Jul 23, 2020
Operator
Good afternoon, ladies and gentlemen, and welcome to the CSX Corporation Q2 2020 Earnings Call. As a reminder today’s call is being recorded.
During this call, all participants will be in a listen-only mode. Following the presentation, we will be conducting a question-and-answer session.
[Operator Instructions] For opening remarks and introduction, I would like to turn the call over to Mr. Bill Slater, Chief Investor Relations Officer for CSX Corporation.
Bill Slater
Thank you, and good afternoon, everyone. Joining me on today’s call are Jim Foote, President and Chief Executive Officer; Mark Wallace, Executive Vice President of Sales and Marketing; Kevin Boone, Chief Financial Officer; and Jamie Boychuk, Executive Vice President of Operations.
On Slide 2 is our forward-looking disclosure, followed by our non-GAAP disclosure on Slide 3. With that, it is my pleasure to introduce President and Chief Executive Officer, Jim Foote.
Jim Foote
Thanks, Bill, and thank you to everyone for joining our call this afternoon. Wow where do I start talking about this quarter.
This was the most disrupted quarter I have experienced in my career with both the fastest decline in volumes followed by one of the most rapid increase in volumes in the company's history. Reacting to those extreme swings while dealing with the pandemic has been and continues to be challenging.
CSX employees have been absolutely amazing in their response and I want to thank them for the hard work and dedication to keep the rail road running well. And I would be remiss if I didn't extend special recognition to our employees and their families who have fallen ill from the virus.
Our thoughts are with them. In difficult times strong companies adapt and that's exactly what we have done.
Despite all that has been accomplished to date and CSX's transformation we are still finding opportunities to be better, faster and more reliable. The actions taken over the past months will not only make CSX more efficient but more importantly they will allow us to be better delivering service to our customers in the future.
Turning to the presentation, on slide 5 is an overview of our financial results which Kevin will discuss later. Due to the economic impact of the pandemic second quarter EPS declined 40% to $0.65 while the operating ratio increased to 63.3%.
On slide 6 you could see that all business lines were negatively affected by the pandemic. Second quarter revenue declined by 26% year-over-year on 20% lower volumes.
Sequentially the volume decline was the largest in CSX's history and almost twice as severe as any quarter during the 2009 recession. Merchandise revenue and volume declined 22% with the largest headwind coming from the automotive plant shutdowns.
Automotive volumes declined 71% in the quarter including six consecutive weeks where volumes were down more than 90% each week. Intermodal revenue declined 18% on 11% lower volumes as both the international and domestic businesses were impacted by lower consumer and industrial demand.
Coal revenue decreased 48% on 44% lower volumes. Both the domestic and export markets were negatively impacted by weak demand, from the combination of reduced power consumption, low natural gas prices and export benchmark prices.
Other revenue declined 19 % due to lower affiliate revenue and declines in demerged charges and intermodal storage revenues. Turning to slide 7.
Safety remains my top priority. Even though we had an all-time low number of train accidents in the quarter, the frequency rates for both train accidents and personal injuries increased due to the lower level of volumes.
While CSX continues to lead the industry year-to-date in safety we must do better. We will never be satisfied with our performance if any of our employees get injured while at work and we are undertaking a comprehensive safety engagement initiative this quarter focused on strengthening critical rules compliance and systemically identifying and eliminating unsafe acts.
Moving to slide 8, let's review our operating performance for the quarter. Despite the challenging operating environment the railroad continued to run at a high level.
The operating team successfully implemented significant plan changes while maintaining fluidity and driving efficiencies across the railroad. In addition to these service design changes we also drove increased yard productivity setting a new record for cars handled per hour worked.
Additionally, CSX continues to lead the U.S. class 1 railroads in fuel efficiency setting a new quarterly operating record of 0.96 gallons of fuel per thousand gross ton miles.
Fuel efficiency along with ESG more broadly are priorities for our team. We are focused on leveraging the inherent benefits railroads have as the most sustainable mode of land-based transportation and are working hard to make sure CSX is building on these benefits to continue leading the industry in safety and sustainability.
The topics of ESG and driving positive social impact are critically important to CSX, our customers and the communities we serve and we look forward to providing additional detail and key initiatives in our sustainability report to be released later this month. Slide 9 clearly highlights the unique operating challenges faced during the quarter.
As volumes dropped more than 25% and then bounced back nearly 20% since Memorial Day. The team acted decisively to adjust the network for the changing volumes reducing total train starts roughly in line with volume declines and realizing line of road efficiencies even greater than the volume declines.
These results reflect the strength of our operating model and the ingenuity of our team. In addition to consolidating trains across the network, they found new opportunities to integrate auto and unit trained business into the merchandise and intermodal networks as well as other unique service changes to be more efficiently leverage yard and local operations.
When volumes began to recover late in the quarter we started recalling employees and added train starts to meet demand but we are confident that many of the changes we made during this period are durable and make CSX a stronger company. Slide 10 shows our hourly trip plan performance in the quarter.
Car load trip plan performance of 80.5 was consistent with first quarter results and intermodal performance remained high at 94%. Volume has been volatile but we are working closely with our customers to ensure they are appropriately resourced and prepared to handle incremental volume when it comes.
I will now turn over to Kevin for more detail on the quarter.
Kevin Boone
Thank you Jim and good afternoon everyone. The second quarter of 2020 represented the most significant revenue drop in the company's history.
[indiscernible] with an $800 million revenue decline our company clearly responded. From a cost perspective our focus through this period was to accelerate initiatives that will deliver sustainable, structural cost reductions that position us to leverage growth as the economy recovers.
As a leadership team we were deliberate in our strategy, focused on avoiding the pitfalls of making short-term cost decisions to the detriment of growing the business profitably as the economy rebounds from the pandemic. As you can see on slide 12 total expense was down 19% in the face of a 20% decline in volume.
This includes the impact of approximately 60 million of unique headwinds we faced in the quarter which included lower real estate gains, severance costs related to a management restructuring, specific COVID-19 related costs, higher depreciation and property tax as well as equipment impairments in the quarter. Excluding these items costs would have been down 22% year-over-year.
I frequently get asked a question especially over the last three months how much of your cost base is fixed versus variable and naturally everyone wants to hear how variable it is when volumes are declining and how fixed it is when volumes are on the rise. The reality is very little of our expense just falls out with lower volume.
Action and a lot of hard work is required. It's a balance to ensure we variabilize the cost structure while maintaining service levels.
In the second quarter we successfully identified creative solutions to help drive efficiency on a long-term basis. Some of these efforts will show up near term while others will benefit us in the quarters ahead.
As volumes improve off the bottom I am confident you will see very strong operating leverage driven in part by a lot of the hard work and effort the team has put in over the last several months. Walking down the expense line items, Labor and fringe was 22 % lower reflecting the benefit of reduced crew starts, lower operating support costs and reduced labor at our terminals as well as dramatically lower overtime spending.
Crew starts were down 24% exceeding volume declines in the quarter and saving over $70 million in total T&E labor expense. Additionally, the active locomotive count was down 25% year-over-year in the quarter, the smaller fleet combined with fewer cars online and freight car repair efficiencies helped drive a 20% reduction in the mechanical workforce while at the same time reducing mechanical overtime expense by 56%.
We continue to remain extremely focused on overtime. The workforce efficiency and management execution we reduced over time across all operating departments by 50% versus the prior year driving $20 million of overtime savings in the second quarter alone.
We also achieved significant largely sustainable reductions in our engineering contract labor expense and our intermodal terminal workforce. In addition to these efficiency improvements we had $39 million of lower incentive compensation expense in the quarter primarily reflecting lower projected payouts on existing plans.
Finally, the quarter included $10 million of severance costs resulting from a management restructuring to align our resources and improve efficiency. From these actions we expect $25 million in ongoing annualized savings.
As I've described before MS&O expense tends to be less volume variable than labor but we still reduce this line item by 9% in the second quarter or 14% when you adjust for the impact of $26 million and lower real estate and line sales gains versus last year. Continued improvement to the train plan combined with increased network fluidity enabled a 37% reduction in crew travel and repositioning expenses versus the prior year.
On the mechanical side the active locomotive count was down 25% year-over-year. We closed the quarter with over 1,000 locomotives and storage.
In addition, newer cars online and freight car repair efficiencies helped drive a 20% reduction in car material expense in the quarter. The safety of our employees remains CSX's number one priority.
In the quarter we spend approximately $10 million in COVID related supplies to ensure our employees were safe and following CDC guidelines while they kept the railroad running. We leverage our purchasing power to procure large quantities of safety supplies to stage around the network.
Going forward we expect a run rate of $1 million to $2 million per quarter for the balance of the pandemic. I already mentioned the decline in the real estate gains in the second quarter.
For modeling purposes our current assumption is for minimal sales activity across the balance of the year. We continue to see sales opportunities longer term while the team is also focused on accelerating strategies that will increase recurring income streams that are tied to our real estate portfolio.
Fuel expense improved $143 million or 61% year-over-year driven by a 50% decrease in the per gallon price, lower volume and significant efficiency improvements. I probably sound like a broken record but we achieved another all-time record quarterly fuel efficiency at 0.96 gallons per GTM.
Looking at other expenses. Depreciation increased $7 million or 2% in the quarter mainly driven by our 2019 equipment study.
Equipment rents expense decreased $14 million or 15%. Lower volumes as well as improved cycle times and our intermodal market was the most significant driver.
Turning below the line. Interest expense increased primarily due to higher debt balances partially offset by a lower weighted average coupon.
Income tax expense decreased $123 million or 45% primarily resulting from lower pre-tax income. Absent unique items, we continue to expect an effective tax rate of approximately 24.5% for future quarters.
Closing out the P&L, CSX's operating income decline 37% year-over-year with a 63.3% operating ratio. Turning to the cash side of the equation on slide 13.
On a year-to-date basis capital investment is roughly flat. We continue to invest in our core track, bridge and signal infrastructure prioritizing investments that provide safe and reliable train operations.
We are not cutting capital especially investments in the safety of our core infrastructure and projects that produce attractive returns. Through the second quarter free cash flow before dividends was $1.4 billion down 15% versus prior year.
Free cash flow has continued to be a key focus for this team. Even in this challenging environment we saw free cash flow conversion on net income exceeded 100%.
Our results this quarter really highlight the significant improvement in our operating model. Our ability to generate positive through cycle cash flow allows us to continue invest in our network and pursue incremental investments that will further strengthen our business.
Importantly, our cash and short-term investment balance at the end of the second quarter was $2.6 billion. This industry-leading cash and liquidity position provides us ample flexibility going forward and we remain committed to distributing excess cash to shareholders.
With that let me turn it back to Jim for his closing remarks.
Jim Foote
Thanks a lot Kevin. Concluding on slide 15 we are we happy to see the volumes recover from the May trough as the economy strengthens.
However, while these trends are encouraging the ultimate path of the recovery remains too wide to accurately predict at this point. As for CapEx we are still expecting the full year to be at the low end of our initial $1.6 billion to $1.7 billion range.
We will never reduce or defer any spend that impacts safety and we will continue investing to maintain the integrity of our network. We are, however, evaluating our capital spending programs to maximize efficiency and prioritize high return projects.
We're applying the same discipline approach to our capital budget that we do to our operating expenses and making sure every dollar is spent productively while actively seeking out and eliminating wasteful spending. It's this mentality that has generated CSX's industry-leading cash flow profile and strong liquidity position.
Not only does our transform cash flow profile provide additional operating flexibility during these periods of uncertainty but it allows us to continue investing for the health and growth of the business throughout the cycle. CSX is a better company today due to the actions taken over the past few months.
No matter what path the recovery takes from here we will remain laser-focused on serving our customers and making this company stronger than it has ever been. I'm proud to work with such an exceptional team of railroaders and I'm more confident than ever that the best is yet to come for CSX.
Thank you and I'll kick it back to Bill.
Bill Slater
Thank you, Jim. In the interest of time I would ask everyone to please limit themselves to only one question.
With that we will now open the line for questions.
Operator
Thank you. We will now be conducting a question-and-answer session.
Our first question comes from Tom Wadewitz from UBS.
Tom Wadewitz
Yes. Good afternoon.
I wanted to see if you could offer some more thoughts on the structural changes to cost and how we might think of those? I guess the simple framework I think of is just kind of the schedule and what would your train schedule look like if the volumes came back to pre-COVID levels.
I don't know if that's the right framework or if there are other things, just want to see if you can give more of a framework of the structural cost take out and how that looks when volume comes back. Thank you.
Jim Foote
So Tom, I think probably Jamie is -- probably the best, can give us a little bit of the color behind everything he's been working on so hard for the last three months.
Jamie Boychuk
I know absolutely. Thank you for the question Tom.
As Jim mentioned and both Kevin we've seen a bit of a rebound obviously on our volume levels here over the past six weeks. We have being up 25% from our low point during the COVID period here and if you take a good look at that this business has come back with us only using 15% more locomotives and 14% more [real estate].
So we have, we use this time during COVID almost like our practice hour to be prepared on how to run trains differently, on how to really adjust our network. We're using more distributed power as Jim had mentioned in his opening.
We are doing more of a train mix. Our auto network which practically disappeared throughout the COVID period has come back strong and we are moving it in a different way than we ever have.
We are mixing the auto network with our manifest and in some areas with our intermodal network and reducing those train starts, road starts that we see out there is going to be a good lasting effect as we move forward. Are we going to have to continue to add some assets?
Absolutely. It continues to improve and go above the pre-COVID volume.
Definitely we'll be putting some assets back in and bringing some more people off furlough but I've always said that every asset we bring back in we'll learn it to keep and we're running the network we're starting to get our mojo back I guess with respect to our main line speeds where we hit 21 mile an hour here today which is a number that we're happy with. So we want to get that fluidity moving.
And also in our yards we sees that won't come back. We have made sure that we've reduced the proper shifts in some of our diesel shops as well as move to work some of our Q type work which is some of our heavier semi-yearly work to certain facilities.
It's working really well. We'll continue to do that which will continue to help us drive those savings and particularly on some of the areas of engineering.
So if we take a look at not just this being the costs on the transportation side it's very successful in making sure that we get good work blocks out there. Our engineering team even though we're putting in still the same amount of ties and rail as we did last year we're doing it with $17,000 less per mile and we’re doing it over $3 less per tie installed.
So these are items that we're going to continue to move forward even as the volume continues to get back to pre-COVID levels and we feel quite confident that we're going to be able to absorb some of the cost or some of the volumes as it continues to come back.
Tom Wadewitz
Great, thank you.
Jim Foote
Thanks Jamie.
Operator
Your next question comes from Ken Hoexter from Bank of America Merrill Lynch.
Ken Hoexter
Hey, great. Good afternoon.
Jim, can you maybe talk about given the speed of the volume rebound that you're seeing and carloads now down only mid single digits. Thoughts on employees may be little bit more details on what you did with the restructuring there did you eliminate layers where there shift in operations and maybe the pace of return of some of those employees and then I guess in a bigger picture you're just thoughts on returning to possible operating ratio improvement as we get into the back half of the year.
Thanks.
Jim Foote
That's a nice three question one question. I like your style.
Yes. Again in terms of the structural changes that we made during the last couple of months here, I test the team with taking a look at everything that we do and seeing if there is a better way to do it.
It wasn't just a exercise headcount reductions but it was an opportunity to see if during this more difficult period of time we could assess organization and figure out how we could eliminate layers and get things done more effectively and as a result of that we basically aligned in the areas where there probably should have been a long time ago and the organization is stronger and better performing as a result of that. Jamie, can offer a jump in little bit here more on calling back people -- more people in the field as we move forward.
Our number one priority here is to make sure we deliver an excellent product to our customers. It would be when we saw that the dramatic yo-yo effect of our volumes over that six-week period there where everything just dropped off and then bounced back it's not an easy way to run a railroad and you've got all kinds of work rules etc.
associated with how long it takes people to come back to work and so we're just now as Jamie said getting the railroad back up running with great fluidity and velocity. And now we will focus on getting back to what this team is now known for being exceptional operators and as we move forward in terms of the third part of your one part question the operating ratio is, it's an equation and we need to get the revenue stream back to where we expected it to be and we think based upon sequential increase week after week after week in the carload volumes which you see just like we do.
Things are beginning, things are grinding their way forward and we hope that that continues and if that continues then we'll get back to where we think we should be which is showing everybody that we can run a railroad as efficiently and as lean as anyone else in North America. Jamie do you want to just, anything else that I missed?
Jamie Boychuk
Yes. Just look at it when it comes to the headcount we make sure we have enough people.
The most important part of that recipe really is working with Mark and his team ensuring that any customers who we get a heads up on who are starting to pick up on some of the traffic flow that we've got people where we need them and we start positioning people ahead of time as much as we can and we've brought in hundreds of T&E employees back. They're out there working for us on the front line moving the freight making sure that our customers get the service that they expect out of CSX but of course it's not easy as Jim mentioned in six weeks to go from your all-time low during this COVID period to a 25% volume increase and be able to pick it up is everything we said that we were going to be able to do at CSX and we've been able to accomplish that.
So as more business at some point comes along again we work really, really close with our marketing team and we have got a good number of employees still on furlough that we want to find work for them and we'll continue to bring them back as we see the business level start to come.
Ken Hoexter
Great two-part thank you. So thanks for your time and thoughts.
Appreciate it.
Operator
Your next question comes from Brandon Oglenski from Barclays.
Brandon Oglenski
Hey good afternoon everyone and thanks for taking my question. I guess Jim or Mark can you give us some color on where you see the recovery coming right now?
I think from our outside perspective it seems like a lot of consumer oriented freight markets are maybe rebounding a bit faster. Could you talk about that and maybe the dichotomy of what we're seeing on more core industrial trends or maybe that's not the right way to describe it right now.
Mark Wallace
Sure. So it's Mark.
So thanks for the question Brandon. So interestingly over the course the last few months as our employees have been working from home and not spending time in airports and hotels and out there meeting with their accounts, we made it a key priority for our sales and marketing teams to remain close to our customers in order to sort of understand what they're seeing in the marketplace and how we could continue to service their needs and I think the general consensus throughout the quarter from customers has been that the outlook remains unclear.
Having said that I think as Jim said earlier we and our customers are certainly have been pleased and encouraged to see the volumes recover off the trough from May but I still think it's too early to say that we have an accurate view on the trajectory of the volumes or the shape of the recovery in the second half. Now getting to your question I think in merchandise obviously encouraged to see auto plants reopen which has helped other markets like steel and plastics and auto parts for example interestingly even our [Oregon food] business during the quarter which traditionally is a pretty stable business in a recession was impacted given the declines in ethanol as nobody was driving into the office every day.
Our beverage business was impacted given some of the shutdowns in Mexico and those supply chains were impacted and our feed grain shipments were low given also some food processors were running low capacity levels. All these markets now are starting to see some good volumes across the merchandise portfolio and we'll obviously continue to watch them very-very closely.
I'll just also touch a little bit on intermodal. In April and May, they were obviously tough months for us both for domestic and international but we started to see volumes rebound nicely in June especially on the domestic side as the economy began to reopen and we saw inventories being replenished, some of the retailers and we also saw strong volume surges for our e-commerce business as individuals stayed home but shopped online.
So that was encouraging. We think that strength will continue and we're encouraged with the international businesses as previously announced some of the blanks sailings have been reversed but there are customers direct quote from them they remain cautiously optimistic for the back half of the year.
And then just rounding out the portfolio with coal, the outlook remains challenge both for domestic utility and for export. So as Jim said earlier, Brandon, virtually every one of our markets and customers were impacted by the pandemic.
There remains a lot of uncertainty around the pace of the recovery and the continuing impact of COVID-19 on states and businesses, coupled that with what's going on with the upcoming election in November and other geopolitical issues that all shapes our view that while we're encouraged with the increases that we're seeing today we remain cautiously optimistic about the back half.
Brandon Oglenski
Appreciate thorough response.
Operator
Your next question comes from Allison Landry from Credit Suisse.
Allison Landry
Thanks. Good afternoon.
So just given that the wild swings in volumes, are you guys seeing any challenges or choke points as the traffic comes back whether your own network or with any of the interchange partners? It just seems like the service metrics have deteriorated across the industry recently.
So just curious what you're seeing from a fluidity standpoint and if you think some of those clients we've seen recently are just temporary blips?
Jim Foote
Allison, it's Jim. I think I can't speak for the other industries but I can our experiences as like somewhat alluded to in my earlier answer, when we have that kind of really quick drop in and had to respond appropriately by reducing our workforce normally in a more traditional economic downturn scenario don't expect your employees they have to come back to work or don't expect them to come back to work so quickly.
And in the normal scenario you're always worried, well Jesus these guys are all for 6, 8, 9, 12 months, are they going to be available for me to come back to work when the economy rebounds and I need to start recalling employees. So that was our principal concern working our way through this kind of maze and difficult period of time as to what is really going on here and so that was our concern was where are these guys going to be 12 months from now and I need to get him back to come back to work.
Well, as we've now seen we had this short period of time and in that circumstance meaning we called people back. They have quite a lengthy time to actually return to work.
When we call them and say okay business is back surprise, surprise then you come back to work tomorrow and the guy goes well, I got a couple of weeks here before I really got to markup and return and then there's a process to the seniority system where displacements occur. So it's just a work in progress for us to ramp up and get the trains fully staffed, so we can get our velocity back to where it needs to be our on-time our originations and arrivals where they need to be and that's taken us a little while and yes it shows in the metrics but we think that we are in a pretty good place right now and again I can't speak for the other railroads but I would imagine they have the same practically identical labor agreements that we do.
They kind of probably struggled through this as well. And I just think now that everything is kind of smoothing out, we didn't see any kind of major congestion points throughout the North America like we sometimes do.
So I think everybody's working very, very closely and effectively. There is a certain like mindedness now in the operating structure of the North American railroad where everybody kind of thinks the same way and acts the same way and as we said in the past the scheduled railroading model as it is implicated across North America is a good thing for the industry because we all know how to move trains now more effectively and efficiently than we put in the past.
Allison Landry
Okay. Thanks so much.
I mean it basically sounds like the takeaway is that you think this is mostly transitory. Is that fair to say?
Jim Foote
Yes. [indiscernible]I think we are in good shape right now.
Allison Landry
Thank you.
Operator
Your next question comes from Amit Mehrotra from Deutsche Bank.
Amit Mehrotra
Hi, thanks. I had a very quick follow-up first Kevin you've been helpful in the past more recently in helping us think about OR in terms of a six handle etc.
I wonder if you could do the same for the third quarter is another six handle kind of in the cars because of the volume declines or can we get back to the five handles given the revenue growth is much more, a decline is much more benign and then Jim you also talked about, I was hoping you could talk about the underlying growth initiatives that you guys have been working on pre-COVID. How they're tracking in terms of truck back to rail conversions?
You obviously have a little bit more of a track record in terms of good trip plan compliance and truckload rates are taking up. So I was hoping you can give an update there as well.
Thank you.
Kevin Boone
Yes. Amit, this is Kevin.
I'm not going to give out any handles today. I thought it was appropriate last quarter but given where we are today and we're not guiding, I'll probably defer on that one.
I will say as the volume comes off the bottom you're going to see a lot of operating leverage in the model. I'm very, very confident across all the expensive line items.
If you look at it on a expense per GTM say we're going to see improvement across every area there and look as the volume come, if they come back stronger than what we anticipate that'll continue to improve the ORs. So we see, we just did [indiscernible] in the first quarter if anything our cost structure we've improved at this last quarter.
So we pretty feel very confident once the volumes returned that we'll be back where we were.
Jim Foote
Yes and as in reference to your growth initiatives as Kevin just talked about as the volume of the business comes back and I just talked about the equation here being the operating rationale being revenues and expenses. It's only appropriate that we let Mark answer the question of how he plans to grow the business here in the next couple of weeks.
Mark Wallace
Jim thanks. So Amit, I think the journey continues on all our marketing efforts that we started these little less than a year ago now it seems like a long time but we haven't been at it that long but our clearly first priority at CSX was to fix the service product by and large mission accomplished there.
I think we got the best service product going into this pandemic in the industry and we're very pleased with that and so, it allowed us to really focus on growing this company and really looking at all the marketing initiatives that we just haven't done in the past and the team's been hit hard at work looking all those things, peeling back the onion with our customers books of businesses, looking at opportunities, looking at business that maybe once was on CSX that has lost that had gone away over the years business that traditionally never moved by rail and moved by other modes of transportation, reaching out to those customers and explaining to them the value of CSX. I think part of the big benefit to as we've been going through this pandemic is as we talked to different shippers we offer a very competitive truck like solution and we're cheaper than the truck by and large.
So in a time when companies are looking to save money during this pandemic, we become with our service a very interesting service option for them. So they continue that journey we're only 9 months or 10 months into this and we're very-very pleased with the lot of the progress that has been made across the portfolio, everything from metal and forest products and aggregates and a whole bunch of commodities where we've seen a lot of truck conversions happening and that as I said that journey continues and the work continues but so far our marketing team has done an outstanding job identifying a lot of those opportunities and we've got a great sales team that are actually going out and converting them.
Amit Mehrotra
Okay. Thanks very much Mark.
Appreciate it.
Operator
Your next question comes from Scott Group from Wolfe Research.
Scott Group
Hey thanks. Afternoon guys.
So I don't know if this is for Kevin or Mark on the yield. So Radford car was down 7%, I think yields [indiscernible] fuel were down about 5%.
Can you give us a sense of the price verse mix component in the quarter? And then I know mix as a tough one to forecast but directionally does mixing more or less negative in third quarter out to second and any thoughts Mark on the [indiscernible] with the benchmark grades if that goes down any further and any sort of help on the yield side?
Thank you.
Mark Wallace
Lot of questions in one here today. Just kidding Scott.
I'd be happy to answer those. I'm doing -- let me attack the pricing side comes to the heart of your question, I think and obviously this was a tough economic environment this past quarter but our pricing philosophy has not changed in terms of continuing to price the value of the service product which we think is really good.
I was extremely happy in the quarter despite the tough environment that we were able to secure several significant longer-term deals with great pricing in the quarters. So the team is doing despite the environment the team is continuing to go out and get the price increases that we're looking for and I'm very-very pleased with the work they're doing.
On the merchandise side, we saw positive pricing year-on-year. Inflationary plus pricing really good pricing area.
Intermodal again increases year-on-year and then coal well, we can talk about that at another time but clearly a bit of a challenge especially when the export side and then on the domestic side as well. With respect to RPU Scott, I think the big story on RPU and the quarter was a fuel surcharge just given what happened with fuel in the quarter.
If you look at our intermodal RPU was down 8%. If you exclude the impact of fuel surcharge that was about a 5% to 6% impact there.
So we'd be down to 3% on intermodal for RPU and merchandise excluding the impact of fuel surcharge merchandise RPUs would actually be up. So a lot of mix issues as we've talked about.
You and I and the rest of it everybody else always mix plays, ongoing impact in any given quarter just with the different RPUs and the different screens and the various commodity groups that we move. So we're always going to see that but clearly the big story this headline story this a quarter was the impact of fuel surcharge.
So not going to give much guidance going forward but hopefully these things moderate here would hopefully that we will see a little bit less volatility on that side of the business going forward.
Scott Group
Okay. Thank you guys.
Operator
Your next question comes from Chris Wetherbee from Citi.
Chris Wetherbee
Hey thanks. Good afternoon.
Kevin, you ran through I think a couple of cost that were it sounded a bit transitory from a second quarter perspective. I think severance costs around management restructuring which may actually go from I guess a negative in Q2 potentially a positive as we move forward.
I think COVID steps down a little bit. Number one do you mind just kind of running through those again so we understand what sort of its some of the discrete moving parts are between 2Q and then 3Q maybe back half and then when your previous comment about sort of costs on a per GTM basis kind of improving sequentially as things volume comes off the bottom, would this be incremental to that?
I just want to get a sense of maybe some of the magnitude there. I'm not sure it's a lot but I just want to make sure we understood it.
Kevin Boone
Yes. I'll go through a little bit of it.
So I called out the $60 million in total on a year-over-year basis. Part of that was the COVID supplies which I called out around $10 million this quarter.
Quite frankly we did everything cost. We prioritized speed over cost to get these supplies out to the field and protect the employees.
So we experienced some pretty high costs on that. That will be coming down.
We think it's about $2 million going forward on a run rate basis which I said in my opening comments. On the severance side we said that was about $10 million with about $25 million annualized savings related to that.
We had some equipment impairments within the quarter call it mid single digit on the equipment impairments and then obviously real estate gains on a year-over-year comparison basis was down significantly about $26 million so and then I also called out depreciation was up this year following late 2019 equipment study that we went through essentially making the depreciation up year-over-year which obviously has a lot of different components within it but doesn't necessarily reflect the lower capital base that we have today. In terms of going forward there's a lot of things that we've done and I spoke to this a little bit a lot of other initiatives that we're working on currently that will have that you'll probably start to see show up in the third and fourth quarters and quite frankly in the 2021 take a bit of time.
When I think about leases, buying those out, getting out of leases that we worked with Jamie very closely to identify that we don't need any more. Those take a bit of time to get out of and see the savings.
The procurement team has done an amazing job working on with our suppliers. We're fortunate enough to be in a position today where we have we're strong balance sheet.
Suppliers want to work with us. That provides leverage we're working on cost savings that have a longer tail that can hopefully have a multi-year savings behind them.
So those things will start to show up which I'm very excited about. But there's, we have probably over a list of 30 different areas which we're going through that are non-labor related that we think they're great opportunities.
Vehicle spend, utilities we've done a great job on the fuel sourcing side. We think there's big opportunities there over the longer term.
We've gotten really, really efficient. We're doing a great there but we can source our fuel a lot better too and Jamie and his team are really helping us there think creatively on that side and then I also mentioned the management labor that will obviously have some impact in the following quarters and in the next year.
So we're pretty excited about those and now that we can get through the quarter we have we're all going to meet again next week and go through the list and hopefully it continues to grow.
Chris Wetherbee
Great. Thanks very much for the color.
Appreciate that.
Operator
Your next question comes from Brian Ossenbeck from JPMorgan.
Brian Ossenbeck
Hey good afternoon. Thanks for taking the question.
Maybe one for Jamie just want to ask about train size and weights as it applies to CSX maybe the Eastern network in general. We're hearing a lot of that from western and Canadian peers.
I mean could you provide some context as to how much they grew sequentially as volumes fell if that was one of the levers you could pull and are there any upper limits to what the network might be able to handle either from an investment perspective or perhaps a physical with great crossings and do you think that's really a difference or perhaps a constraint when you look at some of the peers operating with a lot bigger train size and weights during this pandemic?
Jamie Boychuk
Yes Brian. We did see some good gains with both of our tonnage and length here in the past quarter hitting some records for ourselves pushing ourselves over 7% higher on our tonnage and around 4% on our length.
We've only given a small piece of that back through the 25% of volume that we've seen. So we expect to see that continue forward and that is a, it is a big item that we talk about when we continue to design this network and we continue to look for those structural changes is that we'd like to continue to see our train length grow and depending on which quarter you're at, there's lots of opportunity on that end.
So we're not going to give it all back. I can tell you that right now and we will continue to as I mentioned earlier with the auto network and how we were putting that together with our intermodal network and our merchandise network that gives us those opportunities to continue to grow our footage and our tonnage on our network and we have got a great network out there that has long sidings, that has double track, that is not an issue at all with respect to our network.
We do have some grades in areas that may be more of a challenge in some areas but that's where distributed power comes in. And in some areas if we use a third locomotive instead of adding a train start and pushing a little more footage or tonnage we will continue to do that.
Some other things, I guess to your second question somewhat, we have found some more opportunities on the network with respect to some quarters that we can do some small investments on which we are. I'd use an example of a trip that I was on a couple of weeks ago and Kevin joined me on that trip around the railroad.
We found an area where we were back hauling cars millions of miles really back hauling automobiles that were coming off of St. Louis.
I would have to go all the way up to Toledo to come down to Cincinnati because we had a subdivision in Indiana sub which was not cleared for autos. This past month our engineering team has done a fantastic job or I guess the past two weeks in clearing way for undercutting bridges and allowing the auto network to go direct now from St.
Louis by Indianapolis down to Cincinnati again saving millions of auto route miles. So we continue to find those kind of opportunities out there.
The more and more we get out on the network the more and more we work with the local people who are out there to ensure that we don't miss on these opportunities. Those are lasting structural changes that we will continue to see across our network.
Brian Ossenbeck
All right. Great.
Thanks Jamie.
Operator
Your next question comes from David Ross from Stifel.
David Ross
Yes, good afternoon gentlemen. I wanted to ask about the service levels in slide 10, both the trip plan performance and intermodal take down a little bit a little bit more on the intermodal side.
Was there also a difference between that quarter average say on that 94% intermodal versus how it was the beginning of the quarter versus the end of the quarter? Is that 94 consistent or did it go from kind of a 96 to a 92 as you move through the quarter and volume came back and how does that relate to taking share back from truckload especially as rates are improving and the truckload side?
Jamie Boychuk
Well, I'll take it on the first part and I'll pass it over to Mark to talk a little bit about customer side but on our trip planned side that exactly what happened is your example we're towards the growth when we started to see this large pickup on our business when we went to this 25% increase in volume in six weeks, we definitely saw a little bit of our deterioration I guess really in some of our trip lines across the board. We're in a much better situation now but it is a enormous task to turn this big ship in six weeks to absorb that kind of volume.
Operating team I would say has done an amazing job Marcelo Estrada who runs our intermodal business has done a great job making sure that trains that did arrive late to some of our ramps were offloaded faster by utilizing some of the assets we had at that end but to your point some of those percentages have dropped and we're starting to see that rebound come back but definitely very-very large volume swing.
Mark Wallace
Yes. I'd say just on the sort of truck conversions like there's good news bad news.
Yes to Jamie's point we saw some of the quick time performance numbers fall below where I think we'd like to see them for intermodal and we were sort of 99% and again full visibility to our customers, we provided that last year in October. So they see exactly how we're performing to these trip plans.
The depths of this crisis sort of in May volumes were down pretty substantially and so it wasn't too much of an issue and you're doing okay there so but as certainly as volumes have picked up since the trough in mid-May, the service levels have improved quite substantially and continue to prove every day. So as these volumes come back were our trip plan performance it's continuing to improve really nicely and so I think if you talk to our channel partners they would say that we were there for them even during the trough and we continue to be for them be there for them especially as these domestic volumes are rebounding and coming back.
David Ross
Thank you.
Operator
Your next question comes from Justin Long from Stephens.
Justin Long
Thanks and good afternoon. So I was wondering if you could talk about your active locomotive count.
I am sure that's something that fluctuated throughout the quarter just given the volatility that you mentioned in volume. So can you just give us a sense on how that progressed over the course of 2Q and how you're thinking about the active locomotive count in the back half of the year?
And then also along those lines would love to get your latest thoughts on the locomotive overhauls that you plan to do this year and longer term.
Jamie Boychuk
Yes. Absolutely.
Look our locomotive fleet year-over-year Q2 was down over 650 locomotives. We have obviously brought back some of those locomotives.
We were, we did hit some all-time lows down in the 1800 locomotives when we had a business decline that was pushing down towards 28%. Coming back to where we are now we're just into the above into the 2000s and we will continue to monitor that.
We monitor it really daily when we look at a locomotive fleet. We have as Kevin mentioned over a thousand locomotives sitting in storage and we do have some locomotives that are ready to go in different areas.
We position them properly. Now when we are very selective of what locomotives we put in storage.
We made sure that we put down those that weren't, that were higher fuel burn that didn't give us the best performance and we tucked those really towards the back of the storage area as we continue to rebound and bring back some of the locomotives but that's where it's important that we continue to do a rebuild program. We believe in that rebuild program.
We're finishing up what we committed to this year and next year as well, 30 plus locomotives that we're going to continue to rebuild into next year. I mean the fuel efficiency you get from those locomotives as well as the reliability.
At CSX we found early on that we had a tired fleet and we needed to do something about it. We had well over 4,000 locomotives three years ago to where you see where our numbers are today and at CSX in the past we just continued to buy locomotives and just add them to the fleet and never retired anything.
So we've taken the opportunity over the last three years to make sure we got the most efficient reliable locomotives out there and that's what we're pushing across the network now and particularly on the distributed power and that technology wasn't really utilized at CSX when we first got here and this team has done an unbelievable job wrapping arms around that and understanding the importance of that fleet and one last point with our locomotive fleet is we're very lucky that the majority of our fleet is AC locomotives which is more reliable. We've put down the majority of our DC locomotives.
We did that a while ago and where we finished off changing out some of those to the AC fleet we had stored which allows us to pull more horsepower per locomotive and again that reliability.
Justin Long
Great. Very helpful.
I appreciate the time.
Operator
Your next question comes from Jon Chappell from Evercore ISI.
Jon Chappell
Thank you. Good afternoon everyone.
Kevin, you mentioned the elevated cash balance and you've been able to add to that board without really adding significant stats. So you're still very net debt we are getting in a good position there.
started buybacks in June it looks like which is probably earlier than you had anticipated the last time you spoke to us in April. Can you just give us some cadence around how we should think about capital return in the second half of the year?
Is the third quarter going to be maybe look like a measured pace like June or could we see a return to the type of buyback pace of prior?
Kevin Boone
Yes. I don't think we're sitting here thinking we're out of the woods yet.
So I think the approach is going to continue to be very, very prudent. Jim and I talk about that a lot every week but also opportunistic at the same time.
I mean clearly on a long-term, medium-term basis we don't need $2.6 billion of cash on our balance sheet. We need something well south of one billion to really run our business.
So we have a lot of excess liquidity right now. Certainly makes me feel good at night to go to bed and have that cash balance just given all the uncertainty in the world today but we'll use it effectively over the next few quarters and talk closely with our board as well on the strategy around that.
Jon Chappell
Okay. Thanks Kevin.
Operator
Your next question comes from Jordan Alliger from Goldman Sachs.
Jordan Alliger
Yes, hi guys. Hey one thing I'm curious about on the wage inflation or said another way your cost per employee which I believe was down pretty sharply in the second quarter.
I know there's moving parts with employees furloughed employees coming back but essentially could give how we should think about that part of the equation going forward?
Jamie Boychuk
Yes. Look there was a few moving parts to that in the second quarter.
One when you look at our headcount number it included 300 on the reserve boards on average through the quarter and obviously the cost related to those employees is lower than what you would see on average and we no longer have those reserve boards when you look into the third quarter. So you'll see some normalization there.
Also I highlighted the incentive comp and that will also have an impact in the quarter as well and would expect that to normalize a bit here. Sequentially when you look at the headcount probably something more flattish into the third quarter on average, same average that you saw in the second quarter that I would expect the overall per employee cost to go up slightly here particularly what the mid-year union wage increase as well.
Jordan Alliger
Thanks very much.
Operator
The next question comes from Bascome Majors from Susquehanna.
Bascome Majors
Hey Mark much earlier in the call you spoke about your efforts to reconvert some freight that the carload business had loss over the years and that some freight, that has always moved on trucking hasn't moved in the railroad. As the trucking market seems to be moving to an inflationary pricing backdrop pretty quickly here, can you take a step back and let us think about where you are in the sales cycle and some of these efforts that may have been disrupted by COVID and its impact on your business and your customers business and it just really did you size this up as a needle moving opportunity for CSX and investors over say a two-year timeframe?
Thank you.
Mark Wallace
Yes. Thanks Bascome, listen I certainly hope so.
I think as I said it's been this pause I would say has been sort of a refreshing time period for people from working at home to sort of step back and reevaluate things and where we are and what the priorities are and where we're focusing and look at opportunities opportunistically going forward and I think we are seeing the opportunity to look at a lot of those conversion opportunities and we know there's a huge market out there for us to protest to be able to go out and tap in and address that maybe just because for various reasons over the years CSX is ignored or just didn't want to move it or wasn't focused on those opportunities and I think as we are looking to grow and looking for opportunities with a better service product, a lower cost basis which opens up the opportunities for us to play in some markets that traditionally we couldn't before and to price them. I think maybe this is a sort of a defining moment here and we'll see.
We are extremely excited by the opportunities going forward. Now you got to understand the environment we are in.
We're in a very tough situation given the current economic environment with COVID-19 and the economy where it is but certainly regardless we're still seeing great opportunities and I think those opportunities will continue and when the economy does recover and industrial production does resume back at full strength and the consumer economy is back at full strength and businesses is roaring again, I think you will see those efforts pay off big-time.
Bascome Majors
Thank you.
Operator
Your next question comes from Ravi Shanker from Morgan Stanley.
Ravi Shanker
Thanks. Good evening everyone.
May be shifting gears and actually looking out a little bit. I don't know if you guys have paid much attention given everything going on but the Investment America Infrastructure bill that's kind of going through the house right now has a few kind of rail provisions in there.
Some of which kind of it include things like mandating two-person crews and launching congressional investigations into kind of PSR and the impact of PSR or something. So just wanted to get kind of your thoughts on that if you spend any time with your folks in DC and then and maybe labor just your latest conversations on going to one-person crews and maybe kind of sizing the risk that if you do have some kind of political change in DC it could potentially kind of undo some of the gains you've seen on PSR over the years.
Jim Foote
Well, as soon as how it's a Washington question I think it's appropriate that I say I'll have to answer the question in a politically correct manner because I don't want to tell you what I really think of it. Everything comes out with a wish-list that's put forward by a well-known people with agendas and I don't know that politically billions and billions of dollars of capital investment over years and years and years on how to run the railroad appropriately and safely is going to be undone with some political mandate but we're certainly not focused on that but again I have been around a long time and there is I'm sure somewhere in some state house somebody's drafting up a bill right now to put the firemen back on the diesel locomotive.
So we're aware of the situation. We follow all these developments in Washington and elsewhere but it's just a part of doing business but it's not something that distracts us.
Ravi Shanker
Makes sense Jim. Thanks for the color.
Operator
Your next question comes from Cherilyn Radbourne from TD Securities.
Cherilyn Radbourne
Thanks very much. Good afternoon.
Just wanted to ask a question on overtime. You referenced some substantial reductions there this quarter as you have in prior quarters.
So was CSX pre-PSR organized in such a way that it was more reliant on overtime and what do you think the remaining opportunity is there and would you expect that to have a knock-on benefit on safety? Thanks.
Jamie Boychuk
I think the overtime we've mentioned I think over the past couple of quarters how important it was for us to get it in control which we have and we've hit out some great numbers across the board and it's also an area where we're able to use to flex as well. So even though I know Kevin threw out some numbers which were some very good percentages that we were able to drop, there are some areas as the business started to come back as fast as it did.
We're able to flex ourselves and utilize a little bit of that pent up over time if you want to say by bringing it down. So is there more opportunity?
Yes, absolutely there is on our engineering end. I know Ricky Johnson is working really hard with his engineering team to continue to bring down the costs particularly with the amount of time that they're getting out on the railroad to ensure that we're bringing those numbers down.
On the mechanical side we've done an unbelievable job which Kevin had mentioned with respect to where our overtime is at and yes we'll continue to drive down those numbers but ultimately we'd like to get those overtime numbers down. So then when there's the time where we need it for a small surge we're able to utilize those employees on overtime if we get into an area where we need to do some hiring, we're able to use that as a bit of a bridge for us to get to that point.
Overtime and safety, I don't really there's really a lot of correlation for me on overtime and safety. Safety is as Jim had started out the opening is for forefront for us.
The number one most important piece of railroading and how we start all of our discussions around the railroad and we will continue to be.
Cherilyn Radbourne
Thank you for the time.
Operator
Your next question comes from Walter Spracklin from RBC Capital.
Walter Spracklin
Thanks very much, good afternoon everyone. I wanted to focus on a little bit of the structural change that's been precipitated here by COVID-19 and really focus on two elements and love to hear your commentary on both.
First of all is whether your capital intensity is something you're relooking at or you are reexamining. Mark you talked about getting into new areas you haven't been in before but are you looking as well to getting out of areas where you have been and that have been insignificant and structural decline particularly in coal, could we see some line divestiture that would come about as a result of significant decline in coal and the second part of this structural change is how well you and the railroads have done both in the global financial crisis and now this one whether you reexamine your capital structure and whether additional leverage is something that you could contemplate going forward given the consistency that you've been able to provide from a financial perspective through some of these very difficult times.
Jim Foote
Well, let me start maybe some of you guys want to jump in there with some brief comments. We're not in the, we don't have a railroad that's up for sale.
We're very comfortable with our network. We are in the business right now of looking for business.
We are open for business which [takes] every piece of business that we can get after. Our strategy is to grow this company.
Maybe that wasn't the case when the cost structure was what it was before but based upon our levels of efficiency what we think we can do in the marketplace we're not interested in divesting and so our network is rock-solid. In terms of financial reengineering so to speak based upon what we've been through, I think for a company like CSX that has dramatically changed its financial profile and dramatically changed its cash flow, I think what was important to the rating agencies and others was to watch us work our way through various different in the economic scenarios and I don't think you could probably draw up a better stress test for a railroad to see how you're going to perform in difficult circumstances then what we were going through not only associated with the pandemic but what we've gone through before that with basically an industrial recession.
So you take the industrial recession you throw in there the pandemic on top of that, you start figuring out what's going to transpire in the fall with the elections and all we do is keep kicking out cash day after day after day hour after hour. I think yes, that we have proven to the world that we had transformed this company into a very-very strong and stable financial company that and right now we have no obviously no reason to do that.
Kevin just told that, we are having a hard time finding places to store the cash that if we decided that we wanted to level up further we've already said we've proven to the world that we have the capability in the world to do that. So I think it's a, I think again proof is in the pudding, people ask us what are you going to do two and a half years ago when we started on this adventure.
This is what we told everybody we were going to do and now we again we've proven it.
Walter Spracklin
Appreciate the color Jim.
Operator
Your next question comes from David Vernon from Bernstein.
David Vernon
Hey Jim or Kevin, I just wanted to hop on this issue of kind of [indiscernible] in relation to volume, it looks like and from the commentary earlier I sounded like we've just fallen below a watermark where it's too difficult to provide cost or it's happened too quickly. I'm trying to get a sense from what level of RTM do you think you need in the network to where profitability would be kind of stable on a year-over-year basis or is that not the right way to think about it?
Kevin Boone
Profitability stable from an OR perspective on year-over-year basis?
David Vernon
Just in terms of like an EBIT level. So volume was down 21% or so operating profit 35% or so and clearly it sounds like there was some deleveraging some volume.
What I'm trying to get at is how much volume do you need to get back and does it matter if it comes back as coal or intermodal or merchandise is just RTMs like is it 45 billion RTMs like what's the magic number where you feel like that de-leveraging doesn't happen?
Jim Foote
Yes, I mean I feel a lot better today where volumes are down mid-single digits versus the 20s that we're looking at. That's certainly helpful, so I think we're in a much better place right now and as I mentioned I think you're going to see some, you'll see across the board improvement on a cost per GTM level as we move in the third quarter assuming these volumes continue to recover from what we saw in the second quarter.
So I'm very confident there and remind everyone it was just a quarter ago where we were traditionally what would be seasonally the worst quarter for us posted [58.7%] and I would I think we'd all agree here around the table today that all the things that we've done in the past three, four months have made us a better company and probably provided more leverage as the volume comes back. So I am more confident sitting here than I was when we reported in April that [58.7%] that we can really leverage it.
It's just waiting on the economy to improve and going after it. So we've got a lot of initiatives that we'll continue to work on that'll hopefully continue to improve that.
Kevin Boone
To answer your other question an RTM is not an RTM, it's not an RTM. I mean that's just basic railroading, yes, we had a lot more coal in the first quarter than we had in the second quarter.
We'll probably and then we'll have in the third quarter. So they're not all the same.
David Vernon
Yes. I guess the is that going to create a little bit of an added headline here a coal stays weaker than or like how should we be thinking about the mix impact of where kind of volume fell out of the network?
Kevin Boone
It's only been going on at CSX for the last 10-15 years. So I mean, it shouldn't be a revelation that it's going to have an impact on the third quarter.
Operator
Your next question comes from Jason Seidl from Cowen.
Jason Seidl
Thank you operator. Hey good afternoon gentlemen.
I wanted to talk a little bit about peak season and how we should start thinking about it and what types of conversations you've had with some of your partners out there and also taking into account that July seems like it's going to be a stronger month than June which is seasonally a little bit different than historical averages. So would love to hear some commentary around that.
Jim Foote
Sure Jason. So typically we have really two peak seasons at CSX.
We have sort of the labor day late, early September, late August peak season as you know kids are going back to school and we're seeing goods coming in from Asia and around the world, getting ready for all the fall activities. Halloween and Thanksgiving and all that kind of stuff and as people are going out and buying new goods for the back to school and all that kind of stuff so.
I think clearly we've seen some good domestic intermodal volumes here over the last a couple of weeks as inventories have been replenished at some of the retailers. I think it's really wait and see if we see that sort of that bump up here call it around labor day.
We'll see what happens with back to school. We'll see what if the states reopen, how the reopening process is, how the COVID cases are.
So it's really in my view and our discussions with our customers are, we're cautious and we're watching it and it's I think you heard some of that from one of the channel partners who reported last week. It's a wait and see game.
So we're there and we will be there and we'll have the crews and the locomotives and everything to be able to move that freight when if it does come and we'll see. So then the key, the other sort of traditional peak that we see is really around Thanksgiving or the e-commerce peak as people prepare for Christmas and order goods online.
Again I think we'll probably see a peak, I think the peak may again depending on whether people are back at work, whether people are what the status of are the shopping malls open are people comfortable going to the shopping mall, if the COVID cases are still sort of concerning and people are cautious about venturing out then I think you may see that e-commerce type of peak a little bit sooner as people stay home and sort of order stuff on the web. So we'll see what happens but again as we said many times all this is really a wait and see period here for us as we move into the back half of the year.
Jason Seidl
I think that e-commerce peak has been happening since almost April at least in the societal household for sure?
Jim Foote
We have seen some good volumes on the e-commerce business. I mean clearly people are not venturing out and they're at home and they're ordering toilet paper and other things on the web.
So our e-commerce peak and our volumes have been pretty strong in that area.
Jason Seidl
Okay. Well, I'll keep our fingers crossed for the outlook for after labor day then.
Gentlemen appreciate the time.
Jim Foote
Absolutely.
Operator
Your next question comes from Ben Hartford from Baird. Ben Hartford your line is open.
Ben Hartford
Hey sorry about that. Thanks for getting me in here.
Jamie, just wanted to get your quick take or clarify some comments made earlier about the safety performance. I think Jim had said that it was largely a function of lower volumes which makes sense in terms of the uptick in kind of the index whether it's personal injury rate or train accident rate but you're obviously undertaking some safety engagement initiatives as well, so what should we look at that as almost exclusively a function of lower volumes and so we're seeing incidences pop up on a per unit basis as a result of that or do you think that there was some slippage in safety performance on an absolute basis whether it was from service or some other factors that's leading to some of these initiatives that we're seeing in the third quarter.
Jamie Boychuk
Really, I think what Jim was mentioning more than anything was these are ratios. So if I take a look at the incidents that occurred they are decreased.
There's less injuries. There's less accidents but it's based off of a per mile and/or per hour work.
So as we had 1,000 plus employees really almost 1,300-1,400 employees at one point furloughed those hours disappear. So it creates a bit of a headwind when you take a look at how we do our FRA ratios and on the injury side we were at 0.86 which is still top line in the industry versus a 0.81 in 2019 and on the accident side we were at 2.19 this year versus a 2.47.
So we did see an improvement on the accident side. It's the injury hours that are different but I mean look at that that said heading into the future, I think every railroads has got a little bit of a headwind with respect to engineers who went on the ground to work as conductors because they have seniority flow back rights.
So they're doing jobs that they weren't used to doing. Retraining was something that we weren't able to do in most circumstances because of social distancing.
So we were doing the best we could to provide distance training and/or working with the employees to ensure that they're obviously were qualified they were just doing jobs that they hadn't done for a number of years. So I think that's a headwind that we'll probably see across the entire industry but absolutely this past quarter the man hours that were removed from the furloughs is what would have affected our ratio.
Ben Hartford
Okay. That makes sense.
Thank you.
Operator
There are no further questions at this time. I will turn the call back over to the presenters.
Jamie Boychuk
All right. Well great.
Thank you so much for spending your some time with us this afternoon and we look forward to seeing you all in the near future and be safe.
Operator
This concludes today's teleconference. Thank you for your participation in today's call.
you may now disconnect your lines.