CSX Corporation

Good day and thank you for standing by. Welcome to the CSX Corporation second quarter 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session and instructions will follow at that time. If you require any further assistance, please press star zero. I would now like to hand the conference over to Bill Slater.

head of investor relations please go ahead thank you and good afternoon everyone joining me on today's call are jim foote president and chief executive officer kevin boone executive vice president of sales and marketing jamie boychuk executive vice president of operations and sean pelkey acting chief financial officer on slide two is our forward-looking disclosure followed by our non-gap disclosure on slide three With that, it is my pleasure to introduce President and Chief Executive Officer Jim Foote.

Thanks, Bill, and thank you for joining us on the call today. This quarter's results highlight just how quickly volumes have rebounded as each of our three lines of business experienced record growth as we lapped the most severe economic impacts of the pandemic. I want to first thank all of the CSX railroaders for their unwavering commitment to our customers as they work very hard to deliver service in a very difficult operating environment. As we enter the second half of the year, our focus is squarely on continuing this growth. We have kept our yards and terminals open and freight moving throughout the recovery and we will continue taking the necessary steps to add resources and increase fluidity in order to help customers meet their own growth targets this year, despite the ongoing supply chain disruptions. Let's begin with slide five of the presentation and an overview of our second quarter financial results. Operating income increased to $1.69 billion, and earnings per share rose to 52 cents, These figures include $349 million and 12 cents per share impact from the sale of property rights to the Commonwealth of Virginia. Our operating ratio was 43.4, including an 11.7 percentage point impact from the Virginia transaction. Excluding these impacts, operating income increased 62%, Earnings per share increased 82%, and the operating ratio improved 820 basis points. Turning to slide six, revenue increased 33% on 27% volume growth. Venture-based revenue increased 26% on 21% higher volumes, led by automotive, metals and equipment, and ag and food markets. Intermodal revenue increased 42% on 28% volume growth, setting a new record for average daily volume. Both domestic and international volumes increased significantly and continued to benefit from strong demand for transportation services, as well as growth from East Coast ports. Coal revenue increased 47% on 44% higher volumes, with growth across all coal markets. Domestic coal benefited from higher utility and industrial demand, and both export net and thermal coal volumes rebounded meaningfully. Other revenue growth was driven by increased intermodal storage and equipment usage, as well as higher revenue from affiliates. Turning to slide seven, we remain committed to being the safest railroad. In the second quarter, we achieved a new record low number of train accidents, driven by a focus on increased communication and education to reduce human factor caused accidents. Safety initiatives for the remainder of the year will focus on culture, communication, and continuous education. As an example, we recently introduced a modified approach to operational testing for T&E employees. The new program is designed to be instructive rather than disciplinary to increase employee engagement and create lasting changes in behavior. Combined with face-to-face safety summits and expanded education of top causes of incidents, these new programs will further reduce risk and protect our workforce. Moving to slide eight, let's review this quarter's operating metrics. The intermodal segment continues to perform well. Intermodal trip plan performance averaged 89% for the quarter. And through the use of our reservation system and the hard work of our intermodal team, we have kept all our intermodal terminals open over the last year as volumes surged. Colorado trip plant performance improved sequentially to 69% for the quarter, and we are focused on continuing this positive momentum throughout the rest of the year. We are also working to further improve network fluidity. Cardwell improved sequentially and remains the lowest in industry. Velocity began to trend positively exiting the quarter, and we expect to see further improvements in both metrics in the second half of the year. On slide nine, I want to take the opportunity to highlight some of the actions we're taking to resource the network for growth. As I mentioned on previous calls, we ended the year planning to add T&E headcount in response to the expected growth, and we'll continue adding through the second half of the year. Over the past several months, we have increased the size and number of our new conductor classes and then also enacted new programs to improve availability of existing employees to ensure that we have resources in place to capture the rising demand and serve our customers well. We staged locomotives across the network as we prepared for the incremental volumes. While these assets provide additional flexibility to react to customer demand, we are maintaining a balanced operating plan. And we are investing in the safety and reliability of our network. We demonstrated this commitment by maintaining our capital spend throughout the pandemic, and we continue to invest with a focus on the long-term growth and sustainability of our business. We still have ample capacity across the network for growth, and we're working to find new ways to improve the efficiency and impact of our capital spending programs. Turning to slide 10, our focus on investing for the future extends to improving the safety, productivity, and sustainability of CSX's operations through the increased use of technology. while we are driving further emissions reductions to our advancement of energy management software and the expanded use of fuel-saving technologies. In addition to the almost 40% increase in distributed power trains year-over-year, we continue to expand the number of distributed power-equipped locomotives. We are adding that capability to approximately 100 locomotives this year, in addition to including all the locomotive rebuilds we are performing. We're also expanding use of inspection technologies to improve the safety of our operations and increase the efficacy of our track maintenance and repair programs. We're performing roughly 80% more drone inspection flights this year, and our increased use of autonomous track inspection cars is improving safety by better highlighting areas in need of repair. Lastly, we're providing our field employees with digital tools to replace inefficient manual or paper-based processes to increase the speed of the communication across the railroad. We have distributed roughly 9,000 tablets to employees, which are improving both safety and productivity by allowing real-time information sharing and feedback. We are pleased with the success of these programs to date, and we are only beginning to see the potential value these investments can bring. from more efficient network planning and dispatching to changing how customers interact with CSX. We see significant opportunities to leverage technology to improve the pace and quality of decision-making across our business. I'll now turn it over to Sean to run through the numbers.