CSX Earnings Call Transcriptbeta

Q42012

23 Jan 2013

From a third-party data provider and not yet checked: wording, speaker labels and fiscal quarters can be wrong. Check anything you rely on against the company's filings.

Operator: Thank you Pat and good morning everyone and again welcome to CSX Corporation’s fourth quarter 2012 earnings presentation. The presentation material that we’ll review this morning along with our quarter financial report and our safety and service measurements are available on our website at csx.com under the investor section. In addition, following the presentation, a webcast and podcast replay will be available on the same website.Here, representing CSX this morning are Michael Ward, the Company's Chairman, President and Chief Executive Officer; Clarence Gooden, Chief Sales and Marketing Officer; Oscar Munoz, Chief Operating Officer; and Fredrik Eliasson, Chief Financial Officer.

David Baggs: Thank you Pat and good morning everyone and again welcome to CSX Corporation’s fourth quarter 2012 earnings presentation. The presentation material that we’ll review this morning along with our quarter financial report and our safety and service measurements are available on our website at csx.com under the investor section. In addition, following the presentation, a webcast and podcast replay will be available on the same website.Here, representing CSX this morning are Michael Ward, the Company's Chairman, President and Chief Executive Officer; Clarence Gooden, Chief Sales and Marketing Officer; Oscar Munoz, Chief Operating Officer; and Fredrik Eliasson, Chief Financial Officer.

Michael Ward::

Clarence Gooden::

Oscar Munoz: Now from a system performance let’s turn to the next slide, terminal dwell is a strong indicator of how well we are utilizing our assets. Looking at the chart on the left, you see dwell improved 4% to 24.3 hours. Looking at the chart on the right, velocity again showed improvement up 7% to 23.3 miles per hour. This is the clear example of where great customer service builds great shareholder value. Assets moving through the network quickly and reliably, handling the customers receiving outstanding service and over the long term allows for more efficient capital deployment.Let’s go to velocity on the next slide, as a further reflection of the operating improvement, velocity was once again up against across all three networks. In coal we’re driving improvements and service and efficiency, with volume down 19% CSX adjusted operating plans and maximize loadings to increase both train length and tons per car.Turning to intermodal, velocity continued to reach high levels with a record fourth quarter volume. Higher velocity in the intermodal network gives us the ability to reach end market more quickly and to meet or exceed customer expectations. Across the network container and trailer availability to the customer in the terminal was at 86% and in the high 90s for our expedited product. Finally the merchandize network also continues to perform well with velocity up 5% to 21.9 miles per hour, car cycle times improved 8%. This means we’re making more final deliveries to customers on time requiring fewer local motives, cars and crew starts.Over the course of the year service has improved significantly in all the markets we serve including those that we have absorbed strong growth. Turn to the next slide, we will look at productivity. Over the past five years, CSX has delivered nearly $850 million of productivity savings including nearly 200 million in 2012. Efficiencies last year were driven by overall car cycle times they were 15% shorter, lower estimate, lower overtime across all operating departments and increased fuel efficiency. In 2013, we expect to build up the success by delivering another $130 million in productivity gains.We will continue to focus on improved asset utilization, using a combination of plan, process and technology enhancements to continue to gain traction. We’ll also adjust resources up or down based on customer demand and remain flexible to insure we’re operating as efficiently as possible. We’re moving locomotives in and out of store more efficiently now and we’re leveraging furlough retention boards when it makes sense. So let’s talk more specifically about the resource adjustments we made in 2013 on the next slide. The chart at left represents the total active T&E workforce with the blue portion of the bars representing fulltime employees and the gold portion representing those employees of furlough retention boards.On a year-over-year basis the active T&E count was down 1% with volume down 3%, at year end CSX had over 600 employees on full furlough and approximately 300 on furlough retention board. As you know furlough retention boards are useful in areas of the network or we would otherwise need to hire new employees to meet attrition or customer demand within a relatively short period of time. It's easier and quicker to bring an employee off one of these retention boards in the longer process of bringing an employee back from a traditional furlough. For those currently on full furlough we have offered a voluntary transfer program. The intent of this program is to meet employee demand and other geographic locations without incurring the hiring and training cost associated with most new employees.In addition to lower T&E headcount overtime hours were down 17% with 26% few relief crews in the quarter. Now let’s look at locomotives, looking at this chart on the left you can see that the act of locomotive count peaked during the first quarter of 2012 since then we’ve been storing access power and had 8% fewer locomotives in the fourth quarter of 2012 than a year ago with nearly 400 units currently stored. We measure our locomotive efficiency based on gross ton miles per horsepower hour using this measure locomotive efficiency improved by 7% on a year-over-year basis.The decision to store locomotive is aimed at saving cost but not at the price of service or flexibility. As such we’re constantly monitoring locomotive levels and are currently bringing some units out of storage to prepare for seasonal volume needs. As we make changes to the locomotive count that is critical that we monitor the impact on service recognizing that locomotives are generally a fluid asset and we can put in or take out a storage on a relatively short notice to meet demand or service need.

Fredrik Eliasson::

Michael Ward::

Operator::

Scott Group - Wolfe Trahan and Company::

Clarence Gooden::

Scott Group - Wolfe Trahan and Company::

Clarence Gooden::

Scott Group - Wolfe Trahan and Company::

Fredrik Eliasson::

Scott Group - Wolfe Trahan and Company::

Michael Ward::

Operator::

Michael Ward::

Tom Wadewitz - JPMorgan::

Clarence Gooden::

Tom Wadewitz - JPMorgan::

Clarence Gooden::

Tom Wadewitz - JPMorgan::

Operator::

Michael Ward::

Bill Greene - Morgan Stanley::

Michael Ward::

Bill Greene - Morgan Stanley::

Oscar Munoz::

Bill Greene - Morgan Stanley::

Operator::

Michael Ward::

Kevin Crissey - UBS::

Clarence Gooden::

Kevin Crissey - UBS::

Fredrik Eliasson::

Operator::

Ken Hoexter - Bank of America Merrill Lynch::

Michael Ward::

Ken Hoexter - Bank of America Merrill Lynch::

Michael Ward::

Ken Hoexter - Bank of America Merrill Lynch::

Michael Ward::

Ken Hoexter - Bank of America Merrill Lynch::

Fredrik Eliasson::

Operator::

Tom Kim - Goldman Sachs::

Clarence Gooden::

Tom Kim - Goldman Sachs::

Clarence Gooden::

Operator::

Michael Ward::

Brandon Oglenski - Barclays::

Michael Ward::

Brandon Oglenski - Barclays::

Michael Ward::

Brandon Oglenski - Barclays::

Michael Ward::

Operator::

Michael Ward::

Chris Wetherbee - Citi Investment Research::

Clarence Gooden::

Chris Wetherbee - Citi Investment Research::

Michael Ward::

Chris Wetherbee - Citi Investment Research::

Operator::

Michael Ward::

Chris Ceraso - Credit Suisse::

Michael Ward::

Chris Ceraso - Credit Suisse::

Michael Ward::

Chris Ceraso - Credit Suisse::

Michael Ward::

Chris Ceraso - Credit Suisse::

Michael Ward::

Operator::

John Larkin - Stifel Nicolaus::

Oscar Munoz ::

Michael Ward::

Oscar Munoz::

John Larkin - Stifel Nicolaus::

Clarence Gooden::

Operator::

Cherilyn Radbourne - TD Securities: Mr. Ben Hartford with Rob W. Baird

Clarence Gooden: Mr. Ben Hartford with Rob W. Baird

Cherilyn Radbourne - TD Securities: Mr. Ben Hartford with Rob W. Baird

Michael Ward: Mr. Ben Hartford with Rob W. Baird

Cherilyn Radbourne - TD Securities: Mr. Ben Hartford with Rob W. Baird

Michael Ward: Mr. Ben Hartford with Rob W. Baird

Operator: Mr. Ben Hartford with Rob W. Baird

Michael Ward::

Unidentified Analyst::

Michael Ward::

Unidentified Analyst::

Michael Ward::

Unidentified Analyst::

Operator::

Michael Ward::

Jason Seidl - Dahlman Rose::

Fredrik Eliasson::

Jason Seidl - Dahlman Rose::

Fredrik Eliasson::

Jason Seidl - Dahlman Rose::

Michael Ward::

Operator::

Michael Ward::

David Vernon - Sanford Bernstein::

Michael Ward::

David Vernon - Sanford Bernstein::

Michael Ward::

David Vernon - Sanford Bernstein::

Operator::

Michael Ward::

Sal Vitale - Sterne Agee::

Michael Ward::

Sal Vitale - Sterne Agee::

Michael Ward::

Sal Vitale - Sterne Agee::

Michael Ward::

Sal Vitale - Sterne Agee::

Michael Ward::

Sal Vitale - Sterne Agee::

Operator::

Peter Nesvold - Jefferies and Company::

Clarence Gooden::

Peter Nesvold - Jefferies and Company::

Clarence Gooden ::

Peter Nesvold - Jefferies and Company::

Michael Ward::

Operator::

Matt Troy - Susquehanna International::

Fredrik Eliasson::

, ::

Matt Troy - Susquehanna International::

Clarence Gooden::

Matt Troy - Susquehanna International::

Operator::

Michael Ward::

Walter Spracklin - RBC Capital Markets::

Clarence Gooden::

Walter Spracklin - RBC Capital Markets::

Clarence Gooden::

Walter Spracklin - RBC Capital Markets::

Oscar Munoz::

Walter Spracklin - RBC Capital Markets::

Fredrik Eliasson::

Operator::

Keith Schoonmaker – Morningstar::

Clarence Gooden::

Keith Schoonmaker – Morningstar::

Clarence Gooden::

Michael Ward::

Keith Schoonmaker – Morningstar::

Clarence Gooden::

Operator::