CSX Corporation

Good day and thank you for standing by and welcome to the Q1 2021 CSX Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Bill Slater, Head of Investor Relations. Please go ahead.

Bill Slater 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 President to introduce President and Chief Executive Officer Jim Foote.

Great. Thanks so much, Bill. And welcome to everyone joining us on today's call. I want to begin by thanking all of CSX's railroaders for the hard work and the exceptional efforts they've made to keep the yards open and the terminals open to serve our customers throughout the severe weather we experienced this quarter. An amazing job. We entered this year cautiously optimistic about the potential for an improving economic environment. and I am pleased to see momentum steadily building over the last few months. Throughout the quarter, we remained focused on laying the foundations to prepare for growth, and I am excited about our prospects for the rest of the year. It's nice to finally have an economic tailwind at our backs. Let's begin with slide five of the presentation for an overview of our first quarter financial results. Earnings per share decreased 7% to 93 cents, and the first quarter operating ratio increased to 60.9%, reflecting a spike in COVID cases early in the quarter, winter storm impacts, and fuel surcharge timing lag. Turning to slide six, revenue declined 1% on 1% volume growth. as intermodal and other revenue growth was more than offset by merchandise, coal, and fuel surcharge revenue declines. Merchandise revenue declined 6 percent, led by declines in automotive and energy-related shipments within the chemicals and minerals segments. These declines were partially offset by growth in the metals and fertilizers businesses. Intermodal revenue grew 11%, reaching new first quarter record levels. This growth was driven by strong demand for transportation services due to continued inventory replenishments and growth from East Coast ports. Coal revenue decreased 5%. Domestic coal revenue increased due to growth in utility coal shipments. This growth was more than offset by declines in export coal, primarily from reduced international shipments of thermal coal. Other revenue increased 42%. The largest driver of this increase was higher revenue from storage at intermodal facilities. Turning to slide seven, we remain committed to being the safest railroad. With fewer recent COVID cases across the network, we are able to increase the number of in-person interactions and training sessions. We resumed hosting safety summits across the network and are even expanding these summits to cover additional crafts beyond our T&E workforce. Our top concern is eliminating life-changing events, and through increased engagement on critical rules compliance, we have seen a reduction in injury severity to start the year. Continued education and training will allow us to further reduce the total number of injuries by working with both managers and frontline employees on how to identify and eliminate unsafe behavior across the railroad. Additionally, we're finding new ways to improve safety through the increased use of technology. We are increasing drone usage to help ensure the safe movement of trains throughout our yards, and are already seeing the benefits of this program in the positive train accident trends. We will look to expand these programs going forward as part of our ongoing efforts to identify and implement new tools to help us operate as safely as possible. On slide eight, let's review our operating performance for the quarter. Despite challenging conditions, the team did a good job of maintaining network fluidity throughout the quarter. Going forward, we are focused on driving velocity and dwell back to pre-pandemic records, and we expect to see improvement in both metrics throughout the year. We also remain focused on driving additional efficiencies across the network. We set a new record for distributed powertrains, averaging over 100 trains a day for the first time. Labor productivity also reached a new record, Even though we are adding headcount in the second quarter in preparation for the expected volume growth, we still plan to realize incremental labor productivity this year. Turning to slide nine, I wanted to take the opportunity to frame these recent operating metrics against where we started this transformation. Over this period, we have increased velocity more than 30 percent by reducing both line of road congestion and creating excess capacity within yards to limit how long through trains sit idle. While dwell has also improved over this period, we view this metric as an area of opportunity. Even though CSX currently has the lowest dwell in the industry, pushing this number back towards previous record levels will enable us to further reduce cars on line and improve asset utilization. It is most important to note that this increased fluidity was enabled by redesigning the train plan to operate as a more balanced and efficient network. We are doing the same amount of work today with 1,500 fewer locomotives and dramatically improved locomotive utilization. These efforts have also driven significant improvements in fuel efficiency, Not only are we more fuel efficient, but we have retired older, less efficient locomotives and increased the use of distributed power and trip optimizer technologies to further expand the emission savings we offer our customers. Our train plant also greatly improves our crew productivity. One measure of this productivity is the total number of deadheads. or the times where we have to reposition crews using taxis or other vehicles because there isn't a return locomotive. The balance plan reduced the number of deadheads almost 60% by better matching crews and locomotives in both directions. We have also increased the number of cars processed per hour worked by over 30%. This higher throughput is due to both the reduction in yard congestion as well as more strategic upstream blocking of cars. Any way you look at the data, we have dramatically transformed how CS operates, which has created the capacity to absorb significant growth for years to come. We remain focused on driving the network back to record performance levels as well as realizing the incremental efficiency benefits this will provide. Turning to slide 10, I want to be clear that we are not done improving our network. The opportunities identified during the early stages of the pandemic last year continue to drive sustained efficiency improvements, and the more streamlined network is well positioned for growth. While this quarter's trip plan performance was negatively impacted by the winter storms and COVID-related absences, intermodal trip plan performance was still improved for the quarter and is currently running nearly 90 percent. We expect to see similar improvement trends for the carload business going forward. We are committed to providing our customers with an industry-leading service product and are proactively adding headcount and pre-positioning locomotives across the network to ensure we are prepared to provide high-quality service while handling incremental volumes. And I'll let Kevin take us through the financials.