CSX Corporation

Good afternoon, ladies and gentlemen, and welcome to the CSX Corporation Q1 2020 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 conduct 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, Head of Investor Relations for CSX Corporation.

Thank you, and good afternoon everyone. Joining me on today's call are 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.

Thanks Bill, and thank you all for joining our call today. Before I get into the details of the first quarter, I want to say that our thoughts are with those who have been affected by the virus. No one ever imagined that we would be dealing with anything like this, but to see people everywhere respond to the challenge is uplifting. With the beginning of the transformation of CSX just a few years ago, We adopted a few tenets by which to operate. First, be safe. Employees should never be injured while on the job. Second, help our customers be successful by providing them with good service. And third, operate as efficiently as possible. We knew that if we did those three things, we would be a great company and shareholders would be rewarded. We clearly did not change how we operate with a pandemic in mind. But because of the intense adoption of those core beliefs, CSX is now a much stronger and resilient company and in the best possible position to respond to this unprecedented and uncertain environment. I am incredibly proud of the men and women of CSX who are working on the front lines. They have once again shown what outstanding railroaders they are. CSX is running at peak condition, keeping the nation's supply chain moving and delivering critical products to millions of Americans. Thousands of customers trust CSX with their freight. and every one of them right now is experiencing some degree of disruption. And we are deeply committed to maintaining the best in class service they have come to expect from us. I am proud to say that service is currently the best it has ever been. Now let's go to slide five of the presentation for highlights of the first quarter financial performance. First quarter EPS declined 2% to $1, while the operating ratio improved by 80 basis points to 58.7, a new Class 1 railroad first quarter record. Given the combination of the known headwinds this year from export coal and other non-core items, as well as the initial impact from the pandemic in the final weeks of the quarter, These results are impressive. Moving to slide six, first quarter revenue declined 5% as merchandise growth was more than offset by declines in coal and other revenue. Merchandise revenue increased 3% on 2% higher volumes as broad-based volume growth across markets was partially offset by declines in automotive and fertilizers. Excluding automotive, merchandise revenue and volume were up 5% and 4% respectively. Intermodal revenue declined 1% on flat volumes as domestic revenue and volume growth was more than offset by decline in the international business. Excluding the COVID-19 impact from the final weeks of the quarter, International volumes would have been positive as well. Coal revenues decreased 25% on 15% lower volumes. Both the domestic and export markets continue to be negatively impacted by natural gas prices, weak export demand, and benchmark prices. Other revenue declined 40% representing a 2% headwind to total revenue due to lapping a favorable customer contract settlement last year and lower demurrage and intermodal storage revenues. Turning to slide seven and our safety performance where we again showed improvement. This quarter was one of the safest in CSX's history. The personal injury rate declined 22% and the train accident rate declined 34% with both figures approaching all-time company records. Let's now turn to slide 8 and review our operating performance. CSX continued to operate at an extremely high level during what is typically the most seasonally difficult quarter. setting first quarter records for velocity, dwell, and car miles per day. Additionally, CSX continues to lead U.S. Class I railroads in fuel efficiency, operating at one gallon of fuel per thousand gross ton miles. Improving fuel efficiency is a top priority for the team, and we are proud of our success. Efficiency initiatives over the last several years have reduced annual diesel consumption by approximately 60 million gallons. The emissions avoided from this reduction are the equivalent of planting almost 1 million acres of forest each year. And we are challenging ourselves to be even better. CSX recently became the first U.S. Class 1 railroad to have its long-term emission intensity reduction goal approved by the Science-Based Target Initiative. Reducing emissions is important to us, our customers, and the communities we serve. Critically, as shown on slide nine, Our operating performance continues to drive best-in-class service and reliability for our customers. Our trip plan performance is the best it has ever been, with 84% of merchandise carloads and 98% of intermodal containers currently meeting their hourly trip plans in April so far. This performance includes the implementation of substantial service design changes in recent weeks to adjust our network in response to the current lower volumes. Let me turn it over now to Kevin for more detail on the quarter.