Tom Wadewitz: Nice performance on the OR and the network and everything. So, congratulations on that. I wanted to just get a little more color, I think, Jennifer, or whoever else wants to jump in on the expense side? I know you’ve got a couple of questions, but comp and benefits, how do we think about that going forward? Is head count stable? Does that go down a little bit? And then on the purchase services line, I know kind of storing locomotives cars, that’s helpful. But is that — should we model that kind of flat looking forward? Or I guess you said there’s a one-time where you didn’t identify whether that’s kind of small or meaningful. So, I think just from a modeling perspective, and is there kind of further improvement? Or how do we think about it sequentially on comp and benefits and purchase services?
Jennifer Hamann: You bet, Tom. So let me start with the purchased services. So, I think I did say that the one-time item there, accounted for about half of the year-over-year decrease. So, you should set that aside when you’re thinking about rolling that forward. But again, as you heard me talk on another question, we still obviously think we have opportunities there. If you switch to comp and benefits then, back in January, we said we thought that we would probably see about a 5% increase in that line for the year. We were at 4% here in the first quarter, so really kind of right online there. And I think you know the drivers, they’re wage inflation, they’re the sick pay benefit some higher guarantee pay offset by what we’re doing to improve our overall productivity and how we’re managing the headcount.
When you think about those new contract benefits in terms of the sick pay is also when we’re rolling out the work rest agreements, that is resulting in a little bit of an elevation in terms of our TE&Y head count in anticipation of those benefits. And so really, the way to think about that is that we’re paying a little bit more due to those agreements for the same unit of work. But I think what’s encouraging there is we’re offsetting that with some of our productivity, and that’s our plan going forward.
Tom Wadewitz: Okay. So that kind of benefit flying probably stable is the right way to look at it?
Jennifer Hamann: Yes. I mean, obviously, if there’s a significant change up or down from a volume perspective, that can have an impact, but I think we feel like we’re in a pretty good place right now.
Jim Vena: It’s a great way to look at it, Tom, in the short term, you see in the next few quarters. But the challenge and one that we know that we have to tackle is we have wage inflation. You deal with that absolutely, and you have a great service product and you price properly. I think we’re doing the right things there so that we don’t impact our customers to the point where they can’t win in the marketplace. But efficiency-wise, if you look at how the number of cars we’re switching for employee and everything that we’re doing with technology, I’m very comfortable that we’ll figure out a way to change that slope on that line on what it costs us and the number of people per car to be able to hand the business level that we’re at. So, a little bit — it’s a lot of hard work, but I see over the next couple of years for us to get back in line to where we were.
Operator: Our next question is coming from the line of Bascome Majors with Susquehanna. Please proceed with your question.
Bascome Majors: The owners of your Western competitor made some very public comments about really wanting more margin and profitability out of that business just a few months ago. Can you speak to if you’ve seen any being different in either how they approach the market or operate their business? And is or can that create opportunities for you to grow in the midterm?
Jim Vena: Bascome, it’s a great question. And did I like to hear that, absolutely. But because I think we’re in an industry where we provide for the price that we charge very competitive and we beat most modes of transportation. So, I think you need to be smart on how you price, and I think you need to make sure that we provide the service for that price that we sold. So, we compete every day against our competitor, and we’re here to win. And hopefully, they’re prudent in the way they look at their markets, and I don’t tell them what to do. They need to do theirs. And we’re very comfortable that we’re doing the right things. And I think head-to-head, we’ll put our complex of what we have, including the Mexico piece, and I think it gives us a great opportunity to compete.
And you have to love a great competition against the great others. Railroad is a wonderful thing. I love it. It makes us better, makes the whole industry better. So, I love the comments, but we’ll see what their actions are as we see them go down the road.
Operator: Our next question is from the line of Scott Group with Wolfe Research. Please proceed with your question.
Scott Group: So, Jennifer, Kenny sounded a bit better on price. I know, last quarter, you talked about price cost is a margin headwind for the year. I’m just wondering, are we getting any closer to that becoming a tailwind, right, if we can combine some of the productivity stuff with price cost that the margins could get pretty good. I just don’t know if we’re getting closer to that inflection yet. And then can you just clarify that if we’ve seen the full impact of the coal RPU headwind from lower not gas or if there’s another step down coming there?
Jennifer Hamann: Yes. I’ll let Kenny take that coal question. But you’re hearing it right. We’re putting a lot of pressure on Kenny and the team to go out there and deliver the price, and they’re very much stepping up to that and are taking on that challenge and being aggressive in the marketplace. Obviously, we improved our margins in the quarter. So, the combination of our volume, which was down a little bit, the price and productivity is what’s driving the margin improvement. I can’t say that we’re accretive yet from just a pure price inflation standpoint, but that absolutely is a goal. We are though exceeding just the dollars are exceeding the inflation dollars. We’re still very confident of that. Kenny?
Kenny Rocker: I just want to reiterate what Jennifer said, we’ll exceed our inflationary dollars. On this coal question that you have, we’re looking at the same thing. You’re looking at in terms of the natural gas futures, and we’re talking to our customers, similar to my comments around domestic intermodal, yes, I think we’re at the trough levels, when they will come up is yet to be seen. They’re still depressed. We’ll see if we get some seasonal lift here going into the spring and the summer. I want a hot, muggy summer so we can move more business. But if that doesn’t happen, we’ll see what Eric and the team to do for us to efficiently move the coal business. Thank you for the question.
Jim Vena: I’m telling you, and I have to jump in on this one here, Kenny and team and everybody coal is what it is, and I said it in my prepared comments on purpose. We have other markets that are going to take care of that coal business. It’s tough to replace number of trains that we originate, but we used to originate a heck of a lot more than we do today, and we need to be able to grow it. So, we can hope and I’m not into hope. I’m into, let’s go out or deliver have the right processes, have the right things possible, and we go deliver and we win. And I’ve spoken about our franchise a few times on this call. That’s what allows us to win. We provide good service and will more than offset anything that happens over the long term with coal.
It is what it is, okay? I don’t see it coming back to a large level that will change us and might do it for a short term, but that’s the way I look at it, and that’s the way the team here at Union Pacific is. We’re going to win regardless of what happens to one commodity that we ship.
Operator: Our next question is from the line of Stephanie Moore with Jefferies. Please proceed with your question.
Stephanie Moore: So, Jim, really nice progress here across safety and service. So, in terms of customer engagement post these improvements, what are you hearing from customers? Are you seeing engagement accelerate at all? Kind of what’s the opportunity from here? And then maybe on the flip side, I’d love to hear, have you noticed any challenges to the network, maybe revenue holds looking to fill that were maybe less apparent. I’d love to get your thoughts.
Jim Vena: It’s a great question. I think it’s — when I came back to work, a lot of people thought that the only thing I’d concentrate is on operations, and I have been spending some time there. But I have spent a lot of time to customers. I did it the first week I was on the job, I’ve followed up with them. I’ve gone to meetings when we bring them in, our industrial, our bulk, our premium business — so the feedback is they want us to win, and they see themselves winning in the marketplace if Union Pacific can be successful in what our strategy is. So, the feedback has been positive. There’s always some markets and some customers that we have to truly understand what their impacts are and where they are because we want them to survive and win. So, we’re doing everything we can. And maybe, Kenny, you can speak a little bit more about our engagement and what we’re doing with customers.
Kenny Rocker: Yes. If you look at it so far this year, our face-to-face meetings, the strong customer engagement strategies we have a lot more significantly more contact with customers, and we’re touching them in different ways. One of the unique strategies that we have as I’m looking at Eric, 1/3 of our meetings have an operating leader or local operating person is there. And we’re doing that to see how we can grow more business specifically. So strong customer engagement strategy at all levels, and we’re going to keep at it. Thanks for the question.
Operator: Our next question is from the line of Elliot Alper with TD Cowen. Please proceed with your question.
Elliot Alper: This is Elliot on for Jason Seidl. My question is on international intermodal — so the outlook calls for pretty muted international intermodal for the year, I guess I would appreciate some more context around that? I mean, I understand there was a customer loss that you called out last quarter. We’ve seen some strong volumes coming out of the West Coast ports. I guess, — should we continue to think about that continued acceleration on the West Coast mostly offset? Or could there be some upside, if the strength on the West Coast continues?
Kenny Rocker: Elliot, thanks for the question. So, a few things here. Let’s set aside the contract loss you referenced. It’s been strong. International Intermodal has been strong for us, a little bit of a pleasant surprise for us that we’ve been able to capitalize on it. We’re seeing more IPI business or business that’s going into our network increased by a few points. We are aware that there has been a small impact on the positive side because of some of the challenges with the Panama Canal. We’ll see what happens, if some of the BCOs are a little bit more concerned with any labor issues on the East Coast. But as we go through the second quarter, I feel pretty good about those volumes staying where they are as we talk to our customers in their pipeline.
I’d like to see as we move a few weeks out what happens in the second half of the year. So, I’m not ready today here in April to bet on what’s going to happen in the second half of the year. The last thing I’ll end with, and I’ve said this quite a bit, I do like the fact that regardless of what happens at the West Coast, we’re preparing for if it does get transloaded more products for it to get to the East Coast that I talked about, those 20 cities that will move with the NS and the CSX, our Phoenix product and us being holistically and leveraging the entire franchise to go after more business out of the Port of Houston. Thanks for your question.
Operator: The next question is from the line of Walter Spracklin with RBC Capital Markets. Please proceed with your question.
Walter Spracklin: So, I want to take a little bit of a bigger picture on the competitive environment and how you interact with your competitors, both East and West and when we were attending a recent session with the Nordic Southern campaign, they called out the CP-KCS CSX as an actual alliance. Just curious whether you see yourself as naturally being able to cooperate, coordinate operations to bring a more effective, higher service product to your customers? Is there one company in particular or that you could align a little bit closer with given the network interplay between the companies. Just curious what you’re thinking about longer term in the absence of acquisitions or mergers, could there be increased cooperation that allows you to bring a higher service to the customer.
