Jan 23, 2013
Executives
Michael Ward - Chairman, President and Chief Executive Officer Clarence Gooden - Chief Sales and Marketing Officer Oscar Munoz - Chief Operating Officer Fredrik Eliasson - Chief Financial Officer
Analysts
Scott Group - Wolfe Trahan and Company Tom Wadewitz - JPMorgan Bill Greene - Morgan Stanley Kevin Crissey - UBS Ken Hoexter - Bank of America Merrill Lynch Tom Kim - Goldman Sachs Brandon Oglenski - Barclays Chris Wetherbee - Citi Investment Research Chris Ceraso - Credit Suisse John Larkin - Stifel Nicolaus Cherilyn Radbourne - TD Securities Jason Seidl - Dahlman Rose David Vernon - Sanford Bernstein Sal Vitale - Sterne Agee Peter Nesvold - Jefferies and Company Matt Troy - Susquehanna International Walter Spracklin - RBC Capital Markets Keith Schoonmaker - Morningstar Justin Yagerman - Deutsche Bank
Operator
Thank you Pat and good morning everyone and again welcome to CSX Corporation’s fourth quarter 2012 earnings presentation. The presentation material that we’ll review this morning along with our quarter financial report and our safety and service measurements are available on our website at csx.com under the investor section.
In addition, following the presentation, a webcast and podcast replay will be available on the same website.Here, representing CSX this morning are Michael Ward, the Company's Chairman, President and Chief Executive Officer; Clarence Gooden, Chief Sales and Marketing Officer; Oscar Munoz, Chief Operating Officer; and Fredrik Eliasson, Chief Financial Officer.
David Baggs
Thank you Pat and good morning everyone and again welcome to CSX Corporation’s fourth quarter 2012 earnings presentation. The presentation material that we’ll review this morning along with our quarter financial report and our safety and service measurements are available on our website at csx.com under the investor section.
In addition, following the presentation, a webcast and podcast replay will be available on the same website.Here, representing CSX this morning are Michael Ward, the Company's Chairman, President and Chief Executive Officer; Clarence Gooden, Chief Sales and Marketing Officer; Oscar Munoz, Chief Operating Officer; and Fredrik Eliasson, Chief Financial Officer.
Michael Ward
Clarence Gooden
Oscar Munoz
Now from a system performance let’s turn to the next slide, terminal dwell is a strong indicator of how well we are utilizing our assets. Looking at the chart on the left, you see dwell improved 4% to 24.3 hours.
Looking at the chart on the right, velocity again showed improvement up 7% to 23.3 miles per hour. This is the clear example of where great customer service builds great shareholder value.
Assets moving through the network quickly and reliably, handling the customers receiving outstanding service and over the long term allows for more efficient capital deployment.Let’s go to velocity on the next slide, as a further reflection of the operating improvement, velocity was once again up against across all three networks. In coal we’re driving improvements and service and efficiency, with volume down 19% CSX adjusted operating plans and maximize loadings to increase both train length and tons per car.Turning to intermodal, velocity continued to reach high levels with a record fourth quarter volume.
Higher velocity in the intermodal network gives us the ability to reach end market more quickly and to meet or exceed customer expectations. Across the network container and trailer availability to the customer in the terminal was at 86% and in the high 90s for our expedited product.
Finally the merchandize network also continues to perform well with velocity up 5% to 21.9 miles per hour, car cycle times improved 8%. This means we’re making more final deliveries to customers on time requiring fewer local motives, cars and crew starts.Over the course of the year service has improved significantly in all the markets we serve including those that we have absorbed strong growth.
Turn to the next slide, we will look at productivity. Over the past five years, CSX has delivered nearly $850 million of productivity savings including nearly 200 million in 2012.
Efficiencies last year were driven by overall car cycle times they were 15% shorter, lower estimate, lower overtime across all operating departments and increased fuel efficiency. In 2013, we expect to build up the success by delivering another $130 million in productivity gains.We will continue to focus on improved asset utilization, using a combination of plan, process and technology enhancements to continue to gain traction.
We’ll also adjust resources up or down based on customer demand and remain flexible to insure we’re operating as efficiently as possible. We’re moving locomotives in and out of store more efficiently now and we’re leveraging furlough retention boards when it makes sense.
So let’s talk more specifically about the resource adjustments we made in 2013 on the next slide. The chart at left represents the total active T&E workforce with the blue portion of the bars representing fulltime employees and the gold portion representing those employees of furlough retention boards.On a year-over-year basis the active T&E count was down 1% with volume down 3%, at year end CSX had over 600 employees on full furlough and approximately 300 on furlough retention board.
As you know furlough retention boards are useful in areas of the network or we would otherwise need to hire new employees to meet attrition or customer demand within a relatively short period of time. It's easier and quicker to bring an employee off one of these retention boards in the longer process of bringing an employee back from a traditional furlough.
For those currently on full furlough we have offered a voluntary transfer program. The intent of this program is to meet employee demand and other geographic locations without incurring the hiring and training cost associated with most new employees.In addition to lower T&E headcount overtime hours were down 17% with 26% few relief crews in the quarter.
Now let’s look at locomotives, looking at this chart on the left you can see that the act of locomotive count peaked during the first quarter of 2012 since then we’ve been storing access power and had 8% fewer locomotives in the fourth quarter of 2012 than a year ago with nearly 400 units currently stored. We measure our locomotive efficiency based on gross ton miles per horsepower hour using this measure locomotive efficiency improved by 7% on a year-over-year basis.The decision to store locomotive is aimed at saving cost but not at the price of service or flexibility.
As such we’re constantly monitoring locomotive levels and are currently bringing some units out of storage to prepare for seasonal volume needs. As we make changes to the locomotive count that is critical that we monitor the impact on service recognizing that locomotives are generally a fluid asset and we can put in or take out a storage on a relatively short notice to meet demand or service need.
Fredrik Eliasson
Michael Ward
Operator
Scott Group - Wolfe Trahan and Company
Clarence Gooden
Scott Group - Wolfe Trahan and Company
Clarence Gooden
Scott Group - Wolfe Trahan and Company
Fredrik Eliasson
Scott Group - Wolfe Trahan and Company
Michael Ward
Operator
Michael Ward
Tom Wadewitz - JPMorgan
Clarence Gooden
Tom Wadewitz - JPMorgan
Clarence Gooden
Tom Wadewitz - JPMorgan
Operator
Michael Ward
Bill Greene - Morgan Stanley
Michael Ward
Bill Greene - Morgan Stanley
Oscar Munoz
Bill Greene - Morgan Stanley
Operator
Michael Ward
Kevin Crissey - UBS
Clarence Gooden
Kevin Crissey - UBS
Fredrik Eliasson
Operator
Ken Hoexter - Bank of America Merrill Lynch
Michael Ward
Ken Hoexter - Bank of America Merrill Lynch
Michael Ward
Ken Hoexter - Bank of America Merrill Lynch
Michael Ward
Ken Hoexter - Bank of America Merrill Lynch
Fredrik Eliasson
Operator
Tom Kim - Goldman Sachs
Clarence Gooden
Tom Kim - Goldman Sachs
Clarence Gooden
Operator
Michael Ward
Brandon Oglenski - Barclays
Michael Ward
Brandon Oglenski - Barclays
Michael Ward
Brandon Oglenski - Barclays
Michael Ward
Operator
Michael Ward
Chris Wetherbee - Citi Investment Research
Clarence Gooden
Chris Wetherbee - Citi Investment Research
Michael Ward
Chris Wetherbee - Citi Investment Research
Operator
Michael Ward
Chris Ceraso - Credit Suisse
Michael Ward
Chris Ceraso - Credit Suisse
Michael Ward
Chris Ceraso - Credit Suisse
Michael Ward
Chris Ceraso - Credit Suisse
Michael Ward
Operator
John Larkin - Stifel Nicolaus
Oscar Munoz
Michael Ward
Oscar Munoz
John Larkin - Stifel Nicolaus
Clarence Gooden
Operator
Cherilyn Radbourne - TD Securities
Mr. Ben Hartford with Rob W.
Baird
Clarence Gooden
Mr. Ben Hartford with Rob W.
Baird
Cherilyn Radbourne - TD Securities
Mr. Ben Hartford with Rob W.
Baird
Michael Ward
Mr. Ben Hartford with Rob W.
Baird
Cherilyn Radbourne - TD Securities
Mr. Ben Hartford with Rob W.
Baird
Michael Ward
Mr. Ben Hartford with Rob W.
Baird
Operator
Mr. Ben Hartford with Rob W.
Baird
Michael Ward
Unidentified Analyst
Michael Ward
Unidentified Analyst
Michael Ward
Unidentified Analyst
Operator
Michael Ward
Jason Seidl - Dahlman Rose
Fredrik Eliasson
Jason Seidl - Dahlman Rose
Fredrik Eliasson
Jason Seidl - Dahlman Rose
Michael Ward
Operator
Michael Ward
David Vernon - Sanford Bernstein
Michael Ward
David Vernon - Sanford Bernstein
Michael Ward
David Vernon - Sanford Bernstein
Operator
Michael Ward
Sal Vitale - Sterne Agee
Michael Ward
Sal Vitale - Sterne Agee
Michael Ward
Sal Vitale - Sterne Agee
Michael Ward
Sal Vitale - Sterne Agee
Michael Ward
Sal Vitale - Sterne Agee
Operator
Peter Nesvold - Jefferies and Company
Clarence Gooden
Peter Nesvold - Jefferies and Company
Clarence Gooden
Peter Nesvold - Jefferies and Company
Michael Ward
Operator
Matt Troy - Susquehanna International
Fredrik Eliasson
,
Matt Troy - Susquehanna International
Clarence Gooden
Matt Troy - Susquehanna International
Operator
Michael Ward
Walter Spracklin - RBC Capital Markets
Clarence Gooden
Walter Spracklin - RBC Capital Markets
Clarence Gooden
Walter Spracklin - RBC Capital Markets
Oscar Munoz
Walter Spracklin - RBC Capital Markets
Fredrik Eliasson
Operator
Keith Schoonmaker – Morningstar
Clarence Gooden
Keith Schoonmaker – Morningstar
Clarence Gooden
Michael Ward
Keith Schoonmaker – Morningstar
Clarence Gooden
Operator
Justin Yagerman - Deutsche Bank
Clarence Gooden
Justin Yagerman - Deutsche Bank
Clarence Gooden
Justin Yagerman - Deutsche Bank
Clarence Gooden
Justin Yagerman - Deutsche Bank
Clarence Gooden
Justin Yagerman - Deutsche Bank
Michael Ward
Justin Yagerman - Deutsche Bank
Michael Ward
Operator