Greetings, and welcome to the Union Pacific First Quarter 2024 Conference Call. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded, and the slides for today's presentation are available on Union Pacific's website.

Thanks, Rob, and good morning to everyone. Beautiful day in Omaha, 60 degrees, a little bit of rain. It is absolutely perfect for railroading. So why don't we get started? And thank you for joining us today to discuss Union Pacific's first quarter results. I'm joined in Omaha by our Chief Financial Officer, Jennifer Hamann; our Executive Vice President of Marketing and Sales, Kenny Rocker; and our Executive Vice President of Operations, Eric Gehringer. As you'll hear from the team, we continue to execute our multiyear strategy to establish Union Pacific as the industry leader in safety, service and operational excellence. We, again, took positive steps towards that goal in the first quarter. While challenges outside our control persist, we are establishing a foundation for long-term success. Now let's discuss first quarter results starting on Slide 3. This morning, Union Pacific reported 2024 1st quarter net income of $1.6 billion or $2.69 per share. This compares to 2023 1st quarter net income of $1.6 billion or $2.67 per share. We're pleased to be able to report earnings growth in a tough environment, especially since last year's results included a $0.14 per share real estate gain. First quarter operating revenue was flat as solid core pricing gains and a positive business mix were offset by lower fuel surcharge revenue and reduced volumes. Normalizing for the impact from fuel surcharge, freight revenue was up 4% versus last year. Expenses year-over-year were down 3%, driven by lower fuel prices and productivity gains. This was partially offset by inflation, increased transportation workforce levels to compensate for new labor agreements and higher depreciation. Our first quarter operating ratio of 60.7% improved 140 basis points versus last year. This also represents a 20 basis point improvement sequentially from the fourth quarter, which further demonstrates the strong work by the team. It's a great start to the year. I'm pleased with how the Union Pacific team is coming together to unlock what's possible for our company. But there's a lot of work to do. I'll let the team walk you through the quarter in more detail, and I'll come back and wrap it up before we go to question and answer. So with that, Jennifer, why don't you go through the first quarter financials?

Thanks, Jim, and good morning. I'll start with an overview of our first quarter income statement. Operating revenue was $6 billion, which remained unchanged from last year, despite a 1% decline in volume primarily due to a 20% drop in coal shipments. When excluding coal, we actually saw a volume increase of nearly 2% year-over-year, even in this challenging freight environment. Looking at the revenue components, total freight revenue was $5.6 billion, also down 1%. The main factor contributing to this decrease was a 25% drop in fuel surcharge revenue to $665 million, as lower fuel prices adversely affected freight revenue by 375 basis points. However, solid core pricing gains and a favorable business mix improved freight revenue by 350 basis points. The positive mix was driven by reduced coal and rock shipments alongside increased soda ash and petroleum carloads. Excluding fuel surcharge, freight revenue grew by 4%, marking a strong start to the year and showcasing the diversity of the UP franchise. Additionally, other revenue rose by 4%, largely due to higher accessorial revenue, which included a one-time contract settlement of $25 million. Now, focusing on expenses, operating expenses totaled $3.7 billion, down 3%, as we achieved strong productivity despite lower demand. Looking at specific expense lines, compensation and benefits increased by 4% compared to last year. Workforce levels decreased by 2% in the first quarter, as reductions in non-transportation staff more than compensated for a 4% rise in our active TE&Y workforce. While our training pipeline has notably shrunk, we've kept extra train services employees to support operations and manage the impact of new sick pay benefits and work rest agreements. On a related note, we are transitioning operating responsibilities for certain passenger lines in Chicago to Metro. As a result, we will transfer approximately 350 mechanical employees to Metro in June, which will reduce both revenue and expenses by about $15 million on a quarterly basis. Cost per employee rose by 5% in the first quarter due to wage inflation and additional expenses from new labor agreements. Fuel expenses dropped by 14%, following a 13% decrease in fuel prices from $3.22 per gallon to $2.81. We also improved our fuel consumption rate by 1%, as increased locomotive productivity offset a less efficient business mix due to the decline in coal shipments. Purchased Services & Materials expenses fell by 6% year-over-year, thanks to a smaller active locomotive fleet and reduced drayage costs at our logistics subsidiary. Furthermore, about half of the year-over-year variance was related to resolving a contract dispute. Lastly, Equipment & Other Rents decreased by 8%, reflecting improved network fluidity and lower lease costs. Through effective cost management, our first quarter operating income reached $2.4 billion, a 3% increase from last year. In terms of below-the-line finances, interest expense dropped by 4% due to lower average debt levels. Our first quarter net income was $1.6 billion, and earnings per share reached $2.69, both up 1% compared to 2023. Our quarterly operating ratio improved to 60.7%, showing a 140 basis point enhancement year-over-year, despite a 60 basis point headwind from lower fuel prices. Moving on to shareholder returns and our balance sheet, first quarter cash from operations was $2.1 billion, up about $280 million from last year. This growth in operating income is reflected in the increase, alongside impacts from 2023 labor agreement payments. Additionally, free cash flow and our cash flow conversion rate both showed strong improvements. As planned, we repaid $1.3 billion of debt maturities in March, leading to a decline in our adjusted debt-to-EBITDA ratio to 2.9x at quarter’s end, and we maintain an A-rating from our credit rating agencies. During the quarter, we also paid out $795 million in dividends. In conclusion, while you will hear more from Kenny, our overall outlook on the freight environment remains largely unchanged since January. There have been some fluctuations in our outlook, but overall economic uncertainty persists. However, I am confident that our service product can meet current market demands and will be prepared to support our customers once volume increases. Our first quarter results further affirm our dedication to achieving productivity that enhances network efficiency. We are committed to generating pricing that surpasses inflation, excluding fuel costs, and we expect positive mix contributions in 2024 to allow freight revenue to grow faster than volume. Lastly, we are set to restart share repurchases in the second quarter, reaffirming our confidence in our strategy and the momentum building within the company. The initiatives we are implementing to enhance safety, service, and operational excellence are reflected in our financials, and we believe that continuing this approach will yield shareholder value throughout 2024 and beyond. Now, I'll turn it over to Kenny for further updates on the business environment.

Thank you, Jennifer, and good morning. As Jennifer mentioned, freight revenues totaled $5.6 billion for the quarter, which was down 1% as core pricing was offset by lower fuel surcharges and a 1% drop in volume. Let's jump right in and talk about the key drivers in each of our business groups. Starting with Bulk, revenue for the quarter was down 4% compared to last year on a 5% decrease in volume and a 1% increase in average revenue per car. Solid core pricing gains across most Bulk segments were largely offset by low natural gas prices that unfavorably impacted our coal index contracts and lower on fuel surcharges. As stated, coal continued to face difficult market conditions in the first quarter as warmer temperatures overall led to record low natural gas prices and caused significant declines in demand. Grain and grain products volume was up for the quarter with increased shipments of corn to Mexico as well as more shipments from Canadian origins. Lastly, despite strong truck competition, food and refrigerated shipments increased as a result of new business for dry goods solid demand and network service improvement. Moving to Industrial. Revenue was up 4% for the quarter, driven by a 1% increase in volume. Strong core pricing gains and a positive mix in traffic were partially offset by lower fuel surcharges. Our strong business development efforts in petroleum allowed us to capitalize on windows of opportunity along with new domestic contract wins. Demand improved for our Petrochemicals business in both export and domestic markets. However, challenges with high inventories and weather negatively impacted our rock volumes. Premium revenue for the quarter was down 3% on a 1% increase in volume and a 4% decrease in average revenue per car, reflecting lower fuel surcharges and truck market pressures. Automotive volumes were positive due to business development wins with Volkswagen and General Motors, along with continued strength from dealer inventory replenishment. Intermodal volumes were positive in the quarter, driven by strong international West Coast demand, which was partially offset by the international contract loss I mentioned in January and soft market conditions in domestic intermodal. Turning to Slide 10. Here is our 2024 outlook as we see it today for the key markets we serve. Starting with Bulk, we anticipate continued challenges in coal as inventories are projected to be at record levels and natural gas futures remain depressed. We are hopefully watching grain, particularly as it relates to new crop conditions and fourth quarter export demand. We expect domestic grain demand to be stable. Lastly, we are optimistic about grain products, as we continue to see growth in biofuel feedstocks. Additionally, we recently won incremental grain products business out of Iowa that started moving earlier this year by demonstrating our consistent service products and developing competitive solutions to support our customer's business. Turning to Industrial. The rock market will be challenged to exceed last year's record volume. However, we expect petroleum and petrochem markets to remain favorable due to our focus on business development, supported by our investments in the Gulf Coast and operational excellence. And finally, for Premium, on the intermodal side, we expect to see consistent, strong West Coast imports in the near term, but it's still too early to predict what will happen in the back half of the year. On the domestic intermodal side, we continue to see market softness, but expect our strong service products and diversified set of IMC and private asset partners will set us up well when demand returns. For Automotive, we will see continued strength due to our business development wins and improved OEM production. In summary, coal and domestic intermodal will put pressure on our volumes this year, but the team has taken action. As you saw in the first quarter, excluding fuel, we were able to grow revenue even as we face lower volumes overall. I am confident that with our improved service products, we will continue to win new business and take trucks off the road. On the price side, we are having deliberate conversations with customers on price increases to overcome inflationary pressures. And those conversations are backed up by an efficient service product that Eric's team has given to our customers so that they can compete and win. We have a great franchise, along with being the premier cross-border rail provider to and from Mexico that positions us well to serve markets in both the U.S. and Mexico. Our legacy service and the new service offerings we've added allows us to win in the marketplace, and we see strong opportunities in front of us to grow with our customers. And with that, I'll turn it over to Eric to review our operational performance.

Thank you, Kenny, and good morning. Moving to Slide 12. We exited 2023 with strong operational momentum across the board. And while weather quickly presented its challenges, the team rose to the task. The speed with which our service product recovered is a testament to our strategy and the resiliency of our network. We continue to see meaningful year-over-year improvements in our metrics. This is a direct result of our steadfast focus on providing industry-leading safety, service and operational excellence. Starting with Freight Car Velocity. Improvements in terminal dwell and overall network fluidity led to a 4% improvement compared to first quarter 2023. Sequentially, Freight Car Velocity declined 6%, primarily due to shifts in product mix between our Bulk, Manifest and Intermodal services. Particularly, we are seeing an impact from declines in Intermodal and Bulk shipments, which generally contribute higher average daily car miles. Key is that our service product remains consistent, and we are delivering what we sold to our customers. We want our customers to win. And if they win, we win. To further deliver on the service we sold to our customers, we recently introduced a new measure Service Performance Index, or SPI. As the name implies, it's a combined metric that reflects the actual service provided, and we believe it's a better measure than trip plan compliance alone. For those customers with specific transit commitments, we measure against that. And for the many customers who rely on our historical performance to inform their rail transportation planning decision, SPI provides a measure that aligns with this practice. For the first quarter, both Intermodal and Manifest and Auto SPI saw a sizable 14 and 7-point year-over-year improvement, respectively. The team also delivered safety performance in the quarter, both on derailment and personal injury fronts. As we continue to emphasize the culture of safety, we're also investing in technology and process, ensuring our employees have the tools they need to operate safely and efficiently. Our goal is clear, we want to lead the industry and drive tangible change so everyone goes home safely each day. Now let's review our key efficiency metrics on Slide 13. While maintaining focus on enhancing safety and service, it is equally crucial that we do so in a cost-effective manner, enabling Kenny and the team to compete in a broader range of markets. In alignment with this objective, we saw year-over-year improvement across all of our first quarter metrics, indicating that the efficiency of our railroad is on the right track. Locomotive productivity improved 10% compared to first quarter 2023, as the team continues to run an efficient operation and a transportation plan that requires fewer locomotives to satisfy the demands of the business. In fact, we have reduced our active fleet by about 500 locomotives compared to last year. Workforce productivity, which includes all employees, improved 1% as average daily car miles declined slightly and employees decreased 2% compared to 2023. While overall workforce counts declined, our train, engine and yard employees increased 4%, as we continue to support our training pipeline, scheduled work agreements and provide the capacity buffer necessary to navigate an ever-changing environment. Train length improved 1% compared to first quarter 2023. After a particularly challenging January due to winter weather, we quickly adjusted to set train length records in both February and March. Notably, manifest train length increased by around 300 feet. While train length increased for nearly all train categories year-over-year, declines in intermodal shipments, which generally move on longer trains, moderated sequential performance. Although we are encouraged by these results, there are ample opportunities ahead for us to further improve asset utilization and the efficiency of our network. For instance, we are leveraging technology to automate terminal functions and engineering renewal activities, increasing energy management utilization to improve fuel consumption and developing car plan optimizers to reduce car touches. While these are just a few of key initiatives, running a safe, reliable and efficient railroad for all our stakeholders is vital. And as we move forward, we will continue pushing the envelope in our pursuit of industry-leading safety, service and operational excellence. So with that, I'll turn it back to Jim.

Thank you, Eric. Turning now to Slide 15. Before we get to your questions, I'd like to quickly summarize what you've heard from our team. First, as you heard from Jennifer and Kenny, our volume outlook in some markets continues to be challenged. We are mitigating those challenges by driving efficiency in the network, which is driving stronger financial returns, and this provides confidence to start repurchasing shares in the second quarter. Kenny provided you with an overview of the first quarter volumes and laid out some updated thoughts for the year. Coal is going to be a headwind. It is what it is. We need to outperform what our markets give us naturally to offset that impact. And if we provide the service we sold to our customers, I'm confident they'll grow with us. It's also imperative that we generate pricing for the value we're providing our customers. Lastly, Eric walked you through the progress we're making across safety, service and operational excellence. When I look at how we're performing, I see improvement across the board. The network is operating fluidly and efficiently, allowing us to meet the demand in the market. And that drove the financial success, as you saw here in the first quarter. There's certainly more to do, but we're on the right path. At the end of the day, we're demonstrating continuous improvement, getting a little better each day. In the long run, our focus on being the best across the spectrum will generate sustainable long-term value for the years ahead. One final item for you all, a Save the Date. We are planning an Investor Day on September 18 and 19 in Dallas, Texas. More details to follow, but we're excited to lay out more of our vision to demonstrate what's possible for this great company of ours. And with that, Rob, we're ready to take on some of the questions.

So it seems like the operations are working pretty well, Jim. I'd like you to maybe talk about kind of what you're doing with Kenny and his team to start focusing on growth that's maybe different or hasn't been done at UNP in the past. We know there's been a couple of the joint services with the CN and the Falcon and stuff like that. But internally in terms of focusing the team on more business development efforts, can you just kind of talk to us a little bit about what kind of changes you're making or what kind of initiatives you're emphasizing to start driving a little bit more growth on the networks?

Thank you for the question, David. I'll quickly summarize what we're doing, and then Kenny can provide more specifics. On the railroad side, we're focusing on how we can grow with our customers. Some expect speed and resilience, while for others, consistency is more crucial than speed. We're building fundamental blocks to offer a unique service. For example, we have a high-speed service that can cover 2,000 miles in less than two days, making us competitive with other transportation modes. We aim for our customers to succeed in various sectors, whether it's the automobile industry or our export activities, including access to Mexico and interchanges with other railroads. I'm dedicated to operations, and while I believe we're doing well, there's room for improvement. We need to be more consistent and deliver faster, as that will lead to our success. I've also invested time with Kenny and his team to engage with customers and understand their needs. By providing consistent service, we aim to create value that encourages current and potential customers to partner with us. I'm optimistic about our ability to maintain this consistency, which should help you, Kenny, grow the business effectively.

All right. So look, David, you hit it on the head. What are we doing differently? And I just want to talk to you about some of the product development that Eric and I and our teams are doing together. You look at the Phoenix ramp. We're excited about it. We're seeing that volume come in there and grow sequentially. It just gives our customers and BCOs more optionality. Port of Houston is one. We put that service back on. We've been excited about the growth that we've seen come out of there and we'll continue to add on to the destinations that are there. We started off with 5, now we're at 11. You look at Inland Empire, we just added on a new product there. Now we're going to 20 cities, east of Chicago with the CSX and the NS on the unit train side. Because we are seeing the cycle times improve, we're naturally getting more volume, so we like that piece. On the finished vehicle side, you talk about product development. Business that's coming off of the water that's getting land bridge that we're moving back east. Look, this lower cost that we have really opens up new markets for us at great margins. So we're on offense. I mean we're pushing every lever we can to get business onto our network. We got a beautiful franchise, as Jim mentioned, and we're taking advantage of it.

All right. If I could maybe squeak one quick follow-up. How is the FXE performing with the extra volume? I know south of the border, there's been a lot that shipped over onto that. And then, are you thinking about sort of expanding capacity over the Eagle Pass Gateway to maybe accommodate future growth out of Mexico?

David, I've spent considerable time in Mexico, making about 8 or 9 trips in the last 8 months to collaborate closely with FXE regarding our ownership in them. We are aware of the key concerns, and FXE has successfully identified the necessary actions. They provide a solid service product, and we share the same objective of continuous improvement, working together towards that goal. In a few weeks, I plan to take a ride on the front of a freight train with FXE to gain further insights into their operations. We have established processes at the border to facilitate smoother crossings for our crews, which is logical, similar to the arrangements between Canada and the U.S. at International Falls. We are actively addressing issues that hinder the speed and efficiency of border crossings for our customers, and I'm pleased with our progress. Our aim is to operate as a unified railroad. While I prefer not to share excess locomotives with other railroads, we have allocated some to FXE to ensure they can handle the existing traffic, and they have experienced significant growth. They will provide specific numbers, but we are seeing growth in Mexico in both directions, which presents an opportunity for us to leverage our six touchpoints into Mexico and optimize it for Union Pacific.

So it was good to see the OR improve a little bit sequentially despite the typical seasonality that you see. And in the outlook, you talked about profitability gaining momentum. But can you help us translate that into how you're expecting the OR to trend over the balance of the year? It seems like we're tracking towards the sub-60 the rest of 2024, but is there anything on the horizon that could prevent that from happening?

Thank you, Justin. We are not providing an outlook on the operating ratio, so I won't comment on your number. However, we aim to continuously improve. Jim mentioned that we made some good progress, but there is still more work to do. Our focus is to keep making gains each quarter. Of course, we are navigating an environment that we cannot fully control. We have influence over many aspects, such as our service product and cost structure, as well as our market approach and pricing strategies led by Kenny and his team. Nevertheless, we are facing some economic uncertainty that affects us, particularly with fluctuating interest rates and fuel prices. So, stay tuned. We are optimistic about our setup and confident in our ability to perform.

Congrats on the strong results. Eric, obviously, you and the team have done a phenomenal job with the operations and the metrics. We've kind of been stuck in this 155,000-ish 7-day carload number. I will be curious to get your confidence and perspective on how much more you can handle when Kenny gives you that to handle. How you feel comfortable about moving 5,000, 10,000 more carloads per week, if you can talk about that? And then just, Jennifer, related to that this question that was just asked, the weather gets better from 1Q to 2Q, you move more industrial carloads. It's a pretty meaningful advantage as you move from 1Q to 2Q, if you can just talk about any. And fuel, I think fuel noise moderates a little bit. If you can just talk about anything that I'm missing there as we think about from 1Q to 2Q that might be on the negative side of the ledger.

Good. I'll start with it, Amit. Thank you very much for that question. Now I want to be really clear right off the bat. We have the capacity to be able to handle more than 155,000 carloads. What brings us tremendous confidence is when you think about the 5 critical resources that we have. We clearly have enough terminal capacity. We clearly have enough mainline capacity. More specifically, we've talked about in the past and continue to maintain a buffer in our crew base. We have a couple of hundred extra crews based across the system that are available. As to your point, when that volume comes on, we have the crews. Locomotives, in my prepared comments, I said that over the last 12 months, we've been able to store 500 locomotives due largely because of the increased fluidity in the system. Those are available to us. As Kenny brings more volume to the railroad, we don't have to wait a week, we don't have to wait 30 days, they're parked across the system available to us. And then, of course, on the car side, we have cars not only spaced across the system that we call out the ready cars, but we actually have been working with customers in which we're storing cars right at their facility, so the moment they're ready to give us that load, we're ready to pick it up. Now when you think about capacity, the final thing you have to think about is the work that we do on train lengths. We talk often about driving volume variable approach to how we operate the railroad. Train length is one of the ways we do it. At a 300-foot improvement in our manifest quarter versus same quarter last year, that's a huge lift. That's a massive accomplishment by the team. Building train length in the manifest network is one of the hardest things we do. What that tells you is if we're really good at the hardest things we do, as the intermodal volume starts to come back, we don't have to add train pairs on. We can take some of the latent capacity we have in our existing train pairs and utilize it. So we're ready.

So, Amit, the only thing I would add is, and you know, I've never given guidance on operating ratio because it's a result of how you operate the railroad, and that's really important. But ex-fuel, a 60.1% last quarter with where the volumes were, what we did with price and what we did with efficiency on the railroad, that's a pretty good number. It's okay in the way I look at the world. Some people would say it's excellent. I go, it's pretty good. So I see moving us forward, and unless we get surprised, Kenny does his job properly, and we are able to return the proper price because of the great service and the product that we're delivering, and we continue to operate the railroad efficiently, and numbers underneath and the numbers that people don't see every day that I look at, make me very comfortable that we have a clear view of how we become more productive down at the ground level in this railroad driving decision-making closer to the people that need to make the decision and not trying to do it here in Omaha in like the headquarters. So, Amit, I'm not going to give a number, but I'm comfortable with where we're headed in the long term for Union Pacific.

Jim, I was going to ask just kind of where you left off. In January, you kind of admitted somewhat modestly that it would be difficult to improve the margin without a volume tailwind. And here you are with 200 basis points of core improvement with volumes down year-over-year. So what was the, I guess, change in the last couple of months? Eric touched on a lot of things, but how are you able to make such a huge improvement in such a short period of time? And what's your comfort in the sustainability of that when you actually do get a volume tailwind in the network?

Well, let's start with the end of the question. I love volume, and I love revenue. So at the end of the day, that's really important to us to be able to drive it forward. And what we've done is we worked hard. It looks easy sometimes to operate a railroad, especially as complicated as the Union Pacific network is because it is complicated. It's not a linear railroad. It's very, very spread out in the way it operates. But I think we're focusing the people at the right level. We're doing the right things when it comes on the expense side and headcount and everything that's involved in it, making sure that we don't impact service. I think we did a great job of it, and I can see us improve in every one of those. So Kenny is going to deliver, Eric is going to deliver and the rest of us are going to make sure that we do everything we can possible to make sure that this company moves ahead because if we can have better margins, it opens up markets to us, even more markets than what we have today. So that is the end game, and you basically have asked me what our strategy is, and I'm looking forward to delivering it in the next couple of years.

Congratulations to the team on achieving impressive results in a challenging volume environment. I would like to reframe Amit's question a bit. You've been focusing on these operations for eight months now, and I want to understand if there's still more potential for improvement. You are getting your service to the desired level, but is there an ongoing capacity to reduce locomotives and cars as you become more efficient? Could you provide some examples? Eric mentioned increasing train life; is there a chance to go further before the volumes increase? Typically, with PSR, you aim to enhance service first, which then allows for the reduction of equipment and employees as you progress. Could you discuss the opportunities to continue this process?

Yes, that's a great question. I'll let Eric share his insights on this, as well as Kenny. To summarize my perspective, we always aim to optimize our network operations and find ways to enhance efficiency. The foundational plan focuses on what we've sold to our customers and what we promised to deliver, ensuring that this remains our priority. We’re seeing improvements in train length with more cars per train, which increases our network efficiency and capacity. Additionally, we're examining our terminal operations and the handling of cars, looking for ways to move them over longer distances without physical handling. Another important aspect is our reaction time to our train plan adjustments, which currently takes too long. We are implementing tools to shorten this adjustment period from weeks to just a few days, allowing us to optimize our operations even further. I'm very excited about this progress, and I consider it a positive development. Eric, Kenny, do you have anything to add?

I'll start building up with that. So, Ken, to Jim's point, when you look at our quarterly performance from a dwell perspective, and we had a 5% improvement in our car dwell during the quarter, that's a full half of 1 hour off of every car on the Union Pacific. That's how we are able to move the cars faster. Now when you think about that going beyond that, to Jim's point about being agile, we took out 4,000 touchpoints just in the first quarter as we looked for more and more ways to be able to modify the transportation plan to move the cars faster. Now you build off of that and you start to get to the fundamentals of the railroad, the improvements we've made in recrew rate. There's still opportunity there. Certainly, our investments in technology, both with RCO as well as Mobilinx, that's about getting more productive in the yards. Even when we think about the brake-person deal that we signed last year that we spoke about working to ensure that we have capitalized on all those opportunities. We've talked about locomotives, 500 already out. We see more opportunities. You hit on train length to start your question, but also sometimes things we don't talk about, our purchase services, we made great progress, as Jennifer reported in the quarter on purchased services. We did that from everything from maximizing the material movement using trains instead of trucks to how many vehicles we have on the railroad. You've seen what our headcount has done over the last year. We've aligned our fleet from a vehicle perspective to that, to about 600 vehicles coming out. So everything is in play right now, Ken. We look at it every single day. We work through it every single day. And the biggest thing that we're looking for is how do we ensure that we make meaningful changes to not only improve our service product but also make us safe while we drive financial success.

Ken, anything to add?

I mean we talked about the efficiency. It shows up in the product development that we talked about. It shows up in all these small discrete things like adding more cars right at the customer's plant and asking for more business by customer, by plant.

So the 3.5% price/mix number in 1Q, kind of how do you think about that over the course of the year? And obviously, puts and takes on the macro, truck pricing, et cetera, and some movements in the mix side as well. So how do we think the number evolves?

We're not going to provide a specific number, Ravi, which you might expect, but I'll let Kenny address the markets. From a mix perspective, with intermodal likely remaining weak for most of the year, this could allow us to achieve some positive mix within our business as we consider this for the remainder of the year. Kenny?

Yes. I've been very encouraged and proud of the commercial team and the conversations that they're having with customers on price, articulating the inflationary pressures that are there and working with those customers to price to the market, taking a little bit more risk to price that business. And at the end of the day, our service product has improved, as you can see in the results, and we're talking to our customers about that and aligning that with the capital investments we're making. So it is not a coincidence or by luck, we are having very deliberate conversations with our customers.

Understood. And if I can squeeze a super quick follow-up kind of, I think you had said in other revenue, there was a contract settlement and there's a claim settlement and other expenses as well. Is that the same one? Or are they two different ones?

Those are two different ones, Ravi.

Just wanted to kind of follow up on that last question from Ravi. In terms of just the mix, it sounds like it's getting better from here. Maybe, Kenny, you can give us some color in terms of the pace of renewals as it was always going to take a bit of time to touch through the rest of the business and services helping with that momentum. So it would be helpful to hear that. And then just secondarily, similarly on the labor agreements in coal, like are both of those with coal network rightsized to the big drop you've seen right now? Or is there a little bit more to do? And on the labor side, you obviously had some new agreements to adjust for as well. So just trying to figure out where those three things stand in terms of where they are now and sort of looking at the rest of the year.

I’ll begin by addressing your question. As I mentioned in January, we didn't just decide on January 1 to engage in these focused discussions with customers; these conversations started well before that, early last year. We have noted that we can impact nearly half of our pricing annually, with the other half tied to multiyear agreements. I previously mentioned the intentional discussions we are having and the associated risks. Looking at domestic intermodal and the spot markets, they are currently performing the same way they did last year, indicating a prolonged period of stagnation in those areas, including contracted rates, which have remained unchanged for over eight months. As an optimist, I recognize that we might be at a low point, but it's uncertain when improvements will occur. We won't speculate on when that might be. However, I can assure you that in terms of product development, we are prepared and ready. We are collaborating with Eric's team to bring in more volume as it becomes available, and we are eager to see how things unfold.

And Brian, to your question about crews and the coal lines, so every single week, we review every board across the system. And we're looking, just as you pointed out, for changes in the market that shows up an increased or reduced demand. We've made adjustments. We'll continue to make adjustments. And it reminds me to make sure that we remind ourselves a year ago, we were talking to all of you about 200, 250 borrow-outs across the system. For the third month in a row, we have zero borrow-outs across the entire system. Now that doesn't mean that with some seasonal adjustments to some business like grain harvest, we might put some out there, but it's a massive accomplishment, and I give the team credit for it because they've been able to manage the crews in a way that we don't have any borrow-out. So agility, all day long.

You've alluded to this a few times this morning, but productive and cost takeout certainly seem better than we would have had in our model, particularly in areas such as PT, which you have alluded to as well as the rents. Can you maybe talk to some of the sustainability of the current trend line? Because it was quite a bit of a delta versus what we've seen lately as we move forward from here.

Yes. Jordan, thanks for that question. So I think you're right. You're hearing a lot of positivity by the team because we know that there are more opportunities. And first, it's building the momentum, it's sustaining the momentum and then keeping the cost out. And so if you think about equipment rents, that really is all about continuing to drive the car velocity, continue to drive the cycle time and the dwell that Eric referenced. So those are directly impacting that line. And then purchased services, certainly, the locomotive fleet is a big part of that, as we continue to use our locomotive fleet more protectively and reduce those numbers, that's an opportunity to sustain and potentially improve there as well as across the rest of the contract services that we use, is we're being smarter and looking deeper at every dollar that we're spending. And that's been one of Jim's messages to the team is, when you're looking at the resources, spend the dollars like your own and make sure that it's a wise dollar that's being spent and that you're getting the appropriate return for it. So feel good about continuing to make progress.

This is actually Eric Morgan on for Brandon. I just wanted to ask another one about mix. I appreciate the detail on the impact to yields, but I was just curious if you could speak to any effects on margins just because with coal being down, big drag on volumes right now in international intermodal as well. Should we be thinking these sort of mix swings helped to drive the strong OR in the quarter? Or is it really just an RPU impact?

Thank you for the question. The mix does indeed contribute to the revenue per unit. When we consider the mix, there are different cost profiles involved. Our goal is to enhance the profitability of every segment we operate. We take pride in our manifest franchise, which is definitely a strong area for us. However, as Eric mentioned, intermodal, grain, and coal are also very profitable sectors, particularly as we aim to increase train lengths. While we aren't completely indifferent, we are focused on growth across all our business lines. If we successfully achieve that, I believe you will appreciate the margins we generate from them.

You bet. Let me summarize my perspective on the quarter and our outlook moving forward. First, if you look at our results, I appreciate Union Pacific's industrial originations. The non-intermodal Mexico product provides us with a different level of return and pricing capability, which is strong. This has contributed positively in the first quarter, and I don't expect that to change, although I'm uncertain about the macroeconomic factors in the short term in the U.S. I was hopeful for an interest rate cut in the coming months, which may still happen later this year. Such a cut would benefit consumer spending on home-related products like lumber. We take advantage of our strong presence in the Gulf and originations in the heartland of the U.S., consistently seeking ways to improve efficiency. We achieve better returns from both international and domestic business. Whenever I see a train full of box cars and tank cars, it brings me great satisfaction. Thank you very much.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.