Canadian Pacific Kansas City Ltd. (CP) Q4 2024 Earnings Report, Transcript and Summary

Good afternoon. My name is Margo and I'll be your conference operator today. At this time, I'd like to welcome everyone to CPKC's Fourth Quarter and Full Year 2024 Conference Call. The slides accompanying today's call are available at investor.cpkcr.com. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. [Operator Instructions] I would now like to introduce Chris de Bruyn, Vice President, Capital Markets to begin the conference call.

Thank you, Margo. Good afternoon, everyone, and thank you for joining us today. Before we begin, I want to remind you this presentation contains forward-looking information. Actual results may differ materially. The risks, uncertainties, and other factors that could influence actual results are described on Slide 2 and in the earnings press release filed with Canadian and US regulators. This presentation also contains non-GAAP measures outlined on Slide 3. Please note, in addition to our regular quarterly financials, there's supplemental Q4 and full-year combined revenue and operating performance data available at investor.cpkcr.com. With me here today is Keith Creel, our President and Chief Executive Officer; Nadeem Velani, our Executive Vice President and Chief Financial Officer; John Brooks, our Executive Vice President and Chief Marketing Officer; and Mark Redd, our Executive Vice President and Chief Operating Officer. The formal remarks will be followed by a Q&A. In the interest of time, we appreciate if you limit your questions to one. It is now my pleasure to introduce our President and CEO, Mr. Keith Creel.

Okay. Thanks, Chris, and thanks everyone for joining us this afternoon to review our fourth quarter and full year results as well as what our views are and what we see as an exciting year ahead in 2025. As always, I want to start by thanking the 20,000 strong world-class railroaders, we call our CPKC family for their efforts to produce these results over the course of what was a historic first year as a combined company. And I can tell you as a leader, it remains my honor to represent these results that we're going to cover on behalf of the entire CPKC family. So, for the quarter, the team delivered revenues of $3.9 billion that was up 3% and volume growth of 2% in the quarter, an operating ratio of 57.1, which was 160 basis points improvement, core EPS of $1.29, up 9% versus last year. For the full year, total revenues of $14.5 billion, which is up 5%, volume growth of 3%, an industry best, an operating ratio of 61.3, 70 basis-point improvement. Core EPS of $4.25, up 11% versus last year. And I can say all that despite a number of challenges, we delivered on the guidance that we set out at the start of the year, to produce double-digit earnings growth. And we did it safely. I can tell you, Mark will elaborate on the points, but I'm extremely proud that CPKC continues to improve on our personal injury frequency ratio and again this year, we lead the industry with the lowest train accident frequency. Looking at the year ahead, there's certainly no shortage of uncertainties that are out there from the macro to trade policies, but we're focused on controlling what we can control. From a guidance standpoint, with the opportunities that we have in front of us, opportunities that this network uniquely enables we expect to deliver another strong year of growth as outlined in the press release, in 2025, we expect to deliver mid-single-digit volume growth and earnings growth of 12% to 18%, which is in line with the multi-year guidance that we set out at our 2023 Investor Day. On the initiative side, we continue to invest in safety and service to support the growth in the fourth quarter. I'm extremely happy to say we completed the construction of the second span of the Laredo Bridge. Next week, I'm excited to go to Laredo to host an opening ceremony where we'll christen the Patrick J. Ottensmeyer International Rail Bridge. As many of you know, Pat's vision and leadership were instrumental, not only in this project, but also the creation of CPKC, we carry on his legacy in the work that we do every day at this company. That investment as well as others that we're making across our network will continue to support the growth that we're bringing into the network in a safe and efficient manner, growth that's uniquely enabled by this network, growth like MMX 180/181, again the fastest and most reliable single-line rail service from Chicago to Mexico in the industry. Connecting new origins and destinations across our ECP, MMC and Grain portfolios, and automotive utilizing our closed-loop service solution, which is creating tremendous value for our suppliers in CPKC. In fact, I'm very happy to share with the group that CPKC was just recently last week named GM Supplier of the Year for finished vehicles in 2024. Some would say, is that impactful? I would suggest, yes. I've been at this for 34 years. It has never occurred in any of my service in the industry. And just to order of magnitude, out of 20,000 suppliers, only 100 are picked on an annual basis. So that's a meaningful recognition from a voice of a customer that means a tremendous amount to our team and certainly illustrates the strategic value of strategic partnerships. Credit to the commercial team and the operating team that have marketed and executed this industry-changing solution delivering the service that's unparalleled in the industry. Again, the award is just example of the many service benefits that our customers are enjoying from this new unique network. So in closing, I'm going to say short-term things are out there, certainly uncertainties from the macro to the trade policies. We've entered into 2025 with a tremendous amount of momentum that we fully expect to build on as we move throughout the year. The long-term fundamentals of the North American economy and trade between the three countries this network uniquely connects remain unchanged. CPKC's value proposition is as strong as it ever was. We're extremely proud of the results we produced in 2024 and we're excited about those that lie ahead of us in 2025 and beyond. So with that said, I'm going to turn it over to Mark. He'll elaborate a bit on the ops. John will bring some color to the markets and Nadeem will bring it back to me after he elaborates on the numbers. Over to you, Mark?

Yes, thank you, Keith, and good afternoon. I'm extremely proud of the performance the operating team delivered this quarter and also throughout 2024. I'd like to thank each one of them for their hard work and dedication in delivering best-in-class service to the customers and their unwavering commitment to safety. As I look at the results in the fourth quarter, we continued to drive year-over-year operating improvements. Just looking at train weight and length, both improved by 4%. Locomotive productivity improved by 1% while our fuel efficiency improved by 2%. These results speak to the efficiency of the network and they are worth highlighting given the impacts of the work stoppages we had at Port of Vancouver and also the winter weather we dealt with in the fourth quarter. Despite these challenges, we rebounded quickly and had a strong end to the year, while we continue to deal with weather across the parts of the network today, our resources are properly sized, and to meet demand and we are efficiently handling strong start of the volumes in this year. Looking at safety, our FRA personal injuries were 0.84, 26% year-over-year improvement for the quarter, and our FRA train accident frequency was 1.03%, which is a 5% improvement year-over-year. I'm very pleased to note that for the second year in a row, CPKC led the industry with the lowest FRA reportable train accident frequency among the Class 1s, building on the legacy of 17 years of consecutive -- for industry-leading for CP. And although we will never stop striving to do better, I'm proud of the team and the results. So turning to capital, in 2024, we made several key investments to drive capacity and efficiency. The engineering team is delivering efficient improvements by leveraging technology to help us more accurately plan maintenance and capital investments across the network. During the year, we in-serviced eight new sidings as part of our merger capital and commitment to the STB. We also invested in Mexico with new infrastructure targeted toward Mexico capacity and fluidity. These investments are paying off. As performance has been stable throughout the year, we are delivering strong service to our customers. Finally, I would share my enthusiasm as well, Keith, with the opening of the Patrick J. Ottensmeyer bridge. The bridge is more than doubling the capacity on what is already the safest and most reliable US-Mexican border crossing. The increased capacity is allowing my team to optimize border crosses and improve the efficiency at the border. Now looking at 2025, our plan is to continue to support safe and efficient sustainable growth through pinpointed efficiencies and capital investments across the network. We continue to make upgrades of the legacy KCS locomotive fleet, which will allow more assets to lead trains in Canada and improve our flexibility in directing our power north. We're also investing in new capacity, including merger sidings, merger CTC along with targeted investments in Mexico and Kansas City to improve fluidity in these key corridors. Our timing service these investments is aligned closely with our growth outlook, ensuring that our network performance and growth and our volume growth are lockstep. We also were taking delivery of 100 new Tier-4 locomotives this year that would support our growth, improved reliability and fuel efficiency. In closing, we are carrying positive momentum in 2025 our network is strong and resilient, poised to deliver mid-single-digit RTM growth, along with the efficient reliable service that our customers expect from CPKC. With that, I'll pass it over to John.

All right. Thank you, Mark, and good afternoon, everyone. The team overcame certainly several challenges this quarter including disruption at the Port of Vancouver, the weather impacts that Mark spoke to and an uncertain macro to deliver solid growth, strong pricing, and unique value to our customers. We closed 2024 out strong and 2025 is off to a good start. Our network is performing well and I feel good about the setup heading into this year and our ability to deliver mid-single-digit volume growth. Now looking at our Q4 results. This quarter, we delivered freight revenue growth of 3% and 2% increase in RTMs. Cents per RTM was up 1% with strong pricing continuing, partially offset by fuel and mix. Now taking a closer look at our fourth-quarter performance, I'll speak on an FX-adjusted basis. Starting with bulk, grain revenues and RTMs were up 11%, a record Q4 performance. Canadian grain volumes were up 18% with increased grain to Vancouver and Thunder Bay driven by the improved Canadian grain crop. We also saw higher volumes of Canadian grain move into Mexico as our network continues to deliver on these new synergies. Now looking forward, our comps for the first half of the year remain favorable in this area, that coupled with our regulated grain pricing of approximately 6.5% and continued synergies has us well-positioned for Canadian grain. US grain volumes grew 5% over the prior year. Our US grain franchise continues to benefit from a solid harvest, steady demand and growth in new lanes as we expand our market reach. In 2024, as an example, we moved over 130 trains from legacy KCP's grain franchise to markets south of Kansas City, most of which are completely new markets for these customers. In potash, revenues were down 4% on a 7% volume decline. Now despite solid potash demand in the quarter, our volumes were impacted by the strike and the challenging weather. We moved record levels of potash though in 2024. And with positive demand fundamentals and Canpotex fully committed to strong levels through Q1, we are well-positioned for another strong year of growth in 2025. And to finish out our bulk business, our coal revenue was down 3% on an 8% decline in volume. The decline was mainly driven by US coal volumes impacted by a specific customer outage, while the work stoppage and weather impacted our Canadian coal shipments. Now moving on to our merchandise franchise; energy, chemicals, and plastics grew 2% on 1% volume growth. We continue to deliver volume growth across multiple commodities in this area, fuel oils, LPGs, biofuels, driven from a variety of opportunities, self-help, and synergies. This growth though was partially offset by lower crude-by-rail volumes in the quarter. Now looking ahead to 2025, we see solid demand fundamentals coupled with continued wins in plastics, LPGs, and renewable diesels delivering another strong year in ECP. Forest products revenues were up 1% on a 5% increase in volumes. Now despite a soft base state demand environment, we are delivering unique synergy growth and extended length of haul in this space, including lumber shipments moving from Canada all the way down to Texas. We continue to work with our customers and supply-chain partners in this space to deliver unique service solutions that will position this business for accelerated growth as the housing market and broader macro improves. In the Metals, Minerals, and Consumer Products area, revenue was down 4% on a 5% volume decline. A softer demand environment, coupled with production challenges at a customer facility impacted our volumes in the quarter. These declines were partially offset with higher volumes of frac sand. Now similar to Forest Products, with our development of two new aggregate transload terminals and the start-up of Aluminum Dynamics new facilities on our network in Mississippi and Mexico, we are well-positioned in MMC to benefit from these strategic network developments along with further growth as the broader macro continues to improve. Moving to automotive, revenue was up 16% on 23% volume growth. Another record quarter and a record year in automotive. This team continues to raise the bar and I'm extremely pleased with our sustained differentiated performance in this space. Benefiting from our unique closed-loop service model that Keith spoke to and key network developments and investments such as our Dallas auto compound, growth and synergies are tracking well ahead of expectation with line-of-sight to future opportunities. In 2025, despite increasingly tougher compares, we expect our auto franchise to continue delivering steady growth as we benefit from new contracts and the ramp-up of market-share gains. On the intermodal side of the business, revenue was down 6% on 1% volume growth. Starting with domestic intermodal, volumes were up 4%, driven by growth in our refrigerated business, and our US Mexico MMX service. Looking to 2025, we have strong line-of-sight to continued growth in domestic as several opportunities start to take hold. Our business with Schneider and others on the MMX service accelerated to peak levels in Q4. And we expect continued growth in 2025 as we add our direct service between Mexico, Texas, and the Southeast US with CSX. Additionally, Americold's cold storage warehouse co-located in our yard in Kansas City will start ramping up midyear. This facility will serve as the anchor along with new CPKC rail-served co-developments now in Mexico and at the Port of St. John which Americold announced yesterday. This builds -- these projects build on our strategic collaboration with Americold as we further expand our reach of our unique rail-served temp-controlled supply chain. On the international intermodal front, volumes were down 1%, primarily due to the labor disruption at the Port of Vancouver. The decline was partially offset by growth from a new contract that continues to ramp up and higher volumes for the Port of St. John. Now looking to 2025, we see a lot of opportunity in this space from increased customer utilization of our CPKC ports and growth through our differentiated service offerings. So to close, we rebounded quickly after the work stoppage and weather impacts, our network is performing extremely well and we feel good about delivering mid-single-digit RTM growth in 2025. And while the macro remains uncertain, we are confident in our unique growth from synergies and self-help, along with our continued ability to achieve pricing that reflects the value of our servicing capacity. 2025 is going to be an exciting year and I look forward to sharing success in the coming quarters. With that, I'll pass it over to Nadeem.

All right. Thanks, John, and good afternoon. I'd like to start by thanking the CPKC family of railroaders for their tremendous effort and execution in our first full year as a combined company. Our best-in-class team of railroaders continues to rise to the occasion to produce results that are exceptional. Now turning to our fourth-quarter results on Slide 12, CPKC's reported operating ratio was 59.7% and the core adjusted combined operating ratio came in at 57.1%, a 160 basis-point improvement over the prior year. Diluted earnings per share was $1.28 and core adjusted combined diluted earnings per share was $1.29, up 9% versus last year. Turning to our full-year results on Slide 13, CPKC's reported operating ratio was 64.4% and the core adjusted combined operating ratio came in at 61.3%, a 70 basis-point improvement over the prior year. Diluted earnings per share was $3.98 and core adjusted combined diluted earnings per share was $4.25, an increase of 11% versus last year. Taking a closer look at our expenses on Slide 14, I will speak to the year-over-year variances on an FX-adjusted basis. Comp and benefits expense was $619 million or $625 million adjusted for acquisition costs and the tax recovery. The year-over-year decline was driven by lower share-based compensation and efficiency gains from improved train weights, partially offset by inflation, incentive compensation, and volume-driven increases from higher GTMs. Looking to 2025, we expect our average headcount to be up low-single digits driving labor productivity gains against the mid-single-digit RTM growth we expect to deliver. Fuel expense was $459 million, down 13% year-over-year. The decline was driven by lower fuel price and a 2% improvement in fuel efficiency from running longer and heavier trains which resulted in $6 million in P&L savings for the quarter. These savings were partially offset by volume-driven increases from higher GTMs. Materials expense was $116 million or $115 million adjusted for acquisition costs. The year-over-year increase was driven primarily by a long-term parts agreement that was put in place last quarter. This agreement is driving higher materials expense as we have in-sourced a subset of our maintenance work, but we are recognizing a favorable offset within PS&O for net savings in the quarter. Equipment rents were $94 million, the year-over-year increase was driven by inflation and lapping against pooled equipment credits received in 2023. Depreciation and amortization expense was up 6% year-over-year, resulting from a higher asset base. Purchase services and other expense was $538 million or $517 million adjusted for acquisition costs and purchase accounting. The year-over-year decline was driven by savings from the long-term parts agreement I mentioned earlier, efficiency gains in IS as we consolidate systems, and lower casualty expense. These savings were partially offset by inflation and increased maintenance expense. We continue to drive efficiency and cost synergies gains with excellent momentum heading into 2025. We expect these gains along with the impact of lower expected inflation to be sustainable and continue improving our cost structure going forward. Moving below the line on Slide 15, other components of net periodic benefit recovery were $87 million in Q4, reflecting the lower discount rate compared to 2023. Full year 2025, we expect this line to increase by $76 million from $352 million in 2024. Net interest expense was $203 million or $197 million excluding the impact of purchase accounting. The year-over-year decline was driven by a reduced debt balance. Income tax expense was $246 million or $353 million adjusted for a decrease in Louisiana State income tax rate [indiscernible] and a tax recovery. For 2025, we expect CPKC's core adjusted effective tax rate to be approximately 24.5%. Turning to Slide 16, we are generating strong cash flow this year with cash provided by operating activities of $5.3 billion in 2024. Our commitment to safe and disciplined growth is reflected in our capital investments and in 2024, we reinvested $2.8 billion, this is slightly higher than our outlook to invest approximately $2.75 billion during the year, with the increase driven by a higher US dollar versus Canadian FX rate. Our disciplined and strategic investments in safety and capacity across our network position us to continue efficiently absorbing the growth that this merger has enabled. Looking to 2025, we expect to invest approximately $2.9 billion in CapEx. Again, this is slightly higher than the outlook provided in our multiyear guide with the increase driven by expected FX impacts. We generated $2.7 billion in adjusted combined free cash flow for the year. We have continued to direct free cash flow after dividends towards repaying debt. I was very pleased to see Moody's recently upgrade us back to our target BAA1 credit rating. We certainly are getting closer to be in a position to return to increasing shareholder returns. In review of the quarter, the team continues to deliver discipline on price and cost control, exceptional execution, and industry-leading results. We have strong momentum entering 2025. Looking ahead, although the macro and trade policies remain somewhat uncertain, we expect to deliver 12% to 18% core adjusted earnings growth in 2025, underpinned by mid-single-digit RTM growth. We also anticipate generating strong free cash flow while investing in the network and reinstating our share buyback program. Putting all of this together, CPKC offers a truly differentiated investment profile. Combining our unique growth opportunities with industry-best execution is driving the results that we are sharing with you today, and I'm excited for the opportunity that we have in 2025 and beyond. With that, let me turn things back over to Keith.

Okay. Thanks, gentlemen, for the color. Let's take the balance of our time and open up for questions. Operator, over to you.

Thank you.[Operator Instructions] And your first question comes from Chris Wetherbee with Wells Fargo. Please go ahead.

Yes, hey, thanks. Good afternoon, guys. Maybe we'll start on the RTM outlook, and so John, you gave us some, I think, helpful color there, but maybe we can unpack it a little bit more and kind of curious how you think about sort of first-half, second-half cadence of that and if you can break it out, how much you might be getting from specific new opportunities, KCS related or merger-related opportunities or what you're seeing kind of in the underlying book of business with core customers?

Sure. All right, Chris. So a couple of comments may be on this. So maybe high-level, think about it in real simple 2% to 3% tied to synergies and I'd say 2% to 3% tied to kind of our base organic business and initiatives tied to the base railroad. I can tell you, I'm not really counting on the macro and hoping for maybe a second-half tailwind if we see something there. So it's really about self-help. I'll tell you probably a little more weighted towards the back half, but I'll tell you this, we're off to a really strong start and not dissimilar to 2024. I think our setup, particularly the first half of the year, if you think about our bulk franchise, is really good. So to be honest with you, I'm trying to I see a path to outperform maybe the first half and then we'll see what the second half of the year brings. I think we're -- the comps look pretty good in the grain front, as I spoke to, we've got a really strong outlook in potash and also Elk Valley has got a strong outlook for coal. On the initiatives front or the synergy front, just to give you a little color on that, continues to be really excited for the international space. We're really busy on that front. Saint John is going to prove to be a nice bump and improvement for us. Of course, we got Americold's new facility that was announced there. We're going to call out some new services from Gemini at Port Saint John. And honestly, that area combined with what we do down at Lazaro and growth in Vancouver, I'm pretty positive about that. The automotive sector continues to shine and I know there's a lot of maybe uncertainty swirling around out there, but you know what, I think we feel irregardless of that, we're set up well, our closed-loop system is producing results as Keith spoke to relative to GM. And we see some other partners there coming on in 2025 that they're going to help pay dividends. And maybe last, I'd point to our intermodal service and specifically our new route with the CSX, not only is that going to provide a lot of opportunity in and out of our new auto compound in Dallas for finished vehicles, potentially even parts, but we're super-excited about what it's going to do in terms of our dry van business and refrigerated business in and out of Mexico that we can use on that route. So, I hope that gives you a little bit of flavor, particularly sort of high-level around the split between synergies and sort of what I consider base initiatives.

Yes, very helpful. Appreciate the color. Thank you very much.

Yes.

Thank you. And next, we're going to go to Fadi Chamoun with BMO Capital Markets. Please go ahead.

Thank you. Just maybe follow up on Chris' question. So the 4% to 6%, I guess, volume kind of band that you've highlighted. Is this kind of how we should think about the volume kind of range versus the EPS range? I'm just trying to think of what would be required, I guess, to be at the higher end of the range versus the lower end of the range and wonder it's the volume band or not? And really my question is, maybe Keith can provide some kind of perspective from your conversations with customers on the potential for these trade policies changes maybe affecting behavior and do you feel that this mid-single-digit kind of volume growth this year is quite independent from anything that happens on that front?

Let me, Fadi, if I can, let me take a stab at the latter part of your question, then I'll let John provide some color. John and his team have spent a tremendous amount of time as we all have concerned and trying to learn about what may or may not happen to the tariffs. And the bottom line is we don't know. But what we do know is that in spite of that volatile perhaps uncertain perhaps outcome we still have investment that's not pulling back, that's doubling down. I've got one particular customer -- strategic customer that was only enabled and created as a result of this transaction, this merger of single-line service where it's a new product to the market that made a commitment to me, sales commitment, made the commitment count, announced expansions of its facilities that he understands this is a long-term play. This is a railroad built forever, not a railroad built for 48 months. Now not to say we don't have to navigate that, not to say we're not going to be close to our customers. But I can tell you this, trade between these three nations has never been, in my assessment more critical. President Trump drove a hard bargain and was central to renegotiating US ACA back at the beginning of the pandemic. I didn't believe that was finalized in 2020, then we had the pandemic occur. Supply chain security became an amplified issue that didn't exist before and that has really accelerated not only the expansion of nearshoring and ally-shoring, but the integration of our supply chains. And that's true in all spaces. You can talk about automotive. I mean, if you really got into the details line-by-line, commodity by commodity, how many engines and transmissions are built in the US to go to Mexico so they can produce the vehicle that comes back to the US that goes to the consumer market, because the fact is we've got 75% of production capacity in the US and 25% that's got to come from somewhere else based on what we consume on an annual basis. So that type of interdependence, that type of need is woven into this economy. And I think in the end, the range was responsible, the range bakes in some risk. If it's not as volatile as we think it is, then don't expect us to be at the 12%, expect us to be another number. That's responsible conservatism. We feel it was our responsibility to ensure that our investors understand, we don't have our head in the sand. We're not sitting on the sidelines, we're going to be engaged, we're going to be at the table. We're going to be involved. I'm going to be involved at the table as far as working with the business communities, and the Government in Canada, I'm going to do so in the US and I'm going to do so in Mexico. We have a vested interest to make sure that our shareholders, our customers' interests are represented and in the end, the right thing in Mr. Trump's desires to build a stronger America to bring jobs to America to balance trade, I think is going to be accomplished. And we're going to see, I think, exceptional growth between the three nations. I just think that -- and I think the other thing, a lot of people get wrapped up in this, I tend to listen to what people say. And I know that there's things that are said and unsaid, but when I hear a President that I take very seriously say that what I'm concerned about Canada and what I'm concerned about Mexico is that you take action to address immigration concerns and illegal drug trade concerns, that are occurring at our borders. And what I've seen since he said that, if you don't, will impose a very significant number, but what I've seen since then is a very responsible Canada take action. I've seen Mexico take action. I personally went down to Mexico City and met with President Sheinbaum the week before Christmas. Had a very productive discussion with her about all of our business about what our network entails and how we can align and help her achieve Mexico's ambitions, but at the same time, the partnership of the trilateral trade between the three nations in a very extreme unique way and that resonates. It makes too much sense not to resonate. So at the end of the day, again we don't know where to put the pen exactly. We think the range is a responsible way to represent that. And I would be extremely surprised if it's not at the higher end versus the lower end unless there's just some crazy -- some volatility because certain people stick their head in the sand and I just don't see that occurring. I don't think that's in anyone's best interest and I think a pragmatic approach will clear the day and we're going to come out on the high side, not on the low side.

Fadi, this is John. So, maybe I'd just add a little bit to that. I've spoken to dozens and dozens of customers here over the last month or so. And I think the reality is the growth platform and the initiatives that we have line-of-sight to aren't really going to be impacted. I mean, we are going to be focused on delivering those unique, whether it be synergies or base opportunities we're going to be fostering the base railroad demand in our bulk franchise that I spoke to. And frankly, if you look back to 2018 and 2019 during the last set of tariffs, I think the reality was that these supply chains are very complex. It's commodity by commodity, it's lane by lane, it's customer by customer. And ultimately what happens, and I think what we saw is there wasn't a lot of change. It's hard to change these complexities overnight. So, we're going to keep laser-focused on the opportunities ahead of us. Just like any sort of volatile demand environment, this team will be ready to adapt and react, if something material does change in one direction or the other and otherwise, we're going to be laser-focused on delivering the growth that we just spoke to.

Appreciate it. Thank you.

Yes. Thank you, Fadi.

And our next question comes from Brian Ossenbeck with J.P. Morgan. Please go ahead.

Hey, thanks. Appreciate you taking the question. Maybe one for Nadeem, you sit here looking into next year, can you give us some of the assumptions or maybe your visibility into the inflationary environment or hopefully disinflationary environment on some of the bigger line items? And maybe also some commentary on expectations for the buyback and how I should think about that starting up and at what pace and at what time? Thank you.

Sure. Thanks, Brian. So inflation, I think it's something that's impacted the industry a fair bit as far as absorbing the cost in the last two years and not being able to fully reprice as contracts come up and price above inflation. And so we've been -- we've absorbed a lot of that on the expense side, on labor, on purchase services, on materials, with steel prices, commodity prices, and of course, tightness in labor market. So that being said, we've seen inflation moderate in some areas kind of non-labor closer to 2%, 2.5% the past year, which is much more normalized. We've seen particularly in Canada, inflation come down closer to 2%. And then on the labor side, it's moderated to start with something with a 3% as opposed to what we face with the PEB, et cetera. So it's much more normalized environment from an inflationary cost side. I think we anticipate getting pricing in that 4%, 4.5% range for the year. So, certainly, we see an opportunity there to see improvements, support margin improvements in 2025 from pricing above inflation. On your second part of your question, as far as the buyback, yes, we're -- we said we wanted to get our leverage back down below 3, closer to 2.5. We've accomplished a lot. We've paid back by the end of this week, it will be close to $7 billion of debt post our announced transaction and post our deal. So we've been very successful in de-levering. The currency has hurt us a little bit. Canadian dollar depreciating and being at a 52 week low has certainly hurt our balance sheet and hurt our leverage number. But if you normalize for a more kind of long-term average on the Canadian dollar, we are closer to that 2.5 -- 2.6 level. So, all that means is, yes, we're excited about being returning to the market. You can expect us to we continue to invest back into the network this year about $2.9 billion. I think we want to address the dividend to an extent. Our yield is, I think 0.7% and even lower at this level. So we'll do something there, but we're going to be balanced in how we return cash to shareholders. And then you can see that the model spits out a significant amount of cash and we'll use the rest to buy back shares and some more to come. We've talked long-term when you looked at our Investor Day, that range of about 3% to 4% is what the buyback kind of spits out when you factor in our CapEx and dividend approach and getting our dividend closer to 25%, 30% payout. So that's kind of what you should expect from us.

Okay. Thanks very much, Nadeem.

Thanks, Brian.

Thank you. And your next question comes from Steve Hansen with Raymond James. Please go ahead.

Yes, good afternoon, guys. Thanks. Appreciate the time. Look, if we think back on to 2024, you were obviously hit by a whole host of diversions and disruptions across the network. I don't need to go through them all here, but if I can stick the tariff issue aside for a minute, I mean, how do you feel about the repeatability of those types of events going forward, whether it's strikes at ports, the terminals, the workers themselves on the railroad, I guess we won't predict wildfires and things like that. But I mean, how do you feel about the normalization of that effect into 2025?

Well, the way I look at it, I think they were episodic. I think 2024 was -- especially the multiple strikes we had at the ports, labor strikes, I think it was very challenging, especially in the calendar year with episodic events that I don't see occurring in 2025, re-occurring, and I say that because of a couple of things that are extremely encouraging that have just recently developed. We just literally this week negotiated an agreement with Unipor, we negotiated an agreement with BMWE, we -- next week will be with USW, I applaud the union leadership, their professionalism, the wisdom, they allowing us to come to an agreement that's good for our customers, good for our employees. At the same time and most assuredly, good for reliability, because I can tell you and I've said this publicly in Canada, there's been so much strike fatigue and labor fatigue that Canada's reputation on the world stage as being a reliable supply chain partner has been challenged and put in jeopardy. And I'm encouraged that those union leaders understand that. I'm encouraged that our employees understand that. Our employees want to be treated well, paid well, and be part of a success story that enables growth and prosperity for their families as well as our customers. And we're at a place now pending the ratification of those agreements, we're going to have an award from Capital on the TCRC, I see 2025 with a positive outcome from those ratification votes with no work stoppages. We have labor reliability, what a refreshing thing to be able to say not only to Mark, he's saying you bet refreshing, but to John, go sell this business to the customer. It's going to be a fluid railroad, it's a success enabler, help them win in their markets so we can win with them. That's a pretty good place to be, Steve. And in all honesty, it hasn't been this way across the board for some time. And the last thing I'll say about that from a reliability standpoint, the terms of those agreements are four-year terms. They're not short-year terms. So we're talking about four years of labor stability with a clean platform and [slate] (ph) for nothing but positive railroad even growth. And I think that's a great place to be in, especially in light of 2024.

That's exciting. Appreciate the time.

Thanks, Steve.

And your next question comes from Daniel Imbro with Stephens Inc. Please go ahead.

Yes. Hey, good evening, everybody. Thanks for taking our questions. Maybe to follow up on our earlier topics. So you mentioned in the script, you're well ahead on synergy capture, you have line-of-sight into some more opportunities. I think you mentioned 2% to 3% extra growth or growth this year from synergies. But could you just expand on what's running better than planned where you see these opportunities maybe increasing? And then while not providing a more formal outlook, should these top-line and cost synergies continue into 2026 and beyond? Should we expect that there's more than you initially thought or we're just finding the synergies earlier in the process? Thanks.

Yes, Daniel, this is John. So I'd say, first of all, the opportunity pipeline we had identified at Investor Day hasn't let up. I feel really good about what's out there and I think hence, you've seen us deliver on that. And you're right, we are ahead of where we thought we were going to be at this point in the journey. I think we are pretty open around closing out 2024 in excess of $800 million type run-rate and I'm super pleased we've delivered and a little bit beyond that. As I think about 2025, I see no reason with what I have feet up out there and the team has feet up out there that we can deliver another $300 million on top of that. And it's across really all the lines of business and that's what makes this unique and frankly fun. And I'm just thinking about, as I said, we've had a lot of success in our automotive business. But I'm going to tell you, we're still early-to-mid innings on that and I see a number of opportunities that exist not only with the OEMs in leveraging some of the capacity in new routes that we've added, but also in the auto parts side of that. We've just kind of scratched the surface there. I already talked about our MMX service and the growth that Schneider has seen on our franchise. But I fully expect that to continue. And we really haven't been able yet to develop because we're waiting on the Americold facility in Kansas City, our reefer business. And every -- as you recall, that's a significant opportunity we laid out at Investor Day that is really targeted at a market that's dominated by trucks. So now you take the combination of our facility in Kansas City, our route into Atlanta, our route in facility with Americold that they will work on in 2025 in Mexico, combined with the new facility in Port Saint John and creates this ecosystem that we've talked about in the reefer space that, again, we really haven't scratched the surface on that yet. And then maybe the other piece that I think worth mentioning, and I say this because it helps lends itself to that future that you spoke to in sort of how long these opportunities are out there for. I talked about in my remarks, the new facility with aluminium dynamics in Columbus, Mississippi and also down in Mexico. That is an opportunity with both of those that are going to open up in the end of or middle of Q3 of this year that are not only going to present sort of base railroad new opportunities, in the steel and aluminium side of the business for us, but also tremendous synergies linking some of our production in Canada and also our production in Mexico up into the US. So I'm excited about that, and then maybe last, the team -- and more to come on this, but the team has worked hard in the Dallas market to continue to develop our relationships with the customers in that area. And we've got a number of transload facilities currently in that market, but I think the opportunity to expand ourselves and our footprint there. So, I'm excited about them. Again, that will be more of a second half of this year story. But one, I think that lends itself into linking these franchises in three countries and delivering more goods in and out of the fastest-growing really US city in the United States. So I hope that provides a little color or more color.

Yes, appreciate all the detail. Best of luck.

And your next question comes from Tom Wadewitz with UBS. Please go ahead.

Yes. Good afternoon. So I think Nadeem, you talked a bit about inflation easing a bit. I think you also mentioned pricing outlook is constructive, I don't know, maybe if that's kind of similar to the 4% to 5% similar to last year. How do you think about the pace of OR improvement and kind of -- are we getting to like 58, 59? And then I guess if you say beyond 2025 that sets up pretty well, do you think that keeps going that there's kind of a runway for further 100 basis points a year or something like that, or is there you kind of slows down a bit when you get to 57, 58. So I guess we're really looking for some OR comments. Thank you.

Sure. So I mean, obviously, we're coming off 57 in Q4, there is some seasonality, of course, as you know, in Q1 and especially up North and then you've got some compensation, incentive compensation accruals and you've got -- you don't have as much capital work available in Q1. So, there is sensitivity around that. But that being said, we had a very challenging first quarter a year ago. And it's a much more conducive operating environment. So I think there's more snow in Florida than we've had in Calgary this year. So, overall, I think it's supportive to seeing -- continued some benefits as far as the OR year-over-year in Q1. I think and if you look about all the one-offs we had a year ago as someone described, debt by 1,000 cuts with all the stoppages and outages and casualty costs, et cetera. So that we're not planning on those occurring. We're always going to have something, but not to that extent. So I think there's some opportunities on that front. So I certainly see, to your point on pricing above inflation and just operating execution, Mark and team running continually, improving the network velocity and productivity across the network, Mexico in particular, that's all going to be supportive of operating leverage. We start getting the volume that we're talking about bringing that to the bottom line. I think we can see that sub-60 operating ratio again. And then if you factor in, going forward, we've talked about 100 basis-point type of improvement as part of our Investor Day. And that's just again operating more effectively, always continuous improvements, that's kind of a cornerstone of how Keith has taught us to lead in this organization. And so 100 basis points over-time each year should be the goal and should be a product of the outcome of running efficiently and safely. And as far as long-term goal, I mean, I'll leave that for you. It's a -- let's get sub-60 first and then we'll go from there.

Okay, great. Thank you.

Thanks, Tom.

Thanks, Tom.

Your next question comes from Walter Spracklin with RBC Capital Markets. Please go ahead.

Yes, thanks very much, operator. Good afternoon, everyone. I want to come to automotive. You've seen a really strong growth in your automotive seg -- your automotive component in 2024. Just curious now is going forward, do you see potential tariffs impacting your business there? And I know Wylie has been a big part of your growth in automotive, do you have any perspectives that you can share with us on the on the Norfolk Southern purchase option in the Wylie Terminal?

All right. I'll take a shot at the -- what my view is on the Wylie option, and I'll let John maybe touch on the tariffs on the automotive side, Walter. I think just for perspective, as everyone understands what we're talking about, back in 2006, when the Meridian LLC was created in partnership with KCS and NS, there was an option to purchase the Dallas Intermodal Terminal, which at that time was at a place called Zacka Junction that was conceptualized and baked into the agreement. It was a one-time one-year window that opened up and in 2024 that closes in April of this year. It's a one-and-done kind of thing, to purchase just that terminal. Now it's important to understand that it's just that terminal. So many of you have been to our Wylie terminal where we opened up our new automotive terminal, it's adjacent to the intermodal terminal, opposite -- south of the mainline, we got about a 500-acre footprint. It's about 90 some-odd acres of the 500. Essentially, that's it. So if it were to be purchased, if they were to exercise the option, it essentially, lack of a better term, is an island. Today, we own it, we operate it, they're the customer, they pay the slip rates for their agent. If they buy it, we take their money. They've got to pay a fair price that's all kind of worked out in the agreement. We can redeploy the capital and make money with it. And we become the customer and we're treated in a fair and equitable way the same way we treat them today. So to me, it's nothing to be concerned about at all. Because truly the true value of it is, it's how you package and how you create the total value for the customer because standalone if you think about it historic and this is the way I look at things, the facts are that was not a big growth engine for NS and KCS. For whatever reason, you go back and look at the data, and I went back as far as 2018; number one, 95% of the business originates or terminates outside of that terminal that's coming from [indiscernible]. So, essentially with an NS terminal, it always has been an NS terminal as far as the destination standpoint. Now we've changed a little bit of that, but there's been no runaway in growth because the true competitor in that lane for that terminal, if you look at it standalone is I-20, it's the interstate. So as the ebbs and flows go of trucking capacity, oversupply, undersupply, rates go up, rates go down, it's going to ebb and flow. So I'm not saying it doesn't have some value. But the true value is when you package it with an automotive compound. And you create an ecosystem that complements this automotive closed-loop system where you have the possibility now to ship automotive parts, they play a role in the production of those finished vehicles that go to those auto racks that operate in that closed-loop system. And when you can do that around our entire network, the strongest automotive network that's been created in the industry, that's when you start to move the needle. So again, my guess is and I've heard the same saber rattling and I know that in NS's recent challenges with their shareholders, some of those shareholders have strong views that there's a lot of untapped or lost value there. Quite frankly, I've been doing this a long time and I hope that they can unlock it. I hope that they can unlock some growth because the reality is this railroad is built to grow with both railroads. The traffic goes to and from on the rail is going to come over our route, we control it, we dispatch it. It's going to go perhaps in this case to their island, which they share with us and have to serve us in. So we're going to compete to that island, we're going to work hard with NS as well as with their competitor in the East to grow from the Southeast markets into the Dallas markets in the triangle down to the Mexican markets. So I hope that if they do buy it, Walter, that they're motivated and they want to grow. I hope that they do what they haven't done in the past because guess what, we get to be part of that and we'll work closely with them. And at the same time, whether they do or they don't, one thing you can bet your money on, this entrepreneurial team, these hunters that we have and John's marketing team are going to work closely with all strategic partners, be it Schneider, be it CSX, be it any other player that wants to bring traffic to the table to take trucks off-the-road and to utilize this unique network to leverage that triumph. We're going to grow into Dallas, we're going to go into Mexico, we're going to grow Mexico into the Southeast in a very unique way. So again, what I would say is they do, if they do, I'll shake their hand, we'll take their money, we'll redeploy it. We'll make a great return with a sizable amount of money, they're going to have to pay us to buy it out and we'll still compete against them and partner with them, nothing changes. We still grow. We still -- net-net, we're in a beautiful position of strength, however that shakes out.

Walter, so just a couple of comments maybe on the first part of your question, but I would maybe start by just emphasizing Keith's comments. The real growth across that Meridian Speedway and into the Southeast is in and out of Mexico. And it is an untapped lane in which the speedways in our route with both those carriers can compete every day against trucks when it's marketed and sold the right way. And also the amount of vehicles that are being short-seas out of Mexico and customers looking for solutions against that is going to be also a big part of that growth over that railroad. If you think about the tariffs, and again, we're staying very close to the OEMs. I'm looking at the opportunities we have in 2025 and 2026 and very much isolation right now relative to a lot of the tariff talk and we're laser-focused with those folks on delivering solutions. The fact of the matter is we've had significant uptake in this product because it's giving these customers a world-class product that frankly, they have not enjoyed from other routes and they can count on the car supply and that matters. So I have a lot of conviction that we'll continue to deliver these opportunities and projects. And look, at the end of the day, North American sales are what they are. They're 16 million, 17 million vehicles a year. The reality is the US has production capability as we sit here today and maybe 10 million of that. The demand to fulfill the need in the United States for vehicles has got to come from somewhere. And whether it's the European markets, the Mexican markets, the Canadian markets, we're going to be there to provide a solution. And that's where we're going to continue to be laser-focused on.

That's fantastic. Appreciate the color.

Yes.

Thank you, Walter.

And your -- thank you. And your next question comes from Scott Group with Wolfe Research. Please go ahead.

Hey, thanks. Afternoon, guys. Couple of things, really big carload RTM spread in 2024. How are you thinking about that this year? And then maybe, Keith, longer-term on the operating ratio, I totally get Nadeem's point, let's get to sub-60 and then we'll sort of figure out where we go. But when we started this journey, we were thinking mid '50s, even some people may be thinking low '50s on OR. Is that just the wrong way to think about where we can go over time or is that still somewhat over time still in the cards?

Well, let me -- I'll take the first part of that, Scott. I haven't envisioned the low '50s number. Again, the operating ratio was an outcome. So if we grow the revenue the right way and continue to run a fluid railroad and we get to the potential of this network over time beyond that 2028 timeframe, is low '50s a possibility. Sure, it is. I'm not planning for it, but yes, it's within the real possibility. But as far as the other guidelines that you're talking about, that path to that double nickel is something that is certainly real. Now there's a lot of uncertainty between now and then, we've got volatility in the marketplace. But again, if unless things get really crazy, we do a good job we continue to execute the way we're executing. We grow with our customers strategically. We don't oversubscribe the network. This network is built to run very efficiently, do it in a low-cost, sustainable way and produce not only strong industry-leading earnings growth, but at industry best, if not industry-best OR.

Scott if I could just make a comment on it as well. Think about things we do in operating, we have our meeting once a year at the end of the quarter, fourth quarter and we pull out double-digit millions of dollars within the operating department to sign up for certain things to reduce cost. Those are the things that we add to the operating ratio to drop it. And if I think about just deploying our capital, I'll tell you, when you look at some of the metrics that's happening in Mexico today with double-digit speed increases, all of this is because we're deploying the capital in the right bottleneck areas to get the locals off the mainline, so trains can travel down the main. We can switch the customer, we can be satisfied with customer satisfaction, but also get everything we need with fuel efficiency off these locomotives, heavier trains, longer trains, we don't have to start and stop. And then when we talk about deploying capital with some new locomotives that we're bring on board this year, very fuel-efficient and again, on the fuel of excellence that we have we deployed on the Deans team is just bringing the cash register with some of the fuel efficiencies we're getting. And those are the things that it brings down. We're exceptional right now what we're doing with the savings of -- dwell with locomotives in Mexico.

Yes. I think you're being modest. Scott, I'll share with you just to kind of sneak peek here. If I look at legacy KCSM or CPKC network year-over-year, raw network speed improved 22%, dwell 8%, GTNs per operating horsepower almost 24%, car miles per car day almost 13%. And that's without the full benefit of the six, what I call productivity infrastructure projects that we executed in 2024 that literally have just came online towards the end of the year. So things are moving more fluidly. The culture is evolving. We've got a tremendous amount of pride. We're driving capacity. We're becoming better railroaders every day. The better railroaders in Mexico is such an untapped diamond in the rough that is evolving every day to become better and better. And I say all those improvements, if you look at like [GTN's] (ph) operating horsepower, our standard legacy CP, we want to go close to 200, is the number. That number with 23% improvement is still at an 80. Now will we ever it to 200, no, because there's a lot of industrial work, the length of fronts aren't the same. The mix is different. But think about if we just improve it from 80 to 120. And the number of locomotives we use in Mexico. And as we grow, the number of locomotives will continue to increasingly use in Mexico. So it's exciting. And again, Mark is being modest, it's a lot of hard work to get it done, but they're pulling the right levers, driving the right culture, making the right investments strategically and these are the outcomes. And when you do that, you control your cost. And bring it right to the bottom-line and however you want to measure it, it's pretty impressive on the operating ratio side and on the earnings growth side.

Thank you guys. Appreciate it.

Thanks, Scott.

And your next question comes from Brandon Oglenski with Barclays. Please go ahead.

Hey, good afternoon. Thank you for taking the question. Maybe for Keith or Mark, I mean, you guys have gone through a lot of labor agreements now. Is there any harmonization that you're like seeking to achieve here longer-term between Mexico, the US, and Canada? And are you working towards some of those longer-term productivity goals on these contracts?

I would say for the US, we would be looking at engineering how we can deploy capital gains throughout the year instead of having reduced forces in the winter months, that's for sure. Obviously, we're still negotiating some of the hourly agreements on the KCS property. We'll work through those over the coming year, but certainly some things that we're doing in that space. When I look at Canada, obviously, we're still going back and forth with TCRC, actually start back conversations next week. And then I think Keith touched on it earlier down in Mexico. I mean, it's -- we just can't change overnight. There's going to be incremental change that we have each year that will help us with the locomotive size of train, fuel optimization, all of that type of stuff, and it's just going to take time in that space. But there is upside to it for sure.

Thank you.

Thank you.

And your next question comes from Kevin Chiang with CIBC. Please go ahead.

Good afternoon. Thanks for taking my question. I guess I was just wondering when you think of tariffs and maybe what that means for the energy patch here in Canada, I think that the view is that could result in a widening of differentials. Just wondering how you might think that plays out for your crude-by-rail franchise and as those potentially widen out if we do get tariffs as we did.

Well, I think so far, Kevin, what we've seen is the uncertainty has created a little bit more of a narrowing and looking at some of our customers in the US looking for alternatives. Now we'll see maybe some certainty bring some opportunity back or allows the market to sort of settle out and think about it differently. Now the other interesting thing is we've seen it spur more in-bound type shipments and more folks looking at opportunities from Canada all the way down to Mexico as a potential alternative growth area separate than the United States. So right now, I think the uncertainty has hurt the markets a little bit. We'll see what the numbers and how the tariffs end up looking and certainly adapt and adjust from there for that space.

That's great color. Thank you, John.

Great. Thanks, Kevin.

Your next question comes from Ken Hoexter with Bank of America. Please go ahead.

Hey, great. Good afternoon. Congrats on the -- great to see industry-leading 57 OR. But it did include harsh winter weather at the end of the quarter and strike at ports. I guess, which really impacted. So Nadeem, I guess, can we go a little short-term, it sounded -- you might have touched on this earlier, but is there a normalization beyond what you've already removed or thoughts on the cost impact for the quarter as we think about that sequential 4Q to 1Q transition versus normal seasonality? And then a minor question, does the 12% to 18% growth target include the buyback already in there or is that incremental to the target?

Yes. So I'd say that part of giving the range, Ken, is to factor in that a buyback is in the target, is in the guide, but just depending on when the timing of that buyback because obviously, the later in the year, it and you get a buyback to less of an impact that will have in 2025, it will have more of an impact in 2026. So, I'll just say this that we do have somewhat of a buyback embedded in the guidance. It's not going to have a meaningful necessarily impact. And obviously, it's going to be dependent on number of shares we do for the July 1st effectively before you can get a benefit, especially with interest rates and so forth. So, some modest benefit in the 12% to 18%. We didn't -- the 57.1, it could have been better. Yes, absolutely. We had the impact of the strike. It impacted some costs associated with that. Weather, we're in Northern railroad, so we do deal with weather and Mark and team were able to overcome near-term challenges. So we're not going to make excuses on weather. We save that for tomorrow, I guess. And then as far as what's -- what I'd say is the sequential OR, it's typically about 300 basis points, 400 basis points is what I'd factor in. And there's some puts and takes with stock-based comp timing. So we had a benefit in Q4 of stock-based comp. And so, that was a tailwind to us, probably have a headwind this quarter. So factor in that as well when you think about quarterly ORs.

Very helpful. Appreciate the time. Thanks.

Thanks, Ken.

And your next question comes from Ari Rosa with Citi. Please go ahead.

Hi, good afternoon. So you guys mentioned the MME offering several times. I just wanted to get a sense for where that is in terms of the rollout of that kind of levels of customer receptivity, the levels of competition you've seen from depressed truck pricing and where that maybe could go in 2025 and the kind of support it could provide to Intermodal volume growth? Thanks.

Yes, Ari. Sorry, I think it's significant part of the story. I'm super pleased with where we sit today, but you're right, it's been against the backdrop of a pretty tough market, well, really tough market out there. To give you some perspective, we grew about 12% Q3 to Q4. year-over-year, I think we are up about 33% when you kind of back-out some of that short-haul business that we're actually lapping right now. So, I'm pleased with how we've -- the team has grown it, but we've got a lot of -- there's a lot of opportunity left on that train to not only fill it up, but also how we begin to high-grade it and really maximize the value of that. And then look, we've been candid relative to the new route over to the CSX that we saw the opportunity for a train a day in that corridor. And as Keith spoke about, the narrative with customers change when you can sit-down and have a discussion around a route, the fastest route in the marketplace between Chicago and Central Mexico, but then you also layer in into Atlanta and Charlotte and some of the Southeast markets. We're super excited about what that brings to the table also. And then even finally beyond that, the upside relative to the reefer business. And again, we've just started to scratch the surface in that product. So a lot of opportunity yet to come in the MMX.

Thank you. And we have reached our allotted time for Q&A. I would now like to turn the call back over to Mr Keith Creel.

Thank you, operator. Well, listen, let me close by again thanking each of you for taking the time to so let us share results and share our story. I think we all understand there's no shortage of uncertainties in the world that we're navigating today. But one thing is certain, this company has a track record and this team has a track record for managing those highs and those lows. We're going to control what we can't control. We undoubtedly have a very unique network with unique opportunities that in spite of what the macro gives us, we're going to create something unique and special, which is going to reflect industry-leading -- at industry-leading margins and certainly industry-leading growth and most importantly, industry-leading earnings growth. So have a safe day. We look forward to sharing our results on our next call, be well.

This concludes today's conference call. You may now disconnect.