Union Pacific Company (UNP) Q2 2022 Earnings Name Transcript

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Union Pacific Company  (NYSE: UNP) Q2 2022 Earnings Convention Name dated Jul. 21, 2022

Company Contributors:

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Kenyatta (Kenny) G. Rocker — Government Vice President – Advertising and Gross sales, Union Pacific Railroad

Eric J. Gehringer — Government Vice President – Operations, Union Pacific Railroad Firm

Jennifer L. Hamann — Government Vice President and Chief Monetary Officer, Union Pacific Company

Analysts:

Justin Lengthy — Stephens — Analyst

Allison Poliniak — Wells Fargo — Analyst

Tom Wadewitz — UBS — Analyst

Scott Group — Wolfe Analysis — Analyst

Amit Mehrotra — Deutsche Financial institution — Analyst

Bascome Majors — Susquehanna — Analyst

Chris Wetherbee — Citi — Analyst

Walter Spracklin — RBC Capital Markets — Analyst

Brian Ossenbeck — JPMorgan — Analyst

Jon Chappell — Evercore ISI — Analyst

Ken Hoexter — Financial institution of America — Analyst

Jason Seidl — Cowen — Analyst

Ben Nolan — Stifel — Analyst

Ravi Shanker — Morgan Stanley — Analyst

Jordan Alliger — Goldman Sachs — Analyst

Jeff Kauffman — Vertical Analysis — Analyst

David Vernon — Bernstein — Analyst

Jairam Nathan — Daiwa — Analyst

Presentation:

Operator

Greetings. Welcome to the Union Pacific Second Quarter Earnings Name. [Operator Instructions] And the slides for in the present day’s presentation can be found on Union Pacific’s web site. It’s now my pleasure to introduce your host, Mr. Lance Fritz, Chairman, President and CEO for Union Pacific.

Thanks. Mr. Fritz, it’s possible you’ll now start.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

And thanks, Rob, and good morning, and welcome to Union Pacific’s second quarter earnings convention name. With me in the present day in Omaha are Kenny Rocker, Government Vice President of Advertising and Gross sales; Eric Gehringer, Government Vice President of Operations; and Jennifer Hamann, our Chief Monetary Officer. As we anticipated and shared again in April throughout our first quarter earnings name, the second quarter was a tricky quarter. Our initiatives to revive fluidity restricted automotive loadings and elevated working prices, these actions are working. We made strong progress enhancing the community with elevated automotive velocity, lowered card properly and lowered extra stock.

However earlier than we get into that dialogue, I wish to acknowledge the Union Pacific staff that’s making it occur. Our individuals really are particular, and they’re the muse of our long-term success. Now turning to our second quarter outcomes. This morning, Union Pacific’s reporting 2022 second quarter internet revenue of $1.8 billion, or $2.93 per share. This compares to second quarter 2021 outcomes of $1.8 billion or $2.72 per share. Our second quarter working ratio of 60.2% deteriorated 510 foundation factors versus 2021. Community restoration efforts and report excessive gas costs have been headwinds.

Nonetheless, gas surcharge revenues, sturdy core pricing beneficial properties and a constructive enterprise combine offset these pressures to supply working revenue progress. As we mentioned throughout the quarter, we understood that the actions we took to enhance fluidity would affect our monetary efficiency. These actions have been crucial to extend the velocity of our restoration and be in a greater place to deal with buyer demand. The enhancements we’ve made since mid-April offers me confidence that we’ll develop volumes as we proceed to enhance service within the third and fourth quarters. There’s extra to be accomplished, however we’re transferring in the suitable course.

Let me flip it over to Kenny for an replace on the enterprise setting.

Kenyatta (Kenny) G. Rocker — Government Vice President – Advertising and Gross sales, Union Pacific Railroad

Thanks, Lance, and good morning. Second quarter quantity was down 1% in comparison with a 12 months in the past. Progress in our industrial was greater than offset by a decline in our premium and bulk enterprise segments. To enhance community fluidity, we made reductions to our lively freight automotive stock, and people efforts had a adverse affect on all three of our enterprise teams. As well as, our intermodal quantity was down because of continued international provide chain disruptions. Freight income was up 14%, pushed by larger gas surcharges, sturdy pricing beneficial properties and a constructive combine.

Let’s take a better take a look at every of those enterprise teams. Beginning with bulk, income for the quarter was up 10% in comparison with final 12 months, pushed by a 12% enhance in common income per automotive, reflecting larger gas surcharges and strong core pricing beneficial properties. Quantity was down 1% year-over-year. Coal and renewable carloads grew 2% year-over-year, pushed by continued favorable pure gasoline costs and two new contract wins that began on January 1. Grain and grain merchandise quantity was down 4% because of fewer grain shipments from longer shuttle cycle occasions, partially offset by elevated shipments of biofuels. Fertilizer carloads have been down 2% year-over-year because of lowered shipments of sulfur and home consumed potash. And lastly, meals and refrigerated quantity remained flat within the quarter as stock discount efforts restricted automotive provide.

Transferring on to Industrial. Industrial income was up 12% for the quarter, pushed by 6% enhance in quantity and a 7% enchancment in common income per automotive because of larger gas surcharges and core pricing beneficial properties. Total, quantity was up, though we definitely left demand on the desk as we took actions to cut back automotive stock to enhance the community. Vitality and specialised shipments have been up 2% in comparison with 2021, pushed by enhancements throughout numerous markets, partially offset by fewer petroleum shipments. Quantity for Forest Merchandise was down 2% year-over-year, primarily pushed by our service challenges, though general demand for forest merchandise remained regular within the quarter. Industrial chemical compounds and plastic shipments have been up 3% year-over-year because of new enterprise wins and demand throughout the plastics market.

Metals and minerals volumes proceed to ship year-over-year progress. Quantity was up 3% in comparison with final 12 months, primarily pushed by progress in building supplies and enhance in frac sand shipments and metals enterprise growth. Turning to Premium. Income for the quarter was up 19% on a 5% lower in quantity versus final 12 months. Common income per automotive elevated by 26% because of larger gas surcharge income, core pricing beneficial properties and a constructive mixture of visitors. Automotive quantity was up 11%, pushed by auto components, which elevated 12% and completed autos growing 10%, each pushed by sturdy demand towards a softer comparability. Intermodal quantity was down 8%, primarily pushed by service challenges and fewer worldwide shipments from continued international provide chain disruptions. Home quantity was up 1% within the quarter, aided by tight truck capability and personal asset progress, offsetting weaker parcel shipments.

Now transferring to our outlook for the again half of 2022. At a macro stage, we will likely be intently watching our markets to see how rising inflation and rates of interest will affect our general quantity. However primarily based on our conversations with clients, I’m excited concerning the alternatives which can be in entrance of us. Let’s begin out with our bulk commodities. We anticipate biofuel shipments to develop because of strong market demand and enterprise growth wins. For coal, we anticipate continued favorable pure gasoline costs all year long. We all know there may be extra demand out there than what we’ve captured thus far. So our alternative is to higher match our sources to that demand. And our outlook for grain can also be depending on our service restoration the place we anticipate cycle occasions to enhance. However we’ve a tricky comp within the fourth quarter as exports have been sturdy final 12 months.

Transferring on to Industrial. Our outlook has not modified. We anticipate our markets to be stronger than the present industrial manufacturing forecast. Buyer expansions and enterprise growth wins will drive progress in our industrial chemical compounds and plastics commodity teams. We don’t anticipate to see petroleum shipments return to 2021 ranges. And lastly, for premium, we’re intently monitoring home intermodal demand and spot truck charges have softened. We anticipate to see enhancements in worldwide intermodal with the restoration from the provision chain challenges and pandemic shutdowns in China.

Nonetheless, we are going to proceed to watch and receivers to verify we keep fluidity all through your complete provide chain, from the ports to the warehouses. Regardless of elevated gas costs and rate of interest will increase, we anticipate automotive progress within the second half of the 12 months to be pushed by enhancing provide of semiconductor chips and pent-up demand. Total, I’m optimistic concerning the demand setting we see within the market as we head into the third quarter. And also you’ll hear from Eric that we’re seeing constructive momentum in our service product.

I wish to thank our working staff and our clients for working collectively to get well our service ranges. As we proceed to enhance the community, I’m assured that we are able to seize extra progress within the again half of the 12 months and into 2023.

With that, I’ll flip it over to Eric to evaluation our operational efficiency.

Eric J. Gehringer — Government Vice President – Operations, Union Pacific Railroad Firm

Thanks, Kenny, and good morning. Starting on Slide 9. As we mentioned in April, we started the quarter with our service product in want of serious enchancment. To get well the community and higher serve our clients, we applied decisive measures to cut back stock ranges and restore fluidity. The chart on Slide 9 reveals the present state of operations. We hit a trough in April and have since made regular progress. Whereas the advance has not been a straight line due to continued crude challenges and remoted incidents, the staff has stayed the course to construct momentum and generate constructive outcomes.

We skilled lowered crew availability from the Father’s Day and 4th of July holidays as we anticipated and deliberate for. We have now, nevertheless, recovered from these vacation impacts and returned to our prior enchancment trajectory. We proceed to see the advantages of our hiring initiatives and really feel assured in our potential to rent and practice roughly 1,400 new transportation staff this 12 months. Up to now, in 2022, we’ve graduated 486 staff and have a further 504 at the moment in coaching with virtually 400 of these staff graduating by the top of the third quarter. Though the laborious work shouldn’t be but accomplished, I’m inspired by the advance already made.

I might be remiss to not acknowledge the efforts and cooperation from all to the working and advertising and marketing and gross sales groups inside UP and most significantly, our clients. Our community is in a greater state in the present day due to these mixed efforts. Now let’s evaluation our key efficiency metrics for the quarter, beginning on Slide 10. The important thing efficiency measures for second quarter 2022 proceed to development beneath 2021 outcomes. We did, nevertheless, strengthen freight automotive velocity in addition to manifest and auto journey plan compliance sequentially as we transfer by the quarter. Intermodal journey plan compliance continues to lag outcomes from earlier within the 12 months, because of continued provide chain congestion leading to elevated container boxed properly and elevated chassis avenue time.

Our consideration stays on growing freight automotive velocity, which can enhance intermodal service efficiency though the challenges related to the provision chain will seemingly persist. Turning now to Slide 11. The community effectivity metrics for the quarter illustrate the affect of our community restoration actions. Because the starting of the 12 months, we’ve added locomotives to the community, which when coupled with decrease practice velocity impacts locomotive productiveness outcomes for the quarter, declining 12% in comparison with 2021. As we anticipate quantity progress heading into the second half of the 12 months, locomotive productiveness will enhance with higher fleet utilization as we transfer extra carloads at a higher general velocity.

Second quarter workforce productiveness deteriorated barely, down 2% as automotive miles have been primarily flat for the quarter, whereas worker ranges elevated. Practice size stays flat in comparison with one 12 months in the past. Nonetheless, practice size is up 3% sequentially. The staff leveraged practice size to enhance crew utilization, aided by the completion of 10 sidings thus far in 2022. We proceed to determine productiveness alternatives as we construct a extra resilient and high-quality service product for our clients. Wrapping up on Slide 12. We stay dedicated to the aim of reaching world-class security efficiency.

The advance in our worker incident metric gives proof that the enhancements we made to our security packages are starting to take maintain. Whereas the derailment charges haven’t but improved in comparison with 2021, we proceed to teach our workforce to in the end scale back variability and expense. The swift and decisive initiatives applied in April lowered congestion and sped up the community. A rise in crude provide will additional help these restoration efforts. Wanting ahead to the second half of 2022, we plan to construct on the momentum gained throughout the second quarter.

With that, I’ll flip it over to Jennifer to evaluation our monetary efficiency.

Jennifer L. Hamann — Government Vice President and Chief Monetary Officer, Union Pacific Company

Thanks, Eric, and good morning. Let me begin with a take a look at the walk-down of our second quarter working ratio and earnings per share on Slide 14. Union Pacific’s earnings per share elevated $0.21 to $2.93 and our quarterly working ratio of 60.2% worsened by 510 foundation factors. Quickly rising gas costs all through the quarter, the lag on our gas surcharge packages and the widening refining spreads negatively impacted our quarterly working ratio by 130 foundation factors, whereas including $0.18 to earnings per share. Our working ratio and EPS have been additional negatively impacted 380 foundation factors and $0.02 per share, respectively, as core outcomes replicate the affect of community restoration efforts that greater than offset the advantages of our prime line progress.

Under the road, actual property gross sales and decrease state tax charges netted to a year-over-year good thing about $0.05 per share. We closed the second half of a land sale with the Illinois Tollway authority, which we introduced in Might. After which the state of Nebraska modified its company tax charge within the quarter. Wanting now at our second quarter revenue assertion on Slide 15, working income totaled $6.3 billion, up 14% versus 2021 on a 1% year-over-year quantity decline. Working expense elevated 25% to $3.8 billion. Excluding the affect of upper gas costs, bills have been up 11% within the quarter. Second quarter working revenue was $2.5 billion, a 1% enhance versus final 12 months. Curiosity expense elevated 12% in comparison with 2021, reflecting larger debt ranges. Revenue tax decreased 2% as a result of Nebraska company tax charge discount I simply talked about and contributing to decrease second quarter efficient tax charge.

Web revenue of $1.8 billion elevated 2% versus 2021, which, when mixed with the share repurchases, resulted in earnings per share, up 8% to $2.93. Wanting extra intently at second quarter income, Slide 16 gives a breakdown of our freight income, which totaled $5.8 billion, up 14% versus 2021. Decrease year-over-year quantity lowered income 150 foundation factors. Gasoline surcharge income elevated freight income, 11.25% factors, reflecting the rising diesel costs. Whole gas surcharge income was $976 million within the quarter. Robust pricing beneficial properties mixed with the constructive enterprise combine drove 425 foundation factors of freight income progress. The numerous decline in worldwide intermodal volumes contributed positively to combine.

Nonetheless, the often sturdy combine affect of year-over-year industrial progress was muted by power in short-haul rock actions. Total, the demand setting continues to help actions that yield worth {dollars} exceeding inflation {dollars}. It’s essential to notice, although, that our community restoration efforts restricted our upside for each worth and blend as we solely rely worth if we transfer the vehicles.

Transferring on to Slide 17, which gives a abstract of our second quarter working bills have been the first driver of the elevated expense was gas up 89% on an 87% enhance in gas costs. We noticed a dramatic rise in costs by the quarter, paying report highs as they surge from a mean of $3.71 per gallon in April to $4.34 per gallon in June. Our gas consumption charge was comparatively flat in comparison with 2021 as adverse productiveness was partially offset by a extra fuel-efficient enterprise combine. Wanting additional on the expense traces. Compensation and advantages expense was up 7% versus 2021. Second quarter workforce ranges elevated 2%. Administration, engineering and mechanical workforces grew 1%, whereas practice and engine crews have been up 5%, primarily reflecting year-over-year will increase in our coaching pipeline.

As you heard from Eric, sturdy third quarter graduations place us to help our community restoration efforts and put together for future progress. Value per worker elevated 5% on account of wage inflation and continued elevated prices referring to community inefficiencies that come within the type of larger recrew, extra time and borrow out prices. For the stability of the 12 months, we anticipate year-over-year will increase to be sequentially decrease from the second quarter in each the third and fourth quarters. Buy providers and supplies expense was up 30% pushed by larger price to take care of a bigger lively locomotive fleet, inflation and volume-related buy transportation expense related to our Loup subsidiary. We additionally had an unfavorable comparability within the quarter versus 2021 the place we referred to as out a $35 million favorable onetime merchandise.

Tools and different rents grew 15%, pushed by decrease TTX fairness revenue and elevated automotive rent expense associated to community congestion. Different expense grew 17% within the quarter, pushed by a $35 million enhance in casualty bills related to adversarial changes to older claims and elevated enterprise journey. For the complete 12 months, we now anticipate different expense to be up low single digits versus 2021. Though gas was clearly the motive force of upper quarterly prices, the added expense from our service efficiency resulted in 69% fuel-adjusted decremental margins. Turning to Slide 18 and our money circulate. Money from operations within the first half of 2022 decreased barely to only underneath $4.2 billion, down 1%. Our money circulate conversion charge was 73% and free money circulate of $1.1 billion declined $727 million.

This, in fact, contains the affect of $455 million elevated money capital spending and $206 million in larger dividends. Capital spending year-to-date is up 38% versus 2021, which displays each a extra normalized spend trajectory and an elevated capital finances for 2022. 12 months-to-date, we returned $5 billion to shareholders by dividends and share repurchases. This features a 10% dividend payout enhance introduced in Might, the third such enhance in a bit over a 12 months’s time. And we completed the second quarter with an adjusted debt-to-EBITDA ratio of two.8 occasions as we proceed to take care of a robust investment-grade credit standing. Wrapping up on Slide 19. As we’ve mentioned this morning, it was a tough second quarter however essential to place ourselves for achievement within the second half of the 12 months.

Importantly, we’re demonstrating higher community fluidity as evidenced by the metrics and Kenny simply described for you that there’s nonetheless strong demand for our providers regardless of some indications of financial softening. For instance, full 12 months industrial manufacturing continues to be forecasted at almost 5%, however again half 2022 estimates are weaker. Towards that backdrop, we anticipate to be again on monitor to exceed industrial manufacturing within the second half of 2022 and produce full 12 months carload progress of 4% to five%. Because it pertains to our working ratio, the primary half efficiency makes achievement of year-over-year enchancment unlikely. Nonetheless, we do anticipate year-over-year enchancment within the second half of 2022 and a full 12 months working ratio round 58%.

Whereas our 2022 outcomes received’t match our view coming into the 12 months, we stay dedicated to our aim of in the end reaching a 55% working ratio. We’re additionally revising our steerage for incremental margins, which we now anticipate to be round 50% for the again half of the 12 months. Past 2022, we nonetheless anticipate to attain our longer-term steerage of mid- to higher 60% incremental margins. Our capital allocation plans stay unchanged. Capital spending at $3.3 billion for the 12 months, properly inside our long-term steerage of beneath 15% of income and we stay dedicated to main the business with our long-term dividend payout ratio and share repurchases on par with 2021.

Lastly, I really feel lucky to work with such a unbelievable staff of railroaders at Union Pacific. Each time I return from the sphere go to, I’m energized about the way forward for our firm. Because of an important staff. We have now a brilliant future forward.

So with that, I’ll flip it again to Lance.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Thanks, Jennifer. Earlier than my closing remarks, I wish to briefly contact on a few subjects. First, associated to our sustainability efforts, we’ve made nice progress to extend the usage of renewable diesel and biodiesel in our locomotives. We’re at the moment over 4% blended in our gas utilization and on course to attain our interim aim of a ten% mix by 2025. It is a crucial initiative for us to attain our 2030 greenhouse gasoline emission discount targets. Second is a fast replace on the standing of our labor negotiations. Earlier this week, President Biden appointed a Presidential Emergency Board, and the Board’s proceedings start this coming Sunday in Washington, D.C. All events are anxious for an affordable settlement. Our staff are lengthy overdue for a wage enhance. We’re able to put the uncertainty behind us and sit up for a decision within the close to future.

Now wrapping up, as you heard from Eric, we’ve made constructive strides on security within the first half of the 12 months. I’m inspired by the momentum that I see constructing inside our security packages. Having stated that, we’re in need of our aim of world-class efficiency, and that’s our job forward. Our second quarter efficiency, each operationally and financially, didn’t replicate the perfect of Union Pacific. But we nonetheless achieved quarterly monetary information. This displays the good work we’ve accomplished by PSR adoption within the final a number of years to make our firm extra resilient, environment friendly and worthwhile. Our focus over the subsequent six months is to once more exhibit our potential to efficiently develop volumes whereas enhancing and sustaining service ranges. I’m assured we are going to construct that monitor report. These efforts are crucial to our success within the again half of 2022 and past and are core to our long-term technique to serve, develop, win collectively.

With that, let’s open up the road on your questions.

Questions and Solutions:

Operator

Thanks. [Operator Instructions] Thanks. And our first query in the present day comes from the road of Justin Lengthy with Stephens. Please proceed along with your query.

Justin Lengthy — Stephens — Analyst

Thanks and good morning. I needed to ask concerning the OR steerage again in early June, you made an adjustment and we’re getting one other adjustment in the present day. So simply curious what modified within the final month? Is that this service associated? Is it the financial system, possibly a bit little bit of each? After which simply serious about the quarterly cadence of the OR within the again half, is there any shade you may present on the way you’re considering 3Q performs out relative to 4Q?

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Sure. Properly, let me begin, Jennifer, after which possibly you end this up. So Justin, clearly, because the quarter progressed and as we exited the quarter and got here into the third quarter, there’s a couple of headwinds that both continued or didn’t abate as we had anticipated. So one is, whereas we’re recovering the community, we had anticipated the tempo being a bit faster. And extra importantly, we had anticipated quantity approaching sooner because the community improved. And getting the quantity again is admittedly the first driver of enhancing our working ratio and actually shoring up the financials in complete. As well as, gas didn’t behave form of like what we had hoped it will and there have been another inflationary pressures that added to it. However I’d say these first factors are the large factors.

Jennifer L. Hamann — Government Vice President and Chief Monetary Officer, Union Pacific Company

Sure. After which I might additionally say, as we shut out the quarter, you make a few of these quarterly changes. And also you heard me reference the $35 million casualty change. That clearly is a reasonably large swing issue. But it surely’s issues like that in addition to sequential enchancment that we’re seeing in our operations that provides us the boldness in how we’re serious about the again half of the 12 months to have that enchancment. As we sequentially enhance our operations, see volumes develop, that’s going to assist us produce these stronger monetary metrics within the again half of 2022. So I believe that’s an essential method to consider it, Justin.

Justin Lengthy — Stephens — Analyst

Okay. And on the cadence within the again half, I suppose the steerage mainly implies that you just go from a 60% OR within the first half to one thing across the 56% within the second. Do you anticipate it to be fairly even 3Q to 4Q?

Jennifer L. Hamann — Government Vice President and Chief Monetary Officer, Union Pacific Company

There’s various factors in each. Definitely, sequentially, as I discussed, we’re going to anticipate to enhance. Clearly, you get into the fourth quarter, you are likely to see lighter quantity and also you possibly can get some climate. So we’ll see precisely how that performs out. However what we’re targeted on is sequential enchancment. You’ll see enchancment within the third quarter from the second quarter, definitely. I don’t know that you just’ll really see year-over-year enchancment within the third quarter. We expect that’s most likely a bit little bit of a stretch. However definitely, while you get to the fourth quarter, we’re taking a look at year-over-year enchancment altogether than to within the second half.

Justin Lengthy — Stephens — Analyst

Obtained it. That’s useful. Thanks.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Yeah. Thanks, Justin.

Operator

The following query comes from the road of Allison Poliniak with Wells Fargo. Please see along with your query.

Allison Poliniak — Wells Fargo — Analyst

Hello, good morning. Simply following together with — and simply in line of commentary, when it comes to that incremental, it seemed like the quantity piece was the larger contributor. So I’m simply making an attempt to grasp between service and quantity enchancment, form of what you could see there to get that incremental margin within the again half? Simply any extra shade there?

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Sure. So I’ll begin, Allison. What we have to see is precisely what we outlined earlier this morning, and that’s continued enchancment in our service product in order that we are able to each spool up current belongings like grain shuttles, which can generate extra masses and really engaging masses within the grain world in addition to deliver on extra belongings that may get extra masses for us like coal units or personal vehicles or system vehicles. So backside line is what we actually want to concentrate to is, are we seeing automotive velocity enhance? Are we seeing extra stock proceed to exit the community? And are we seeing our locomotive utilization and general utilization of our belongings enhance as a result of that may generate mainly what we have to have occurred.

Jennifer L. Hamann — Government Vice President and Chief Monetary Officer, Union Pacific Company

Sure, which is extra carloads to leverage towards that asset.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Right. Sure.

Allison Poliniak — Wells Fargo — Analyst

Obtained it. After which I simply — in keeping with that quantity, I do know Kenny stated there was kind of — there was a quantity affect, clearly, from the metering. Any thought — any method you may quantify what that affect was? So assuming that’s going to return again on-line within the second half?

Kenyatta (Kenny) G. Rocker — Government Vice President – Advertising and Gross sales, Union Pacific Railroad

Sure. Allison, the way in which we take a look at it and give it some thought as should you take a look at the place we have been within the first quarter, we have been up, name it, 4%. We’d have anticipated that kind of a run charge going into the second quarter. So should you needed to body it, you need to body it in that mild.

Allison Poliniak — Wells Fargo — Analyst

Nice, thanks.

Operator

Thanks. The following query is from the road of Tom Wadewitz with UBS. Please proceed along with your query.

Tom Wadewitz — UBS — Analyst

Yeah, good morning. I needed to ask about, I believe, bought providers prices would appear fairly elevated. And I ponder if there may be — have been there form of transitional prices, one-off sort of prices, you’d have good visibility to that enhancing in second half? Simply possibly some ideas on that and form of how we take into consideration community effectivity enhancing, affecting how we take a look at working prices within the second half.

Jennifer L. Hamann — Government Vice President and Chief Monetary Officer, Union Pacific Company

Certain. Sure. When it comes to the acquisition providers, you’re proper, it was elevated. One factor to recollect is we did have a $35 million good information final 12 months. In order that’s a part of that year-over-year comparability. However as we’re bringing extra locomotives on, that definitely — there’s a value to take care of that bigger fleet. You noticed the locomotive productiveness numbers that Eric confirmed. So that actually is a chance within the second half. After which additionally, when you consider our Loup subsidiary and the acquisition transportation price is we’re seeing, notably the automotive enterprise come again on, which is a giant a part of their enterprise. that’s the place you see a few of that buy transportation circulate by is in that buy providers line.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Eric, possibly you wish to — as a result of I heard in Tom’s query, prices that existed within the second quarter and the way they arrive out within the third and fourth.

Eric J. Gehringer — Government Vice President – Operations, Union Pacific Railroad Firm

Sure, completely. So choosing up the place Jennifer left up. The shopper targeted on most proper now, all of them relate to that gaining and the speed that we demonstrated within the second quarter. The chance we see within the rapid future is the locomotive aspect. In the event you look again in our first quarter earnings report, we had reported including in about 150 locomotives, we’ve been working simply within the final two weeks to begin to reverse that and be very considerate about taking that out. We wish to be sure that these get put into our at-the-ready standing, in order that we are able to proceed to regulate for variability, but in addition capable of meet the second half progress forecast. In order that’s a giant alternative for us, Lance.

Tom Wadewitz — UBS — Analyst

Okay, nice. Thanks.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Yeah. Thanks, Tom.

Operator

Subsequent query is from the road of Scott Group with Wolfe Analysis. Please proceed along with your query.

Scott Group — Wolfe Analysis — Analyst

Thanks, good morning guys. I wish to ask only a larger image query. I believe some individuals are questioning the success or possibly the sustainability of PSR. And should you look in 2Q, your headcount from pre-PSR is down on the 25%, 30%, volumes down about 7%. Is there some potential that you could get that headcount again nearer to these pre-PSR ranges to get the service again? And I suppose I wish to perceive what you suppose this implies for the OR, proper? We have been purported to do at 55% this 12 months on our method to a decrease low to mid-50s OR in a few years. Are these simply the incorrect numbers to be serious about now for the OR over time?

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Sure, Scott, let me begin first by saying emphatically that PSR shouldn’t be the reason for our issues within the second quarter. Once you take a look at our pre-transformation to in the present day, the — all of that headcount change is as a result of we took work out of the community. We run 1/3 fewer trains, which require 1/3 fewer locomotives and in addition 1/3 fewer individuals working the trains and sustaining the locomotives. So we took work out of the community that didn’t have to be there as a result of we have been touching vehicles greater than we wanted to, and we had too many particular commodity unit trains working across the community. So we reworked the community, took that out, and we have been in high-quality form. We’re the identical railroad that we have been in 2021 or 2020, I imply — however right here’s the place we bought into bother.

We ran the community tight, and we didn’t acknowledge the stack up of dangers that have been in entrance of us with COVID persevering with to affect crew availability, progress approaching and regular climate occasions, while you run tight, you simply don’t have plenty of alternative to get well shortly. We bought into bother and stock grew on us, and we needed to take some fairly important measures to repair that, and we did within the second quarter. Once you take a look at what we have to do completely different going ahead, it’s not thousands-of-employees completely different. It’s a whole bunch and in several methods. We bought to get our odd sports activities again. We’ve bought to run our boards much less tight than we have been working them for some time. And we’ve bought to do another distinctive and inventive issues with our labor unions so as to make our crews extra out there and extra productive with out them working tougher. And that may be accomplished. We see a transparent path for all of that.

Jennifer L. Hamann — Government Vice President and Chief Monetary Officer, Union Pacific Company

However to the opposite a part of your query about does that imply 55% is off the desk? Completely not. We completely imagine we’ve the chance to have that 55% OR as we restore our service, deliver the volumes again on in addition to the incremental margin goal. So that doesn’t change for us, Scott.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

100%.

Scott Group — Wolfe Analysis — Analyst

Okay. Very useful. And simply, Lance, your feedback have been useful. Do you suppose getting a labor deal accomplished within the subsequent couple of months goes to be a assist right here?

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Sure. What’s going to be a assist about that, Scott, is it takes off the desk all of the anxiousness and battle of a labor pressure that hasn’t seen a increase in 2.5 or three years. And you set that to mattress after which we are able to get busy on offers that we care about on property, that are actually, actually essential to us.

Scott Group — Wolfe Analysis — Analyst

Thanks, guys.

Operator

Our subsequent query is from the road of Amit Mehrotra with Deutsche Financial institution. Please proceed along with your query.

Amit Mehrotra — Deutsche Financial institution — Analyst

Thanks, operator. Hello, all people. Jennifer, I simply wish to perceive what’s embedded within the back-half steerage or the revised full 12 months steerage? As a result of that is now the second time in, I don’t know, 40, 45 days that we’re revising the complete 12 months outlook. And so I simply suppose it will be useful to grasp. If we take a look at the back-half steerage, how a lot implied service inflection is there? As a result of Kenny and Eric’s staff have accomplished job form of addressing the most important points early within the quarter, and we’ve seen a giant stability on service. And so what I wish to perceive is that if we keep the place we’re off this improved stage, is that sufficient to get to the back-half steerage or embedded in that as an additional enchancment in service, in automotive miles and issues like that? In the event you can simply deal with that, that might be useful.

Jennifer L. Hamann — Government Vice President and Chief Monetary Officer, Union Pacific Company

Certain. So two issues. I imply you’re completely proper. We have now seen an excellent rebound when it comes to the place we have been, name it, from the center of April to the place we’re in the present day. So we’re getting into the third quarter in a a lot better posture than we entered the second quarter and be ok with that. However for us to have the ability to obtain these targets, we do have to proceed to enhance. And I believe you’ve heard that from us. We have to proceed to enhance the fluidity of the community.

Meaning utilizing the belongings extra successfully, utilizing our crew base higher, getting extra utilization out of the locomotives. You heard Eric discuss that. These circulate on to the revenue assertion you consider comp and advantages, you consider our buy providers however then we want the quantity leverage on prime of that. And so these are the issues that we’re taking a look at. You get these markers from us each week, so that you’ll be capable to monitor that progress. However we do want to enhance from the place we sit in the present day to hit the second half goal.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Sure. And Jennifer placing a last level, I imply, I believe what we’ve talked about is with the STB and others, we have to see that automotive velocity begin with to the 2 — the 200-type quantity within the again half of the 12 months. And with that, you’ll see a lot of the different metrics transfer in the suitable course.

Amit Mehrotra — Deutsche Financial institution — Analyst

Lance, simply associated to that, given how essential it’s to get to that 200-plus automotive mile velocity per day, there are a couple of individuals on the market which have many a long time of PSR expertise which have seen PSR applied in not simply an up cycle, however a down cycle and and so forth. These guys appear to be out there on a consultancy foundation. I don’t know if there may be scope to usher in any individual on a short-term foundation to speed up a few of the progress that you just’ve already made or Eric’s staff has already made on the service ranges. Is that one thing that you just’re contemplating or taking a look at doing?

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Sure. Really, Amit, we stay in dialog with all the contacts that we’ve created by our PSR journey. And actually, they’re useful, however we don’t be taught something essentially new, proper? The problem is aggressively implementing the restoration plan, which we did by the second quarter, demonstrated the motion and holding that motion up. So sure, essentially, the method doesn’t change. And we’ve bought the staff that may make that occur.

Amit Mehrotra — Deutsche Financial institution — Analyst

Certain. Okay, superb. Thanks. Thanks very a lot recognize that.

Operator

Our subsequent query is from the road of Bascome Majors with Susquehanna. Please proceed along with your query.

Bascome Majors — Susquehanna — Analyst

Jennifer and possibly Lance, there’s clearly some uncertainty as to what the precise union wage will increase from 2024 are in the end going to be. Are you able to share how UP has managed that uncertainty along with your accruals to this point? And if precise wages have been changing into completely different than these expectations, when do you true that up retroactively and talk it to individuals like us prospectively?

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Jennifer, let me begin by speaking about wage will increase and what we might see after which you may form of discuss how we’ve accrued, and so forth. So, Bascome, the PEB goes to hearken to each side after which provide you with what they suppose is an affordable method to wages. Recall that our package deal goes to incorporate ’20, ’21, ’22, ’23 and ’24. And in ’20 and ’21, the markets have been powerful for wages, proper? In 2020, wage progress was most likely close to zero. 2021, it accelerated. It’s accelerating in ’22. And I’d anticipate it’s most likely going to be comparatively sturdy in ’23 earlier than dropping again down. So we’ve bought beat on that. We’ve bought a proposal that we’ll be speaking to the PEB that displays that. And I believe if the PEB is affordable, and they seem like educated and expert as arbitrators, we’ll get to a spot that we’re comfy with.

Jennifer L. Hamann — Government Vice President and Chief Monetary Officer, Union Pacific Company

Sure, Bascome. And when it comes to timing, so as soon as there may be an settlement and we all know what these numbers are, we are going to acknowledge something that displays the backward-looking piece instantly if there may be something completely different there that we have to acknowledge. When it comes to what we’re accruing, we’re clearly listening to the markets, the negotiations and we’re holding tempo with that as we glance to make these accruals. So we are going to true up if wanted, on the time of the settlement.

Bascome Majors — Susquehanna — Analyst

Lance, simply to double examine right here, it sounds such as you’re anticipating or a minimum of the proposal from the rail is anticipating a decrease inflation setting in 2021, possibly a better one in every of ’22, ’23 and a few normalization after that. Is that affordable to suppose your accruals would directionally replicate that?

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

It’s affordable to suppose our proposal in entrance of the PEB displays that, for certain.

Bascome Majors — Susquehanna — Analyst

Thanks, each.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Yeah.

Operator

Subsequent query is from the road of Chris Wetherbee with Citi. Please proceed along with your query.

Chris Wetherbee — Citi — Analyst

Hey, nice, thanks, good morning. I suppose as we’re serious about kind of the cadence of quantity choosing up within the again half of the 12 months. So clearly, it’s associated to service, however possibly, Kenny, can we undergo a few of the segments the place you possibly have good visibility to that if there are some incremental adjustments within the service product that you just’re providing? You’ll be able to see a direct consequence from quantity as a result of I believe service has been enhancing right here. I’m unsure we’ve essentially seen the commensurate enchancment within the weekly carloads. So I simply wish to get a way of possibly some particular factors the place you’re feeling like, sure, there’s a a chance coming right here. We simply want a bit bit higher product to have the ability to form of serve the market.

Kenyatta (Kenny) G. Rocker — Government Vice President – Advertising and Gross sales, Union Pacific Railroad

Sure. Thanks, Chris. Let’s simply stroll you thru all of the markets right here. In the event you take a look at our bulk enterprise. We talked about our grain enterprise. We’ve had a few good years on the grain aspect. And clearly, there may be plenty of demand on the export aspect, so a tricky comparability versus final 12 months within the fourth quarter, however the demand is there, and we all know that the crop is there additionally, which has given us plenty of confidence. On the coal aspect, you all see the identical metrics that I see when it comes to pure gasoline costs, these are going to be sturdy for certain all through the remainder of this 12 months, most likely properly into 2023.

On the fertilizer aspect, there’s nonetheless plenty of demand on the export fertilizer aspect. After which one of many issues is I’m going to industrial and depart meals and refrigerated, Eric and I’ve been working hopefully collectively to doing the second a part of the quarter, add a couple of extra of our system vehicles in. Right here just lately in July, we’re including a couple of extra vehicles in. And in order you take a look at locations like metals the place we’ve wind, should you take a look at some new enterprise that we’ve approaching with industrial chemical compounds and plastics, even lumber is an space that — I do know there’s plenty of combine media on the market, however the demand continues to be fairly sturdy and the automotive provide will likely be there, too.

So that you take a look at that and then you definately transition over to our premium space the place, once more, we’ve bought a brand new personal asset on our railroad and home intermodal will nonetheless be steady to sturdy. After which on the automotive aspect, seller stock continues to be low. It’s nonetheless at 25 days. And we anticipate, and we’ve been speaking to plenty of our clients that they’re going to get a greater, stronger provide of semiconductor chips, and there’s plenty of pent-up demand there. So the way in which I take a look at it, I’m very optimistic concerning the demand being there and the — and our business staff with the ability to win new enterprise to deliver it on.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

And Eric, it’s all about working the community in order that we are able to seize as a lot of that as potential.

Eric J. Gehringer — Government Vice President – Operations, Union Pacific Railroad Firm

Sure. That’s precisely proper. I imply when you consider automotive velocity and you consider service, they’re tied collectively. And so after we take into consideration our largest alternative sitting proper in entrance of us, it’s actually about crew availability. And we’ve bought some rising tailwinds. We’ve gotten by the third and fourth most impactful vacation of the 12 months. Now that Father’s Day and 4th of July is behind us, we noticed a sequential enchancment month after month throughout your complete quarter in our recrew charge that generates extra crews for our use.

After which, in fact, we’ve bought the hiring that I lined in my ready feedback that deliver me an amazing quantity of confidence, particularly as a result of 400 of the five hundred which can be coaching will likely be out there to us by the top of the third quarter. So all rising tailwinds to have the ability to enhance velocity and ship the service product that our clients anticipate.

Chris Wetherbee — Citi — Analyst

I recognize that. Possibly one fast clarification. Simply Worldwide Intermodal, is there one thing that’s kind of exterior of your management when it comes to whether or not it’s clients choosing up on the port, warehouses having the incorrect stock that’s making a log jam that’s form of creating a few of the points that we hear very publicly about when it comes to dwell on the dock in L.A. Lengthy Seashore? Or is there one thing else occurring there?

Eric J. Gehringer — Government Vice President – Operations, Union Pacific Railroad Firm

Certain. So let’s again up and take a look at your complete provide chain on that. In the event you begin within the west ports and also you take a look at their present complete field rely, clearly, it’s as excessive if not larger than it was final 12 months. What we’re targeted on, moreover simply the west ports is the inland terminals. What you wish to be sure you do is be certain that these inland terminals can stay fluid, proper? Occupied with Chicago once more final 12 months. We don’t wish to get to the purpose the place we’ve bought an extreme variety of trains holding exterior of Chicago.

And to be clear, for this whole quarter, we haven’t had that. We’ve remained fluid in Chicago. What’s driving that’s the elevated chassis time, which turns into an absence of chassis to have the ability to generate again to the West Coast to have the ability to preserve the system solely fluid. In order I take a look at the community proper now, we’re prioritizing appropriately so for our clients, fluidity inside our intermodal terminal and we want continued enchancment on exterior components to maintain driving your complete provide chain to get higher. And it’s possible you’ll wish to add one thing.

Kenyatta (Kenny) G. Rocker — Government Vice President – Advertising and Gross sales, Union Pacific Railroad

Sure. Simply you and your staff are doing an important job of controlling what you may management. We don’t have management over the worldwide chassis. So we’re working with our clients to be sure that they will get as a lot effectivity from their very own chassis as potential.

Chris Wetherbee — Citi — Analyst

Thanks very a lot recognize.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Thanks, Chris.

Operator

Subsequent query is from the road of Walter Spracklin with RBC Capital Markets. Please proceed along with your query.

Walter Spracklin — RBC Capital Markets — Analyst

Yeah, thanks very a lot. Good morning, everybody. So I wish to deal with again on the metering embargoing of visitors. And I do know your japanese peer yesterday quantified that as form of a measure of final resort and really excessive in nature. And my query, I suppose, is whether or not are you being extra impacted than your friends from structural — the structural prevalence of the provision chain points and maybe should you can characterize that relative to your closest peer BNSF in the event that they’re going by form of an identical expertise?

What I’m making an attempt to evaluate right here is the potential for share loss as soon as issues reasonable and clearly, there’s some buyer dislocation right here and whether or not when issues reasonable, that may come again to chunk you in any respect. I do know CPKC goes to deliver on new competitors subsequent 12 months as properly. So any shade on the place you stand relative to your friends and whether or not you’re feeling that your return to a greater service is matching that of your friends lagging? Or are you coming forward of these of your friends when it comes to that restoration?

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Sure. So Walter, you may see the info for your self. Our restoration since April has led the peer group, the U.S. railroads. Definitely, it’s led within the west. So our statistics would let you know that we’re recovering. And I’m certain all of our friends are working laborious to get well as properly and we’re not dissatisfied with our tempo at this level. When it comes to how we use embargoes, it’s evident. In the event you take a look at the STB, we use embargoes greater than our peer railroads deal. And the way in which we use them could be very focused to a specific vacation spot or receiver that isn’t controlling their inbound volumes. And when our serving yard for that receiver signifies that we’ve bought far more stock each in route and readily available than they will deal with in an affordable time period, that’s after we use embargo. So we use it greater than our friends do. I’m unsure why they don’t, but it surely’s a really efficient software for that objective. Kenny?

Kenyatta (Kenny) G. Rocker — Government Vice President – Advertising and Gross sales, Union Pacific Railroad

Sure. I imply you hit it on the pinnacle, Lance. I simply wish to first begin off by saying we make unilateral selections about how we method the shoppers. And so we’re not taking a look at what somebody is doing within the east or the west, and I bought to thank our clients, they have been proper there with us doing our course of to work by metering the visitors. Eric, you and your staff did a extremely good job of us working collectively, offering clients with quantifiable knowledge for the place we thought they need to be for getting the surplus stock out of line. These conversations, I don’t wish to downplay it. They weren’t — as a few of them have been tough. I believe the tail story for us are the outcomes. We have now had some actually sturdy wins popping out of RFPs, bids, aggressive bids the place we received incremental enterprise. So after we take a look at it that method, a few of the identical clients that we needed to have these tough conversations with, we’ve turned these into constructive and incremental volumes. In order that tells you that, once more, we’ve a extremely targeted and deliberate method with our clients.

Walter Spracklin — RBC Capital Markets — Analyst

Very encouraging. Respect that shade. Thanks.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Yeah, thanks Walter.

Operator

The following query comes from the road of Brian Ossenbeck with JPMorgan. Please proceed along with your query.

Brian Ossenbeck — JPMorgan — Analyst

Hey, good morning. Thanks for taking the query. So Eric, you talked about that the hiring tendencies are up. Needed to listen to a bit bit extra about retention. We’ve seen only in the near past a few bulletins from the east bumping up the pay for, I suppose, new contractors — or new conductors moderately are getting certified. So is that one thing which you can equally do or are taking a look at doing? After which for Kenny, possibly another factor within the bucket of issues you may’t management. Are you able to simply discuss extra broadly about AB5 and whether or not or not that’s going to have some kind of affect on the ports provide chains and if that impacts your IMC companions in any method if that does find yourself getting applied?

Eric J. Gehringer — Government Vice President – Operations, Union Pacific Railroad Firm

Sure, Brian, I’ll begin. Thanks for that query. As you realize, our aim this 12 months in complete is to deliver on 1,400 transportation staff. And as I stated in my ready feedback, we’re properly on our method to try this. Particular to your remark round, are you seeing elevated retention points or washouts, we’re actually not. Each of our charges can be in keeping with our historic efficiency. Now, we’ve accomplished quite a lot of various things across the hiring that’s helped to make sure that that’s the case. After we went again and also you look originally of the 12 months with a few of the adjustments we made to our coaching program that in some instances, prolonged components of it, that was to make sure that the standard of the coaching program was precisely what our staff wanted.

On the identical time, even simply within the final two weeks, we’ve provided up a brand new program the place for our new hires, we’re really participating them to see if they really wish to go work in different places than they could have in any other case been employed on. And that’s offering flexibility that traditionally we could not have. So we proceed to problem ourselves between the working staff and our workforce Sources Group to incentivize our new hires to stick with us. We wish them to be the 30-year plus staff that we’ve bought throughout your complete system.

Kenyatta (Kenny) G. Rocker — Government Vice President – Advertising and Gross sales, Union Pacific Railroad

Sure. So in your query about AB5, I’d say it’s simply too quickly proper now, and it’s a bit unclear on the affect. And also you’re proper on. We’ve been speaking to quite a lot of our IMCs on the market, they usually’re seeing the identical factor. I imply, a couple of of them have a few of these proprietor operators, contractors, but it surely’s simply too quickly and a bit bit unclear to see what that affect will likely be.

Brian Ossenbeck — JPMorgan — Analyst

Okay guys, thanks on your time. Respect it.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Yeah. Thanks, Brian.

Operator

The following query is coming from the road of Jon Chappell with Evercore ISI. Please proceed along with your query.

Jon Chappell — Evercore ISI — Analyst

Thanks. Good morning. Kenny, I believe originally of this 12 months, there was plenty of optimism on the intermodal aspect, including Swift, including Schneider subsequent 12 months, improved provide chain, tight truck market, and so forth. As you consider onboarding Schneider subsequent 12 months and mixing that with a few of the service points we’ve spoken about and the restoration plan, do you’re feeling that you just’re appropriately resourced to satisfy the expansion targets that you just have been anticipating by onboarding these two big clients and given a few of the macro dynamics that needs to be supportive to Intermodal? Or do you could cut back a few of your expectations within the medium time period?

Kenyatta (Kenny) G. Rocker — Government Vice President – Advertising and Gross sales, Union Pacific Railroad

No. I imply, I wish to begin off by saying that the administration staff right here has actually accomplished an important job of being deliberate about our capital expenditures. We’ve talked concerning the $600 million that’s going to assist us with extra rail sidings with business amenities. And I do wish to say that this can assist all of our intermodal community. So sure, we’re enthusiastic about Schneider approaching, however we’ve bought a robust steady while you take a look at Hub, Knight-Swift and XPO and a few of the IMCs that we’ve. All of them, your complete community will profit from it. Eric and I and our groups are simply we’ve bought a extremely rigorous course of — planning course of, and we be ok with the investments that we’re making and the power to onboard these new clients and truly develop with the present clients.

Eric J. Gehringer — Government Vice President – Operations, Union Pacific Railroad Firm

Sure. I’ll like the very same confidence. As you consider what the working division and the advertising and marketing gross sales division are doing collectively. The final six months of Knight-Swift, which has gone exceptionally properly. That’s our continued playbook with Schneider. We’re ensuring that we take each a type of performs and making use of them to Schneider. I’ll additionally echo Kenny’s remark about how we take into consideration funding. Kenny, you hit on the infrastructure. We’re additionally doing lots on the expertise aspect, and it doesn’t simply profit Schneider. It advantages all of our clients. If you consider the work simply within the final month, we’re now by our UP Go app, we’re getting about 10,000 feedback again from drivers on our intermodal ramps. These feedback vary from concepts to enhance, to — issues that they suppose are going very well. It’s that sort of suggestions that we are able to proceed to make sure that we’re making our ramps as environment friendly as potential from a driver’s expertise for all of our clients. So I’m very excited, very assured.

Jon Chappell — Evercore ISI — Analyst

Okay. Thanks,, Eric. Thanks. Kenny.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Yeah.

Operator

Our subsequent query is from the road of Ken Hoexter with Financial institution of America. Please proceed along with your query.

Ken Hoexter — Financial institution of America — Analyst

Hey, nice. Good morning. Possibly it looks like some momentum you talked about within the latter a part of the quarter. However Kenny, volumes are up 1% quarter-to-date right here, virtually one month by the quarter. And with about 1% common progress within the first half of the 12 months, simply to get to the 4% to five% progress Jen was speaking about, it looks like you’d must shortly ramp to higher single digits particularly given the development of almost 1/3 of the quarter within the bag. So possibly, Kenny, you additionally talked about the drop in spot charges in trucking. Possibly might you simply revisit that for a bit and possibly stroll us by the place we should always see that fast ramp? After which Lance, out of your perspective in your seat, I imply, I suppose we’re form of even one thing that a few of us haven’t seen with inflationary backdrop that hasn’t been round for 40 years. How do you consider that when it comes to managing the rail and how one can regulate?

Kenyatta (Kenny) G. Rocker — Government Vice President – Advertising and Gross sales, Union Pacific Railroad

Sure. First off, and Eric talked a bit bit about this popping out of 4th of July vacation definitely places us in a ramp-up capability or ramp-up situation. The opposite a part of that’s — and I discussed that is that we’re including extra sources, that means we’re including in additional of the system vehicles onto our community. And in order that’s given us much more confidence there. And then you definately talked about the spot charges. And we’ve bought to distinguish the spot charges that we’ve seen go down versus these contracted charges. We nonetheless see that there’s a firmness in these contracted charges and there’s lots to that. Lots of causes lining. There’s nonetheless quite a lot of truckers that have to be larger, and that’s within the tens of hundreds, we’ve seen chassis dwell enhance. We’ve seen container dwell enhance. So there’s nonetheless tightness there. And as our service is enhancing, we’re going to be pricing and we’re pricing proper now for that in service enchancment, particularly throughout all of the tightness that we’re seeing.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Ken, and essentially, you’re proper, we do have to speed up volumes into the third quarter and we are going to. We’re assured that, that will likely be occurring and is beginning. When it comes to inflation, additionally right, it’s a singular setting, proper? Once you begin seeing CPI within the 9%-plus vary. It’s been a protracted, very long time since we’ve seen that and doubtless most of our administration staff up and down the org chart hasn’t skilled that earlier than. What we’re dealing — what we’re doing to take care of that’s simply being relentless on productiveness and effectivity, however what you noticed within the second quarter, which was all about restoration and including the mandatory sources and experiencing the mandatory prices to get well extra shortly than we’d in any other case.

However overarching that, there’s only a relentless use of expertise and course of enchancment to get productiveness out of the community. And one of many issues that’s serving to us straight with bought inflation is the wave course of that our provide chain staff goes by. We’re on our — I wish to say, wave 11 proper now the place we take a bit of our spend and mainly deconstruct it with ought to price evaluation or benchmark evaluation after which negotiate with our major suppliers and in search of new suppliers that may assist us discover price discount, complete price of possession. And that saved us a whole bunch and a whole bunch of hundreds of thousands of {dollars} during the last handful of years, and that’s cumulative as we glance ahead. So sure, you do must do various things, Ken, and it’s a singular setting, proper? And it doesn’t appear like it’s going to go away anytime quickly.

Ken Hoexter — Financial institution of America — Analyst

Lance, if I might simply make clear one factor, I suppose, by this name. It’s not simply — I suppose from a UP perspective, this isn’t nearly staff as we heard about final evening from an japanese rail. I suppose you continue to see this as plenty of operational enchancment that you just management and I suppose, from Eric’s perspective, it’s not nearly including headcount. Am I listening to that proper?

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Sure. Ken, I believe you’re listening to it principally proper. Primarily, we do must get crew availability, which is about hiring and hiring in the suitable spot to get again to being fully fluid. In order that’s an essential factor. Along with that, although, you may see in our metrics, terminals are in typically fairly good condition. Terminal dwell is sweet and there’s parts of the community which can be working fairly darn properly. We’ve bought to recover from the highway extra successfully that begins with crew availability, however there are different issues which can be constructed into that, that may assist like persevering with to cut back variability occasions and derailments, issues like that.

Ken Hoexter — Financial institution of America — Analyst

Thanks for time. Respect the ideas.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Thanks, Ken.

Operator

The following query is from the road of Jason Seidl with Cowen. Please proceed along with your query.

Jason Seidl — Cowen — Analyst

Thanks operator lance and staff. Good morning. I needed to speak a bit bit extra on the home intermodal aspect. You talked about, Kenny, I believe that you just’re holding an in depth eye on kind of declining spot truckload charges and possibly the impacts it may need on home intermodal. How ought to we take into consideration the yields within the again half of the 12 months as we take a look at the mannequin?

Kenyatta (Kenny) G. Rocker — Government Vice President – Advertising and Gross sales, Union Pacific Railroad

Properly, we’re 80% by our RFP season. And so the costs and will increase that we’ve taken, you’re going to see these replicate as the quantity improved in home intermodal. Once more, sure, we’re going to observe it, but it surely’s simply not exhibiting up proper now on the contracted aspect. It’s nonetheless a really tight provide chain. We’d prefer to see a couple of issues loosen up when it comes to the chassis dwell that’s on the market and the container dwell to assist with the quantity and us seize extra of that quantity that’s on the market. However once more, there’s nonetheless a disconnect there between what we’re seeing on the spot aspect and the contractual charges.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

And Kenny, I imply that’s simply reflective of the truth that in our contracted world, we chase pricing completely different than you see the fast worth adjustments in truck. In order that whereas truck spot charges flew up and at the moment are beginning to drop again down, we’re nonetheless within the form of the catch-up part, if you’ll.

Jason Seidl — Cowen — Analyst

And as we take a look at 4Q, final 4Q, we have been kind of on the top or the peak of the fear concerning the provide chain, there was most likely plenty of accessorial fees that plenty of completely different carriers on the rail or trucking aspect was including on. How ought to we take into consideration that this 12 months as we glance to the year-over-year comparisons for 4Q yield generally?

Jennifer L. Hamann — Government Vice President and Chief Monetary Officer, Union Pacific Company

Sure, Jason, I imply, you’re proper. We had seen some elevation in a few of these ancillary income gadgets due to provide chain. And as we talked form of originally of the 12 months, and I might say we nonetheless see this in the present day. There’s alternatives for that to enhance within the again half of the 12 months, assuming the provision chain improves as properly. So we’re watching that hasn’t modified a lot, I might say, right here within the first half however would search for some enchancment within the again half. I must also point out relative to yields within the again half, we predict a bit bit extra of a adverse combine affect within the again half as we see these worldwide and home intermodal loadings choose up relative to a few of the remainder of the enterprise group. So one thing else to think about.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

And all of that’s embedded.

Jennifer L. Hamann — Government Vice President and Chief Monetary Officer, Union Pacific Company

Completely. And that’s according to how we form of noticed the 12 months taking part in out relative to combine even again in January.

Jason Seidl — Cowen — Analyst

Okay. Respect the colour, everybody thanks for the time.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Yeah. Thanks, Jason.

Operator

Our subsequent query is from the road of Ben Nolan with Stifel. Please proceed along with your query.

Ben Nolan — Stifel — Analyst

Yeah, thanks. So while you discuss definitely the carload progress within the again half of the 12 months, however then, Kenny, I believe you additionally stated that you just’re anticipating incremental progress in 2023. Simply curious what sort of broader macroeconomic assumptions that takes into consideration and actually is it — can you simply kind of play make amends for the carload aspect, even when the broader macroeconomic setting have been to say no a bit bit? Or how delicate would that progress be?

Kenyatta (Kenny) G. Rocker — Government Vice President – Advertising and Gross sales, Union Pacific Railroad

Sure. I imply plenty of this isn’t with the ability to meet up with blended quantity. I imply, there are most likely some low inventories that we’ll replenish on the coal aspect. However once more, the basics for pure gasoline costs, we anticipate to stay fairly sturdy in 2023. The identical is true with a few of the commodities like completed autos and auto components, however layered on all of those are actually enterprise growth wins. So I can level to enterprise growth wins on completed autos that have been over the highway, enterprise growth wins on auto components that have been over the highway. After which once more, identical is true with our plastics enterprise and our metals enterprise. These are new enterprise wins which can be approaching. In order that’s how I give it some thought after I’m taking a look at industrial manufacturing as an entire and the place we stand and what’s on the market for us to seize.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Sure. And Ben, concerning form of what might occur in a recession, I’ve been speaking to plenty of our clients throughout the completely different markets. And people which can be large multinationals and international, their general outlook is clouded by the truth that Europe is certainly slowing down fairly dramatically. China is in a nasty place proper now. They usually look to the US markets, they usually suppose that hasn’t occurred within the U.S. but. And the affect in commodities that we ship if a downturn have been to happen may not be as sturdy as it will be in any other case in a recession as a result of in recessions and in commodities, you get this bullwhip impact, proper, the place there’s not simply in-demand destruction, there’s destocking that happens.

Lots of our markets, there’s not destocking to happen as a result of they’re nonetheless making an attempt to make amends for their provide chain stocking points. So it’s simply laborious to say, Ben. We’ve been actually making an attempt to parse that out ourselves. And to this point, we predict that if the U.S. financial system slows down, let’s say, it’s slowing down. I believe our markets are going to be in a spot the place we’re nonetheless going to have progress alternative.

Kenyatta (Kenny) G. Rocker — Government Vice President – Advertising and Gross sales, Union Pacific Railroad

Completely.

Ben Nolan — Stifel — Analyst

All proper that’s tremendously useful. Thanks.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Yeah.

Operator

Our subsequent query is from the road of Ravi Shanker with Morgan Stanley. Please proceed along with your query.

Ravi Shanker — Morgan Stanley — Analyst

Thanks, good morning everybody. Only a follow-up right here on the home intermodal commentary. Look, I believe I ought to fully hear you on the yield variations between you and the truck spot market. However I believe the broad consensus, together with from — some trucking corporations is that the truck market is loosening right here and properly into the again half of the 12 months. So while you stated earlier that a few of these and IMC switches between you and your major competitor are going to be good for everybody, that suggests the potential for important truckload conversion within the again half of the 12 months, form of what drives that uptick in truck conversion, the time when truck charges actually needs to be falling within the again half?

Eric J. Gehringer — Government Vice President – Operations, Union Pacific Railroad Firm

Sure. So bear in mind, we do have a brand new buyer that we’re enthusiastic about that’s on our property now with Knight-Swift. And we’re seeing advantages and wins from there. As our service product improves, we additionally anticipate to insert extra sources on the market to win over the highway. We additionally know that there’s over-the-road enterprise that may come again to us on the parcel aspect. So once more, should you look throughout the spectrum, there’s nonetheless alternatives on the market as our service improves, as we add a couple of extra of these sources into the community to develop this enterprise within the second half.

Jennifer L. Hamann — Government Vice President and Chief Monetary Officer, Union Pacific Company

Sure. And I believe the opposite factor, Ravi, simply to recollect is there’s a giant gas delta between rail and vans. And so definitely, gas has an affect on our margins, but it surely has an excellent bigger affect when it comes to that price for people who find themselves transport by truck. After which long term, there’s the ESG advantages that you just’ve heard us discuss. And so whereas that’s possibly not shifting the needle a lot in the present day, long term, we nonetheless suppose that’s an enormous alternative for us.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Proper. However going again to your query, Ravi, I’m unsure, Kenny, that your necessities within the again half has some form of fast acceleration in truck conversion. You simply carry on the trail you’re on, we get our service product persevering with to enhance and what we have to have occur is going on.

Ravi Shanker — Morgan Stanley — Analyst

Very useful. And simply form of one fast follow-up, Lance. I believe there’s some chatter about Congress making an attempt to mandate one-person crews for the railroads. Type of any touch upon that?

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Sure. So I don’t know if Congress’ getting concerned. They often get requested to get entangled within the crew-size dialogue. Our position proper now inside nationwide negotiation is to be sure that both the PEB addresses the query or they deal with the query by permitting the railroads and labor to proceed to barter, which we’re proper now with our unions which can be affected on redeploying the conductor from the cab to the bottom. We expect it’s higher for the conductors’ high quality of life. There’ll be nice jobs. And naturally, there may be an effectivity alternative there. And so we’re going to maintain pursuing that. So sure, keep tuned. I believe the subsequent large factor that may occur is the STB is pending a rule that they’ve been engaged on concerning how many individuals must be within the cab of locomotive. And we’ve bought our antenna up on that.

Jennifer L. Hamann — Government Vice President and Chief Monetary Officer, Union Pacific Company

I believe you imply FRA.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

FRA, excuse me. Did I say STB? I’m sorry. I meant the FRA.

Ravi Shanker — Morgan Stanley — Analyst

Very useful. Thanks everybody.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Yeah. Thanks.

Operator

The following query is from the road of Jordan Alliger with Goldman Sachs. Please proceed along with your query.

Jordan Alliger — Goldman Sachs — Analyst

Yeah, hello. This can be a bit redundant. You’ve most likely answered it a number of components. However when it comes to the quantity acceleration to kind of excessive single digit within the again half of the 12 months, I’m simply — to go from mainly 1% to that, simply making an attempt to get a way for the way fast volumes can react. And I suppose the query is, I do know you have got alternative moreover the financial system and headcount is essential. However when you consider altogether, whether or not or not it’s the financial system, headcount, operational adjustments, what has to occur like first and in the present day so as to have the ability to get that acceleration to the extent that you just anticipate, as a result of all of the issues collectively appear to be they should occur. However I don’t know. It’s only a large ramp, and I’m simply making an attempt to grasp which is essentially the most crucial elements to it.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Certain. Jordan, that is Lance. So I’ll take you again as just lately as June the place you noticed seven-day carloads originally of the month within the excessive 150s, 160 ballpark within the month at 165, 166. In order that form of ramp can occur, will occur, does occur on the railroad and we’re able to it. We simply did it. By the way in which, throughout June, our service product was enhancing by that complete month. So we grew and improved service on the identical time. When it comes to what makes that occur, primary, we’ve to have crew availability so we are able to run trains on demand.

That’s not simply crew’s being graduated, which they’re each week proper now, but it surely’s additionally ensuring our recrew charge is in the suitable place and that we’re utilizing each crew properly and that’s in the suitable place. Our recrew charges down, first begins are far more environment friendly. There’s nonetheless plenty of room to run on each of these. In order that’s the very first thing that has to occur. After which after that, it’s all of the pick-and-shovel work of working a a lot better community from a reliability and a variability perspective. Proper now, the nice factors are terminals are in good condition. We’re launching on time on common, all of our community. And what we’ve to do now’s recover from the highway higher, and that’s actually about crew availability and variability.

Jordan Alliger — Goldman Sachs — Analyst

Thanks.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Yeah.

Operator

Thanks. The following query is from the road of Jeff Kauffman with Vertical Analysis. Please proceed along with your query.

Jeff Kauffman — Vertical Analysis — Analyst

Thanks very a lot. I recognize you squeezing me in. It’s been a protracted name, so I’ll be fast. You famous that you just had jumped on hiring and elevating your T&E worker coaching a bit sooner, I believe, than another rails. CSX was griping final evening about how they’re having attrition points after coaching. Norfolk simply put a launch this morning saying they’re elevating pay to $25 an hour and including incentives. After I discuss to rail business, individuals which can be hiring, they are saying, that is Gen Z. They don’t wish to work 5 days every week. They don’t wish to be on name earlier than going out within the discipline. Are you able to discuss a bit bit about how the job is altering? Or what you’ve accomplished to be possibly a bit extra profitable in hiring and retaining your staff than a few of the tales we’re listening to?

Eric J. Gehringer — Government Vice President – Operations, Union Pacific Railroad Firm

Certain, Jeff. Let me take that one. And I simply wish to be sure that we stage set on form of your opening. So we began hiring again in April of final 12 months. We employed roughly about 250 transportation staff in addition to mechanical and engineering final 12 months. After which we’ve constructed on that success this 12 months. And as I reported this morning, we stay extraordinarily assured that we are able to rent the 1,400 transportation staff we have to. Now as a part of the job, I’m going to let you know that I believe we’re about midway by that journey. Definitely, the final two to 3 years, as we’ve checked out how do you entice individuals to the railroad, we’ve relied on issues which have confirmed to work up to now.

So our implementation of an worker referral program, ensuring that we’re getting the phrase out inside our personal households and mates as a result of these individuals greatest perceive what the railroad actually asks of you. They arrive in day one, understanding these expectations. On the identical time, our workforce useful resource group has accomplished an exceptional job being in several technical faculties to proceed to attract upon individuals from there with completely different scholarships. In order that they’re additionally inside that, serving to to attain our objectives for minority and for girls becoming a member of the railroad. Now right here’s what’s left, proper? What’s left, Lance hit on a part of it, sure jobs in the present day, should you can take them from a comparatively unscheduled course of or unscheduled nonstandard schedule and transfer them to a extra commonplace schedule 12 months one, going to enhance the retention of the workers you have got now.

And two, you’re going to supply up jobs which have been completely different than up to now and in doing so, you’re going to draw completely different teams of people who you’ll have been capable of entice up to now. In order that’s the work we’ve in entrance of us. Even simply two weeks in the past, we launched a brand new survey to all of our transportation staff to assist them additional assist us perceive high quality of life on the job. So that you’ll proceed to see us deal with it. We’re not struggling as a lot as possibly another roads as you characterised it, but it surely’s nonetheless a chance we’ve to maintain on the forefront of us.

Jeff Kauffman — Vertical Analysis — Analyst

Thanks very a lot.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Thanks, Jeff.

Operator

Subsequent query is from the road of David Vernon with Bernstein. Please proceed along with your query.

David Vernon — Bernstein — Analyst

Hey guys, good morning and thanks for taking the time. Lance and Kenny, a much bigger image query for you on intermodal. You guys have put ahead service restoration plans to the STB which can be concentrating on form of return to low 60s, I believe, on-time efficiency within the intermodal enterprise. I needed to get a way from you guys, why is that the suitable quantity? It looks like a reasonably — I don’t know, not a very aspirational set of targets. And is there a method that you just guys might be serious about that enterprise in a different way that might offer you possibly a greater benefit when it comes to accelerating the modal shift off the freeway and on the rail?

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

That’s an important query, David. And clearly, what we’ve bought in our service restoration plan with the STB shouldn’t be our final finish sport. And so the quantity that you just’re referencing for intermodal journey plan compliance isn’t the aspirational finish sport. Finally, within the present setting, when that quantity is within the mid-80s to excessive 80s, low 90s, it’s superior. And the place we’re proper now within the low to mid-60s wants work, proper? We want enchancment. Now having stated that, in the end, what each buyer tells us what they actually care about, simply do what you say you’re going to do. I can regulate.

And that’s actually what they need from us. So we’re making an attempt to offer them proper now’s markers that they will belief as we transfer by the again half of the 12 months and use us and use our intermodal product to fulfill their wants, proper? We’re nonetheless — we are able to do big quantity at very aggressive pricing in comparison with the choice mode of truck and we are able to do it reliably as long as we proceed to enhance our service product and promise one thing that we are able to really ship. Kenny?

Kenyatta (Kenny) G. Rocker — Government Vice President – Advertising and Gross sales, Union Pacific Railroad

All I’ll add is that we’re all the time taking a look at our buyer success metrics. We discuss it typically, we have interaction our clients, and that might proceed to evolve.

David Vernon — Bernstein — Analyst

I imply it strikes me as throughout a few of these questions and repair opinions with the STB and clients complaining about service, there’s a giant disparity across the definition of what rail service is. And I imply, as you guys take into consideration the way you method that enterprise and the way you contract with clients, is there one thing that you just guys can do to higher make clear form of what that service stage can be and possibly even use pricing to incentivize it? As a result of it does happen to me that there’s a giant buyer in UPS that does get good service. Clearly, they pay for it. However most different clients which can be complaining about issues like service, the paradox round what’s service and that matching of worth for service doesn’t appear to be it’s possibly as tight because it might be. Is that one thing you guys are engaged on or serious about in any respect?

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Sure. We completely worth for the product that we’re offering to the client base. We’ve bought loads of room to run there to proceed doing that, as you level out, extra successfully. And the opposite factor that you just’re mentioning is course of, and we’re working actually laborious proper now on enterprise course of between ourselves and our clients to be crystal clear on what the service product is and what we are able to do and the way a lot we are able to do after which serving to clients handle their enterprise round that and managing our enterprise round that as we proceed to develop and enhance our product. So sure, there’s plenty of work round that, David, proper now.

David Vernon — Bernstein — Analyst

All proper, thanks guys. I’ll observe up a pair extra ideas there. Thanks.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Thanks.

Operator

Thanks. Our final query is from the road of Jairam Nathan with Daiwa. Please proceed along with your query.

Jairam Nathan — Daiwa — Analyst

Hello, thanks for squeezing me in. I simply needed to observe up on a couple of questions that you just already answered concerning recessionary and plans there. So I believe up to now, your curiosity determine has been fairly nimble in chopping prices within the occasion of a quantity decline. However do you foresee any adjustments to how one can regulate your labor given the difficulties that you just had this 12 months? To get crew availability up, do you see a special method within the occasion of a recession or a quantity downturn?

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Sure. Jairam, essentially, the reply is not any. We nonetheless — if there have been a catastrophic downturn within the industrial financial system, the products financial system, we’d regulate in a short time to it. Now having stated that, on the margin, like we talked about very early within the name, we’d be far more considerate about the place and the way a lot and the way we’d make these staff out there to us when quantity returned. So that you’d most likely see marginally some completely different habits however essentially, we’ve the power, and it’s confirmed to regulate our enterprise to regardless of the setting is.

Jairam Nathan — Daiwa — Analyst

Nice, thanks.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Yeah. Thanks.

Operator

Thanks. This concludes the question-and-answer session. I’ll now flip the decision again over to Lance Fritz for closing feedback.

Lance M. Fritz — Chairman, President and Chief Government Officer, Union Pacific Company and Union Pacific Railroa

Sure. And thanks once more, Rob, and thanks all for becoming a member of us this morning. We recognize it. We recognize the Q&A with you. We sit up for speaking with you once more in October to debate our third quarter outcomes. Till then, take care.

Operator

[Operator Closing Remarks]

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