Tom Wadewitz: Yes. Great. Good afternoon. Appreciate it. I know you’ve got a lot of questions, Kevin, on volume. And maybe there’s not — it’s tough not to have a clear crystal ball in this type of environment. But I guess, how do you think about the kind of — you’ve got good momentum with the service, good discussions with customers. You’re talking about the pipeline is good. If we see some improvement get beyond inventory reduction, just see a bit of improvement in demand, do you think you’re going to see maybe a bigger cyclical swing up and maybe more evidence of some of that truck conversion coming through? Or, I guess I’m just trying to think about — we know it’s a tough rate backdrop, but what is — how do these things translate when you see some improvement in markets? Is it mid-single digit volumes higher? How do you think about that potential framework maybe looking at a little ways?
Kevin Boone: Yes. I probably won’t put numbers around it, but there’s a reason we’re hiring. There’s — we see all the things that we can control internally, setting us up nicely for when the markets rebound. And yes, I think the combination of markets returning at least to — in some cases, just the current demand levels is going to create a lot of leverage in our business to do that. And I think you’ll see some of these businesses where we’re having discussions around truck conversion as the market firms up, more willing to move that freight back over to rail or move it to rail for the first time. So it’s — the pipeline takes a while to build up. It’s been — as Joe was pointing out earlier, it’s been about nine months since we’ve seen that rail improvement. And the customers are reacting to it, some sooner than others. But yeah, that’s the idea of all these investments, obviously, will help us participate when that cyclical upside starts to occur.
Operator: Your next question comes from the line of Fadi Chamoun with BMO Capital Markets. Your line is open.
Fadi Chamoun: Yes. Thank you. My question on the service level, like obviously, you have done a great job in rebuilding the service and doing the — a comprehensive work on building the culture to sustain that longer term. But as we know, like some of the service issues we saw in the last two or three years were all rail related. You had obviously a lot of friction coming to you from outside of your own network. I’m just wondering, how are you kind of thinking about some of these problems that are affecting your service from outside your network. Some of these partnerships that Kevin talked about, try to kind of iron out some of these friction areas that you see in the supply chain? Or are there opportunities to kind of build the service level that can be sustained even as demand comes back, which historically has been a challenge to service levels?
Joe Hinrichs: Yes. Thanks for the question. This is Joe. You’re right. Over the last several years, supply chain across the globe was challenged, and we certainly felt the effects of some of that. We’ve got some benefits from that on the supplemental revenue side of things because things were going up in storage. But generally speaking, from a customer standpoint, it definitely impacted everyone. And as we’ve noted in the past, around 40% of what we moved on the carload side touches another rail provider. So interchanges are important and the overall service levels of the partners we have across the Class I rails is really important. If you think about going forward, the ports aren’t congested as much as they were, and we don’t have a lot of the network all gummed up in the intermodal facilities and et cetera.
So we should be able to run more fluidly when the market comes back on the intermodal side especially. So I think from a customer perspective, the things that have calmed down help. And as our Class 1 rail partners continue to improve their service, the collective service that we give to the customer holistically will improve as well, which — that’s an opportunity for the whole industry going forward. That’s the way we’re thinking about it. We can control our piece of it, and we want to keep getting better and more repeatable and more predictable and also working with our Class I rail partners to do the same. At the same time, the other parts of the business have also freed up — so as Kevin was alluding to, when that market comes back, we’ll have the manpower levels, and we’ll have the fluidity in our network and the system overall should be able to handle it in a better way, which should be better for the overall economy.
Operator: Your next question comes from the line of Amit Mehrotra with Deutsche Bank. Your line is now open.
Amit Mehrotra: Hey, guys. Thanks for taking the question. Kevin, can you just talk about the direction of travel for non-coal yield? I just would have expected a little bit of a better performance in the second quarter sequentially. I know there was a few headwinds that’s pretty severe incrementally, that fuel headwind kind of moderates in 3Q. So just wondering what the direction of travel on that is. And then Sean, you made some good progress on PS&O costs in the quarter relative to, I guess, that insurance gain adjusted first quarter. I know you’ve got some like leases that are expiring around intermodal container storage jars and things like that in the back half. What’s the right way to think about PS&O coming down in the back half relative to what you did in the second quarter? Thanks.
Kevin Boone: Yes. Obviously, putting coal aside, obviously, that we’ve talked about on the international side. When you look at yield broadly, there’s always mix, right? And when you look at our merchandise business, in general, one of the markets we’ve highlighted is obviously under cyclical pressure right now is the chemical market, which typically has a higher RPU. So that’s weighed on the overall benefit you’ve seen from the merchandise side, and there’s a lot of moving parts within it. But if you look at what we were able to achieve within the individual markets is quite healthy I think despite some of the fuel surcharge headwinds that you saw. The intermodal market obviously is unique, given some of the challenges on the truck and what we have to do there, particularly on the spot market.
But again, fuel surcharge is a much larger impact there. And absent that, you saw a flattish-type RPU, and that was mainly impacted by some of our longer-term contracts, obviously had positive rate. But on the flip side, some of the spot markets saw some significant downgrade along with the truck. But the market held in, obviously, a lot better than some of the trucking rates out there and what the markets do there. But overall, I was very pleased in some of the NPA results as we measure it or some of the highest results that we’ve seen in a long time, if you look broadly across the markets.
Sean Pelkey: And Amit, your question on PS&O, I’m always hesitant to predict that line, because there’s a number of different puts and takes within it that can impact the quarter. I will say that we are very — we’re focused on cost control and we’re making sure that we’ve got only the costs that are necessary in order to move the volume to the extent that intermodal volumes pick up a little bit, that will have an impact on PS&O costs. But outside of volume-related expenses, I would fully expect that we’d be able to, kind of, hold the line on the improvement that you saw in the second quarter in PS&O going forward. And if you look at it on a year-over-year basis for the second-half, that means we’ll probably be able to absorb most of the inflationary impact in the second half, notwithstanding any sort of volume-related impacts that we might see.
Operator: Your next question comes from the line of David Vernon with Sanford Bernstein. Your line is now open.
David Vernon: Good afternoon, guys. Thanks for the call and thanks for taking the question. So Kevin, just to kind of dig into the mid-teens guidance for RPU sequentially. Does that kind of bring us to mark-to-market for $225? And then how do we think about the sensitivity? Can we extrapolate that sensitivity going forward if we’re going to expect sort of benchmark pricing to either go up or down? Is that a good way to think about the sensitivity on further price changes? Because $225 was still, call it, $75 above the long-run average in the prior decade.
Kevin Boone: Yes, I think that’s fair. Obviously, there’s bottoms, right, and there’s — we protect ourselves both on the bottom and then on the top end. We don’t participate in some of the extreme stream cases, but I think that’s fair. $225 is kind of embedded in what we’re coming into the quarter. We’ve seen a little bit of positive uplift in that so even as recently as the last couple of days. So we’ll see where that trends. But we’ve seen a lot of stability, if not a little slight uptick in that market here recently, and we’ll see what the fourth quarter brings.
Operator: Your next question comes from the line of Jordan Alliger with Goldman Sachs. Your line is now open.
