CSX - Earnings call transcript Q2 2018

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Operator

Good afternoon, ladies and gentlemen, and welcome to the CSX Corporation’s Second Quarter 2018 Earnings Call.

As a reminder, today's call is being recorded. [Operator Instructions] For opening remarks and introduction, I would like to turn the call over to Mr. Kevin Boone, Chief Investor Relations Officer for CSX Corporation.

Kevin Boone

Thank you, Amber, and good afternoon, everyone. on Frank is Lonegro, me Executive Foote, with and Officer; Chief -- today's Jim call Chief Today Financial Officer. is slide X non-GAAP slide our followed disclosure, On by disclosure on X. forward-looking our pleasure With that, Officer, Foote. introduce and Chief Jim to it Executive President my is

Jim Foote

you, get to it with who, started, all, been due kick the really says financial way tell afternoon. release results. work it’s I are that you our call. it out great what for to the accomplished. we you guess, all joining Well, press off In are Kevin. results this Thank record to of These put has you, be about excited Thank order all I hard is, to the first CSX employees, can

bit all the and work change celebrate back to to little and realize to fully will company. it's a tomorrow this then continue drive of tonight potential We

me the I couple let turn of to comment Before on initiatives. a slides, key

intend in in result. as is being to safety. underway our and materialize safety performance. organization a that years safest joined in the expert best assessment be safety to companies We we regarded almost entire bring confident Schwichtenberg comes us to that in changes FRA. First, the Schwich a the railroad highly I improvement helping an approaches Jim he May, XX experience, with with performance. is railroad. our Chief May, new Also the comprehensive DEKRA, XX including Officer, engaged company. positive will safety safety. I'm to drive of improve new Safety A The their committed years can In expect

Mark’s scheduled Chief take with Diana than more most a President, experience I Mark Executive Mark have of drive Wallace marketing years recently to her Chief more customers sales his XX lead, Vice and big Executive we has our of portfolio, assuming appointment a in built and and responsibility for over growth. at now as Sorfleet announced our and CSX’s President and our will Marketing. technology new effectively been transformation Second, time to will Her and with former team drive has allow productive Vice labor Officer. part Administrative Diana ability more Sales combined known as the include railroading long big -- driving increased which and a Human significant of to Resources will a work Officer profitable workforce. relations responsibilities, of engaged a organization. role focused a provide by opportunity more

two to with to X get turn slide, sum start to the our and think slide up let’s great Now results, words everything, I performance.

lower like X% and They're unusual very quarter, count, increased rate last there's The year’s XX% adjusted new nothing significant $X.XX. increase. contributed $X.XX lower numbers. these tax first in the to to versus the of EPS straightforward. EPS down year-over-year Just share

did increase was Our -- points compared US segments, Similar coal. ever to operating of adjusted as exception in for line Quick year-over-year on combined with this in by ratio discussed the to related gains. in lumber, products last previously revenues quarter. coal Plant growth, our price improvement X%. Forest surcharge, CSX ever showed production, have wallboard and I to price. rail the Fertilizer’s by lowest to was a pricing North record results were Products, trends, increases. this metals, see And weaken. fly last XX.X% railroad. construction each X% plastics the remained which XX.X%, which which lower to saw steel slide all quarter, by clearly across improved significant products, driven lower and up year. the truck based export X%, revenues Auto with the were partially business crude next industrial fuel. chemicals, improvement the impacted XXX growth positively Revenue mainly in costs, lowest basis year's positive coal field the quarter quarter. price, In good a of and quarter. increased slight In excluding higher to we in The was panel, strength in facility fuel I as and pretty of light on sheet, supplemental a board offset contributed and drove our increased X% continued were recent In the the Utility by we look volume, paper due the by much believe coal mentioned OR and shipments last closure American markets, all and during fuel and ash on strength US City losses, very products healthy top

On because the $XX relatively intermodal liquidated a to declined of the the of due or million repeat from of growth on results, to which million year's domestic fall year-over-year international basis last did of the business, was damages, in continued year. rationalizations which declined with a $XX side Other the come revenue in flat that through we markets went not XXXX. this line

saw Excluding in supplemental that including revenue, demurrage. item, gains we

on. improvement. year-over-year X, to Terminal approach dwell continue look at the velocity year-over-year to let’s of as X% key that take this create a especially customers a work and metrics more network, focused and we the XX% sequential is increased fall with sequential season. Train On some on a team saw an peak We fluid operating slide quick basis.

increased drove basis, improved length in on year-over-year X%. train we and both While XX% a sequentially, dwell, velocity

easy same time Let me no three of all tell you, at improving metrics these task. the is

day per financial good improvement The our results. turn assets. a asset translated of Finally, ability to effectively year-over-year saw is we into clearly these low our measure This a in basis. efficiency our car and both sequential and on improvements metrics double digit miles showed

Now, let who financials as improvements. through benefits it hand operating Frank more to detail the me well go these the in will off as of

Frank Lonegro

afternoon, Thank everyone. you, Jim and good

quarter. up driven volume, more recoveries X% all across higher store Same second gains through you walk was I’ll traffic intermodal the X, down stable summary X% the contracts pricing store revenue quarter reflects Reported year-over-year. sequentially same Pricing sales was the sales fuel year-over-year growth. second in second and exceeding the core improved slide in for income revenue pricing Other and was renewed that by strong, quarter, markets. statement. to merchandising pricing, increases in for major solid Turning which

cycling year. of the benefit the to $XXX other higher million charges in from prior million expect demurrage year. of that the remain Now, damages now $XXX and the mostly offset revenue storage the remainder range in the $XX we liquidated for to million Note quarter per of

reduction or operating last year's year-over-year for savings the charge. after quarter million average footprint This expenses, Moving by normalizing an XX% labor G&A both or to Overall, total X% in lower expenses X% driven were spans smaller and headcount. restructuring fringe labor lower the departments. XX in XX% operating were second of and

aligned were Shifting engine length while improvements helped X% use level higher locomotives locomotive in and despite count of XXX we in drive ability side, fell XX% train and reflecting regional X%, X% recently along for was starts craft employee XX%. starts fleet keep network and the yard volume signal more dropped down Even XX%, in mechanical, also train with The transportation, drove engineering headcount workforce. the yield mechanical the have On local an the our over also smaller and volumes. efficiencies which velocity mechanical recruits, repair We storage, by function structure our and great moving year-over-year active our to of train X%. fluidity, of to down other road a And crews the growth, in and of forward. decrease XX% to operating efficiencies efficient car rolling stock. with will

G&A for opportunity to headcount decline, we as Our every to continues attrition. absorb look

year. structure is communication we management, and our cost effective yielding Over was layers down making network. a X% have MS&O the decision that rapid and unnecessary past the year, against expense across of eliminated enables prior

favorability are XXXX. many estate the recall you cycling helped drivers drive savings look levels and to year, efforts storage guidance with with labor service in we combined decisions were million in cumulative MS&O are of down less complemented an also portfolio. at of reliability as a in These in fleet from comparisons sales judgment the improvement a perspective, further additional out to As lower to as yielded MS&O XXXX. reliable. benefited make gains Material services. attributed the materials real From of $XXX our are resource we and of expense our XX% monetizing asset MS&O, quarter of million results achieve related $XX surplus in to drove decision reduced This gain of from $XX by savings contracted favorable million costs headway locomotive gains, store key year-over-year second the estate measure locomotive expense. year-over-year estate real made legal and we’ve our around a The quarter, fleet that in through units that our smaller the real operational consistent continued to

Looking combined costs crews, reduction our fluidity crew better with at non-labor starts the with associated road lower in yielded train [indiscernible]. network

efforts XXXX continues Consistent guidance, workforce with our total contractors department. in the of to streamline resources our remain and end MS&O technology reduce by to from to benefit on our we Additionally, particularly consultants, by prior our XXXX. track

to XX% as Yield Looking offset mostly price fuel record achieve depreciation increase we quarter. up primarily other efficiency expense the of impact investments. were at the the gallon the of was increased benefit a slightly pleased capital to expense that items, sales the asset in in per due

mainly property We from by length performance volume the fuel non-recurring favorable across expense affiliates partially These will times Higher offset is improved due the car through to markets. continue network affiliate’s increases benefit earnings improvement addition to equipment use were fluidity, our in a in drive increases in an train optimization technologies. savings to to Equity and fuel improving cycle volume continued of quarter. rents were at related growth. sale most further attributed

strong core recent expect $XX now Given earnings million QX performance, $XX in the and QX. million of we affiliates to of equity

cycling Lastly, XXXX’s just are we restructuring as a charges. reminder,

this Looking a primarily lower weighted offset average corporate due higher issued below benefits expense the the rate. tax the partially year-over-year, expense even lower the with earnings, of new given we rate. line, debt earlier year, was additional to interest lower pretax Tax coupon by increased

tax rate legislative state was to effective one-time slightly Our mainly quarter, prior due the from guidance, lower a benefit than changes. XX.X% in our

of the we absent forward, around Going to one-time year. back be the half our XX.X% expect effective for events, rate

to XX.X%. now opening P&L, $X.X nearly income Jim record billion in operating ratio of his Moving and CSX delivered record remarks, highlighted operating as of

were free the billion the slide investments XX, keep intensity side equation for in of the track reform improvements core benefits us of $X.X with our in year-to-date helped cash on enabled free a scheduled the generation the double increase and returns drive and the combined on year-to-date million flow cash target. capital year capital leverage nearly flow. earnings XXXX. slide to to Turning half cash The to reduced capital $XXX our model, substantial first prior lower by of three tax XX% higher railroading shareholder nearly compared adjusted detailed of the on progress us Significant

completed complete the now and $X $X approximately billion buyback program have XXXX. of by of remain to We QX the authority pace end billion on current the

our CSX I and With key will daily to his appropriately reiterate back As our on let closing that, and we investor our this on great returns at ensuring remarks. cash shareholders. of it drive safety our basis. for continue conference, an the evaluate three deployment that service shareholder closing, will employees annual basis, a turn customers priorities management delivering and for stated me Jim the team to communities, rewarding In

Jim Foote

Frank. Great. lot, Thanks a

lot short I Turning go. we a period XX, are number of far to the a we we've in while where time, achieved believe can last from slide very

important, react fix where discrete think car just a I is in happened, you room allows improve. us any and problem. We're ago. and to there have of opportunity few to Trip better velocity of does may even and about can more have allows to improvement so it and many container delivering customer know, be efficiency. so something on stages to asset this months As more This It repeat. driving the we get know are level a Clearly, rolled compliance and so not every a plans why there out very to in importantly, us at better. trip and we track plan identify dwell the best, we metric early earlier. our mentioned service network significant problems our we as we

the below Our opportunity speed have specifically, industry improve remain train significant to we we leaders. as

this Our focus again dwell of line for best. the is than industry there can call better a be before significant opportunity runway is average, continue to team. ourselves we Cars but the on

efficient turning more frees with move additional We’re also we to business cars and same in -- But the move to for moving same us get, up to volume. cars faster, we of capacity need the the the on it less cars business. take the

up, more quarter so area. $XXX in becomes fuel many Finally, improvement prices cost. efficiency. drive are even this to are Diesel was important. [indiscernible] ways million this There this in

billion are These rate in run for big dollars. full range the $X we're So year. the

For cost. to will these power, all lower to optimizer and distributed use drive improvement trip we of

revenue. on Now,

export have time growth. prices are year. is it belief our In our We factors, that model, At I mid-single thought including half on remain said on closing, we cannot the there outlook of are higher a variability digits. continue, where to into the up horizon the of fuel we but slightly little specifically. you assure investor a be will quarter an up me raising fourth some and our a eye long-term full see than conferences, trending we from business year we Obviously, how some as executing today. strength provide a we focus is factors sustainable backdrop. slightly we relentless higher were be number have we This at the to better that develop to that let economic shown we in reflection can healthy of would coal guidance control, back this But economy mainly get will a

America. of are practices employees, you CSX railroad business the we and run are to Kevin. part as to it becoming work Our every in I’ll back the North DNA, our Thank turn day of with best new goal hard but becoming

Kevin Boone

needed. interest All everybody of I ask we take will the time if right. In Operator, one you, that everyone’s Thank would themselves question and to Jim. short today, questions. limit one follow-up

Operator

[Operator first Our Instructions] Mehrotra. from comes question Amit

Amit Mehrotra

do I around target is be what time the you Hey, team fair And obviously period? that take XXXX what results. so the quarter that the set achieved macro. feel understand thanks seasonality the But and second Thanks. it over is on maybe limit you target would of where on in to XXXX. can the far? the OR Jim, a lot. conservative based risk fully nuances the as the great characterize OR Congrats structural below for of so, has a you that if the

Jim Foote

over had thought up Well, everybody years it target that we and of period, there room when out three I XX stood laid time that be and said, just we was three think the in what months of we'd crazy a ago able in there. kind I never to get

and -- it's – only we’re quarters So two in. only

-- what this got not a clearly our quarter changing as here have help we're is work lot guidance So coal. lot to lot, and a said, a of I of we think not we do we and from And achievable.

continue everybody extremely, impressive. that to hit have things confidence if is a XX, So, extremely to continue I which say number, align, think we thinks I can I

ago. So a quarter laid short we just no time there's what in change from period this out of

Amit Mehrotra

Right.

of kind to follow just up. related my And Okay. that as

are the implementing just at more fruit imagine, particular, a terms to in room you and with respect you side hanging to I PSR cost the in comments end of can where in particular there low not just railroading, go would where on lot on that talk the some I intermodal business. specifically of schedule PSR on that about of you're the terms today, taking in that in on implementing franchise represented network strategy new the guess, initiatives is Your

be the and That If the there talk places reductions that. time about concretely in where things terms represented like you more opportunity dwell or of in can great. some it's of would not

Jim Foote

One answer, intermodal.

and needs to to in we're get that become much a become to it business, needs our to for there our rationalize start we big much just of that a customers. how of of be efficient figure out beginning to ton and efficient work product can part better Our network really and the intermodal system order in part so our have more

Amit Mehrotra

how business? outside should that in does your I And there? that looking in we mean, progress terms yields dwell time be watching -- should of we monitor origin

Jim Foote

But here a our have the yeah, intermodal all it years, reflected be we our mean, a dwells for in and degree, standalone will franchise our of is product network many many, is pretty – metrics. large are all many, good. I having entity. dysfunctional terminal to it CSX that, a Again, many, of

need of properly and sure is rail we more it that benefits to the reconfigure and franchise the kind So can integrated forward efficiently. make go effectively the into we so and operating and appropriately company, achieve of

in and results have velocity. get early have we so lot to don't very, other and at had us very work have We we every dwells, lowest a do that. of the of to great some lot area of area, opportunity Yeah. highest We we So I are a as the said. did EBITDA. that don't We stages, ahead

Amit Mehrotra

are Yeah. Makes two. [indiscernible] But it conservative. – seem those so I will just my

it I Congrats I there. appreciate So will leave again. it.

Operator

Our Hoexter next with question Ken comes from Merrill Lynch.

Ken Hoexter

the congrats. on-time everything's the afternoon the again down and the Good the both noted how a are but great. restated I the year-over-year, and down, network? results originations on arrivals, calculation were job to Hey, but phenomenal operating the in and accelerated so quickly. Jim, It's Why guess, network given But conform. changed ratio on on improvement details, they are has you

Jim Foote

XX% the destinations of two on period to we over accounting to depart across yourself cushion give did We're We a standpoint, end, flexibility depart, and operating to That’s our depart the you three either We we as the trains unacceptable. but originations. a close pretty as an better don't, network like We get on that day which range. of in we be hour comfortable. effectively pretty if trains don't give we'd we to couple schedule on ourselves, schedule. hours get with Obviously, from again we them should. if our XX%

of up reasons. for a comes always number -- that what, with different know You

to to to causes the We to therefore, our eliminate need to failures compliance need why they get just we’re in the and kind the XX% of trip of we miss and on time, XXX% so to and be arrive continue work fail the range. And trains plan that's trip connections when up able their to is that off plan.

So the things failure go do going it of be call And train. beyond the need to they people that on all to next and that that connection makes with we recognize sure lot where get the to those to above a improve. and culture, make there's box has a duty of of the

many when he the UPS not As what gets truck. sees a box get down employee times, a truck, the on and in box the that to the does road runs do I that truck the is he makes sure going said behind he

guys for see the day Our to the later. a going later train, runs and are wait you car

and all changes place better. to that it's take it's order in get So, culture need kinds we to of

Ken Hoexter

Wonderful. are a there you. you is? the from I follow-up basis And -- talk mentioned more on Can pricing Thank that you truck on to, a given especially it, growing, up pricing pure it if going terms pricing. you year-over-year can you be specific can seeing XXX on basis. tight how accelerated where you Frank, get sequential basis points Are of, levels XXX basis market any in were. the

Frank Lonegro

you Ken, to probably know answer the that I question. Yeah. think

strong sales and pricing. you same store the that's we're what trying why think is renewals I to the coming understand environment than contract the is higher we're seeing environment help a

out we and and since What number QX we X.X% QX QX were sales in say have store XXXX, the improvement of than I were in renewals can seen that. renewals last the in intermodal. that sequential in there we discretionary that quarter same is have every better than for better discretionary the merchandising public then the is think at

Operator

comes from Brandon Capital. with Barclays question next Oglenski Our

Brandon Oglenski

were made on Mark, does Does two improvement maybe, dynamic lower we'll ’XX, bit you call, a market I think if that focusing in I kind know change mean, the a any a but and because on growth on the don't as the price little outlook? of or Jim questions network, seeing I Day, Mark but first at in seeing, the look, base, more guess at the is I of between in the of alluded here now. revenue the stronger it for Analyst that the that change is maybe way all. bit much bit you're changes does now faster coming seems your -- volume you is get and the philosophy a with obviously to. this cost

Jim Foote

As in on I said and as Day scheduled I been of one, implement top at your focus customer you and ignore your don't the you growing said line, since as the I’ve basically implementation number railroading changes. that the here, operational differentiate Investor ever don't I

at that do time. the You same

would work customers. So to responses pretty the months working -- me when and to our to say from last grow customers hating to we up -- and business our our me favorable of occasion quality have I our a drink. and from with went service with buying the been They even showed improve throughout results six and on I here now

in great we our made customer So improvements relationships.

this as price And but look also see a at so, don't here. a price leader a or differentiation you’re don't taker. oh, I I

on price. better our have on and have differentiated to day by recognize recognize with better and focused been focused their grow money sustainable, growing volume, in with We’re future. business customers business. will That’s strategy on can to one customers long-term we're product, that the that our the business our a business product we our we working quality ourselves the focused sell continue to a us profitable our us our marketplace, and because strategy that’s save that they We're that people since paying into in strategy, has more, we’re and

Operator

to Tom we'll of next, And UBS. Wadewitz go

Tom Wadewitz

obviously impressive. they’re Yeah. everybody to to that, Good very and results. afternoon great sure is going refer I'm but

see. about or sub-XX half. up we pretty a you second results consider tailwind, half to mean, probably anything you’re in ought strong that I really to second OR half? terms in in no comp, OR the in XX ought sub to it is of be anything think in quarter, there second it well headwind about to Is think else think in the it second quarter? reasonable as when is go would half numbers Let’s do a second What maybe implies relative or we incentive second

Jim Foote

Sure, Tom. the a quarter CSX is standpoint, From best. second for seasonality the always

too. one assume always this to So be that's best going would the that year

way Going account have vacations, into half with the disproportionate the half expense year, our forward year. for the we we of a vacations the second second one, amount of of the number labor associated in

We have year. increase, wage a second increase the X% wage the of X% around in half

So, have phenomenon reliable those planned and and for Mark, Erie. Lake where have along fourth is the and got headwinds variable we all expected are and Florida me rain quarter, about that which new and along. you're the is And in in Atlanta snow worrying while most then, Gulf, a the in in the for here Chicago you've weather freezing hurricane a

we weather So difficult quarter. in fourth, fourth the have seem us makes I more to to always third it operate for that it’s mean and quarter

say, and that So that? look is can totally tell that we at be I things lower how year, we what be and second. you quarter be and the our case rational fourth believe those the higher will than the last in of that kind than they it were the expenses will are they about to third

Tom Wadewitz

fair. That's that. color on I Sure. the appreciate

that? touches, pretty in that fewer the it plan see changes potential or intermodal Let can you is the XXXX? the not, for might get what over quickly maybe to kind or flow, a that multiple made execute the Seems timing right? to also, you intermodal don't comment simplify Is something Is know might be accurate if result and me that do and quarters you ask think that’s I about to imply something you you that of that and need but the network network. simplifying you do how further. you on

Jim Foote

that well as this need the the accomplished, was part really we last I taken has think volume taken intermodal and railroad. I spoke, not the and understand I my that starting changes well, of peel that that's time, make. to case. Tom, the rationalization off talked about. revenue, of and hub X% about what back was at off large year, it that been of belief of philosophy said point changed was was mean And rid the Obviously, just in [indiscernible] the got we’re earlier to that a it

take we're it methodically. So to -- but going very

do train We open are we're communication -- involves involves and design changes, will terminal And our potential is customers with going to we have very terminals this very be and everybody of very and that fact logically appropriately looking to us being fully which season to about methodically are and it, is peak is good and going terminal we year, the a indicating do and trying it it at this aware strong. accomplish it consolidations. what

we're going the screw do going to So up anything to that's not railroads.

that. longer, quarter two, So with if or then it fine takes a little I’m a

Operator

Our next Wetherbee from question comes Chris Citigroup. of

Chris Wetherbee

touch to Wanted a of outlooks. sort little bit on volume the revenue and

numbers up. revenue taking the You’re

the but driven of sort maybe other queuing volume that you competitive sort and how think think, is outlook the by what on about I do seeing environment. line, you're some of up the of

How up the that You us expected. you those forward? see do of some think of brought going lot had opportunities of than faster most about the half? you down second kind OR new arguably open a opportunities? in that Do Did

Jim Foote

of the efficiency we to customers. believe means that that reflection operating I that my our offer of which a service, improve ratio mind, the we our the is in continually product

can We we ratio, to diligently be leader so marketplace. down operating that the the drive the price are not working in

quality as product a much I have flexibility superior that product So we for stickers our volume. And sell extent Clearly, is it us the we points where fully I only in that as to, opportunities business, to time, to we there we low intend customer price are bonus want us, do a to in the that can too. last said don't provider, if interested cost unique the is we sense we therefore, marketplace, in makes and service, to pursue as for the interested of as marketplace, but being get not in think do can and that.

all segments whatever pursue want. flexibility the in we the world have to business we So

has we to XX% a that grow to the the by at you why go, is differentiated customer can for, more truck, already marketplace quality objective and demands your that’s price principal customer the extent when a that better more a discount having product be network truck service know here of save money a business service so that XX% for we run Our paying the product you in like. is higher know which better can

Chris Wetherbee

think and I out Okay. I an bit about side, tough you’ve more XXXX like some the the getting of predict, helpful. the on about for know year, into we’ve little you coal don’t then but might be there as the million high talked into second opportunity ton given is in past guess sounds specifically, us half? that half And of you look back the to that we out that's XX sort there look expect any this changes it you the a help commodity as number volume export to

Jim Foote

Yeah.

you comment year better half, have we and the better higher On that the half the expected. will appears year second the have in originally coal half slightly because the than we talked in on second Frank, in that. now been half what better volume second of further has mean, maybe be of that it one the some export -- first of the reasons I clearly, about is

Frank Lonegro

Yes.

higher second and the at we thermal about can at run that mentioned in tons on the see If the same the were hold the see Jim in his XXX remarks you So framework index, half. the we prevail in opening or rate XX XXX as met million holds indices and and half. first

So be mid-XXs early for decent range it. to a probably would

Operator

of And Wolfe next, Research. Group go we’ll to Scott

Scott Group

you perspective, once the the maybe directionally color be are And XXXX if So this do can wanted behind, and the the rest of points XXXX close it us to maybe what behind, give can of us intermodal all maybe how basis points the where about. is rest intermodal to some think there? you business. got talking relative optimized the some you on OR give been we want you've to Jim, up to, margins way follow basis business, you've

Jim Foote

intermodal tell When describe tried basket the other, year over can ones when to various this more lot corporate our did have the and And was what's we improvements. business think the areas I the Well, average we the business it fixed detail in business this, where CN, fixing in this at it And don't moving of at profitable which period, the we then segments and intermodal. were business same there I around and intermodal done we GM, up, went did we GM we are. profitability I and over average. and couple did of terms great in portray, fixing a even make than at when we of I the intermodal than merchandise you better we started was involved as over went got can we thing a of case. and started then a

of to ton got to couldn't So Mark we’ve I a do that work and be here is do happier it.

that be So well. works -- slow, but updating going be gradual keep it's our to for you, a process just to as we'll going good it's and to going customers be and it’s

Scott Group

or then number The put customers real that – it do half, in estate some behavior because rolling more questions. you real to any out for to And any just realistic on think what have revenue half? other range you're the then way you raise not first the second to is changing way million XX are in a of customers is and guidance, quick,

Frank Lonegro

free through just happening of it's days, the we're two, was it On three I’d as months going two Hey, ago. the it One, it of months ago, Scott. revenue, thought the three in isn't we that behavioral increases maybe rates was as changes other the looking for quickly reduction say things. obviously

out so then that's, I there. roll policies that run the July bleeds answer effective additional we rate X, the some on into did think, So that,

side, On right, million yeah, the XX estate half. real you're the we about had first in

we So quarter. second a had first quarter, a good good

that a saw third ago. a probably all OmniTRAX good will with may line with smaller You we couple in a That have quarter, quarter, was unlike combined QX. not and we third some in that QX the I’d weeks announced what transactions sale saw say of close

Operator

Ossenbeck Brian of go will we JPMorgan. And to

Brian Ossenbeck

to for So Are anything structural a for bit. from half remain a of the side challenge year. or the competition about you coal wanted especially from Florida coal south, next retirements the domestic have power pipelines no plants, still fired years into XXXX. to going I material gas year seeing couple volumes plants and say, further you the through of going gas be that down there's or do this the talk challenges first confidence new through just of fired would

Frank Lonegro

it’s Frank. Brian, Hey,

help story year-over-year. the that pretty have not and the though gas burn utility will XXX-ish, is cold all stockpiles down the in the come stayed a isn't up a helpful in quite rates but autumn lengthy just the significantly, certainly yet, environment, the to days cooling same. go south up We're coal think winter I degree Nat has which are seeing those. largely

structural know are any In in Clearly, We new. competition, going are adjusted to have nothing our but your couple that significantly roll plant of are going those, couple closures impact those, us that we off. next to don't we've of terms again, we the that a knew of new. for about years outlooks

Brian Ossenbeck

the lease a us the up XXXX? something ancillary is start you're to in on are the that back or quick it Thank pipes, pick update other I half give the be you that revenues, things monetize and to Could license? and will able you. or that to wires those starting guess

Frank Lonegro

you and ongoing Mark and or to over utilize business guidance Conference years. those Brian, million the licenses the that been both. quarter. We’ve had $XXX Investor three we are gave deliver and team the over his at of have deliver an time track will to that continue increasing cross leases on over and

Operator

Reustle question Sachs. next Our Goldman of Matt from comes

Matt Reustle

the and ’XX revenue of to improvement raise now. that revenue in CAGR that on the target schedule that’s network ’XX revenue bump is, and XXXX the for real your boosted the does and outlook. X% ahead also the guess guiding you're I question XXXX You're potential obviously beyond Does increase

Jim Foote

I for higher at this time, have revenue most -- looked no, coal looking of two the would that talked was we're reason at the year principal and the One the of and first reasons I half point time for significant about. in that future of I could of is is of going export is talking And anybody point more do. the know coal the because you we're XX about reasons don't export this one what the ’XX, in what beyond tell half being one is December in export coal. that principal to say, second volume at higher at optimistic

that's -- early I little have premature we to time. are stages So at start Intermodal Intermodal, in that what at at network know in am reconfiguration a of the the might growth implications revenue this for it's I going And saying don't because on this second time, on. us that in

are in So ago. where only digits think where we I’ll for mid-single just months being mode, but same we’re rest what terms ’XX, have months it what we to three ago, stick and of this looks like with, years about ago. and here's we, looking was now, in the today, year were hey, Three of at three we the ’XX

Matt Reustle

terms relative anything hearing business the and the from tariffs, early is are you And helpful? talk sensitive, high second you can any your to in that on where tariffs, seeing days still of level, customers your question, or just on about about adjustments but see color you talking trade

Jim Foote

around so again, much tariffs. about there's swirling noise Well,

kicking clearly, in, CSX of both And the steel the was out business terms have of first, today we finished a activity, impacts specific In a steel result some US up standpoint, of from and/or steel. as seen tariff kind any steel on manufacturers production. from positive

some there The soybeans. involved have export second area activities been real where

About export bucks. around that grain third Our of million XX is total is soybeans. in a business

in but autos, imported We coming of the and East for they terms clearly real Canada. both terms watch happened it's European any third in again a rail so put of vehicles from And impacted don't on about not again Mexico. Coast of of things, be which Europe of scheme to soybeans grand not yet it China, activity, anything the is imported imported in are terms anyway. carefully, we then there were normally, has in from and touch through terms if ports, would in not really noise autos tariffs the But of going in all imports on nothing lot us. area factor at NAFTA And to has had a

continue, not much to seem So is very there this -- could despite the economic all our right optimistic about continue downturn, again that an impact and fact our to be that an of at future. now lead to be much discussion customers customers the

Operator

Landry of from Suisse. comes question Allison Credit next Our

Allison Landry

up you thinking if costs variable significant a the a still to Maybe costs ability generate at dried be into my that where fixed into been CSX’s network improvement. a is what OR question, tomorrow, pessimistic have about was good segue turn somewhat are point how And you'd to downturn? but volumes historically in able

Jim Foote

guess program would on about wherewithal status respond something very of such to up that. but your be and of decline Well, just you myself fingertips upon that and in do you you that. it’s event of regular with again of occasion order to if do the your And for able but need what I our job. have the to decline, we get we, we handle away. try to to scenarios would on us a tariffs are, our what will basis this that don’t kind thing fixed recession volumes all we reduce Depending in a severe came scenario a and doing variable And times, deal sudden, what we’re is Frank then much assuming fixed if economic media pessimistic. were a do just costs again, just and thing, we here to it's a with volume couple yeah, with what wars in doing Having and of to thoughts able talk declines. with, degree, at here. a speculation a quickly It's my the better all big And go and to costs if we I be labor. because that meaning better obviously Clearly, the your a least through how about the more here, be it’s quo, minor I'll numbers. the and and continue about minor see they're stick get not a adjustments as we as to could it's be able appropriate trade our at so could we always probably maintain -- and what that, make to plan make our if operations, good to been and a If

Allison Landry

service earlier up, your as my competitor the service you do you about expect context and think your perhaps a growth to between we CPE than if OCN? of product, pull lever at the earlier then pricing and follow within better the what about metrics comments your for And disparity saw and

Jim Foote

never push direction. growth we other lever the the Again,

of three was when was to a but always here, your that work are three Frank that We should it people wasn't cars to taking days, network have to to railroad here, again – tough and your in the lot wasn’t we're and product present in many mode. I this, been were, four weeks. It growth in four grow across running

where the time. again, I'm Once and a we're get we to is the say to customers, difficult current that is business -- always want philosophy but for. from at business of more service that's in period it improved looking in that our today, that provider get mode the – is premium marketplace the former is service So paid it to from and the business be growth back and of – all from service customers,

Operator

Our Vernon of David next from question Bernstein. Sanford comes

David Vernon

it Frank, of in little of much the coal quarter. how mentioned operating chalk commodity way to company versus is mention out you to improvement help in wondering profit PSR the helped you What chalk coal you the in much or here from us bit you just how earlier call year? help help the development year-over-year income that to Is kind could the to half a any -- us to very of contributed in Jim sort can you much first how in the has up there up very, aggressive due the markets. would I'm this of of

Frank Lonegro

from a build the levels one. that of those seeing, that producers asset look the headcount clearly at and Obviously, the different efficiencies When seeing, you're seeing, dollars that is you of railroad reductions helped it’s you're lot areas, reductions precision dollars. you're significant

in the over And moved a a little million If at it, made over point last million year, coal, export of we moved around little you just to the year. Jim second XX tons. that dimensionalize this tons quarter look X

the same coals. can the saw coal. uptick in utility some get for a time, At feel in export So you we reduction

You move things other two want but company coal. both our than got there's a net those them out, that’s whole us. good to for pieces they’re to We of in both, more business happening lot

David Vernon

but basis -- totally that. year-over-year maybe was rates? coal give in up I how I us a moved relation And for can directionally you guess much export agree with was on indication domestic I wondering there coal just an if have to rates

Frank Lonegro

follow We generally don't one for follow on the indices. We one.

want sight that those you going on what happening more external is to our RPU So going are. exports highs are are see than benchmarks one. again, when the you it lot when to the export of are going but to going the a feel we here don’t when again what And are domestic to When RPU to those. follow and what -- get generally than are view on the the one depend you speaking, follow on our going There is I that basis, pricing benchmarks the There them, lower But But look Generally really our that you The are on our is. focusing higher at see up. lose curves the lows higher. can it’s you higher. move coal. be there's be price, a to forward price. times and domestics times for on the are by benchmark to

David Vernon

I’m Yeah. to to losing not sight just to us not happened coal RPU? to We’re Absolutely tell do. you on, what get export going trying the I'm

So maybe –

Jim Foote

to going for get You’re Frank. me that to get going I’m and that for

David Vernon

that -- little run on run to all you rate these or gains question, me of When it is at just hotter quick MS&O of start is pure from cost the some locomotives, levels and the follow-up side kind chunk as back you leaner forward. a of spare going bit a Let run you should that you idling snaps the a think ask there Frank. maybe had about

Frank Lonegro

Remember, in data item. that you got real line

real careful I’ll smaller some clearly estate you on we're on try to a give fleet be rating when So driver. the that what run basis. at detail is But doing, locomotive not look you QX.

are You’ve and eliminations, rolling contractor got through that consultant line. which

as taxi my mentioned -- remarks, in costs. and got opening You’ve I less hotel

the can things think G&A. the less Fewer as the You’ve stay you estate seeing same, money piece, those. excluding long real rate people you’re as I line, obviously got MS&O spend so run on those

Operator

comes of next Justin Long Our Stephens. from question

Justin Long

on based headcount. it Wanted have will headcount has updated if any this Do to during curious the have Just how ask expectations end performed your network about changed? start and you where year? thoughts on as change And XXXX half what better there and of for targeting any in expectation first headcount XXXX to start to the the volumes, as relates a be to than that well. is seems you're expected

Jim Foote

No.

the year, pace vacations of said of and year. other again, year first this in get of we're run reduction, the terms but ahead as have the I where because In of slightly accelerated purposes an that planned for was XXXX that we to -- we the rate earlier to would

on the number for the three this changed to terms for right So of number and we're the plan. year year nothing target hit in has

Justin Long

and better curious there maybe how how between a a quantify And back circle is one, guidance if about outlook better to is out? coal XX%, would split to you for this everything help allocate you that. that a us for would well, or increased as increase think the I'm revenue XX% way XXXX two, just outlook export on for

Jim Foote

details the a to into by volume various the trying getting specific simplistic more that. answer with commodity come up Without groups, to I’m way

at think us run you, in a a strong that norm great and -- rate got second had second I of run had I a of we this weak utility but That's to year. we quarter you that's the kind business with for second a for quarter our look export the think demand of kind year tell in the demand. -- expect and great we continue half and to if just relatively we good rate. Again, coal

that in is coal. merchandise, from of the primarily strong come products, volume And of product. from guidance going markets various some got and all you customers blah, in give to blah, which now a I’ll just reflection it That's the talked recognizing about good were the is again blah, board, So of that rest of all metal, across we've I relatively terms good these service second commodities quarter. forest a

half say, think And pricing year what policies so better were we the fuel think top many, will supplemental more both that of then the going thirdly, of, continued line kind we of expected. going but environment, you why And now to you many would that demurrage a for of that little instance, recognition of now, that's we little reasonable get you’d I surcharge a the a the second give run bit layer second Frank revenues in the that good is rate understanding then bit years, mentioned, view because we're from is we will what that better do. existence -- think policies to and are give be I to collecting is originally than going as for in and fuel continued up quarter I pretty a on. And

and little then in started a was I going than in quarter we said quarter when came expected, of to touch Second that better X% bit now, about the growth. we kind with better we're talking a be earlier

to stay way of you road a leads of mid-single line they top to digit so the year. the way the And to are us view for down get pretty if think I now, a that you giving general good things growth get right how

Operator

question And comes next Walter Capital. Spracklin our of from RBC

Walter Spracklin

Jim, it your as if December wouldn’t that now coal. picked stop what half previous XX? a -- there answer Wouldn't into half in due as with carryover I'm all the year, to just all in that why XXXX. the the first in exactly of change of the Why the better commissions and back, next said you've a think even just curious view why easier will lap year next to pricing would There of come to be your due back been would bit just that you trends other better is to want factors better a that remain other wouldn't to it expect give wasn't areas. curious continue Just you you was volume last to just into noting And that lift more six in months. comps as I up. have to regards to year? question of than to it I

Jim Foote

is ‘XX. are two the And a like some ’XX For don't clue intermodal by don't have One, to what work the in implications to coal of said. I I going there. franchise and what we our have I be the know to reasons, do

So components pause this big road those better bit get the of that after. I year -- the little uncertainties those need my business clearer out ’XX, a and have more – further norm -- year say me view two a the to surrounding give for new of to of the down to a ’XX

Walter Spracklin

price kind where any head-to-head the ago? it allowing easier on bit ago, but months pricing now than of not three intermodal come six that with ago, just And is versus the Are one, movement months a in little versus negotiations ago, are month might you to can particularly trucking versus where of on in months one there comes the finding for that easy, the about your into your six you to you environment, come franchise three competitor? have bit, have play or us capacity a or Okay. cadence talk constraints you

Jim Foote

we not our running telling months we how a good – sorry very six had and ago, railroad. Well, were everybody for

dramatically to for now last where compared is were the we year So environment at of different. us the right end

no the of that the business, environment the a time to secret in pricing everybody. environment terms in capacity to it's good It's a for strong business. it’s In pricing the and be time be transportation good environment, is railroad

long-term, are everybody of as said and the As kind what's growth. profitable profitable worried going don't again, timing not our this and sustainable not top our I'm that stock in is awards value about stuff. rail, and I the to I’m CSX volume. sustainable, best. strategy and I grow Long-term, provide to to channel make we the customers line is in earlier, but in I the worried about to that market. we our marketplace through said, growth where partners play

Walter Spracklin

you could one in I sneak his guys new with what now one, here down of about is there when to you kind Mark franchise his number do role? starts last role, terms objective. it you If think sit want Number kind of one zero on in you as the something of else alluded that Intermodal is your or one I objective to he in as the talk as

Jim Foote

senior relationships management has been with guys know you this of company. lot There time. job We I'm need and he’s long-term to to strengths Mark’s a of of the got who here and Mark We the develop over customers. bright reasons that great the our a of we one excited solid know hear who besides One relationship so taking the the this guy, skills don't turnover really at fact he’s about all are. we call, don't

to there, something what goes I supposed I team call got do, if hold You to am the who wrong. do

one, think merchandise that work start and fix I’m a that's his have the relationship Not in group, for to I going that around Rutherford totally in I’ve our say and But exceptional So Michael where time great job to and number and can do CSX area. that do two, some he Mark us. Mark's I but phenomenal back runs the area. are team again, been confident for long a doing long-term build should guy intermodal, job an that that that know

Operator

next, to we’ll Shanker, go Morgan Stanley. And Ravi

Ravi Shanker

follow-ups of here. couple A

average need of blocking an can on fairly and getting the Can automation basic much be that to initiatives us something. versus still eventually you of longer-term help margin on understand above how tons up yard easily your or there tackling achieved is that and that profile. the just like comments Just you and maybe work Intermodal pretty bigger,

Jim Foote

so running adopt run is at technologies well we run This to blocking help just to ways that start where will This and us could to things be is good a a we railroad. better. position it I'd look new tackling. to like in

– from is core windows. basic ways of bunch This long fixed, just that. We’re broken

Ravi Shanker

smaller And you something as running just have autos auto think that a is auto volumes primarily follow of or end your components up, also or when you an do market, in through intermodal?

Jim Foote

We have parts. auto

intermodal. parts and in are cars that We Racks, auto large are and have parts. auto et And have merchandise in our levels the imported cetera. moving service. levels. in But bi parts in frames, volumes Basically, we primary finished vehicles tri

Ravi Shanker

of there of exposure overall terms quantify segments? kind any in volumes auto’s across to Is way your combined

Jim Foote

for we you We percentage. some dates to could can – try of -- if off come up way but you top the with can my not head, see with if to give we some Kevin,

how moves For kind every much vehicle, general percentage. a of

finished something every thing, car vehicle, you we able a a on with might percentage gives up be the of guidance to kind of that. that come what For

Operator

Our from comes Robert of Hartford Benjamin next W. question Baird.

Benjamin Hartford

quick, box volume you there Real Jim. of specifically that of of plan being growth. that needs volume size does going able whatever targets. the and or not context think to to back with perhaps end satisfy and what enough improve to fleet -- are grow -- you the the through you work network it and grow as line velocity be through needs is think up that UMAX are do growth half to may opportunity What in there, within the terms the need volumes ’XX, ’XX Will work be intermodal about count support growth, to in as in that done to be

Jim Foote

boxes Yeah. Under scenario, the making for us in current I don’t any UMAX. anticipate investment

Operator

Our next Susquehanna International. question comes Majors from of Bascome

Bascome Majors

directional game playbook two of various than and a that here, the historic versus profitability kind I Frank, with years the years am less the you in declined to revenue points curious overall in make hard as what's the to franchise, of but has putting for dramatically? earlier guys call, profitability regime, curious groups. we're new around if you this the some changed different prior not? moving to sort the XX you numbers the what's was do, has the that ago, commodity used best contribution know of that just groups up of business in of on I directional comments XX, I’m of

Frank Lonegro

towards boats environment rising environment, going moves same you a So more all the the merchandise at a spectrum. at I are and show efficiency that I pricing show at the lifts coal look are Bascome, you you're clearly. bottom we When and moves margins. top, the could tide expand good could good and a your In profitability, runs that to intermodal

be XX.X ratio drive growth across, it of must continue business. So, when that good going that long-term and Obviously, mentioned. we’ve got a to pretty to that see we’re portfolio profitable you and Jim portfolio operating a optimize good

Operator

of comes Radbourne TD next from And question Securities. Cherilyn

Cherilyn Radbourne

in X% could Just dynamics growth suggest the big versus shift. of the quarter. RTM a mixed speak wondering up X%, some if carload you to pretty would is

So maybe us there. you could just some give color

Jim Foote

miles Ton up X. Frank?

Frank Lonegro

Yeah.

what team Ed and the those we cetera, network think introduced probably et when some I working last now year, we're of pretty is, you're as his miles closed seeing on terminals, significantly. rack So did are some we down pulling we changes auto that. and

mentioned get I we continue forward. to lot see come think down will think you that closer as go I disparity that you'll and that a

Cherilyn Radbourne

Okay. maybe the a just discussion. And then quick intermodal follow-up whole on

from continue the you to that benefits market pricing reposition continue a standpoint? do volume able hot trucking be a leverage and of a you to As to network,

Jim Foote

to even and be the business. to the in be good better business a A railroad time railroad time intermodal in it’s

yes. So,

it, took look earlier, Just X% said we're the a flat off network today. at year take as last our business of we I and

product that straighten looking So make service that to We selling to and just capacity. the as going we to be and partners, with for sure growth customers. then use other out some our to and to the grow our are the intermodal people e-commerce. are are We as a who enormously to to work growth volumes partners want of customers we just marketplace out footprint able to us to the a going take well we help whatever that’s channel that's our network, when an who sometime us, into their rational to want costs principally going have with doing back provide again of be reduce and -- capacity intermodal want with to can there, their of as that coming we our

this all area and and that's our take is time company already and we fix efforts initiatives we're a what a guys We going what So and done where to more the this it to in Wallace here. terms of just at be improvements intermodal look we're make to of into doing good and make brainpower and sure for tap franchise. us just making Harris is of embarking huge need upon and like one we've with the

Kevin Boone

callers Thanks. Amber, I afterwards. think available and I that wraps joining the would And up to the I'm everybody call queue. thank like for for

Jim Foote

very much. you Thank

Operator

Thank for call. participation today’s in conference. concludes today’s your you This

disconnect may You lines. your

CSX (CSX) 18 Jul 182018 Q2 Earnings call transcript