CSX - Earnings call transcript Q1 2018

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Operator

Good afternoon, ladies and gentlemen, and welcome to the CSX Corporation First Quarter 2018 Earnings Conference Call.

As a reminder, today's call is being recorded. [Operator Instructions].

For opening remarks and introduction, I would now like to turn the call over to Mr. Kevin Boone, Chief Investor Relations Officer for CSX Corporation.

Kevin Boone

good and Michelle, you, afternoon, everyone. Thank

disclosure on Officer; and me X my our by pleasure today's it our With Officer. Executive call Executive Chief is Officer, non-GAAP followed disclosure, and Foote, to Jim forward-looking Slide Frank is Slide X. that, is On Joining on President Lonegro, Chief introduce Financial Chief Foote. Jim

James Foote

on much, be here with everybody to Kevin. this great the It's very you Thank call. afternoon

few would Before had comments. we a with to start CSX I very like quarter. slides, good a make the

are The we record We producing steps operate railroad by run process accomplished drastically a the CSX past that men over shareholders. to and, is of This hard year. women all and operating a place unnecessary of performance, the Clearly, are the changing results when the railroad. use we improved that have combined, way reflection quarter of work the first taking customer out the business millions service of returns taken lot. impressive has to

these safety I on work On my a deliver little safety. to lot come We would good X a out in will the CSX And still like investor that achieve XX, day out is are our ability the time do towards We're contributions plan. plan have always first. that to to to and take to X them. said, achieving at I every results, feel highlight a for news more of their our I all watch, recently employees conference thank quarter laid we goals. is of in, X-year only to these The proud our want confident targets. of With and

have do team improve, be some to to run so. you the work railroad, committed to We to and safest. be the best To have the do is

charge will lower had on rate was flat $X.XX quarter minor drove into Frank in down last on X deck, of And and versus walk through. we'll revenues, count, XX% be X our few simple only by pretty Now We The and a and, start increase to the cash driven also to contributed in other $X.XX. significant results. year, first EPS operating last onetime EPS with out. Slide share The costs XX% prior year's point let's which year-over-year get the year's just versus a and increased new income highlights. that year's I increase. quarter last extra a adjusted about X%, to lower restructuring should events day the the this than relatively the improvement adjusted

ratio operating when a quarter little higher improvement. biased, fuel basis costs, last in year-over-year ever. price, MS&O cost to improved I XX.X%, by record but it's driven a fuel Our XXX quarter. of CSX's drove year's might to be first XX.X% and Lower partially adjusted labor think OR significant offset best a points I compared --

slight sequential flat offset a pricing, the to coal. surcharge volume mix. next improvement revenue Total revenues fuel X. in decline and supplemental and slide, We did negative in as was a Going price, X% Slide see excluding

supplemental intermodal a down driven exited volumes. million, no and car its or pet saw some continuing our by impacted because closure. segment. customers was increase reduced we issue, an challenges food which the increased look by year-over-year are was create movements availability, crude-by-rail. take previously, Lower and Chemicals market. other of And revenue. the practices margin. network. decision. were to no Slide our I somewhat And facility lower higher key auto. and ethanol business, City industry vehicle occurred fly export a more a offset Looking and at strong few Domestic coal to contributed which metrics you. highlighted period was production with in fertilizer and we low North impacted Ag by rail fluid mentioned let's no including Other American revenues, as prior Each damages due shipments liquidated On with performance. Obviously, ash working by business international mainly and remaining have at as were X, demurrage business $XX declines coke this Plant with are some utility year, degree, We've and a revenues demarcating either coal to last a the area or changed quick familiar operating by influences that was plastic strong lower the was, items, outside impacted that basically

to the we car at in As and year-over-year progress train outlined make Investor continue dwell. Day, both significant velocity we

train and improvement improved seems area length set which operations of per It and utilization every also saw day, CSX asset almost GTMs represent we new like horsepower, available another. in our We record one a in or efficiency.

beginning annual our the reduced done and We year, improvements a a job exceptional of with an workforce. weekly but department making we year-over-year. Brian crude line of is mechanical it with a expected seen are smaller XXX and XX% more year-to-date. locomotives XXX been car of opportunity doing failures, has million XX.X over XXX and Service road starts clearly miles design progress, in another Barr improving reduction have in ahead. total have the Since -- there

financials to benefits over will you Frank, provide and operational me on the take Now from the through it details hand more improvements. let the who

Frank Lonegro

everyone. and you, Thank afternoon, good Jim,

X. Turning to Slide

increased higher the core pricing statement. revenue a for decline supplemental by as gains. Let summary offset me the flat through surcharge you Reported roughly in revenue, solid benefits volume fuel and was income was X% first recoveries quarter walk the of

year-over-year the for while The now reflects now line cost were the service charge. income. restructuring restated and the is Overall, Prior an only by average A while train a expenses. fronts. reduction XX% increase in of enable elimination multiple fall Scheduled X% crew XX% reduction last the velocity pension train X% expenses normalizing XX% pension X% XX% on increase our expense, an savings new in accounting of seen or horsepower, in helped and yards of eliminate road the expense of of remaining P&L accounting starts, length dwell the component new other of operating in year velocity and a last below in in last XX% enabled $XXX man our adoption year metrics, standards driven the included in rolling network per headcount. million first this available geography GTMs hump in operating railroading and combined to fringe stock including year's aspects Moving lower pension assets. X through hour improvement crew savings with where in the have yards Total has XX% levels. labor restructuring cars processed been quarter, improvement staffing fluidity per year's reflect results, Improved savings charge, lower a after drove to in were standard.

XX%, the resource down down our of and line by which Our active enabled was on locomotive cars combination reductions within number fleet came the of XX%, mechanical workforce.

streamline and Fewer maintenance fleet resulted in The efficiency resulted our across improve have bureaucracy expense, consumables. and lower quarter. speed addition, year restructuring year. early with locomotive workforce, efforts here MS&O and to labor management with yielding versus in the year-over-year XXXX lower management the railroading, repair the and eliminate in combined the of incentive prior lower scheduled expense in expense. resources In started lower in decision-making counts, also management of system against Jacksonville significantly we prior expense the lower availability, improved levels down asset materials compensation costs lower the XX% was resulted of

have meals contractor towards thousands drove plan and complexity consultant sold flowing and scrapped freight of ancillary to maintenance apply and agreement. taxis. the for in hotels, our sustainable the with streamline the from and broader operating reductions as we significant hundreds have contractor labor allowed also reductions also targets in in Working rightsize of line. workforce reduce workforce XXXX reductions, and services engines made such months. and fleet total balanced have starts savings our to to Given and more reductions we consultant nature our or also Fewer asset footprint past crew us XX of the locomotive reducing to MS&O these cars our beyond, Efforts network contracted The progress costs the organizational workforce.

real portfolio cumulative at year-ago the of The the Finally, year's through would million the period. first real $XX we that $X in continued in in sales efforts quarter provided quarter estate investor this versus to in monetize we guidance million our gains resulted of XXXX. gains estate the million are surplus conference, $XXX real with consistent achieve estate

management rents to the and prices on despite affiliates higher and technologies and year-over-year continuing equipment performance matching drove load Looking earnings reduce due changes fuel asset a presented days year. due base up our higher continued are to improvements winter XX% Depreciation increased at favorable energy trailing although efficiency our to asset are fuel Equity per a incidental to we of offset were capital in sales. slightly reform significant increased at expense. to use in conditions driven horsepower by this our primarily improvement improved to year-over-year by harsher headwind, investments, rents, tax focus drive hire tonnage efficiency car better true-ups. fuel distributed expense though due The the power other through items. slightly

on year. cycling interest debt are earlier due XX% increase a pension line the was illustrating new the additional in restructuring expense earnings, reform. of standard. line, roughly below primarily XXXX's tax to now expense Below increased, Tax impacts housed issued we the flat due part the Lastly, of charges, the this are accounting pretax to which favorable we

told, was items rate remarks. XX% headline in year. All for XX.X%, to though expect these the highlighted in Our to continue quarter pieces sum his full effective opening around the the Jim tax we

Importantly, ratio a XX% step target conference. last first the we investor meaningful ratio we month's quarter at the set the achieved represents XX.X% toward operating operating in

the cash equation announced intensity $X.X investments model. side billion, first capital reflect railroading the the recently the X-year in Slide Turning capital on driven to the reduced our XX. by scheduled quarter target of of Capital of

capital-intensive reliability before we've to here, investing needs an reiterate to effective undoubtedly better safety infrastructure commitment utilization improved asset our many and that and through reduces alternative serve As that yard remains less become times said and as and processes unwavering, investments. a capital we have and stock company rolling in

was Our growth muted of X% than free would our more cash flow growth have implied. earnings

for until April. are estimated and the First federal not most paid payments quarter first tax importantly,

flow. but our As cash a the of you yet in not earnings benefits in free see result, our tax year-over-year reform

with there short-term impact any can items a flow as quarter, basis. are free cash timing that Second, on

employees that have Here, of cash payments significant cumulative taxes combination $X.X expenses. and drive There were will tax in Bigger the XXXX. growth, core flow made unions and free flow payments differences and billion state in back earnings timing the cash with bargaining. also national lower of quarter we free wage picture, through to cash concluded affiliated lower CapEx prepaid conversion

quarter. first first dividend the were to announced of increased February expected completion pleased to On returns to billion, we our during our our Finally, to significant $X quarter and increase XXXX. program the buyback in quarterly XX% XX, provide meaningfully we shareholders with a share

mark-to-market buyback cadence of As Since Jim program. you for much in in the his implementing a smaller program have capitalized evaluate shares the let on larger mid-quarter, that With quarter, than half pace. rata it billion our we that, recent premised closing quarter fluctuations were a remarks. faster at first our and to remember me turn pro $X.X repurchased on a back the buybacks

James Foote

Great. Thanks a Frank. lot,

understand. very beginning, quarter at everyone simple to As said I the and for a it's very clean

And slide a little financial so last in outlook. bit conclusion about here, the on the

have requirement for year. said, the many expect of to As we outlook you weekly slightly Also, increased that happy up before, no calls have confidence as start I I with to the but said in of the STB. as previously longer are I've happy I to the the am say say, only to it, we year, this and are the am revenue aware, given under be the not

We I to service, and that have expect improved continue. our

a the year expect in step-down a operating solid significant each to first As XX% XXXX our deliver on the remains in we ratio. demonstrated OR. in quarter, There order work ahead of we target

the sight, are making and hard best is that. of to railroad in achieve we CSX working goal our run However,

now. and your of Kevin like questions. I would answer I any start. will it to to be to turn can We glad Frank back So

Kevin Boone

Okay. think [Operator ready to I Instructions]. take Michelle, we're questions.

Operator

[Operator Instructions].

comes from from question Chris first Our Wetherbee Citigroup.

Christian Wetherbee

maybe guess, side. I start revenue I want to the on

Can is good. where there? XQ, for outlook of When of the growth volume a outlined volume in you you is at about core were a the sort looked of and you and us sense progresses? pricing certainly of yields of sort what price, over when as year. think of little guess, I course and mix year could maybe of they kind help price you revenue give that give the us maybe assumption Jim, of modest some bit the So,

James Foote

slightly. was I improved Yes, think I what sequentially said prices

revenues to slight as that the coal we down to is year revenue, you'll moves as going If you if example, the an we've in a surcharge supplemental other. go are the year to going implemented at look see continue through around. clearly, policies we demurrage specific as and in as you and move exclude tick-up our and up more see Fuel

we've for onetime you then today out So these of I items think in of together bringing upon the that as with elements and a in other there's prior demarcated. -- our a remember, had there based year be reasonably pricing. consistent we've run in that here that a kind there expectation total -- or you're rate you solid we've volume reasonably reasonable terms of should put a and what slight increase revenue environment the kind of lot year-over-year saw seeing as there increase, And terms of out

example, railroad summer cycle. taken last as other as an intermodal year volume items. we off late the some well items, X% in As was that of begin to And of those to

so than what a part of later see confident little to having right volume why improvement the more in the an we're we're And of now. year that that's begins the more

Christian Wetherbee

Okay.

as So cadence bit the follow-up a progresses. could just better get maybe helpful. on... That's And then a year

James Foote

saying But shorter of a yes. it, way much

Christian Wetherbee

it. appreciate I Yes.

Now color normal sense guess, appreciated. I trying your seasonality of what greatly look And like. ratio from operating might then, to an just a perspective get was maybe

hard dramatic so to or a how of from sort it maybe, rest some expectations? patterns you be back to that the side, So it's where year doing on out. We Is headcount would typically there XXXX helpful. plays cost on through ended the see improvement little XQ do the guys quarter. and Frank, with the OR relate cost kind your historical and and the anything the saw are anything you of then of can of sort you help us But of cadence in you things

James Foote

the think first in anything for he I'll CSX. quarter, is environment additional in to first the everybody's so that. quarter Clearly, operating I if jump Frank here, opinion toughest And the has let

Frank Lonegro

as of of remember you one. thing that bit little onetime implied adjust couple year, the for seasonality had the you Chris, only a the I'd quarter, significant so probably for the we that items fairly rest to second add, in a need

it in side, year-to-date On contractors, and employees in average the a headcount, bit that about little a the at Jim mean, year-to-date, quarter you first or whether really you around see X,XXX the add matter the it's more I fourth X,XXX. than on doesn't of the headcount ending against headcount look you call we're down year-over-year X,XXX about quarter, on and that set down year-over-year. that's X,XXX basis, goal When

pretty one. in So that we shape we're on feel like good

So hopefully, that enough color gives go on. you to

Operator

Ken Lynch. Our next Hoexter Merrill of question from comes America Bank from

Kenneth Hoexter

pace to eastern about the going whether on Does thoughts continue north? just you your you your failures ability of from your the railroads. rails, Jim, peer this constraints given that your the interchanged see amount or impact it's traffic of is some even improvement service between of Can fellow or that your that -- of that? west peer talk just

James Foote

Canadians, west or again, wherever Ken, it's be a the interchange so out network clearly, or they partners, we wherever in in our Memphis there, the Well, by interchange or a or to Chicago we're and at traffic. Chicago impacted, degree, whether

and first the to any you'd ran better first would look works, at quarter, But scheduled want network if during you think we you the wanted railroad if the our like to at way obviously, fluid performance model So we in network. look proof our the that more operating you if have stress us. I for it. It's a quarter

passed stress we railroad. over think test -- I dome of didn't So in the terms Hunter this a build

everyone We same else are we else, the to soup, with in in operating same dramatically. as everyone speak, conditions winter the and improved and so

of perform performance strength based resiliency And upon to historical the metrics. so a just shows I even organization better future of and the -- think that's kind in the operating our

Kenneth Hoexter

Yes. great Truly a job.

would job. there surcharges. The they and but sustainability now that be what if your see expect as does other adapt was based your of your grow saw, on the adapt? Does increasing other as you follow-up what on know Or customers demurrage continue you've that didn't come do down great you're business just Just items? revenue rates on changed limitation based in on that a the that back Or to seen to you past? business the you've

Frank Lonegro

Frank. it's Ken,

for you liquidated damages piece in out the we So broke prepared the remarks.

in you've basis that money revenue. to item, the make We're on into is obviously, all the of behavior customers trying cars to on we help trying about. of at we service, get that the to balance, scheduled So in some change into week got We're need that onetime tons fasters. And so really customers' respects, look quarter. we get as the not a X-day a we turning supplemental an things railroading get into the in

you expecting customers intended change this going in charges of behavior commentary on want we're forward. pay for But a for the that wouldn't where to really X. X, line we quarter change of year. or be So think be the run behavior -- rate on not I is to something volume basis. And going rest Jim's Qs a the and a Think to type the top to saw the number first more the these here X.XX we're sense and should their give like X a you imply of obviously, the

it. good we So pretty feel about

Operator

from question Tom Wadewitz UBS. next from comes Our

Thomas Wadewitz

where down quarter? a a granular thinking OR to the year-over-year good? to thoughts, that Does down, was we Congratulations And per Wanted help performance. would guess, comp how second quarters? per first worker was performance against one that and coming is quarter? to how about I and, the look get cost great third and incentive your that we really at we down. as question. in Or The is of that relative backdrop incentive you Can results, comp do I to, think going were kind and comp was maybe be up Or then quarter, side think comp a us think broader maybe benefits on kind about be worker one-off? strong guess, we Is be of continue down? about,

Frank Lonegro

Frank. Tom, you. Got

the comp largely a the in And is year-over-year a of in about incentive on quarter, driver on you're as were the comp, favorability by basis person right, well. X%. You're per better mix right, employee tad we probably there

As spreading think in you the modeling about about really then you're if assume you're your talking inflation future, you just fixed costs. employee static mix, and

as I do have on plan first drove on quarter. fairly year against we we'll the $XX incident goes fourth reduction the lower a depends going of a you're then the fourth the what think the Hunter's you to about cycle. as That if reversal about how We see fairly that And quarter, piece incentive we on. had year-over-year remember, was quarter comp significant million last you significant think number. reversal of year remember, comp options, did the that of headcount in in it our

moving So that, through how you parts. those are just to think probably the model as big

Thomas Wadewitz

Okay.

then you comp, it's fourth So down, it incentive comp might but be Is get that... quarter, tougher up. could be to

Frank Lonegro

think yes. I that's fair,

Thomas Wadewitz

Okay.

apply were normal of OR XX.X% and this seasonality, first quarters if and broader kind earlier, asked you XXX points could you be versus in basis of So third with you then I you but bit think could I XXX -- improvement little that. see second in question a the have, just the quarter,

XX%, you first reasonable second are that? So a in that from we that that, possible whatever back XX% that that's kind of there apply? one-offs wouldn't that third step deliver potentially framework at of Or reason that, quarter, and should type a Is pattern quarter, puts you quarter.

James Foote

times I my in said But said, impressive ain't we difficult this in very, as delivered I easy. remarks, period. performance a most opening solid Tom, as historically many very and our

set XX continue So we're going to to quarter to done match. can do game isn't of -- game a and improve. to going everything to to out grind But continue we're continue X we

in And figure we're conclusions step-down going this going any of the I hopefully -- But so wouldn't we got enormous is But draw we we're it kind you just better. work, out. and drastic X quarter. -- hopefully, had to to hard get from

Frank Lonegro

Yes. last was One think year comparisons. you pre-precision just your other railroading. of as thing, about Tom, year-over-year QX

against apples-to-apples. as X you So I you obviously, not step-downs in in year-over-year go X, year, Whereas, we this necessarily Qs are 'XX. comparing made forward think, significant and X

So hopper into that of well. as put just sort the

Operator

Allison Landry Crédit Suisse. from

Allison Landry

the Given should the the your a the think lot and service originally could sooner the issues truckload recover how potential you Analyst comments volumes of do the year your think and with intermodal is tightness and But balance about upside what maybe Norfolk, is? than that the expected you at Day? at think consistent I in cadence perhaps we for

James Foote

to mind in sure as of, this is Intermodal and are profitability overall a forward business. to there key then out two look that domestically. concentrate goals side, we us; Yes. which though, But investor for a is, on efficiency the climb both think I for we has on outlined the said intermodal that move the we I the and -- the the and hole specific clearly, a like corridors year, for lot big us network internationally intermodal, of we secondly, have opportunity of make I at forward, improve of but conference, as one, best think to we the focus in degree,

a going there right and be on that's now, might it the out the railroad. of because chasing marketplace lot and And just put just available business volume intermodal truck not in to so I'm

of to going plan. we're move with growth logically and the forward So methodically rollout our

major already upside you. what major, told I'm for And in looking so therefore, not a we've

Operator

from Group Research. Wolfe Scott

Scott Group

down Maybe maybe And on of that little export how dipped start kind thinking that bit in rest first you and how Met were and a And some of about step-down can to think utility bunch some maybe coal. just coal given wanted prices. a share the basis there. some you're the you XXX. on views year. met below a views volumes if yields of So coal in sequential prices volumes about on then

James Foote

Yes.

second the coal first, take utility Let's part volumes. of question your

challenges the of volumes. more into were are know of You vulnerable. now the ones And kind other -- the the moving south. years ago, utilities a there here most coal few in southern are domestic Northern it's what and utilities terms that utility becoming stressed

And low, gas so can to for as those do operating, keep but a up to us. we prices everything it's going we're stay utilities challenge and to try

And domestic absent so utility of side the other expecting some the is business we're that going forces to change pressure, remain that. under would that

not have that, export both the -- year stronger is the coals On relatively APIX, that we're outlook seeing the trend like we than to thermal strength are The originally side, demand expected. the though should met metrics price the business, And even for starting slightly. and And this some is are that used still of there. continue. remained the strong, had the to -- down

railcars move the the continue franchise, we'll the run can can is coal, much do there. we to and to be utility domestic continue long as as maintain to off we'll it thermal as whether export to as the met, possibly or demand everything we wheels So this of

Scott Group

can southern to versus you big a have That's length-of-haul just do say, utilities? helpful. difference Jim, northern you

James Foote

do, think I we yes.

Scott Group

south. Longer than the

James Foote

are north. one's the it why run And one's -- Yes, in the mines I it's we yes. and located the so the north, That's further. south more guess,

Scott Group

the sort of we bigger of about point middle know until should rate was your Okay. can dollars didn't And on just buyback? be run just quarterly of the have you buyback quarter. buyback? what the about the I for then, What's clarify new And sort Frank, the thinking quickly, you

Frank Lonegro

over Well, first quarter. $XXX-or-so the is, obviously it the a was, we're point weeks, X to the the honest trying straight we first were The price you a the depends forgiven no, pretty rata you. to with make rate heavily, hit that. in about market had on for over under the $X we But, what in the was obviously be you perspective, were given from looking X But million I if earlier of that didn't program, were for the to program pro run And we our economy that a what is reaction level. it's the performance exact year. to depend to a think, ahead clearly to is shareholders going dimensionalized it's And capital on do. going the rata I pro version I to It's coming what for from fact entered the quarters, return we for that mentioned. four if which billion mid-quarter, on going is. stock going performance our that quarters. the market's of on to our the just you. going We've The depend think amount cadence, depend We're factors to significant of to obviously, on going prognosis depend

Operator

next Our Capital BMO Chamoun Markets. from Fadi from comes question

Fadi Chamoun

the of I just questions. want volume to go back to kind

capacity bit faster is start XXXX of Investor to improved we're leverage Day to with about the kind leveraging ability story begin acceleration? of cost kind seeing feel you've How's and grow more see outlined us ultimately, to of an at So service, I'm do given service the XXXX, a kind this here is issues that, elsewhere going? business the to of conversation kind wondering, the story. cost, some a improved earlier? your But that little to How and you service problem, to your of the there an trucking the opportunity of customers ability

James Foote

It world about was North And and laid plan, were was, brutal of weeks or conditions weather out whatever and this only New York the we it ago, were like America time at six kind in time. issues the of that and everybody that that kinds having challenges large the were in a knew in to ELDs were at there. all and degree, point railroads, across

major weeks what we our of kind been said in year, said see -- make are. us terms really Obviously the running would weeks What any is of of we're kind there what X and not in still rest ago -- -- good. we change kind I railroad a haven't for our which is summary. where influences at been the the really of of X I right So that there's lot now external minds of ago

lot of a only change. like said, but So not not there's I externally, internally,

that the compensated And none. our so appropriately strategy. that service and our make strategy leverage provide is we service our to are sure And that we for to second service still is

and is to order turn a that dime on that volume not in on so discount you And something want the to railroad. put

go show going in as and create our it's we we clearly be the can a the strategic, customers growth we efficiency methodical, So ourselves and them. that improve the and story marketplace distinguish value as to we for forward as to rational

or continue strategy. and outlined that We see XXXX I accelerate we'll you to something growth no we and have in and to will achieve growth to believe to I we have the begin the to do reason growth. will that try the XXXX

Fadi Chamoun

And that contracts? just of the on follow-up. kind X you're we with Okay. aligned market kind an is of seeing look the rates like at pricing, quick truckload touch intermodal and reporting there like RPU a that this how what the Or opportunity current is maybe intermodal, little well move side? bit in materially your begin you more to we're to of as When

James Foote

-- daily, not portfolio the the to to monthly weekly or markets ability basis. a I have my ability price business have the of I do on

with We existing our have kind of customers. long-term contracts

methodical. in to little advantage of I pieces that that's of bit business of part summer. up. little there, bit a things but the that the aren't, the little environment business of price will business a roll The the is a market appropriately, kind large a take here, So locked over bit These

to truck the my service. just differentiation growth more factor main the tightness in but is in my the be of market -- of reliability the in the And is than going what's service the in now quality driving So future. a so

Operator

Mehrotra Amit from Bank. from comes question next Our Deutsche

Amit Mehrotra

can tangible release Jim. that, tour And is unions. the anything put the share with to Canadian update last week. question, agreement following and them Can out their Just of still Pacific Seems that gaps you disruption going us related on of how there's terms an summer? kind in reaching you first apology last a significant

if work us CSX, If or related on if any the there you some, could side of the actions. -- either what for is the sure exposure, any, there's I'm revenue at stoppage about just help the to think cost type CP,

James Foote

great. says running at a for. than canceled. railroad The else apologize better running so got railroad it -- is is anybody Nothing And That's in The apology if metrics, is No our -- America. on tour that to again, railroad apologize I suitcase you the anymore. North running I it. look

it. to I'm it, railroads one not borrow maybe of the using other So but wants

In or Pacific, to terms Canadian a think don't or going don't have going if not. know a know strike of I strike have they're they're if the to I not. they

can't so I And speculate that. I on really can't comment and

Amit Mehrotra

not have like a they what's I'm I'm going to What to is they're asking CSX? if Well, do, strike. exposure the asking if about

James Foote

question. think a I hypothetical that's

not I'm said speculate. just to I going So

Amit Mehrotra

debt move I'll then quick Frank on one one on. the And buybacks levels. for and Okay. just

debt guess, different percentage the terms but perspective way to And EBITDA. they have of could adjusted each of the from retained I Just as EBITDA. the other of even adjusted balance the a in they flows I kind to buyback. of flow parameters in of and agencies, the and look adjusted cash total maybe -- at couple compute you agencies conflicting with well be that guess, and your versus capacity parameters rating sheet rating debt a can debt out retained metrics cash of the of maybe adjusted

about CSX too it's help us if just but all maybe bit could you So forma how share little balance its sheet, a for the pro for thinks think repurchases. about technical sure,

have help it. appreciate we'd but can just us and you surely with just capacity, if that, You the philosophically,

Frank Lonegro

we I high program, got a and obviously of very more coverage. have we looked at has that think sizing raise leverage Sure. is you've at our other this one a the because is on is coverage, probably because little time what year, We at more X are. amount things with reform breakpoints buyback level, we leverage, looked side more year debt key And at wanted as the look And in the bit understanding flow. They think of looked the a free et the where good got the spent rating allowed earlier credit we I done room cetera. agencies a you've tax profile, cash fair to the of at we

very a think So balance. I good struck we've

as have year right line everything I that in issuances buybacks as later I and well the on to with very are them. understanding, think the good a we that with have all do proposing in on we the debt conversations think we are

we're like in feel really we So shape. good

Amit Mehrotra

So you more, to press I could. just a if little bit

sort the and that we is about XXXX, that $X debt net beyond mean, standpoint? of I debt-to-EBITDA, billion framework look should modeling a out we obviously is which sort right think of you kind flex gross a provided benchmark beyond kind little maybe a As we X.Xx from of now that of basis? higher the it the is on bit

Frank Lonegro

I'll basis. that We to and at going that annual on here, look an at investor the reiterate said conference, we're

Operator

comes from Our Barclays. Oglenski from question next Brandon

Brandon Oglenski

just look you can the that you really volumes that the have the Because remind the flat available want at Jim, as we close at publicly to on and trending to second quarter, we on guys business looked network your in reports. think of level early of said us you've anymore. I are don't

in we do that how So away context, you the business that put walked from?

James Foote

a line year transition railroad. a we're flat that for business, in to the would I on year, took flat, prior the off we And the to, said years, side we of as of me, to model started a And going closing we hub-and-spoke kind middle more which the up. of that close that replacing to is revenue intermodal And slightly close the large we're served, number basis, volume of back the what getting volumes intermodal again, about of run I give a in percentage in to us our able we're to we as is intermodal earlier, rate lanes the that with Well, little to said traffic of getting on be have away getting business. a so think confidence intermodal. referred if X% from last we've

of us, to of kind year for strengthen it the half question fits in in the volumes across a progressed, enough the second and with all but view So the volume somewhat in in of X% prior would as quarter. coal first board the we'd being always decline strengthen that mark see as they with the year of year would offset what our a is the

Brandon Oglenski

you you assets? network, at did people you on talked aggressively the about, down have more where bringing of down think your like big the do about across have have demand, I Appreciate are influx be Okay. mean, you everyone and would you point headcount I OR But headcount mean, hiring quite do a thinking to look a the you if And a structural levels on come here. has improved can that. more or when what left still pretty is side? now bit.

James Foote

we've and Clearly, increase us clearly, volumes have you'd considering in in No, locomotives hiring employees some to back have for got monumental sort of XXX assets. to storage. begin

handle volume. So any in great we're shape kind to increase in of

still intend Forget out. drive assets intend We still the the We We of about network. improve still to intend fluidity taking dwell. length. down to train velocity. increase still to intend to We improve

existing X,XXX X CSX about hump base to one, driving handled All those the allow initiatives with volume -- but yards, volumes our drive X,XXX they with same XX,XXX efficiency, employees, we railcars. add our We're year a fewer fewer fewer of of two that asset additional handling our -- and improve that, cost locomotives, down do us, improving operating have leverage, that things, handed of which fewer today. just by our because amount ago

that So us. going not a more to for be is continue this is putting more volume into to to improve going efficiently operated railroad to be challenge

Operator

from Our JPMorgan. question next from comes Brian Ossenbeck

Brian Ossenbeck

follow-up improving train those it's in and I've recent West up the more North, length. in Jim, to on been just able the the East. phenomenon but track a

balance limitations track So grade something I sidings, there to are actual in longer that just detention was lengths, that? and physical Or keep wondering was going? or train need it building temporary just you crossings a network, like to more the right

James Foote

improve us in necessary order length. capital to No train for

siding were, not But need long length. X-year be that'd consider any not are But stuff. sure to be in do by we'd spend go that's good there. -- a we to We'd we news capital capital if to to XX,XXX-foot of to to before if long, have those get, necessary. have to able to say, be our restricted would way I'm out We spend probably, which vision trains

Frank Lonegro

number that to a is comments. a given One corridor, day fair of and add Jim's and things or decade to And looked meets Ed passes less a the really network reduce good fair plan, Chicago of I'd Southeast clearly. have to Brian, is operating at as congestion, have in any the amount reduce invested so, then call we into the Jim, that it to amount the i.e., The than be. we're so other others we've trains. last you Southeast in number Hunter, done lot used active leveraging what on two we the

Brian Ossenbeck

anything would physical limitations, there Okay. specific between Is that grade tighter, limit shorter train from East, distances to length the crossings growth here?

James Foote

different. No No.

Brian Ossenbeck

for of the that. demand? markets. serving whole to how terminals trade dwell clarify the was, a terminal give handling up get that to to Chicago But wanted to and those addition wanted in specifically, industry, times the you are as growth the if on question the capacity so just larger like back in Just But I you're second, go some disciplined comments intermodal about Can talking your a Memphis performance to across in to hubs sense business. the

James Foote

Street at day in terminals, our XXth efficiency especially have Park Chicago Everybody Christmastime, and for we and slowed the month, came significantly. improved Memphis Chicago the around just everybody so Christmas both winter Well, challenges and when had at down. of in hung Bedford a it weather

away. terminals this to is throughput when them get there time, them for main clear at terminals earlier, what to those then expect be I'm of store our with in don't in Again, again, both can the want them. come if because them community haul X And that predictable. big focus running has for the trade becoming want train year. -- containers are they I'm have our to And And us, our upon therefore, same challenge they mentioned a more that of rely That terminals, handle we and load us dwells been pay increasing Our originating being our positive. terminals intermodal in on into now our is dwells and we the intermodal the a service and as Memphis out, there. and are Memphis our in have to containers I those us arrived reliable and but And fluidity intermodal terminals our of terms we containers smoothly. for more sure. to And down is out. customers

a just fact, Bedford our amount significant without in sure I Street was any improvements will going money. I'm Chicago terminals. XXth that and improve In Park basically through throughput, we make can adds of there capacity which spending that

Operator

ahead. go Matt Reustle you may Sachs, Goldman from

Matthew Reustle

And touch it well. asset in that $XXX the the hit -- quarter. that demand now, you in highlighted to it? Analyst the that tied big you if portion grants here. determines can sales Day? in federal market guess, that you Is to as market? Are that the what are up can that if moment I make be Maybe whether of you expect categorize sales you million base million $XXX or simply case the Made driver on progress for What upside do certain be there asset assets for helpful a some will a at

James Foote

sale. that on we sale his payment are free haven't to a Mark $XXX So you on the pretty up from perspective. stiff out million and sale team what a awfully hard good Obviously, demand seeing, line maybe we're Wallace been put that working quarter a for while. side, there in assets real for down for the obviously, for saw estate

demand have couple continue good bit You've us pretty we on a probably the lot that. of think time. traffic on so there right problem. is a market hitting seen for out out focus see of infrastructure-type a items the demand-side at STB now. we assets, a a There's of to of that you'll out little not bid for And we're It

Matthew Reustle

case customers? Or that. the you It you're in Maybe can Got quarter. just of walk through the these higher is on charges. chargeable good it one quite more days. strict some And where more just this a rates like in on hiring becoming it. jump you're demurrage Is seems for one a Okay. on customers'

James Foote

steamship it's is whether what which the it's whether demurrage the talking is is throughout terminals. transportation it's practice about here industry, a operating you're whether basically, detention, the companies, or standard Well, railroads, the

can't what asset sitting sits because around what and for else's there. out, at your sits property your you get somebody don't use is they it there If charge equipment they while it

business Under CSX. going give focused our do focus time, of degree, necessarily to with our policy to to of what model, current incentive away anymore. not the have having scheduled another, a for under they and customer equally just not an to same and these but infrastructure customer asset, railroading, value a were because a it one exception the or or enforced on customer come books fair for given the time, with here for our pay long the a an of CSX or intense are the we're charges, been an value aggressively, a providing value that us. to large was All viewed on customer the of reason on there and But was our at as we

just are cars that, made or use and we something expect life space car So and not unloading sitting sits our uniform our is applying industry network, track when -- for necessarily more a to -- shape business. are our that a way simple our we Frank a as can't customers. another practices these in fact we the want it not has again, either again, piece gouge the consistent again, we any that it's comments, on And unloaded, compensated is want It in for use profit view -- that that to this for asset the are or our form, be his as we car standard delivered of center manner. use that of of been is the as it's to, while of where or it

Operator

question Stephens. with next Justin comes from Our Long

Justin Long

past. struggling. bigger-picture lot Jim industry Ed, service a service you've address the seen the to some shown a the other disruptions improvement, of in maybe So are but first in approach. take and and of Clearly, you've rails

network mind, rail to when fluidity? of have of look these today, return we You do know to what issues. American fix that it thoughts of normal any environment you you at around With the some North when timing an the can takes in whole as a

James Foote

can other No. that, how me comment railroads are on on be to It'd for when comment that. running. comment. I do I is to can't going CSX just inappropriate

Justin Long

relates have as to coal higher, going percentage a if view like pursuing question. second pressure any Could just you're your Fair downward And back maybe talk are moving to contracts exception. component. fixed the Seems expect of go curious continue things you this it pricing that the pricing forward? Okay. being to and for my coal your to enough. I'm about if on changes you

James Foote

the don't that by two met, of up is -- kind export a of down control that businesses piece business, have and kind of those goes thermal here, Well, so and pricing of we indexes. indexes the with of indices pieces really both business over, and other of lot driven

the utility per are clearly, cost the their million BTU turbines, facilities generating coal-fired a have side coal guys On to business, utilities, the -- just other of utilities, basis. using with the that run in a competing disadvantage natural gas generate on to

Basin a post our the the either to our million of that the going majority from basis utilities, utilities. So that and transportation, to on coal more customers, to Powder to that basis, River a the lower-cost we're -- with extent coal-fired might Basin try or There i.e., involve of utility. we coal give Illinois the those to of them delivered per see going lot what do BTU happens. those cost coal a and The is a comes can work the

is the what been a historically is distance. than moving longer has The case it's larger farther a of that just transportation component haul. there So because

our it And that do and that. we so allow we're very going and the can good try to will to us produces help use if that marketplace to move fact that locomotives a it something return, do coal cars us got will that assets, to in we've to customer,

Operator

Hartford comes from Baird. question from next Our Ben

Benjamin Hartford

some to in the broadly the other standout network rails. any improve heard perspective we lines Have your concerns the times? intermodal, that transit to of regard relative on fluidity as you other for from particular, international But Jim, talk any a with East spring service West being over to in you Gulf to seen flows the peak? diverting or enter any the about any the steamship Coast and have the away

James Foote

Baltimore, Jersey. putting sale sign up can business. Savannah, big Jacksonville, it Open New handle for Virginia, We York, all. I'm in, Bring a New it see, for in. let's

to I'm and I'm handle So go. good -- problem. to freight ready a not their going not to

Benjamin Hartford

it more then obviously, protectionism. the around relates the that rhetoric the that Okay. rhetoric arisen that steel Several broadly -- now And now grain weeks given you months? term more near as into side, tariffs, on have on lot may and to over Any the recently. of have and, couple been absorbing side a we've the thoughts past down consequences aluminum on

James Foote

No. on tariffs, being expert I I'm asked and not. keep to become an

we're bad looking at or is looking day and yes, steel now, up. right on so on at we're Anecdotally, as mills as whether rail it to some is And everybody -- opening this good some everybody what viewed not petcoke, or depends we're a thing moving more a a thing.

that's So just anecdotally.

those So I'm in come out, it's will early too things play and what be, to be sure positives to if might there And anything does and guess be. as negatives try it.

Operator

TD Securities, Cherilyn Radbourne go may ahead. you from

Cherilyn Radbourne

a around ask Just question wanted to routings.

intermodal, at you'd would of from the One the in yards some and hump Day what in moving struck system was was things closing eliminated away how, by seem in I Investor hub-and-spoke the just routings. what, what RPU in franchises? of impact like any, haul in those all you has of in merchandise implications that speak and Could for very dysfunctional on about just if length intermodal that has

James Foote

-- haul you fashion you you assuming artificially more a manner, if inefficient and a car basically, direct haul, increased length you of have do. can an inefficient the Well, that that again, route take assuming you it if in in an

change think would look of it just much. basis, taking it's improving we your basis, by going and a same so revenue and At out out-of-route per your network the going theoretically all revenue, to, actually, I length an your And you're of at on not of that unit to by move of on miles you reduce millions annual haul. cars efficiency these time, the if

mile, an If of get a revenue get because amount the less cents to to revenue ton same you having increase per would ton mile. you're going the can of see and you

straight -- you're is in kind for line metrics, going to taking a to what same versus are but of less is I it's miles, the there paid and different be something So trying think get you're it. doing line going a is get a going crooked and it of -- to to money moving still amount

Cherilyn Radbourne

way in item. earnings for of give by of And think that's some Great. equity can maybe income Frank, normal then line a us rate terms just you a help to annual on about of quick affiliates, run new just that? how statement a follow-up, the

Frank Lonegro

a That's great Cherilyn. question,

some separate So because a earnings had liabilities. reason that Conrail, it of of Railway Chicago, so had actually they revaluations, line And the you and create nonconsolidated those subsidiaries, equity to to was as TTX had affiliates, we item. we to revalue their the the carry because size of Belt that as deferred among those know might of the others, tax the

$XX are same a they did per quarter top at about industry credit well for we there. when have run-rate volumes million said We costs in pulling benefit those $XX $XX on may million there. some not side are quarter a as the We're not time. industry about call when from if year. million against $XX a probably they're thinking think volumes do the down, better. to Obviously, up, do And true-ups the of one basis. they quarter, a benefit out in saw million it You We the you're affiliates, said that fourth the last if tax

Operator

Vernon comes next Our from Bernstein. David from question

David Vernon

some a Jim, utility about bit it with maybe did coal hear aggressive coal pricing utility to get you more business to wanted you just Is clarify, before little what correctly? that price. were trying Or get the little sounded are that commentary? business a the at to coal -- I to using like talking I trying grow bit

James Foote

said, it coal, i.e., keep electric economic that customers, I work utilities up and the extent us, to do aggressive be our we yes, Southern with can and on we will CSX, try to running is if what to more makes Basically, on the using that. price those to utilities sense for

David Vernon

how that rate? much sort bound room of you kind can of us any on for in to move is far as that stuff And indicator of there directional as the

James Foote

We move. have room to

David Vernon

with the are injury rates the But as do -- up Frank, for All then accrual lower And maybe, the personal maybe are they on Kevin accident I'll off-line. the when question up taking as right. MS&O. a significantly follow quarter? reconcile in in you How

Frank Lonegro

So years, longer-term run do, that look what at do and so actuaries something the do, severity, of incidents to something They probability that the actuaries we this it just not accrual they numbers, the not of adjust down. it might necessary. is with of might it number overall incidents on. the but with in quarters its severity it's we and time. we the In work as has them go In other up. the all give period We quarters, and go data, some also

James Foote

first in not? the this quarter actual accident Our rates or -- accident year, rates

Frank Lonegro

a were on roughly basis. accident per what both incidents on denominator, is a that XXX,XXX the raw personal the the on but we PI. train train obviously, train had accidents man-hours and flat, and million moves Yes, which lines injury is ratio But

David Vernon

the indexed they're activity, right? mean, volume I Yes. to of

James Foote

or kind which and industry Right, the when number less is vis-à-vis the rest "Oh in CSX run accidents," than, it numbers. my They're actually, in slightly day going equal terms of of I'm back up moving depending rates that, these and someone lot can historical say, historic where just I'm -- forward upon at what the a not is of year, to to not -- we're suggesting more either that's inappropriate. the saying god! look having

Frank Lonegro

we sprained be David, is hate and as and that actuary I same what amputation. the based remember, that, frequency, about frequency then counts look have severity the it, our experience. thing I talked what the at is but at looks what on is to the so And the you Yes. graphic it mean to index, we what recent is an the about ankle in a

that's why you see the So change.

Operator

from Walter come RBC. Spracklin will question next Our from

Walter Spracklin

sectors Are to like the rolled out after railroading full you've really service of grow is more what really and kind little into are excite you your service see in it in areas some CSX or slower in any really through the this past? of your more that can or de-marketing I'd -- XXXX? competitors regards seen to get to in bit slower a than has as precision focus is implementation able salable. than of phase your on model and either sectors opportunities you What growth with there focus your levels growth volume being of on that once Jim, you selling as that we of

James Foote

customers the where to And with you're today the most the that by they who and with much you those and half cases, National big convert product comfortable is well, a days, the of looked just familiar basis, to all as is that's in product on reliability. and way move convert of a to at business rail shipping at this, much -- rail, them is they're this that large this in on that's to -- X/X price, network a merchandise price, like on the Well, of the looking where as by they're looking the clearly, are of focus, because the your where merchandise for revenue a customers are of the by really side area truck the the other service. to sophisticated side benefits in they're are shipping want already And other but rail in your the of time, high today easiest and business the really Canadian the business. customers shipping by premium opportunity Half early of those to we segment, having, for business And merchandise comes. rail, the value the tied same intermodal big same business. at paying moving just premium want the price are that and get they're customers they're to

of focus than and on of be customer can the years, focus and line and area greater the a improving truing much the basic you side railroad. just the for up the and out top So transitioning operation in where good on is merchandise the base business, the do CSX the we'll best the

Walter Spracklin

Okay. Jim. of lot a makes That sense,

over for reliability, think and a do reliability? reliability. over you increasingly do so going you're you or think long to higher truck run? buy How you got build think be you they're going something in customers those And out clearly, long to How to that long are that going over by Is quarters before that do get trust that'll reputation this -- years? have how --

James Foote

any truck. go depends the most it week, guys more as and doing they months, are earlier, sophisticated have on service in you're they idea i.e., in purchasers who And day upon It it. as at got you converting. to know customer put is rail where quarters, scream a your not got sell I years, the to that that depends pay is. every the prices of and upon Days, business, to And know it customer truck, and you premium of said these to to they'll they of transportation good, it pay in when

days, customer And XX it win so handle of with lane and at reliability where, you of you you by the back. if need level for at that XX They do lane product needed there get that and the their days do same didn't way And that valued just degree necessarily going their can didn't there and "Oh, efficiency time. not lane X they the truck. prove XX outlier a them that say one got X to same you're get lane XX, if to in it's out and a don't of that's go the for reliability there hours. days," you get this there in you it to it how load have that in can onto there it and XX%, days, XX% do by by They

Walter Spracklin

of a lot sense. Makes

a across -- look you over -- management, railroaders of going ranks at next a add you now looking got here. ameliorate management Okay. good senior Any your Senior in think the when to in you're group here. set Last XXXX areas to question be where you or all?

James Foote

ready people and who we'll right right probably again, by that And to those more give what things find year Everything what systems And that we can Ed hard based think can future called the said, And can some we're every with and place day here, and sure with show first here great leaders do anybody. but very, think, the they're still heck better -- roles. these the since opportunities results everything make doing. to I people, around moving that as and aware not I we the fill I've to said talent area sitting we the results working anybody that in upon and are sure certain of with people CSX holes on sitting for And got that in improve we back make clearly, run roles. the I've they performance go well, to team industry, during a is to match know and in been everybody the on. I very I is I'll either. -- perform guys yes, when and the are the this some go, that better there And our -- quarter all proven have organization and and of. it fill up we've

Operator

Jason comes question Our from next Seidl with Cowen.

Jason Seidl

franchise. touch of Can already to XXXX excluding sequential business been think book Jim, bit, for mentioned give there coal some wanted a a of has you how was your back I on little improvement much price you the of I repriced? us sense there.

James Foote

of segment the company? what In

Jason Seidl

Ex-coal.

James Foote

business All every of not a metric That's right. way, the we of rolls I'm that X/X going it's that. any -- I kind can't to you guidance to kind much have guess best safe And more say, than use. of can't say give to year. we good over -- --

Jason Seidl

your Okay. of And piggybacking comments the on some on call.

that setting of gas pricing Hub mentioned something maybe the up Henry that it flexible guys given You some more be think this dynamic. about as change index Should might a the a to you like of you some needs? natural we utility's to links

James Foote

to use. That would the methodology be obvious

Operator

Ravi Shanker from comes question Stanley. last from Morgan Our

Ravi Shanker

you Just on in understand pursuing you focusing truck-to-rail on focusing going on what's Are wanted truck market. on as more make or getting versus volume Or opportunity is conversion? are it the from your you with the to customers sure strategy are -- pricing that I saying here intermodal existing well?

James Foote

things, two business; one, focused we're profitably. on growing clearly, two, the Well,

scorecard make that's my R, new growth. have a customer going not and office price So or get you is a do volume or says a have line giving could R an that road me to equals in how I any not that did give customer call to And today. volume many that's today, always with volume I whatever whether I don't existing That's top it's game whether rail to me that more it, equation. the money.

it him. value good probably me. the customer highway it the right And off because priced truck adds not we the to the in and and a at for value specific on taking and railroad, not it it's to do day, putting corridor, don't it's job Just a moving right if the no the adds end very of no

or we it's whether is advantage connection railroad the his trucking whole make sure provide customer then me him the paid guy probably it's talked him, someplace customer to else. you need over-the-whole take whether for. that customer, a merchandise provide it's and and value wants that, goes to merchandise So intermodal about to the or a over-the-road time, intermodal in the and say, discount I we operation. don't don't get whether to the trucking here to it's expects don't the value align, whether give "I before value he him same value," the at X of And customer an add to go me to can if that who if to objective with customer I with the align, and -- stars the wants --

Ravi Shanker

And just one All Understood. housekeeping Frank. for right.

versus lumpy the what coming it's On of this like XXXX headwind of quarter going you it to $XXX step run gains, cadence in in XXXX. kind the expect I can bucket? had expect down that's a rate terms unless be but line, million the year. because a right that you the step you But the estate Day to million looks you we at that now of had last in I significant Analyst extra quarters guys higher indicated that real $XX think know versus into

Frank Lonegro

sale time years. and to going at we're When trying it's and are to they So Ravi, to for set the them. terms Like we you up in said, quarters are ready of assets not all. the be lumpy this We estate targets investor close, the that but million close It's remember in to in achievable. at isn't you And was actually goal the that there which conference, said sales. upside of that, we $XXX real that aggressive he remarks Mark's some might set. thought he in

at it time put can the to can. trying in as the not as as we're money So we going bank as go we all. and We're to fast fast

Kevin Boone

so And here. questions, so wrap I the we're up think done we'll with all it

Operator

And thank for you Thank today's today's you. in This participation concludes call. your teleconference.

time. ahead and disconnect go may You this at

CSX (CSX) 18 Apr 182018 Q1 Earnings call transcript