Inflation in 2023 was well over 4% in our cost structure. As we go into 2024, I expect to see inflation maybe be half of that impact. So that’s going to be another area of tailwind. So, thanks for the question, David.
David Vernon: That’s helpful. And maybe just to squeeze one in here on the CSR purchase. Obviously, you’re going to be adding depreciation on the rent side. Is there any sort of like net benefit of owning that property versus just renting, or is this just more about avoiding future lease payments?
Mark George: Yeah. Look, I think the biggest issue is these costs could have quickly run away from us upon lease renewal. We did not control what the lease rate was going to be. We knew that, that would go to arbitration and it could be a significant multiple of where we were. So, it’s really a benefit when you think about what it could be on the go forward, overall. There is some above-the-line benefits that we have in our depreciation today, that lesson, as well as the rent payment that goes away. But again, the interest burden and a pause on share repurchase provides a temporary hurdle for us. All right, we’ve got it wrong. We got another question before we wrap up here.
Operator: Thank you. Our next question comes from the line of Walter Spracklin with RBC Capital Markets. Please proceed with your question.
Walter Spracklin: Yeah. Thanks for squeezing me in here. So, Alan, I just want to understand again, at the end of the day here, you’re talking about top-tier volume growth at industry-competitive margins. And when I look at industry-competitive margin, say, consensus estimates for next year, it’s in the 60% to 61% range of OR for each of these — each of your peers. And even if they do nothing and they don’t move in their OR at all and I just take the midpoint of your 100 basis points to 150 basis points, I mean that’s six years before you can get to industry-competitive margins. So, is that what we’re communicating here? Is that the setup? Or we just look — am I looking at it the wrong way? And maybe you can help me there.
Alan Shaw: [Bascome] (ph), we’ve given you a roadmap for the next three years on how we’re going to narrow the gap with our peers with respect to margin. Our commitment is industry-competitive margins. We’ve given you an outline of where we’re headed based where we see markets. If there’s more lift in the freight market, then I fully expect we’re going to outperform, because our investments in safety and service and our ability to attract growth in the fastest-growing markets and the most service-sensitive markets are going to yield outsized benefits to Norfolk Southern and our shareholders during an upcycle But we’re not calling that yet.
Operator: Thank you. Our final question this morning comes from the line of Bascome Majors with Susquehanna International Group. Please proceed with your question.
Bascome Majors: Hey, Mark, you’ve been candid about the lumpy legal outflows and the insurance inflows on the cash flow front you’re going to see from the Eastern Ohio incident and how that’s going to be with you for some time here. But as we think about the cost structure, can you talk a little more about the ongoing operating cost increases that came from that and how fully burdened what we saw in the fourth quarter was for that and what may still be ahead? And I’m thinking things like insurance premiums or depreciation or say maintenance or testing contracts, but really anything you can share on the ongoing cost increase and how far along we are in that process would be really helpful. Thank you.
Mark George: So, I’m interpreting the question beyond the East Palestine specific impacts that we reported and kind of the aftereffects of it that are in the operating results. And I’ll ask Paul to help, but clearly there were impacts that consequential from East Palestine where we accelerated those train make-up, little changes that certainly had an impact in the second quarter and probably going into the third quarter. I think we’ve ingested that now, and that’s no longer really providing any adverse — adding adverse impact. We have installed more additional wayside detectors that we’re carrying. We’re doing more testing. We’ve got some more people monitoring our wayside deaths, et cetera. I wouldn’t say that the incremental direct safety costs that come out of EP are consequential.
And frankly, I think ultimately they’re going to yield to better results in the go forward, because we are running a safer railroad. We’re having a much better derailment experience in terms of less frequency, as a result of some of the operational changes, including the make-up rules have had. So, overall, there’s probably some — for sure, some lingering incremental cost, because we’re doing things different, but there will be a benefit longer term. Paul, do you want to add anything?
Paul Duncan: Yeah, I’ll just add to — thanks, Mark. The proof is in the pudding that we saw a 42% reduction in our mainline accident rate this year. So, as Alan described, part of our strategy has been to safely deliver reliable and resilient service, and 2023 was a challenging year for us, but those are the types of things that are going to move the needle in driving towards “We have a safer, more resilient product on the railroad.” So yes, there are going to be some of those costs as Mark just outlined very well that remain embedded, with the offset being, we’re going to see and deliver a safer product for our customers and through the communities we serve.
Operator: Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I’ll turn the floor back to Mr. Shaw for final comments.
Alan Shaw: Thank you for joining us today.
Operator: Thank you. This concludes today’s conference call. You may disconnect your lines at this time. Thank you for your participation.
