick leave true-up, a $10 million depreciation true-up, and $10 million derailment costs, will roll off in Q1. Management expects to build momentum in cost efficiencies throughout 2024.

Operating Leverage and Efficiency
Q: When will operating leverage improvements show up?
A: Operating leverage is underlying the business but was impacted by first-half headwinds like fuel lag and revenue declines. Management expects operating leverage to show more clearly in the second half of 2024, even in a flat macro environment, supported by business wins and resource optimization.

Pricing Outlook
Q: What is the pricing assumption for 2024 contracts?
A: Management expects cost inflation to be lower in 2024. Pricing is anticipated to come down compared to 2023 but remain healthy relative to historical rates, supporting revenue growth through a balanced approach between volume and price.

Revenue Headwinds from Storage and Fuel Surcharge
Q: How will storage revenue and fuel surcharges impact 2024?
A: Other revenue is modeled at $130 million per quarter, presenting a $50 million+ headwind in Q1. Fuel prices have decreased; a favorable lag is expected in Q1, but it will be a year-over-year headwind. These factors contribute to tougher comps in the first half of 2024.

Resource Management for Volume Growth
Q: Can you handle volume growth without increasing resources?
A: With headcount added in 2023, management plans to hold headcount flat and absorb new growth, achieving labor productivity improvements in the second half of 2024. Existing locomotives will be used more efficiently to support growth.

Labor Efficiency and Headcount Planning
Q: What are the opportunities for labor efficiency with new volumes?
A: While incremental volume may require additional headcount depending on specifics, increasing train size and reducing car touches offer opportunities for efficiency. Management believes they can handle incremental volume with current resources in many cases.

Operational Efficiency and On-time Performance
Q: How will you improve on-time performance and efficiency?
A: Focus is on yards and terminal performance, connecting cars, and increasing train size. Growth initiatives may temporarily affect on-time metrics, but management is not concerned, emphasizing customer delivery and efficiency through a condensed network.

Cash Flow Headwinds and Volume Growth Cadence
Q: How will deferred taxes and CapEx affect cash flow?
A: A $380 million deferred tax payment in the first half of 2024 and a $200 million increase in CapEx (from $2.3 billion to $2.5 billion) present headwinds. Volume and revenue growth are expected to have an even cadence throughout the year, with growth achievable across all quarters.

Accelerating Truck to Intermodal Conversion
Q: What will drive acceleration in truck-to-intermodal conversion?
A: Improved service levels and terminal fluidity are expected to drive market share gains as the company measures customer experience more effectively. The hope is that the trucking market has bottomed, positioning intermodal for growth.

Comp Per Employee and Efficiency Initiatives
Q: Will comp per employee decrease in Q1 after Q4 increases?
A: True-ups in vacation and sick leave added $15 million in Q4 costs, creating a tailwind for Q1. A couple of percentage points improvement in comp per employee is expected versus Q4, steady in the first half, with a 4% wage increase scheduled in July.

Operating Ratio Expectations and PS&O Costs
Q: How are PS&O costs being managed for margin growth?
A: PS&O costs include expenses from Quality Carriers and PanAm acquisitions, which are volume-variable. While an increase is expected from Q4 to Q1, management is focused on PS&O as an area for cost savings to drive margin improvement.

Company Focus and Priorities
Q: What are the focus areas for the next 12–18 months?
A: With business stabilized and manpower at target levels, the focus is on leveraging operational strength to become more efficient, improve safety, and grow with customers. The network and team are in good shape to build on momentum from the past year.