The conference operator, Brianna, welcomes everyone to the CSX Corporation First Quarter 2024 Earnings Conference Call and introduces the speakers, including Joe Hinrichs, President and CEO of CSX. Hinrichs acknowledges the challenges faced in the first quarter, including severe weather and the collapse of the Francis Scott Key Bridge, but praises the efforts of the "ONE CSX team" and their commitment to helping Baltimore recover.

The company is happy with the progress being made in reopening the port and is working to mitigate the impact of the event for customers. They are pleased with the momentum and growth in profitability in the first quarter, with a 3% increase in total volume and a 7% increase in intermodal business. The operating margin improved by 90 basis points and revenue remained flat. The company acknowledges there is more work to be done but is confident in their team and the opportunities ahead. The paragraph also takes a moment to remember the former President and CEO, Jim Foote, who passed away earlier in the week.

The company's CEO, Jim, has guided the company through challenging times and supported the hiring of an outsider as CEO. The company thanks Jim for his contributions and sends their thoughts and prayers to his family. The call is then turned over to Mike Cory, who discusses the company's safety performance and their efforts to improve their safety culture through proactive risk identification and collaboration with union leaders.

The partnership between the company and its employees is helping to create a strong safety culture. The company is listening to employee suggestions and using them to improve their safety plan. The company's focus this quarter has been on providing good customer service while controlling costs. There has been a slight decrease in velocity and an increase in dwell, but train sizes have grown in line with the increase in volume. The company is managing their large capital program and focusing on making sure crews have enough time to complete their work properly. This has resulted in reductions in unit costs. The company is also working on a more inclusive plan to minimize loss of velocity. They have identified some locations that are not as productive and are looking for cost-saving opportunities by reconfiguring and strategically utilizing these assets in their operating plan.

The company is implementing changes to improve efficiency and better serve customers. This includes reducing cars running out of route and excess handlings, increasing speed, and opening up capacity. The company's goal remains to provide the best service to customers and build business from truck and attract new customers to rail. Customer service metrics, such as intermodal trip plan compliance and truck drive return times, remain strong. The company has also improved the experience at its Fairburn terminal, leading to more capacity and opportunities for conversion from truck. The company's carload trip compliance has slightly declined but remains high, and a new metric, customer switch data, shows the company's reliability in delivering on commitments. Overall, the company has many opportunities for growth in the future.

The team is dedicated to achieving success and maintaining a focus on safety, service, and efficiency for customers. They have been successful in quickly responding to customer needs and developing new opportunities, resulting in improved service scores. Merchandise revenues were up 1% due to contract renewals and favorable mix, with positive momentum seen in automotive, chemicals, and forest products.

In the first quarter of 2023, minerals faced a tough comparison for aggregates, but total demand was strong due to a healthy backlog of large construction projects. Metals volumes were weaker due to weather affecting scrap markets, but there is potential for improvement in the second half of the year. Fertilizer volumes were not impacted by production issues, and the ag and food business was relatively soft due to global soybean supplies and high availability of local crops. Coal revenue was flat with a 2% increase in volume offset by a 2% decline in RPU. Export tonnage increased by 25% and domestic shipments were down 17% due to low natural gas prices and a tough comparison from the previous year.

The partnership between CSX and Baltimore is crucial, and the company is working to find alternative solutions after the collapse of the Key Bridge. The closure of the port will have a significant impact on CSX's revenue, estimated to be between $25-30 million per month. The Army Corps of Engineers projects that the channel depth needed for coal vessels to reopen will be restored by the end of May, but there may be congestion and a ramp-up period before reaching full capacity. CSX is working closely with customers, partners, and authorities to optimize resources and serve customers successfully. In the intermodal sector, revenue increased by 1% due to 7% volume growth, but lower fuel surcharge and negative mix affected the RPU. The international business saw strong growth due to higher import levels supported by healthy consumer demand and normalized inventories.

The company's shipping volumes have increased due to new contracts and lanes, and they are optimistic about the demand rebounding. Their domestic intermodal business also grew, and their service performance has helped them win new business. They have a strong industrial development program with many companies eager to partner with them for expansion projects. The company anticipates a significant increase in activity in the future based on their development pipeline.

In summary, the article discusses CSX's positive outlook for future growth and its diverse long-term pipeline. The first quarter results showed a 1% decrease in revenue and an 8% decrease in operating income, but this was largely due to discrete items such as insurance recovery and changes in fuel. Excluding these factors, revenue increased by 4% and expenses were 4% higher. The company's strong performance is attributed to the ONE CSX team's focus on service-driven growth and cost-control initiatives.

The company's momentum in the first quarter of 2024 positions them well for year-over-year gains. Interest and other expenses were higher, while income tax expense decreased. This resulted in a slight decrease in earnings per share, including impact from discrete items. Expenses increased by $85 million, with labor and fringe being the main contributor. Efficiency gains were evident in other expenses. Fuel costs decreased, and fuel efficiency improved. Free cash flow was lower due to decreased earnings and increased investments in the business.

In the first quarter, CSX had a strong balance sheet and an A-rated credit profile. They prioritized investing in safety, reliability, and long-term growth, while also returning excess cash to shareholders through share repurchases and dividends. They believe their focus on economic profit aligns with the interests of shareholders. For the full year 2024, they expect low to mid-single-digit growth in volume and revenue, with merchandise business gaining momentum and steady growth in intermodal. They are working to mitigate the impact of high coal prices and issues at the port of Baltimore on export volume.

The Curtis Bay team is prepared to resume operations once the channel is fully operational. The company has seen progress in profitability and plans to continue growing margins. Despite challenges in Baltimore and global coal prices, the company is confident in its ability to perform well in the second half of the year. There is no change to the company's CapEx forecast and their approach to capital returns remains balanced and opportunistic. The ONE CSX team has remained focused on execution and achieving good results, and plans to continue running safely, quickly, and reliably for customers. The call then moves to a question-and-answer session.

In the paragraph, the speaker responds to a question about the possibility of seasonal improvement in margins and earnings despite the impact of the Baltimore port closure. They mention that they still believe in the potential for growth, but that there may be a decline in coal RPU. Additionally, the speaker discusses the importance of velocity and dwell metrics and explains that they have been affected by weather and the port closure, but they are working to improve them in the coming weeks.

The speaker discusses the inefficiency of their capital programs last year and their decision to strictly adhere to curfews for track maintenance work this year, which caused a dip in train speed but resulted in cost savings and improved safety measures for the track. They also mention their plan to spread out the work throughout the year to avoid congestion during winter months.

In the last quarter, the company reduced crew starts by 5%, absorbed 1.5% GTMs without changing headcount, and focused on increasing tonnage on trains. This led to better utilization of locomotives and increased use of trip optimizer. Despite typical first quarter challenges, the company is confident in their actions and is working to find more efficient ways to handle work blocks and use strategic yards. PSR is not about running at high speeds.

The speaker discusses the importance of providing proper service at the right cost in order to grow margins and business. They mention improvements in arrival to placement for customers and the opportunity to build trust with them. The speaker also addresses concerns about weak demand and pricing, but notes that they are seeing good prices in their merchandise and are working to overcome any headwinds.

Kevin Boone and Tom discuss the stability of prices and the company's growth algorithm, which focuses on volume and price. They expect cost inflation to moderate and for the company to continue to deliver strong results. Sean mentions that headcount will remain flat in the second quarter, and the company's compensation per employee is expected to decrease further.

Scott Group asks about the balance between service metrics and operating expenses. Mike responds that costs, excluding fuel, were down slightly from Q4 to Q1 and that they will continue to monitor business levels and manage headcount down through attrition. He also mentions that the second quarter will see a step down in comp per employee due to winter-related costs and ramping up of capital-related programs, but that it will increase in the second half of the year due to a 4.5% union wage increase. Scott Group asks about overall cost, excluding fuel, from Q1 to Q2.

The speaker is discussing the company's margin performance for the first quarter of the year and potential improvements for the rest of the year. They mention a focus on balancing safety and customer satisfaction while also trying to reduce costs and increase efficiency. The expert in charge of margins discusses the potential for improvement in the second quarter and the difficulty of year-over-year comparisons due to previous impacts.

The second half of the year looks promising for the company, with headwinds expected to ease and labor productivity to increase. The industrial development projects discussed earlier will also contribute to growth. While the company will not give specific guidance on operating income and margin growth, they are confident in their low to mid-single-digit volume and revenue growth. The focus on customer service remains strong, as evidenced by high customer satisfaction scores and efforts to improve efficiency without compromising customer satisfaction.

The speaker discusses the company's customer-focused approach and how it has led to improved efficiency and customer responses. They mention a collaborative effort between operations and sales teams to achieve this. They also mention an industrial development pipeline with 100 facilities that have already opened and are expected to deliver volume in the coming years.

The speaker discusses the timeline for a new facility to come online and the expected growth once it is operational. They mention a diverse pipeline of projects in various industries and express excitement about the potential for growth. They also offer condolences to the Foote family and address concerns about low headcount and flat revenues, mentioning the impact of coal volumes on the results.

The speaker cannot give a specific timeline for when the service will improve, but expects to see improvements in velocity and dwell over the next few quarters. They are implementing stricter processes and are working to address issues with engineering gangs. The network is fluid and they are shifting operations to Newport. The impact of the Baltimore incident will continue through May, but they are looking to offset a third of the business.

The company saw double-digit growth in international intermodal due to easy comps and new services, while domestic intermodal was slightly up. The domestic market is more truck competitive, but the company has performed well in this context. The company has benefited from uncertainty at an Eastern competitor, which has helped capture volume in the short term.

Joe Hinrichs, CEO of CSX, states that despite the uncertainty at another rail, the company remains focused on improving employee culture and service to customers. The team has not been distracted and is committed to delivering results. Customers are happy with the service provided by CSX and the company is working with the industry to improve overall service to customers.

The speaker notes the increased collaboration in the industry and expresses optimism about the potential for growth. They emphasize the importance of working together and improving customer service to achieve this growth. They mention that CSX's focus is on employees and customers, and there are no major changes planned. In response to a question about intermodal business, the speaker acknowledges that there has been a shift back to trucking due to price and operational issues, but there is still a value proposition for intermodal. They suggest that this balance may change as the market normalizes.

The company is currently experiencing a challenging market, but they are confident in their product and service. They are actively discussing their plans for growth when the market recovers. The trucking market is worse than expected, but the company has been resilient. The Baltimore impact is primarily on coal revenue, with some minor cost impacts. The company has had a rough start-up at Newport, but there are no significant additional costs.

The speaker, Kevin Boone, shares a story about the benefits of ONE CSX and the culture it promotes. During an incident in Baltimore, they needed volunteers to temporarily relocate to help with train setup and schedule changes. Many employees immediately signed up, showing a healthy culture and a willingness to serve customers. This is a testament to the importance of consistently focusing on the company's culture and people. The speaker also mentions that they have received positive feedback from a large coal customer, highlighting the success of their quick response and efficient work.

In the paragraph, the speaker discusses how they have seen improvements in maintenance at Curtis Bay and have taken advantage of major restoration projects. They also clarify that profits and margins are expected to increase in the second quarter. In response to a question about interchange, the speaker states that roughly half of their business involves another railroad, with UP being a significant partner. They are working collaboratively to pursue more business opportunities.

The speaker, Sean Pelkey, is discussing the company's outlook for the rest of the year. He acknowledges some challenges that have occurred in the first quarter, such as a tough January and a Baltimore outage, but maintains confidence in the company's ability to meet their guidance. Pelkey mentions small wins in various areas and emphasizes the team's focus on delivering strong financial performance. The next question comes from Stephanie Moore, who is with Jefferies.

The speaker discusses the company's focus on share repurchases and mentions that they will continue to do so, but at a slightly lower rate than last year due to having less cash on hand. They also mention the redirection of traffic in Baltimore and the potential for pent-up demand when the channel is normalized. They also mention the ongoing shift of traffic from East Coast to West Coast ports and preparations for upcoming labor talks on the East Coast.

The speaker discusses the potential for a tenfold increase in demand for their services, citing factors such as outages in the summer, strong prices, and investments on the East Coast. They also mention the possibility of trade moving from the east to west, which could provide additional opportunities. A question is then asked about the driving force behind this potential increase, to which the speaker responds that it could be a combination of increased traffic and efforts from their team.

Kevin Boone discusses the current geopolitical risks and the impact on supply chains. He mentions that companies are viewing their supply chains as competitive advantages and investing in being closer to their end consumers. This shift in activity is expected to benefit the company in the long run. The operator then asks a question about potential nervousness among customers using other rails, to which Boone responds that there may be concerns raised but there is no anxiety among the customer base.

Kevin Boone and Joe Hinrichs discuss the increased activity and support from customers in sharing their truck files and discussing opportunities for growth. They believe that customers want certainty and visibility, and are focused on delivering consistent and reliable service. Despite current market challenges, they are optimistic about winning wallet share and seeing growth in the future. They have personally met with many customers and received positive feedback on their messaging and actions. Customers value reliability and consistency of purpose.

The company is working to regain the trust of its customers and is seeing positive results. They are focused on engaging employees and improving safety to better serve customers. The first quarter showed success and they expect to continue this trend. The conference call has ended.

This summary was generated with AI and may contain some inaccuracies.