Eastern Railroad Discussion > CSX Conference Call highlights

Following the release of earnings, CSX management held a presentation and took questions from investment analysts.  The call is archived on CSX's site, as are the slide decks used.

Here are some highlights I thought were interesting.  From my notes, you can listen to the webcast for more context if interested.

Operating ratio of 58.6, best in CSX history
Revenue up 6% on a 2% increase in volume
Velocity better, dwell fell 11%, length grew 13% and car miles per day improved
Head count dropped, on target for a 2,000 person reduction by end of year

Making good use of Trip Optimizer and distributed power
We can track every car on our network at every moment, and can provide real time info to the owner.
Export coal was a God-send, made a huge difference. Volume up almost 50%
We originate trains more than 90% on time or close to it
We complete trains on schedule only 80% of the time, three days later, got to do better
We need hustle like UPS, our people just wave goodbye as the box sits on the ramp. Tomorrow is good enough. No more!
People like me (Foote)

We don't need to "take price" offered. We have a good product, and we are reliable. We can be a price setter.
Expansion of gas pipelines hasn't hurt our coal business in the deep south, with gas at $2.75, coal is less pressured.  Not aware of any coal plants shutting down beyond those already announced.

Tariffs
We're seeing some benefit from increased US steel shpments
Expect some hits from export grains if tariffs hold
More concerned about NAFTA impacts, especially Canada. That could be very serious
We don't see much of  vehicle imports into the southeast US, not much exposure.

Dropped a lot of consultants, has made a huge impact on our lean organization
Last  year destroyed a lot of good relationships with shippers. We need to earn that back with good service.
No investment planned in boxcar service
Reworked, refinanced, knocked out a lot of expensive financial drag on our company
Need better revenue and expense tracking. "Auto" business is finished automotive, plus auto parts which can be in boxcars or intermodal lines, etc. All over the map.
Stored a lot of locomotives, sharply reduced shop time and expense with older less efficient equipment off line
Good revenue from line sales, have some other transactions in the discussion stage.
No questions or discussions of humps and flat switch, although the dwell improvement was mentioned several times.

Intermodal
Lot of discussion on intermodal
Intermodal needs a ton of work, the current operation is dysfunctional
Needs to be integrated into the railroad and reconfigured, we don't need all these IM terminals
Need to run a better service network
(Declined to provide an OR for intermodal, or cost structure, etc)
Block and tackle, acquire and hold good shippers
Truckers are in deep trouble on longer routes, we should be able to get and hold business
 

> Last year destroyed a lot of good relationships with shippers.
> knocked out a lot of expensive financial drag on our company.

yeah, one of those expensive, financial drags on the company simply expired.

Excellent synopsis, Lackawanna484 - thanks! The market liked CSX Q218 earnings report with share price up 3% in after hours trading. Should be interesting to watch the continuing evolution of the CSX (eg, line sales, intermodal network re-shaping, etc).

nsrlink Wrote:
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> > Last year destroyed a lot of good relationships
> with shippers.
> > knocked out a lot of expensive financial drag
> on our company.
>
> yeah, one of those expensive, financial drags on
> the company simply expired.

My thoughts EXACTLY! 

The "financial drag" was part of a larger discussion of expensive credit arrangements being replaced with more favorable terms.

Posted from Android

Paying a sick, arrogant dictator exponentially more than they are worth to piss off your customer base, destroy employee moral, potentially cripple the company from being able to exploit future business opportunity and leave a trail of messes for the new CEO to clean up is certainly a financial drag.

junctiontower Wrote:
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> Paying a sick, arrogant dictator exponentially
> more than they are worth to piss off your customer
> base, destroy employee moral, potentially cripple
> the company from being able to exploit future
> business opportunity and leave a trail of messes
> for the new CEO to clean up is certainly a
> financial drag.

Yup, and the wicked witch is TOES UP!!!!!!  Is the extra profit worth what he did to the company?  

Lackawanna484 Wrote:
-------------------------------------------------------
> The "financial drag" was part of a larger
> discussion of expensive credit arrangements being
> replaced with more favorable terms.

The most expensive credit arrangement is borrowing money to purchase your own shares to keep Wall Street happy in order to keep your job, because you have no vision for expansion of your paltry sub-10% share of tons of the freight marketplace.

Lackawanna484 Wrote:
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> We can track every car on our network at every
> moment, and can provide real time info to the
> owner.

Funny stuff.  Not *as* bad as it used to be, but still not where it should be.  Still too many Customer Service reps that don't know where the AEI readers are nor how to interpret the information they provide.

Tough crowd.

Maybe we should come up with some questions for the next meeting. And see if any analysts would ask them.

Some analysts are notably cynical about the companies they cover. And ask tough hard questions. Others, especially when the share price is up, seem almost adoring.

These ten were prob in the middle of those extremes.

Posted from Android

ABout older power.....my consist today was four pitiful examples of stuff needing major work. One with traction motor bad....two with weak turbochargers making rev up a mosquito choking affair, and one dead in tow...Yessir.....getting rid of all the junk....

bluesboyst Wrote:
>
> Yup, and the wicked witch is TOES UP!!!!!!  Is
> the extra profit worth what he did to the
> company?  

You have to remember, they are making money for a hedge fund that doesn't give a crap about the railroad or its customers.  Once it implodes and they've sold off everything they could...they just move on to the next business.

The hedge fund owns about 2% of CSX, and is locked in for a few more years.

People like you, me, and a lot of pension funds own the other 98%. I wouldn't pray too hard for the share price to get crushed.

Posted from Android

"Export coal was a God-send, made a huge difference. Volume up almost 50%"

Wasn't it 'ol Hunter that said coal was dead!?  He was quite the visionary...NOT!


Allen 

Lackawanna484 Wrote:
-------------------------------------------------------
> The hedge fund owns about 2% of CSX, and is locked
> in for a few more years.
>
> People like you, me, and a lot of pension funds
> own the other 98%. I wouldn't pray too hard for
> the share price to get crushed.
>
> Posted from Android

I'm so damn sick of these hedge funds, it would almost be worth the pain to see a few crash and burn.  As I have stated repeatedly, my philosophy is that if you don't like the way a company is run, don't own their stock.  Activist investors trying to tell companies how to run the business is just the tail wagging the dog.

Hedge funds do crash and burn with regularity. More will disband and return what's left to their investors. High risk, potential high rewards or losses. No guarantees.

Unlike banks or GE GM Chrysler, which make bad investments and the taxpayers bail them out.

Profits to the investors, losses to the taxpayers in the US crony capitalist system.

Posted from Android

Lackawanna484 Wrote:
-------------------------------------------------------
> Hedge funds do crash and burn with regularity.
> More will disband and return what's left to their
> investors. High risk, potential high rewards or
> losses. No guarantees.
>
> Unlike banks or GE GM Chrysler, which make bad
> investments and the taxpayers bail them out.
>
> Profits to the investors, losses to the taxpayers
> in the US crony capitalist system.

Totally agree, except that the companies you mention actually make something people need. And their size is such that it's better to bail them out than let them falter (in extreme circumstances). Hedge funds neither make anything people need nor are even necessary to the functioning of the economy, so I wouldn't support their bailout like the others...

JG