CSX Corporation

Good afternoon, ladies and gentlemen, and welcome to the CSX Corporation third quarter 2019 earnings call. As a reminder, today's call is being recorded. During this call, all participants will be in a listen-only mode. Following the presentation, we will be conducting a question and answer session. To ask a question, press star 1. For opening remarks and introduction, I would like to turn the call over to Mr. Bill Slater, Chief Investor Relations Officer for CSX Corporation.

Thank you and good afternoon, everyone. Joining me on today's call is Jim Foote, President and Chief Executive Officer, Mark Wallace, Executive Vice President of Sales and Marketing, Kevin Boone, Chief Financial Officer, and Jamie Boychuk, Executive Vice President of Operations. On slide two is our forward-looking disclosure, followed by our non-GAAP disclosure on slide three. With that, it is my pleasure to introduce President and Chief Executive Officer Jim Foote.

Good afternoon and thank you, Bill. Before we begin the presentation, I'd like to first congratulate the over 21,000 strong CSX workforce for a great job in delivering a really good quarter. They again showed that they are the safest, most customer-focused, and best operators in the industry. Breaking their own record with an all-time low operating ratio for a U.S. Class 1 railroad of 56.8% was no easy task. So hats off to all of them. I'd also like to mention several recent leadership announcements, beginning with the appointment of Kevin Boone to Chief Financial Officer and Jamie Boychuk to Executive Vice President of Operations. Both Kevin and Jamie are skilled leaders who have played big roles in this company's transformation and are excellent additions to our executive team. I'm very pleased that Ed Harris will remain a key part of the executive team as we drive hard to get even better. CSX is lucky to have both Ed and Jamie, two of the best operators in our business. We also announced changes in sales and marketing as Mark builds a new team that is intensely focused on identifying and capitalizing on opportunities to grow the top line. Adam Longson recently joined as Vice President of Energy. Adam's deep knowledge of the commodity markets is a valuable addition. The recent appointments of Farouk Bezar as Senior Vice President of Marketing and Arthur Adams as Vice President Merchandise Sales demonstrate our commitment to working with our merchandise customers to find new and creative ways to first add value to our customers, which will then drive long-term profitable growth. CSX's service has never been this good. Now is the time to harvest the opportunities. With that, let's turn to the presentation beginning with slide five and our financial results. The third quarter results are straightforward with only a few unique items, which Kevin will point out. Third quarter EPS increased 3% to $1.08 versus last year's figure of $1.05. Our third quarter operating ratio improved by 190 basis points to, as I said, a new record of 56.8. Turning to slide six, our improved service is driving industry-leading merchandise volumes as customers continue to trust CSX with a greater share of their freight. Despite the softer industrial economy, merchandise volumes held flat. However, the strength of merchandise was offset by declines in coal, intermodal, and other revenue, resulting in a 5% decline in total revenue to $3 billion. I'm encouraged by the performance of a merchandise franchise. Had it not been for the Philadelphia refinery explosion at the end of June, merchandise volumes would have been up approximately 2% for the quarter versus declining industry volumes. In total, merchandise revenue increased 1% on flat volumes as pricing gains were partially offset by mixed headwinds. Intermodal revenue declined 11% on 9% lower volumes. Much of this associated with the impact of lane rationalizations implemented last fall and early this year. We have now lapped the first round of lane rationalizations and will lap the final 5% of rationalizations at the beginning of next year. Coal revenue decreased 12% on 9% lower volumes, with declines in both domestic and export markets due to lower natural gas prices and weaker export demand and lower benchmark prices. Finally, the decrease in other revenues was primarily driven by lower storage revenue at intermodal facilities and demurrage charges. Moving on to slide seven, I am pleased with the continued positive momentum in our safety performance. Our FRA personal injury rate was again the best in the industry, and we further improved upon last quarter's record FRA train accident results to set new company records for both fewest train accidents and the lowest accident rate. We still have opportunities to improve. Technologies such as the increased use of automated track inspection cars and drones are helping to identify small problems before they become big issues and are also improving our day-to-day execution across the network. We constantly strive to make the railroad as safe as it can be. Moving to slide eight, let's quickly review our operating performance. Velocity improved both sequentially and year-over-year. Dwell increased slightly for the quarter, but we see opportunities to improve this metric going forward. We also set another fuel efficiency record. CSX is the only U.S. Class I railroad to operate below one gallon of fuel per thousand gross ton miles. Not only does this reduce cost, but the environmental impact of this is significant. This has been partially enabled by the increased use of distributed power, which has been a focus of the operating team. This technology, which CSX had historically not deployed, allows us to disperse locomotives throughout the train, which improves fuel efficiency and enhances safety and reliability by reducing train separations. For the quarter, we averaged 87 distributed power trains per day, but we frequently operate with over 100. On slide nine, most importantly, as we focus on running a better railroad, we are creating better service for our customers. We continue to improve trip plan compliance figures for both carload and intermodal customers, with 75% of merchandise cars and 94% of intermodal containers hitting their hourly trip plan targets, both new quarterly records. We're now providing individualized, real-time trip plan tracking to our intermodal customers, and we'll be rolling that information out to merchandise customers in the fourth quarter. These new tools, again, differentiate CFX from other rails, and our customers are very excited about the tool. I'll now hand it over to Kevin, who will take you through the financials.