CSX (CSX) 20 Jul 222022 Q2 Earnings call transcript

Company Profile

Participants

Matthew Korn	Head, Investor Relations
Jim Foote	President & Chief Executive Officer
Kevin Boone	Executive Vice President, Sales & Marketing
Jamie Boychuk	Executive Vice President, Operations
Sean Pelkey	Executive Vice President & Chief Financial Officer
Scott Group	Wolfe Research
Bascome Majors	Susquehanna
Tom Wadewitz	UBS
David Vernon	Bernstein
Chris Wetherbee	Citi
Ari Rosa	Credit Suisse
Jon Chappell	Evercore ISI
Justin Long	Stephens
Amit Mehrotra	Deutsche Bank
Brian Ossenbeck	JPMorgan
Walter Spracklin	RBC Capital Markets
Ken Hoexter	Bank of America
Jason Seidl	Cowen
Ben Nolan	Stifel
Eric Morgan	Barclays
Jordan Alliger	Goldman Sachs
Jeff Kauffman	Vertical Research Partners

Call transcript

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Operator

Ladies and gentlemen, thank you for standing by. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 2022 CSX Corporation Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator my turn now to call Mr. pleasure is today's to over It of Relations. Korn, Investor Matthew Head Please go ahead.

Matthew Korn

operator. welcome quarter to you, our Thank Good second call. afternoon, everyone, and

Foote, Executive Joining with Chief our Executive President our and President and Marketing; President Vice Executive are disclosure Sean today's In Executive me Officer. Sales And Jim it on non-GAAP Boychuk, presentation, by of on Vice two, President, and followed Kevin Officer; and and President Chief Foote. Jamie find my forward-looking Boone, Pelkey, Financial be you our our call slide our disclosures. Vice our pleasure Officer, Operations; that, will introduce will to Executive Jim Chief

Jim Foote

to start for CSX Thank all new joined I operating June. thanks We you, Matthew am Am combined our hard Pan very thank forward who together their conditions. everyone, and from quarter I'll expressing network. CSX's pleased And by welcome in to you, team of service employees everyone for across during today. working work another to the my to look tough single-line us build joining

hire firm Our But benefit from growing the and results continue our challenged. we to vital second customer workers, demand ability our were quarter strong which new service and solid as and to is improving retain pricing. to business, remains

had the lifestyle has labor tight, and prospective is pandemic problem. profound recruits employees' market not job are The facing many options in We and this alone effect preferences. have work a on

been slow. but steady, Our process has truck hiring

risen. increased are and pressures with staying of the touch time and We're in pre-pandemic headcount efforts uncertainty economy. not have earnings diligent our and let and But for more higher forecasts. this what current grow are in is right network levels. updating of improve add able order is volatility conductor we and efforts just call, status last Inflationary that parts interest have keeping our by by close capacity now we grow fluidity markets service will in rates our The clearly in rates, workforce have monitoring network what than customers, have now, our to to and demand to to and remains as rail a our to moved constantly our our the We demand. there our are our seen up satisfy. Since not year, we the engineer financial constant entire making

plentiful We're growth for to environmentally long-term are customer on We excited rail, execution. manufacturing. demand we fuel-efficient, opportunities driven must see our in more domestic potential, about investing near-term and focus options, transportation we by it, but because for friendly realize

entire goals in team progress I aligned keeping the you look in is and our updated quarters in our to ahead. forward Our

Turning presentation. to our

from costs. carriers, acquisition the prices Kevin, higher XXX combined impact gain also and for Jamie details. and includes our the Am which And XX.X%, I'll of over We key operating results. moved roughly Operating was start Virginia second ago. ratio Let's X.X fuel which and the Pan our $X.X quality carloads $X.X highlights share, Slide quarter includes a financial share XXX in increased to headwinds from a to which a year includes we now per $X.XX X, nearly in which a Sean gain real estate from quarter $XXX second $XXX from sale. revenue. X% it sale income billion, Virginia over million generated smaller with contribution that from XXXX, the our to much compared quarter includes turn a was of million Recall also this transaction. gain larger real estates recognized Virginia in but of point the points basis a million billion basis Earnings tailwind

Kevin Boone

Thank Jim. you,

Turning to X. Slide

intermodal. surcharge Overall limited fuel revenue. flat, revenue and by the and XX% year-over-year chain. XX% increased demand where many revenue our saw increased strong we quarter across Second volumes flat revenue price supply constraints across on markets, higher by merchandise, were coal resource driven with Merchandise across of growth volume,

some at of the Looking highlights.

in volume. market, encouraged are semiconductor a on challenges strength rose where clear revenues that by are from increase XX% There are manufacturers XX% automotive We auto easing. signs in

business improved minerals Our benefited salt. shipments of in aggregates from

with Our reduced drains. volumes issues, volumes year-over-year impacted ag some was and in the phosphate growth prices, business, from quarter. export shipments. declined favorable fertilizer where and Volatile food on revenues ethanol segment saw and Less fertilizer our combined production

offset by demand along remains continued challenges on to strong in lower Intermodal equipment our quarter. mainly equipment a constraints. driven positive saw higher growth, volumes, lower business market. increased modest in as Intermodal increased with in and X% domestic the products metals Coal volume was Forest industry-leading international XX% continue shipments, X% customers revenue revenue declines resource XX% partially by service revenue volume. the through challenged and product on driven offset recognize by growth by

domestic We we and strong man as international markets. constrained our infrastructure constraints revenue increased Other these improve higher by the demand expect general equipment storage moderate. and issues due port, the remains been Curtis intermodal primarily and crews. to of including coal still including have discussed, volumes some shortages, power Bay usage. to year through the As across at production mine, have at Volumes constraints

to value are mobile will benefit opportunity over to many we time. as the benefit all increase of truck enter believe drivers still Although environmental onshoring rail, into we growth of see the and still and in that Currently, the shortages, limited is will ESG, with share prioritize seeing favoring elevated industrial demand capacity positive we production clearly markets by opportunities. second lack proposition this shortage inflation driver global rail's macro uncertainty customers We our benefits continue including as half, of labor.

investments Going forward, to business. we remain their them our helping grow customers serve the making committed needed to and

Jamie turn to me operations. to Let now discuss it over

Jamie Boychuk

education work hard our the with safety railroad, our critical moment to We this CSX, goals. We operating foundation our instill and of training at environment facilitates that ongoing our Safety and employees not to but is not training a training right have our Kevin. the XXX with end coaching that remains the that of completed culture does Thanks, any protocols. the focus begins year-to-date. to top operating enter an teaching is safely only and facility. employees our on This for coaching achieving The priority way employees important program. T&E particularly new almost across a safety creating work,

employee ensure managers quarter, the injury and helped We quarter points significantly fellow themselves drive have created rate to touch flat both near slightly have in minimizing up positive quarter prior programs accidents remained we from increased strong accidents ticked through employees on focused modestly protecting quarter, increase the year-over-year. are first Train new These record second results. in factor levels to railroads. continued the efforts their their In but another the with as communications. proactive safety human but of new trend

and to Turning to We taking delivering strong service network to we action are remain committed performance. improve X. slide

of and are seeing pandemic second best in improved our We our improved since consecutive This of in exiting performance our signs the this results, local quarter measures. service is downturn XXXX.

actively the improve areas seeing we to coordinate are customers that that in the metrics year. of are improvement of and challenged were encouraged the these continue We entering some most to some largest further with

quarter. the Our intermodal crossed above back this trip threshold strong plan XX% remained and performance

constraints. Looking supply keeping fluid continue focus to on forward, terminals and open during we chain the ongoing

the year additional network as improve to of merchandise performance we fluidity the to commitments. offset crew the half have our to the better second of expect impact To network throughout meet assets increases. We shortages, added customer

and transit plan employees times reduce the refine we improve reliability. will network be mark congestion, to As up, shorten able to

Now turning to our slide ongoing and hiring initiatives. X

headcount over trainees allow pipeline continue to We our in continue us XXX as pipeline have work averaged quarter. we strong a This filling towards second the that hiring classes to targets. will

and active employees. over T&E increased consecutive conductors XXX second the X,XXX to total qualified For quarter, nearly

this to increase expect offset newly We attrition. more the as sequentially throughout second qualified than number half our

These we are us to will will pay agreement the early working help In hires also including new for initiatives conductors. career, attrition. newly addition that their hiring, lift recent focusing years the to our throughout of qualified with a minimize on

service people. to that to to our must level the deliver now will and our with over but said financial I I'll all time, take Sean last of quarter, have review we starts As this we results. our that hand know resources right

Sean Pelkey

and the as In delivered growth and of well also gains across with face ongoing major CSX as challenging were these up million in market chain income Thank conditions supply labor you, all afternoon. reported Expenses a operating issues, as good X%. increased markets. over revenue Jamie, $XXX $XXX result, over million

tax effective heavily on to next for Carriers, while the explain However, were gains, costs estate the quarter by costs XX.X%. improved slide, million. of Interest $X as other million expense year, Quality the I was lower income fuel. the impacted and $XX higher addition and real was more The transaction in favorable prior detail will rate

proceeds and the last Higher surprisingly, $XX expect All This running impact and factor increased $XXX and across the increased locomotive million. reflects with on inflation slide. lower Total the $XXX million, costs million the acquisition rents. remaining of prior and car the larger expense Quality incentive Nearly million above quarter nearly cash by we from costs. million fuel expenses depreciation, $XX higher fuel million due active dispositions, higher $XX approximately in $XX gains versus other quarter. fleet, $XXX this million to retention, gain represents times. of Turning impact services, $XXX Virginia labor, to supply million million inflation expense, about disruptions, cycle property this $XX lower were estate Quality Not higher significant levels. costs. the gains fourth expense of driven represents terminal up This from chain inclusion Am hiring on over $XXX in and the were Pan $XXX of next a compensation historical And million, excluding significant a year. of the by operating a with impact. and Real slower transaction, also is Carriers, with slide million $XX prices intermodal increased million our the the to Virginia costs was receive purchased

expense normalize we first operating on categories. from expect coming in the levels these quarters, to service come opportunity would set As the the side

$XX investment the year. X% we approximately cash proceeds transaction on flow short-term funding normalized is billion dividends. turning $X.X invest to slide in full billion, from over down and and cash shareholder buybacks returns going year-to-date X the have for infrastructure prior brings up Now, of $X projects. $XXX flow to for that, turn over more our go adjusting cash billion opportunistic including This ensures Virginia amount capital This year, about it On as nearly and with a we for and roughly before shareholders. back still million $X.X demands, approximately to these year-to-date me remain Jim fully dividends up to network. our we free and $X being XX. both his reliability excess when to cash and million will balance the allocated in a basis, expect and by strategic After to return spending balanced Capital million, return-based in forward, $XXX With million. in the safety in to exceeded And commitment growing remarks. core $XXX but closing million to our investments our a is X let down

Jim Foote

Thanks, Great. Sean.

on XX export revenue still the Having operating the with the we fuel and of expect to high with over the coal income year. benefited our outlook growth conclude full Let's prices year. year for double-digit first Slide and continue from elevated, half for prices

demand in moderated a anticipated for coal greater supply. our necessary headcount all continue. mentioned over customer the couple and freight our my Export half year. over that guidance Consistent our key of engine had and employee have for what I already efforts increasing last than benchmarks improved able and we months, believe the the our opening correction but network As to rail will currently remarks, our with hiring we're second factor commentary service year, train of the performance is remains

Our transportation reach still as aim X,XXX of active to possible. headcount is an as soon

shareholders. our which planned our expenditures billion, is return unchanged, As capital to Sean year capital are approximately as $X at said, is excess also commitment to full

As forward, you. on but back gradual. is and but I'll supporting to often delivering takes is last customers Thank the we are moving challenging it time turn and and quarter, real we this stressed left our to company. whole progress plenty is And goals, to Matthew. our family CSX growing There do, committed

Matthew Korn

Thank you, Jim.

one now in the will to start that operator, I’d time, and please take everyone, we just limit Q&A, as with ask questions. interest that, yourselves Now And of one question. we

Operator

Instructions] Wolfe [Operator first comes Group Your question Research. Scott with from

Your line is open.

Scott Group

Hey, afternoon, Good thanks. guys.

hiring, first any why the think guys Thank So then Am. do other guidance is? the maybe thoughts on ramping down I just but quarter? excluding third most. separately talk if just Curious, up coal headcount's about were look, perhaps for RPU and maybe Pan Kevin, on rail the And And that in you sequentially, revenue to you struggling you.

Jim Foote

We've take I'll don't the is about everybody And or else of know struggling. your Scott, struggling I we're hi, the if part question issue, not, gone employees since coming hired hiring. two yes. ago, Well, talking years than years everybody and over think our first backwards. last of again more I started numbers a this we X,XXX the saw we haven't which about couple

rate after and So in Unfortunately, from attrition what question through new part go with to through experienced much much, and they environment, than the operating significantly as current outdoor ever our we a training employees much pipeline the we them significantly anticipated. had had and had as than on-the-job a the higher ability attrition than brought on. been training -- has but the that get what not the get And the work workforce. higher really normally seen we've we people part into attrition the rate classroom higher actually them we we a or to from expected our rate process,

invest we that during in terms of as of of Jamie compensation a lot think in on now us, terms of we've a that keep we employees standpoint a attrition we and the mentioned Sean done sure I couple make -- can So focusing what from to do we myself, in. work here,

issue. what stand also people. said X,XXX the of people we the upon I the COVID, time two hope three -- certainly employee so And next north think the put a that had of to And where we or XX target to daily that's so be with I target is -- was out of we off we at was I employees there over that think around I now based that our when number should XX. it's of with months, number out that XX qualifying there, today

we that hope we we of two that expect number. and So factors number quarter. It's down. those the by as the through achievable if end And third comes as we'll hit come X,XXX plan,

Kevin Boone

coal Yes. obviously, met has prices RPU, on coal And everybody look, come the seen. the then have as down,

on other a in bit now, things see probably revenue, first flattish expectation RPU quarter. right line quarter, the we other look in supplemental you'll changing And right line, from second is quarter we down at don't dramatically, Our versus probably revenue given now. where the are, outside market what so saw something with little the the then this of the which

Scott Group

you appreciate Thank I guys. it.

Operator

the next is Majors Your Susquehanna. question from line Bascome from of

is line open. Your

Bascome Majors

retroactively Thanks that you accruals up the from in you there's Sean, talk will uncertainty union your actual come increases when to how communicated its as question. to with managed expectations, has wage the that about what obviously different And Can true my XXXX some prospectively? wage taking for CSX do so if were than actual far? increases ultimately Thanks. be. uncertainty

Sean Pelkey

can I speak to that. Bascome, Yes,

for a would who've settlement, been take not increases that for to backpay. been do contract. look So wage the settlement, when four get once. at see wages it's a we've take the of wages, is look at last us it necessary. accruing back also a we union all several get have and adjustment When we the will do worth with ever and when increased the If at an noting we been back expiration is, likely probably that which if getting to working accruing means And we since get issue, that wage employees that years we we'll

time impact settlement be of around So there will cash whenever that the occurs. a

Bascome Majors

that have the or in has certainty, period historic inflation with reflecting consistent we're been different rail In we where don't environment today? this in accrual that

Sean Pelkey

sort liberty Yes, Bascome. our I'm where what at come any based not terms of in negotiations we, to of That's the CSX, give specific insight on best accruing. are guess out. of

Bascome Majors

you. Thank

Operator

UBS. Your is Wadewitz with question Tom next the of line from

is open. line Your

Tom Wadewitz

to question guess I little the bit in I Yes, back good to the operation. afternoon. go network want a headcount

necessarily on at really time, seems that. made the and have it progress the metrics haven't active T&E You some yet reflected like velocity headcount same

that, was see the And level be of good that. wondering if lot to just So, expect thoughts go why then Thank that's third about number also end stronger of need really quarter, don't visibility? you and we that that to should you would just the you X,XXX a offer I talked beyond achieve confidence you. number. Is right mean like you I right that, case. if pretty volume that of is the could confidence and maybe

Jamie Boychuk

us number. level, that comfortable had untapped doesn't gets to X,XXX. on pre-pandemic growth Thanks we're a going stopping X,XXX that but our at Tom. for we is We're there obviously, touch I'll mean which where We is that mentioned to out that continue still hire, feel first Kevin that quite is were, to really.

a our us gets is else mainline metrics X,XXX number So, other comfortable and out everything the and that trains going that's less on train that we delay -- locations. to feel our and

at are difference different qualifying in for ranks, peak high the us. a if for every T&E folks helping But at in week, comfortable a vacation I quarter-over-quarter, been we're and right; in few I clear. So, for reason, number an seen we our hire With the you're over continue that got to to numbers, want but respect to year that have with us. XX still look us averages. that stopping make the XX really is increase next make last or which months conductor my the sure for to anticipated we've two. for not areas that the look there. to And We got we're making growth have we who

availability our to XX%. XX%, months, of because XX% of has over dropped our seasonality about couple our but are the availability XX%, employees usually of vacation, the past really seasonably, for So,

percentage one XX every close equals point So, to employees. somewhere

if and we're September So, be that backing start the that for into that until start into thinking the and crunch, going we're you all about off. feeling what when back out to to network, Day vacation that Labor means probably vacations

and our seeing it. of reason why of you're part yet our aren't that's velocity other the railroad climbing, So, benefits the but of numbers seeing areas

Jim Foote

terms when historically. a the not Tom, the months which XX fair over the we've and that, hiring affairs about last Jim, with learned of what to And are associated in -- current too. it difficulties comes state it's were lot

at we what -- And so -- know we long-term we going our another are rates attrition be, to the we another our employees surge of where hit of -- know going couple what true of we quarter, lot off and in to attrition time. get going of are there's a this situation where end hundred are be at given any a have some with variants, to

XXXX we're back when that the what to performance. record end publicly out -- we get the a is running at the we really So, to XXXX, trying XXXX railroad number early in of put when is had

that's us it's of so starting do have to really -- And what going better a should forward. we visibility to kind as for point

Tom Wadewitz

Great. Thanks perspective. for the

Operator

the Bernstein. is with question next Your line Vernon of David from

open. is line Your

David Vernon

Hey, for the guys. Thanks time.

of that figure just expense freight. T&E not quarters, having get fewer, to would way to two additional relative this account. your more some been the account I'm just and you've the training of the do to whatever, about T&E to last number you're and was training but best employees be I'm running past your trying better right and we haul active the the how much So terms term than of employees you in active assuming high I for after necessarily that. normalize active think in thinking out long X.X% on headcount? to wondering, single-digits what's payroll, of the be relative just employees incurring -- a

would that, really on Sean, thoughts any helpful. So be

Jim Foote

going what a learn understanding It's ago. the me answer of of to a then I somewhat and been out moments this the dropped surprise to better profession. the of few year have just this all of of don't a of our people as working months of have rates kind a to said next way to us, after of going and few the David, to as are. classroom on-the-job through these again, through We're into deciding let and all that year they all confused that. a get training attrition training, beginning number that what we end have of like It's railroading

these things all And are us. so new for

easily if So have what's attrition What the down know taking it's here, we times -- manage what for one necessary. thing in just we a manage simply advantage lot up. we of more by know, a we that's difficult do more to it's us anyway recent lot can experienced

So everything time, that going about and how it. we short run to we do we're we're point term, what learn can until need the to to to to do do in going differently in And need not short. we

David Vernon

Okay.

probably to too folks is of that sort early out hearing us about some I you're has are the these should So you share from pretty you historically number the think out for of But what get it's of folks quickly, bouncing at. guess some settle -- pretty figure the what job? that of kind if are a rationale can I leaving that what in assessment been attractive with there terms why qualitative that

Jim Foote

of bring time identify and people of factors so with in effort don't Well, if we can -- and we every a somebody. we and associated analysis trying to lot we're why, different don't make cost because figure out type the training to do try there's so

consistent more hire And and better the but and us just we're to worker able new for figured is learning have need better it at we're a So a get do of we'll union out, we're to then do manage -- and the we -- upfront. to profile that psychological basis, help try headcount. trying trying we'll of understanding us a to on this whatever and can be better analytics to we --

David Vernon

time. much very Thanks right. your All for

Operator

is next Wetherbee of with the from Chris Citi. question Your line

open. is line Your

Chris Wetherbee

might little how maybe second little and Good in bit you half the then, play bigger out? picture. that guess, you us a bit of thanks. could that, Hey, help Maybe with a the volume of your I sort And year think afternoon. around expectations

there's demand I a general just able that sense are to there's there than you guys think out capture. more

see from ability the So into the demand sort seeing about, generally headcount of and curious back of your you confidence dynamics with improve, lean hearing sort and to performance as operating demand the Can year? levels that. you speaking, you're you half, help us of what down? you just around there's the volume as Are go anything So the of slow customer? back kind the half into in

Kevin Boone

Hey Chris, Kevin. is this

a Right pick and think, As mentioned supply a of couple clearly that times, and general, alone. I comp mentioned not at crew when up it, We're continues issue we demand here. and now, we're of seen I the production Jim having. half have It's part the to on to chain we're easy if auto the have look chain just you outstrip chain. that business, year, comps the we back on that you in the supply supply basis, the look start with of purely

business. We've some So the happening we're there. had on the on side what's disruption encouraged coal of

will So we year. in think to improve that the half of continue the back

there highly that some forward. then crews on that focused out order and go that existing of things we and market out the share a are get the online, opportunities know opportunity opportunities terms just there point And comparison come that team -- then chase move like of a better back half as terms in are there we're into going view we the fill see of as that, things that and get we the in rates, as know from So are we'll of year. those the

some a but still we the also areas there, from So eye needs environment, on changed nothing exposure restocking there's pretty have we're inventory has last had to really quarter there's on. keeping a housing an happen. other of when what's robust -- frankly, going we but the lot out quite we're Clearly, but see that markets pressure there, not where,

Chris Wetherbee

Okay.

So then think you up, far as if as get are the I concerned, simple right? operations better, guys as goes that as volume

Kevin Boone

seeing environment right we're Yes, given that's demand the that our now. view,

Chris Wetherbee

you Thank much. very Got it.

Operator

the with from is question Rosa Ari line next Suisse. Your of Credit

is line open. Your

Ari Rosa

resolution board could with was union. good Hey and negotiations ability your here. announcement guys, on presidential hoping reaction the these to think a the I that a issues just solid these could based your these emergency to afternoon some any still congrats facing? achieve I risk that result solved maybe some appointment a the of based to to if see you've alternatively, on labor margin negotiations? on relation stand get be negotiations or do around And of that you of targets been you Do Jim, attrition in there's

Jim Foote

puts they didn't was to a -- to Well, X.X the it a has out the and once point. a not we're Do that long, that for time, They -- get a time. the is appointed. resolved our recommendation, raise we're for quite long for to hopeful so glad me that emergency tell me you employees that are it's It's win-win board long said as sides. unfortunately, worked I've for both happy tell get years, often, the we took us that. hope that this that let board But the labor all issue emergency wall and

we're with case, help that rate dealing once the is that that might accommodate they'll both hearing better labor expecting going help And a And then is with final, veterans from certainly and will issues I resolved, the that of so very a win-win they able with and solution. seasoned get this we're upon to and And a Board if that's make reasonable we're I and economics in that our the it's forward. it comes as the to that hope hopeful out recommendation retention. that are And morale going inputs sides. based said, are

Ari Rosa

Understood.

Thank Okay. you.

Operator

ISI. of Chappell Evercore with Your the Jon question next is from line

open. is line Your

Jon Chappell

at intermodal to already wrong addressed you. Thank performance we're when direction, Good metrics, your weekly afternoon. Jamie, plan trip we've in yet look the obviously, moving we the back XX%.

disappointed but with would targeting or others what get velocity And right dwell network? maybe much speak in you're which indicating. free rebounding apparent not disconnect kind be that metrics the of velocity capacity the volumes, probably with, bit where some volumes would to that moving as bad your if I'm you Your one other? sure up for you're little as that you that Can free to how way, a resources, dwell

Jamie Boychuk

the guys Yes, a out look make question. It the for the railroad. the is great those us we from ever network filling folks have Dale, an sure to and then Jon, get to has Dan in the chickens comes working in their sure those the across of make right priority But fed in for trains side and utility environment some look, job that a are working, of intermodal hard we a union from within to that We the are the And in environment, field, folks fantastic best that the work get on stay more where operating than who team they down gaps. the making doing schedule on just it's the operating tough concerns We're at lights this on. and our can. that decisions. have intermodal ground,

because which never traffic So, to goes some before have to would our bulk there's stockpile. we traffic, bulk done of have normally times when prioritize actually a we

you bit the a merchandise that before, never terminal-to-terminal. take when traffic. are take of from it across flows times different or prioritizing really traffic little you of So, of the a traffic goes might delay principles merchandise getting your you making At of sure had against that something XX-hour network care

of just could the quick as areas So, congestion that's where you're as some we're moving out and not some seeing there. that's of where we those

week. can the decisions to normalized in flow So, back to make the when right Alabama we little with the to yes, workforce a and lights worried chickens that on or respect area move to about to get absolutely we're not this able we bit it or having capacity. in being every tough We're about Carolina in down yes, those and train going XXXX, different you're move start see Back to better the lot. you're talked that worried areas, about Southern a

of capacity We have on network. a this lot

We have network. a great

assets We have enough there. more than out

assets. able that stand pull hiring fact, expenses that by with to come that of matter a that to I through be always along I've As are it, said any we're that, we folks the and out going and

better that quite moves keep one confident we're I talk customer that the that order the to merchandise But up happy. metric, metric that customers. to about we're is in, something want say the when to work we we're bring to customers cars going actually on metric everybody feeling. we're and there today in say to you to a making may up the give be the customers to in when than we coming -- mile call improve we we're time. the we're continuing XX-hour able that get and those is, is try we're that first a are to to continue something we're with did last may So, it mile, be to have They in experience which transit that's But going that's making delay to right if customers, a difference they're showing what showing can watching

fooled we're railroad are the to into I completely folks really have. So, out running because differently. be. who the metrics job out final fantastic we my are are hard-working wouldn't this this running -- those it's comment is some how by want the on be operation them metrics read that don't the right. with they not doing of you're way there you there, And tools They're the a

Jim Foote

Yes. This Jim. is

we said, record had XXXX, reliability, in slow XXXX, Just the to railroad doing on et an freed down capacity did of follow-up was made. terms with to phenomenal a in that the we At last not always much XX% changes rates of without in which running we about years, at velocity kind X.X additional time, what the the that talked Jamie have point is cetera. that dwell, where the fact of to we've over that program. our two years capital And during network, rail prior available up the XX% we XXXX,

in We continue the road. to invest

continue sidings, just to -- We across return plus preparing it creates because network. of normalcy all we're it lot makes to extend for efficiency a the

we we whenever only get. do handle have in people as traffic We to can it's So to restriction everything now on great many one as hire shape doing we're whatever can. and us to crews, us and we we're right possibly comes

Jon Chappell

Okay. Very Jamie. Jim. Thanks, helpful. Thanks,

Operator

Stephens. of is Long next line Justin the question Your from with

Your open. line is

Justin Long

you basis. I third a quarter, expenses curious about sequential this you if with again know quarter GDP still especially layered do gave had that's on growth. I outpacing talked in. Sean, if color volumes that And the year, last on I Thanks. your was being was for you expectation. ex-fuel expectations operating Am previously, curious for some could your Pan

Kevin Boone

the Hey, the has that's than lot lot year. changed the Obviously, moving quite around but Justin, a beginning has into since number what it's is of year. Clearly, up bit, -- believe our outlook. people a the out Kevin. coming Nothing has inflation more really changed moved a with GDP

the And been the a the And given that growth. back the year, on supply more reflected volume as we comparisons probably of in of then have comp price. but so as we chain a recovery expect we've probably quick from side, favorable anticipated, still not we that's half -- in

Sean Pelkey

think on it's is the to OpEx, assume OpEx stable the going of fairly fair Justin, part And to that around question quarter-over-quarter. second be I

higher mid-year. higher for that would wages, the reset accruing of at begin will wages We compounding impact

business bit sequentially of mark the the on costs some little you integrated stable begin of the the subsides, it's recognized that Am take get to about should and less begins continue to fully today else a impact. relatively then of worse in crews the vacation Pan ratio But Figure part spread, up cost little terms the see become average the that towards network available our spinning, we an is a And than Am little question, a or of will operating line. on similar and So increase revenue latter out. than a $XX everything spread you of labor your basis, and our and Pan that. X% in next would probably to those of quarter peak to million there as or so be hope as the current

Justin Long

appreciate time. I helpful. That’s the Okay.

Operator

question is line next Bank. the Deutsche Amit Mehrotra from with of Your

line open. Your is

Amit Mehrotra

ask relative half were puts they the of mean, a I to fuel operator. obviously, year to off few just the moderating back Thanks, is in where and everybody. I Kevin, high in takes. Hi, about very wanted the level. yields of second quarter. There's a

still that's environment, in pricing obviously, inflationary debit maybe opportunity. maybe a little to of so we're, high bit a Then some yield. a there's So

mix be what to it is. going understand I is So

Could of EOR. how pressure you And So relative guess that just back the if think second talk releases to be non-fuel half would then, kind comment, with helpful fuel the for you moderating, was optically minute. on the quarter? Sean, really to we that yields in cost on costs. about hold some can that what maybe just I side a you did

But So expect back EOR would the year the of to of the the XQ. Thank a down you. sliding big kind in OR of sliding as the you as continue XQ expect of jump back year? down of to in would you half from not Obviously, half improvement well?

Kevin Boone

on you surcharge a covered bit we the one and of think yields, I quarter. Hey, Obviously, and there fuel there's them. second of third a from quarter move as the lag

works can move understand around the but as on that So bit, you a quite moves a around and adjust prices. how that bit that we'll diesel

good we're just really coming earlier levels moderation export off environment on would these covered the of that they're us. the We coal prices. pricing. for What really seeing high The other really, level. very, is obviously The day. take any still some I is price that It's was really one the today stream

there. So recapture on discussions. contract clearly, today. we'll and high dealing obviously, we're of with with that, value those business, of inflation customers, they moderation environment we're other the our But we're parts in some that having outside having negotiations to side the and when labor our see understand And

as expense-wise. sure what happening we're in having or there stay making reprice, in what's we to out So line and the we're pay market things with

really half probably well. year. nothing the we underlying see that, some would outside back momentum changes of still So as of there But into the

Sean Pelkey

that those and go flat, expenses excluding impact. down, then both to have some two terms had the to on working and last half. I non-core that you set that continue ratio, million prices but just number the operating in of margin favorable And aside, it the less that, the be have gains we volumes second we'll And we real or momentum increase are in think half the are of we'll if year see the similar to about obviously, would our things year. fair continue always and whether gains the I tail We're, have control, will in the on estate have And items OR. benefit good sequential $XX that to But lag we'll think down deals, adding that assume PanAm relatively inside materialize Yes. if wage we second [ph] potential side. of a fuel, help into

Amit Mehrotra

Right.

the I help. Thanks it. Okay. Very for good. appreciate

Operator

question line from JPMorgan. with the Ossenbeck next is Your of Brian

line Your open. is

Brian Ossenbeck

other the little of I there of folks have any Or other Jim, with you can do you or Good to back just go wanted or -- the thanks. you down bit that for compensation made coming comments more things, break afternoon. incentives the to offering a little are on wait Hey, the And there that saw to attrition rate I on network? one some you are which consider, comment that is are on do of the think to Western embargo, a we other to about Or a that things unnecessary? think to any Is Jamie, pretty them be? would but you be official And then do point? this agreement might you that where things settled? for get something of bit get disruptive, to in consider I would that would at rails put seem relief.

Jim Foote

Well, that and have Dave, and feel whatever that. able do options, the try including to work to an like -- tried so we're here, to many we unionized unions, -- agreement working we environment, pay, increasing as too simple we're much their on change without a with and to working not do continue to the work really people want can we'll environment but

like so is. an everything ongoing process it's And

a We'll including to myself, bullets. before, any my But come go we continue I've degree, silver have place this the with that experiences to we'll where this and doing continue and been don't to ideas all innovate. to all uncertain but make everybody we try these work. wants life. up large to because so times And making it as had never We're along we've up, are

that we that's an And it position it would opinion, a a do embargo without so forethought pretty and absolutely lot my take lot, my only on that's we're was would if going in draconian a embargoes not embargoes, of a was necessary. stay. terms of where In lot, one step absolutely, to and

Brian Ossenbeck

is that? And ideas then on early any it do have timing you resolution, Or of tell? still the to too labor

Jim Foote

the terms in of outcome current the Timing of negotiations?

Brian Ossenbeck

Yes.

Jim Foote

the Sometime in -- second cooling off three in the is next done well, -- be days will XX like in next the you're you that period. got -- XX-day

of belief the encompasses is hears, to one where not has that. expired, meets one got they going are period my time board You delay and the emergency

done. board. if plays if has on the the be, history XX-day done agree, the XX the the then be little us be days, the time than And of parties. left or XX there's So, outcome likely days a after for findings that emergency shows parties And cooling that, that. another is whatever less accept off That government don't will they where and the will recommendations parties meet impose will in stepped will to what either period in

Brian Ossenbeck

All right. Thank you, Jim. Appreciate it.

Operator

of next question Your Capital from is Walter Spracklin line Markets. with RBC the

open. is line Your

Walter Spracklin

or that what do happy least assessment forward? more you of quality you've or fitting much. that you is you and need you enough going think you of by on opportunities and organic -- at a focused a sense opportunities how an what chance in of business? an space your guess Or enough would more look ask for do standpoint, the, more would you're question, quality Yes, guess, Jim, had network? trucking afternoon. type strategically, seen space? early specialized with at Good And have with you've for in an that it's what it, of to I with have you my and from with you quality about with got call thanks look trucking the you like impressed very think, I Are have acquisition

Jim Foote

impressed business great became a available. They're have that only in a They that Carriers. what interest They're Quality it with core the first all, and we our first But Well, we're existing core road do when piqued a comes company. they pursued well extremely They leaders, great that's people. job. great was is so reason of fact existing industry our that's It the aligned our that. not with business. and what

if see footprint another it. about And interested that continue to can brings along the try out don't our rail of met same customers. and of met lines necessarily and going criteria, in I then, and to quality same So those those do and size, on the on that be trans it connectivity the everything going spaces criteria. talked it we everything our core of course, to we've and flow through we're warehousing those something doing we'd expand But us in network to the reloads on the greater unless

oftentimes, way gap. So the a to we go all where don't the door there's

whatever to to what we'll so that. and we And customers, bigger try base the core can connecting do to that's of a us, that railroad pursue continue and intrigues fill gap between

Walter Spracklin

you. I Thank Jim. that color, appreciate

Operator

from is question next of America. line of Your with Ken the Hoexter Bank

Your line is open.

Ken Hoexter

team, XXXX. down CSX got in think last XX% XX% and rollout evening. even I before Jim before Good PSR guess, originations, there performance since I at seen at on-time Hunter well and Great.

levels the think some I seeing away? your it away, talking and to specific of guess, -- localized of just then, demand So is the network service parts ability maybe push with that clarify hire on talk you harder your business affect your lift. about where And starts win Jim, you're to railroad here? the you're it's the if, that about don't where to you Kevin, can there this turning And to where you're that the is

qualified do newly can't Maybe you agreement. you just then. said pay said meant by you that what statement can't you Brian, lift -- to you union clarify the without you just conductors. things mentioned for But You can

Jim Foote

we Well, to that leadership labor the a could employees obviously said. -- obviously I labor what we more. means that got got the We agree pay

an logistics concerned be This hard that operators. we we've order clearly with work truckers. everybody the down, very like find it's spectacular company are the and hard in issue had world at to measurements XXXX this and doing the at the still affects I that difficult to slipped affects the couldn't circumstances. to and has at everybody get kinship extremely back under rates. time before an XX%. is is everybody. XXXX, that. the industry. And everybody affects we're operating not before This our much everybody on running affects It's railroad over just XXXX just we so metrics I doing -- and because struggling it guess job in to slowed that done else this This XXX% chain we're good metrics in believe the or is points running running so would companies, we this is do performance fantastic, I affects terminal Everybody not that

put was air saying because an I ever can't facility. don't the Heathrow they'd traffic they earlier through today, As Airport handle I embargo to think have thought

it's global We're So a phenomena. improve. to continuing

to -- to wanted intensely the said, e-commerce, to so know better. on we we going fact terminal down everybody needed use that railroad because can we're for and we were were As us. were America make do only because we never the the we're congested continuing say focused there of we're I I a they that one thing, when in North that shut country sure

that this year of I'm job very everybody proud the did. So

So our metrics, clearly, velocity other stabilized. our has

that's we're XX the plan, that's what last And is and always -- X.X to do CSX Our what corner. here the we when time. that's We're XXX years, dwell -- X,XXX the going we has employees would. this to said, to stabilized. beginning we're I said turn in to going get done and

Ken Hoexter

Jim. Great. it. Thanks Appreciate

Operator

with Your the Seidl of is Cowen. from line question Jason next

open. line Your is

Jason Seidl

to operating operator. bit the on a just afternoon, clarify Thanks, little Good gentlemen. I wanted ratio.

going You of to going into and Pan costs talked Am the aren't puts continue the year. takes half about second some of the the Obviously, forward.

Am of how that headwind XXX basis was point in the much quarter? Pan Just

Sean Pelkey

XX Pan was Yes, points Am. basis Jason, about

Jason Seidl

Okay.

And quick. Pan follow-up Just basis could points XX for just I Am. then if really

gains take we maybe to then about of, pent-up these can it the for a even jump you out lot on open sort assume there really demand rail You how up side, that terms are where demand, improving that in if and just and start is of intermodal talked do going business? much of on boxcar that is. And more you operational

Kevin Boone

I think just intermodal boxcar. beyond it goes and the

You mines some issues as think network. well. about the of have a that the some coal of on is the And lot this coal and of export facilities look, had

part that think But and with boxcar side would piece other we're a we're it's some auto the intermodal. of about the of bit on -- I the limited as When of a puzzle it's like little just So crew well. the business. playing catch-up markets that issue of I say there

So there's opportunities serve almost across that every market we today.

Jason Seidl

Appreciate the as Fair time enough. always.

Operator

of Nolan Ben question with next from is line Your the Stifel.

line is Your open.

Ben Nolan

Hey thanks. big had guys. of question. a a picture sort I Yes,

of with the have railroad challenging mentioned, how to all so, a do a not? bit uncertainty had you into historically the the differently recession, positioned or And that respect do would if a given economy, think more be? you we than as it is environment any little or move guys Just of if that been

Jim Foote

Well, to that by I question. -- answer here. that picture, me know seen in don't what for I we next I the Big economy years us an can they at haven't X.X big last from guess, pictures. Everybody standpoint at looks the thing throw mean, because that

A help for the you that's associated day environment. or if is in general issues when And to we pay to with CSX we're get play are get rate economy, their My that's a historical what reduce there. associated and to more people that downturn concerning railroad to the in there, reliability -- -- they I targets. to I us get about pre More pandemic. extent need right a care are service asking with We're in the that's do we congestion, to more because back to money, it when container truck. of with So is industry railroad the it costs, average where cheaper bigger on, decisions had what single them is highway to their downturn a more a ESG congestion, substantially experience can it save from game they need than want based a and them the B. just it XX issues in to spend we the reduce to customers times is do with business think and in our our where costs and in who companies every always What the there and to gets we're where is option really the railroads transportation the for move their on great are making well-positioned they everything don't now going terms issues going

our ability reliable. winds of here for given the us up all So, that to upon that to we we -- employees in we're number it's can need everything the but customer so based that prove

said, are dysfunctional. just historically -- rail and People it's some grain board. always that the areas, completely disrupted trucking Kevin in As by -- it. across or People the supply chains move completely to

will So, normal. return to things

were, we and convert to share, continue more We traffic time. the will competing and the get back to principally we'll by with off more to grow where highway beginning all and

Ben Nolan

for it. Appreciate Thanks right. All that.

Operator

Barclays. Eric the Your line of with Morgan next question is from

line open. is Your

Eric Morgan

capacity I taking about thanks just of the Hi, question. labor. ask to for network wanted outside my

does additional now, think footing? are on is their labor you at that of still be today? that kind once resolved to I additional think Or And how you has to PSR. situation much up talked exist freed things bottlenecks with looking been your capacity need capital about there

Jamie Boychuk

No, back. Eric, -- us it's what's is people labors purely holding what's

network past if the our -- is improved years. anything, as over Our network three has

and that to spot you have. Jim, we done in need put business. folks if we got just As than and great And ballast We're as had we've more in need. really extensions we siding the we've a much We've areas locomotives heard tie move the rail we we as invested.

terminals, home matter very XX% well. fact, running of terminals our a as So, of our are

of Our which train points train. we bottleneck get make crews don't flat than those is different change moving switching where bit crew running have different to keep are a got terminals we trains congestion Where decision moves quicker a we and on to a well. little

we go confident very was to folks and the better network it probably get ready in that we're than XXXX is the So, up. once what trained

Eric Morgan

Thank you.

Operator

line question is Sachs. of from Goldman with next Alliger Jordan Your the

Your line is open.

Jordan Alliger

Yes.

up any question. in mean shape. a know you there to the reconfiguring that schedules? to mean there wider then be that X,XXX related good matter is sort But employees, it's getting when mean to done close or on changes the mean but last decisions I anything little I how those are employees? simply just needed to run? target, needs of in either intermodal which and pretty the scale network, carload closer mentioned And extra trains following I the -- like operational I is you're be network say front is network, addition I that it just a and quickly reacts Or quickly and hit it does how you this making is I on that? gap to just you seem seem headcount all react? mean far trying Just the the I'm service, -- we're and moving on away. volume that doesn't how in guys to react. service you of how understand Thanks. that the it

Jamie Boychuk

and respect better everything else, shape in to sitting long are right been in we're we time. terminals much where -- a now it's our with Jordan, than we have

single design every single we analyze the every day, railroad we So week. -- review and

As or ago design month of fact, a to made so just that an I reports change org service matter a directly me.

then I Kevin than priority can unscheduled those with is course, When ever rain with that on-time And sure shortened And -- to sure it that we make every a working day. anything time the say needs are we never or to else, was coal just make unscheduled decisions and we'll it grain crew continue it's I and much The for a just utilities. design the that So location become same them thing network of a It's there's there. get service. of and the our we network come can coal has feed been. teams on-time This chickens where availability. a before. I in and at and that when it higher with Southern into closer turned has stockpile was the work all service and all it's so to make things decision,

changed and not unit going to released trains, for So when difficult it's very us knowing out. schedule us, to they're for be to that's come

James Foote

is to to Yes, velocity second that yes, best this more our we mouth And and Jordan, down, hand we did carloads lights can. we're make in is all quarter and trying when we but dwell we day, every Jim, grinding We're the too. our than possibly still the customer sure move of with we up doing in it's here running were year serve of every can, out. that this XXXX we

than is So it's still my be We're we what these oh are XX%. velocity did. XX%. freight god, must not guys more moving like, Their or down volumes down

more So in they're standpoint the get ship to solid dwell, that's a we're grow we going and a and get are did than we the will not we the half the that this were freight looks believe reasonably yes, back truck. the metrics to or whether why from why If first what mile, That's -- that's we important into that base volumes where velocity XXXX. by back, key where in things second rail we're to or velocity they quarter that determine customer confident we these have this But reliability. when grow to moving volumes to future. where are continue at that's is last why get is to customer so mile, and back because

Jordan Alliger

I'm customer separate train that issues a that actually. it and interesting what you mean from just-in-time just-in-time related It's do not? whole make there Yes. unit though, that does rail on curious thing on or the a could may as that and the are to comment more this challenge

Jim Foote

to talking mine weigh Kevin from the everybody the moving a utility chain export Well, from as or we're supply but mine said, it's terminal. in when just an to want to might work, a coal a to work. It's everybody when about in, I moving trains need terminal a the railroad to the we in We a railroad. international the you need need to on side Chicago, to of chain warehouse work, port supply about you're from south boxes talking the not

there. you the work, You have chassis terminal need need inland to to

packers have to need there. You

chassis it there is role can parts, the And You when box respects. off to supply get in many moving those it elements the back. unload have need it warehouse and billion There a challenged. one somebody and we chain that are gets in key each get can play the to of that in the

So employees. to things see the associated are improving. because industry, again, every the with better. to not Everybody sense, get that issues needs that working gradually you of And we of you in get properly And is get a need better. the shortage generally,

Jordan Alliger

so much. Thanks

Operator

Your next Vertical Kauffman with question of Jeff is from Research the line Partners.

Your line open. is

Jeff Kauffman

picture thanks like I'd you very for big on my you and here. taking to Thank go question. much Jim,

not really that need got get ports right? all if you okay, that where everything comes thought guess is running we and then you business last be, end simple, returns our we shippers lot to tomorrow, want it's about, down well. your or about accommodate. we talked right? quickly, need to trains that you year of got run X,XXX that could of this a had to if need the And get all the just a Because You your we've you thought get the part to as to tail it? pick And generate said, well, accommodate. my start We've you crew to that, I running the You target. the guess, How from on what now, can macro? network of changed kind take the it way at Has long would then worlds needed year. in changed I

Jim Foote

picture with I Big up lot, might ball. one, question. a Thanks easy Jeff, following an -- soft no.

it. it, think associated you extremely name the railroad and going thing, industry congestion, with is well-positioned, other for the States, on issues everything I short-term, before, you in just the not world, name highway that's this long-term the globally, with said the reshoring, I As United for

well-positioned railroad extremely the network transportation to is forward. of the I player industry in and goods relevant going customers' more think a key shipment be much and

bad be in our We're good if margins. more a relevant, we sought -- in if provide that much not for service our should service for component a as key so just a after we're to product more opposed And commodity. your better transportation markets,

Can his XXX% even to have railroad was CSX than Can what good. the global No. No. I team, that people it fix that So the I Can CSX do work pandemic? and so back then fix I the hunger? this -- and solve confidence get running in I for that's is Yes. and better?

I can't we've will bigger we But mines. I that. in be participant I chassis fix all move over a will I think that. fix great this. can't that I said, move a problems. can't ahead of I like And in itself much invest correct And got can't So, can't the coal I -- shortage time. us. future

Jeff Kauffman

Okay. Thank much. you very

Operator

This participating. today's conference There are no thank you concludes Ladies gentlemen, call. time. further questions this and at for

now disconnect. may You

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