CSX Corporation

Good afternoon, ladies and gentlemen, and welcome to the CSX Corporation Q3 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'll 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 are Jim Foote, President and Chief Executive Officer, 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 to everyone listening in today. I want to begin by recognizing all of CSX's employees for continually responding to the challenges of 2020. Our results are a testament to our amazing people and the strength of our company. The core principles instilled over the last few years allowed us to act decisively with coordinated effort and alignment across the company. Over the course of the year, we reexamined every process from the ground up to identify and eliminate unnecessary steps across the railroad and, as a result, uncovered significant opportunities to build upon the progress made during our transformation. These changes will provide benefits for years to come. Now, let's turn to slide five of the presentation and our fourth quarter financial results. Operating income grew 5% to $1.2 billion, and the operating ratio improved 300 basis points to a new fourth quarter record of 57%. Our reported earnings per share were $0.99, but I want to point out that this figure includes a $0.05 per share charge related to the early retirement of debt. For the full year, despite lower overall economic activity and historic demand volatility, CSX produced a full-year operating ratio of 58.8 percent, exceeding our initial guidance of a 59 operating ratio. Moving to slide six, fourth quarter revenue declined 2 percent on 4 percent higher volumes as intermodal revenue growth was more than offset by lower fuel surcharge revenue and declines in coal. Merchandise revenue and volume were flat, as revenue growth in chemicals, ag and food, metals and equipment, and fertilizers was offset by declines in other markets and lower fuel surcharges. Intermodal revenue grew 6% on 11% higher volumes to new quarterly record levels. This performance was driven by a combination of strong demand for transportation services due to inventory replenishment and volume growth from East Coast ports. Coal revenue was down 18% on 9% lower volumes as the coal business continues to be negatively impacted by lower domestic utility demand, industrial production, and global mid-spark prices. Other revenue was down 6% as increased intermodal storage revenue was more than offset by a higher reserve for freight and transit and lower demurrage charges. Turning to slide seven, we remain committed to being the safest railroad. In the fourth quarter, we achieved a new quarterly record low number of personal injuries and full year record lows for both personal injuries and train accidents. While our efforts to build a culture of safety can be seen in the annual performance trends, we can always be better. We have launched new near-miss and workplace hazard reporting programs that encourage employees to report potential safety concerns. We are also working to increase awareness of incidents and trends by conducting joint terminal tours with CSX management and local labor representatives. This proactive approach to reporting and communications is helping drive increased employee engagement as we identify and eliminate unsafe practices across the road. Turning to slide eight, we have previously discussed how the use of autonomous car and track inspection technologies is helping us meet our safety goals. And we will continue to invest in new programs to improve safety. However, we have a much broader vision on the increased use of technology in our business. Technology is foundational to our growth. We are actively investing in new technologies across the railroad, but are barely stretching the surface of what is possible. We are making our intermodal yard smarter and more autonomous. We are piloting programs that will further fuel efficiencies. such as allowing us to optimize speed across the full trip of a train. And in the field, we're getting rid of paper-based processes and converting to digital ones that allow faster communications, better data capture, and improved safety compliance. As we look to the future, we are upgrading our dispatch system to lay the groundwork for enhanced network performance through dynamic, real-time routing decisions. We see opportunities to implement predictive analytics in our maintenance programs to both reduce mechanical failures and more systematically identify areas of track most in need of investment. Additionally, beyond these significant operating benefits, we are investing to improve our customer experience and create easier and more streamlined processes for our customers to do business with CSX. Every action we take is designed to make CSX smarter, faster, and more reliable. Turning to slide nine, we remain committed to substantially managing our own business as well as helping our customers reduce their emissions. In 2020, customer shipping with CSX avoided more than 10 million metric tons of carbon dioxide emissions. To put this into context, this figure is roughly equivalent to the emissions produced powering all the buildings in New York City for almost a full year. We remain focused on furthering these environmental benefits, not only by continuing to improve the efficiency of our own operations, but also by providing a reliable alternative to trucking that allows our customers to meet their emissions goals without having to sacrifice the reliability of their supply chain. We have set ambitious long-term goals in order to remain leaders in sustainability, and we are committed to expanding the benefits rail offers as the most sustainable mode of land-based transportation. Let's turn to slide 10 and look at our operating performance for the quarter. Clearly, the simultaneous rapid increase in both volumes and COVID-related employee absences impacted the network. But overall, the railroad is running well, and we were still able to drive incremental efficiencies. Locomotive productivity achieved a new quarterly record for GPMs for available horsepower, and we set a new fourth quarter record for fuel efficiency of 0.94 gallons per thousand gross ton miles. On slide 11, our improved efficiency is further illustrated, which compares volumes and asset levels against the pre-COVID and prior year periods. As volumes return, our revised operating plan is allowing us to operate at a sustainably higher level of asset utilization. This is reflected both in the sequential trends, where volumes have increased at twice the rate of asset redeployment, as well as double-digit productivity gains we have maintained between year-over-year volume and asset levels in the second half. While the team did an excellent job of working during this period to make the network more efficient, our number one priority remains providing our customers a high-quality service product. There is still significant leverage built into the operating plan, but as volumes grow, we have bent and will continue to add crews and locomotives as needed to serve our customers well. Turning to slide 12, our carload trip plan performance was 75% for the quarter, and intermodal trip plan was 84%. Like all transportation and logistics companies, we have faced challenges from both the rising number of COVID cases, along with broader supply chain disruptions from volatile demand, inventory shortages, and imbalanced freight flows. This team has done an admirable job navigating this environment. But we expect these trip plan figures will return to and then exceed our results from the beginning of 2020. While our performance is still at industry-leading levels, we hold ourselves to a higher standard. And I'll turn it over to Kevin for review of the finances.