But I think as we navigate the second quarter depending on volumes, but in particular in the second half is where you’ll see most of the improvement. And, look, I think that 100 basis points and 150 basis points that we’re talking about kind of on the go forward, we should definitely be there in the back half. Whether it translates into a full year amount or not, I think depends on a number of other factors.
Justin Long: Okay. Thanks.
Mark George: Thank you.
Operator: Thank you. Our next question comes from the line of Jason Seidl with TD Cowen. Please proceed with your question.
Jason Seidl: Thank you. Good morning, guys. I’ll put the bat away for the horse, that is guidance here, and turn the attention a little bit to what you’re seeing in terms of impacts from any diversions on the port side, whether they’re from geopolitical events or from the Panama Canal. And if you haven’t seen them yet, do you expect to see them? And what sort of impact should we look going forward?
Alan Shaw: Ed, what do you hear from customers?
Ed Elkins: We’re talking to our customers a lot about this. It’s a situation that has grown over time. We haven’t seen any impact yet to our volumes. Fact is, our East Coast port volumes continue to be remarkably strong, and we are hearing customers start to evaluate their West Coast options, and that makes sense, given some rather unprecedented things that are going on. But regardless, the great thing about our network is we’re well positioned to pick up that volume growth, whether it comes in the East Coast or the West Coast. And I think we’re going to be able to very ably serve our customers and satisfy their needs.
Jason Seidl: Ed, is there a preference on East Coast versus West Coast in the network?
Ed Elkins: Well, I’ve got all kinds of preferences, but no, we’ve got the network built to take on volume, whether it comes through the East Coast or the West Coast. I think there’s probably more intermodal conversion opportunity when it comes through the West Coast. But we’ve gotten very good at doing short haul intermodal with our international customers.
Alan Shaw: Frankly, that’s one of the benefits of our franchise, right?
Ed Elkins: Ture.
Alan Shaw: We’ve got the most powerful intermodal franchise in the East, which serves 60% of the consumers. So, no matter whether it comes in the East Coast or West Coast, we’re going to handle it.
Ed Elkins: That’s right.
Jason Seidl: Appreciate the time, as always, gentlemen.
Alan Shaw: Thank you.
Ed Elkins: Thank you, Jason.
Operator: Thank you. Our next question comes from the line of Allison Poliniak with Wells Fargo. Please proceed with your question.
Allison Poliniak: Hi, good morning. So, with the focus on long-term growth, could you maybe talk to the growth investment embedded in CapEx? Is it higher? Is it lower? And then, with that longer-term margin roadmap, is there an offset embedded in that given just sort of the ongoing investment in service that NS is making? Just any thoughts there. Thanks.
Alan Shaw: Mark, you want to talk about the capital program, please?
Mark George: Yeah. I mean, the capital guidance actually for ’23, I think I mentioned in my prepared remarks, that was going to be largely flat with 2022. And I would say that the mix within that between reinvesting in the business and safety and resilience, it’s about the same as what it was in 2022, call it about 60%, 65%, and the growth element to that is the balance, call it, 35%, and that’s pretty consistent between the two years, Allison. Second part of your question again, I don’t recall.
Allison Poliniak: Yeah. Just that longer-term margin roadmap, obviously you’re investing in service. Is there sort of an offset embedded in that margin just given this ongoing investment? It certainly doesn’t end here. Just trying to think through that.
Alan Shaw: Well, I know that a faster network is a less expensive network. So, as we invest in service and we invest in resiliency, it translates to fewer recruits, fewer network disruptions, fewer — less overtime, less equipment rents, improved fuel consumption and fuel efficiency. So yeah, that’s the part of our franchise — or pardon me, of our strategy, right, it’s that balance between service, productivity and growth, and they build on each other. Thank you.
Mark George: The velocity piece plays into the growth.
Alan Shaw: Thank you, Allison.
Allison Poliniak: Got it. Thanks.
Operator: Thank you. Our next question comes from the line of Jordan Alliger with Goldman Sachs. Please proceed with your question.
Jordan Alliger: Yeah, hi. Just a couple of clarifications here, make sure I understand. In terms of thinking about this year, in light of the — you mentioned, steadily increasing volume assumptions and then increasing incrementals, particularly in the second half and the year-over-year improvement in margin, notably in the second half. I guess the question is what needs to happen to do better than to — the 100 basis points to 150 basis points, the longer-term target? I would imagine part of the plan for the back half of this year is probably to exceed that, I would think. And then, secondarily, can you give a little more color around the use of cash this year? I think you said you’re suspending the buyback, but the interest expense is pretty high. So, is debt reduction part of it? Because I think you also mentioned you want to get the liquidity ratios more in line. So, maybe where do you hope to end the year on that front? Thanks.
