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CSX (CSX)

Participants
Bill Slater Head, Investor Relations
Jim Foote President and Chief Executive Officer
Kevin Boone Chief Financial Officer
Jamie Boychuk Executive Vice President, Operations
Ken Hoexter Bank of America
Allison Landry Crédit Suisse
Justin Long Stephens
Tom Wadewitz UBS
Brandon Oglenski Barclays Capital
Scott Group Wolfe Research
Chris Wetherbee Citi
Amit Mehrotra Deutsche Bank
Fadi Chamoun BMO Capital Markets
Brian Ossenbeck JPMorgan
Bascome Majors Susquehanna
Jonathan Chappell Evercore ISI
David Vernon Sanford Bernstein
Jordan Alliger Goldman Sachs
Ravi Shanker Morgan Stanley
Walter Spracklin RBC Capital
Jason Seidl Cowen and Company
Brian Konigsberg Vertical Research
Call transcript
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Operator

Good day and thank you for standing by, and welcome to the Q1 2021 CSX Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Bill Slater, Head of Investor Relations. Please go ahead.

Bill Slater

afternoon, good and you everyone. Thank

of today's Joining With Chief followed and Jamie by Foote. Jim two that, President President Jim our and non-GAAP slide my are Executive me Boychuk, our Officer; three. disclosure, Vice and it's on President Chief Officer; Kevin Foote, Financial pleasure Executive slide introduce on call Officer, Boone, forward-looking On Operations. disclosure Executive is Chief to

Jim Foote

cautiously call. I We Great. the joining our today's and experienced Thanks serve exceptional customers to so quarter, us all to thanking open And the welcome and amazing the building Throughout Bill hard about made terminals the environment. prospects on remained the an at I momentum for have I'm this our keep we improving the the for this an tailwind focused to year. everyone am the to last optimistic want throughout economic entered of much steadily our potential the an for growth, and and see to efforts railroaders year months. to prepare finally of the nice by they've open weather few we economic job. over to the backs. about It's yards begin excited for quarter, on CSX's work severe foundations rest pleased laying

lag. quarter, the impacts, of ratio share early of fuel reflecting overview operating winter the an slide spike XX.X%, our financial for first with timing to X% and COVID decreased per a presentation $X.XX, results. to storm cases surcharge quarter begin Earnings five and in Let's increased in quarter first the

more X% reaching as and on were new declined Intermodal X% led Turning These Merchandise declines by minerals other growth by to revenue merchandise, coal, XX%, growth, revenue in by by revenue record driven offset to East revenue shipments. Coast than levels. This due transportation in fertilizers revenue services coal partially first growth metals increase and increased export shipments from revenue volume of and This reduced businesses. slide due intermodal continued the energy-related utility and was declines shipments more revenue Coal than chemicals declines. six, revenue growth for offset of the and and fuel segments. surcharge grew X% automotive intermodal declined decreased coal in by offset within was and quarter growth primarily was inventory strong driver X%. growth increased from higher this revenue replenishments in growth facilities. coal. demand Domestic from coal, The declines ports. thermal largest storage international XX%. at to was Other

we increase to Turning COVID to workforce. and the cover sessions. additional to safest T&E to the network, recent cases slide fewer the across safety even hosting beyond these the network resumed We railroad. crafts summits in-person we seven, and are across training number With being are our of remain committed expanding interactions able summits

engagement reduction Our concern compliance, start is through And a rules events. severity we’ve seen the eliminating year. to on increased in top critical injury life-changing

total number the injuries on the both behavior and railroad. employees and allow managers of and across frontline unsafe identify reduce us to to working education will by Continued eliminate further training with how

safety of to Additionally, improve we're technology. through ways increased finding the new use

in seeing accident ensure increasing of the our the the trends. usage already and are yards train throughout drone are of help positive benefits We to safe movement program trains this

the fluidity On as maintaining team job good part these quarter. review and forward programs expand a our as operate as Despite throughout our identify operating slide to did for of efforts quarter. challenging safely going to possible. look to new network performance of let's eight, help us will the tools We implement the ongoing conditions,

metrics both year. we and on we focused back improvement dwell are expect driving to records, and in pre-pandemic the forward, throughout to velocity Going see

the We we focused the XXX Even second trains driving Labor also distributed for day across headcount in to productivity We a powertrains, for record the are volume network. time. this adding for year. in also the still labor a quarter record. averaging a preparation expected growth, new over though realize new additional remained we incremental first on efficiencies set productivity reached plan

road Turning creating to than limit started how period, metrics capacity wanted slide nine. long to within velocity excess more have line Over idle. yards to train where take recent XX%, this opportunity reducing the these both against we we transformation. increased I operating congestion of and frame fluid sit to by this

metric an record over levels period, lowest enable to though operate as industry, view Even us this in a back increased online that was It important cars improve CSX is note utilization. opportunity. of network. dwell efficient further -- plan redesigning While and we asset to fluidity is number previous by will reduce currently most to balanced the the enabled this train and more the as pushing dwell improved area towards also this this has has

We more customers. less work utilization. fuel expand are same the with driven efficient power locomotive emission offer we to only use improvements fuel efforts efficient, distributed technologies but also savings trip and we increased and in the the improved of Not further efficiency. we locomotives our doing are locomotives have and optimizer retired dramatically of X,XXX significant today fewer have amount These older,

of locomotives directions. balanced vehicles because number The dead have in dead better this the also of isn't using One number by measure there crew the the or the have locomotive. to taxis or crews or productivity we train reposition -- where plant heads both heads times crews total a XX% times almost return of is plan reduced greatly Our productivity. improves our we other matching and

well number as the focused how to incremental the XX%. absorb of is this over both network congestion, look processed higher efficiency of the reduction data, increased Anyway as on which worked remain we as record also This by per years operates, We transformed as throughput cars. back for CSX due yard the have more will dramatically realizing cars driving capacity come. benefits blocking created hour upstream to We to in strategic has growth have a at provide. the performance you levels, significant well to

want I not the are of The XX. sustained our to improvements stages opportunities network streamlined pandemic to early for and Slide to clear identified efficiency that network. last be well drive we done the growth. year during improving the more Turning continued is positioned

the While still was plan and improved trip and negatively storms plan was performance absences, still this improve currently performance by quarter's trip running intermodal the winter nearly for impacted XX%. is will COVID-related quarter --

improvement expect similar We trends for to carload see forward. business going the

financials. across and providing volumes. provide industry-leading are to us an network customers let We product proactively prepositioning and ensure, we to the service, to while now I'll with locomotives are handling through service are high-quality prepared committed take adding our headcount Kevin the incremental

Kevin Boone

good low. inventory you, tight Thank is encouraged momentum. levels The afternoon, by growing, positive and team economic and the Underlying are demand Jim, everyone. capacity is truckload is

focused preparing growth and driving leverage. are for the operating network We on positive

we operationally As in supply commercially. a and the and headwinds chain winter creating environment Jim noted, faced with both challenging disruptions, first quarter storms

intermodal by at also recovery several first intermodal despite a fees. statement offset Slide XX. was merchandise our fuel declines income up Double-digit Looking were business in revenue markets. quarter on across X% increased carloads. storage Revenue was the in increase Other primarily lower gains reflecting and significantly, down X%,

lap expense we labor more the increased normalized quarter. fringe impact approximately by program items, the up X% year, other the assumes levels. and as compensation X%, revenue accrual to was other annual as the in expect returned of This Total down due Walking was we line intermodal $XXX in higher increase fees driven year-over-year of incentive compensation as expenses costs. million. and well bonus For largely storage inflation incentive our The pandemic. the to

was made increased remain comp the length relatively Our long-term comp increased Sequentially, current first headcount flat growth quarter to was both plan as Consolidation roughly headcount, year. as basis, also improvements remain incentive train locomotive continued record. drive strong labor in year-over-year last well as Total enabled nearly technology. improve. through year. headcount by a support XX% outlook efficiencies T&E based maintenance as and Partially over employee down outlook. costs improved these quarter on our productivity. T&E the XX% and to up as continued to sequential structural ongoing expect to a second reduction the has in XX% versus prior reflecting hiring we our offset headcount On was yard efficiency also was gains consolidation offsetting a headwinds, incentive flat, increased in train our productivity We've has X%,

are focused As serve rebounding on you highly positioned ensuring know, customer resources economy. we in have demand to adequate a we

by real and inflation recruiting driven increased first important classes headwind million from as headcount should by efficiency actively running and estate items. or We MS&O expense while were slightly going a quarter million in gains offset the lower forward. $XX training increase gains, conductor and $XX X% other a are result,

to gains in MS&O the run related gains and anticipation we continue demand, storage assets related locomotive savings. Despite plan, of As achieve levels proactive in trading headline to asset quarter. were tighter Real productivity efficiency actions minimal record out higher estate to pull weather first of terminal, a and headwinds continue highs. some

be CSX announced freight quarter Cash closing generate of rail in service time value over an However, realized a proceeds as million project $XXX and in with CSX-owned of year. and $XXX both you million XXXX. transaction million the significant $XXX sell with and to passenger Virginia result gain of area. will last The This will for saw expected reliability and will D.C. in Virginia approximately in the certain the likely week, meaningful segments. second we of approximately the line agreement this in enhance safety interest

quarter offset per the expense, fuel first a price. Turning $X in now year-over-year. to helped increase million Record impact efficiency gallon favorable which of was the X%

invest truck the deliver in to advantage Widening sustainability. will rails improvement further that efficiency. hold our demonstrating in to continue over We that commitment fuel and continue technologies

the quarter. forward, and Looking depreciation or $X cycle these to fluidity reflecting other increased car the expenses, increased year Equipment full expect as road increase impacted quarter, depreciation depreciation the million. $XX in asset network to study, in due million by we rent million X% effects offset going a XXXX base, expense times approximately expense $X at partially larger track

unfavorable expense weighted Turning decreased state lower pretax or income of coupon. expense average income due ratio. $X.X or out change. a $XX tax slightly as on and X%, Other million rate million, statement, cash. legislative delivered Closing X% XX.X% to income. interest below impacts the offset the by were increased lower due operating an $X or a CSX million improved The X% to favorable to billion income due to Income XX.X% operating average $X lower line. decreased tax Interest pension

to slide cash Turning XX. on the flow

quarter, income cash free XXX%. flow before dividends conversion first the exceeded XX% flow million, XXXX. net to cash of On quarter was compared the up first when Free $XXX on

levels, year from can chart prior see increase the quarter. on and reflected. repurchase right, recent in the you dividend rebounded the also returned as activity distributions Finally, the is shareholder Share to

be his it let forward, to to approach in expect remain buyback cash returning continue me We opportunistic committed With closing back to Jim to for turn our to going that, and remarks. shareholders. we

Jim Foote

Great, this target. Kevin. projecting year of lot. with Thanks XX, to GDP a expect and achieve slide we growth still excess in entered Concluding the volume

demand We to will volumes on economic off continue growth. outlook the our additional converting to of year combination now expect the full year on the strengthening attract and throughout achieve the double-digit focus revenue based and we highway,

needed drive by monitor incremental this resources service. plan high-quality diligently as our growth, provide and operating with our to will customers to We we'll absorbing efficiently leverage address train

customers finding Our creative focus year. is this foremost and to opportunity. their growth as And always, our and help targets our entire on is first aligned own ways growth to this capture customers meet company

best the Now, Bill unable to noted, to for questions. you. turn we have to call engaged the the have to personal work do capitalize with but I'll may all is And He marketing have. join Mark back Thank will in it today. our to the as done now any The network. again you issue, is team rest may questions the the to a transform time answer And remains non-COVID you business. deal continues health of

Bill Slater

to ask one questions. Thank that, question. limit themselves you, we Jim. everyone time, will to With would take I interest please In now of the

Operator

from Hoexter coming with question Instructions] of Bank line have of We [Operator first America. Ken the our

Your open. line is

Ken Hoexter

the talk growth employee second the half as -- of pace you pace you should in talked the the ramp can the through quarter? we the about recognition we the revenue as as up expenses maybe see about hiring of that -- move expect you Jim, we versus second ramp-up And in need and advance?

Jim Foote

to for Ken. add I'll Great, as question, and Kevin well Good and well. generally, or clarity you Jamie ask know us long hire. how little it a to But takes

do people running have So, the we since been before, beginning distancing classes, we've issues. couldn't this which been at because of of through social year the their and the

them they're running -- railroad coming been be see we've we're into so, because were been and in are because impacted people as of third at the detail? regular to now are we while second areas throughout And impacted give to classes want increase -- growth quarter clearly expect well on field, numbers reasonably struggling you out. crude into have and to across getting coming were our the And quarter, the continue more starting the to on first the Jamie, becoming positioned, quarter. And challenges. will come These again, people in now. the the we, second intervals, some and out now certain through volume in

Jamie Boychuk

But on conductors. the now what as Ken, really is, that absolutely. every stands, week, bumped XX qualifying employees our or up about we've are seeing No, we're what as XX network classes. it Yes. we're right --

mentioned, And from XX new two training weeks, we months, need We XX conductors you for sure And we employees course, over this them. month, those when required we where where Jim the making protocol to on lead has employees the couple them past anywhere new that around aren't a all within the As in willing somebody, locations COVID we're certain the with there's the hire furloughed company environment. areas have that to at. industry, the location. depending just really, we're they're of every a follow our in hire positioning still

it's temporary those to the up or offer employee make You transfers, but decisions. moves, permanent, to

and to hire, we last adding quarter, keep think see year. throughout the to said going hit as really, the that, XXX to just we as the we we'll say, those second half. the I XXX, So continue we're continue levels will, would business hire here point into that resources. we folks will enter But they if come we And we'll to

that position really great puts a got us that where we've looking So growth. in we're spot at

Kevin Boone

while first incremental so quarter, only add of time over over we we're some saw would high I down thing there. that as offsetting is, some expect cost number hiring, add the come the Hey, largely quite the other that to a a we at Ken, employees in going to time and level would

Ken Hoexter

per So offsetting some employee? of cost the incremental

Kevin Boone

Yes.

Ken Hoexter

Or is incentive Okay. comp? that

Kevin Boone

That's right.

You'll probably highest see quarter. terms employee the of cost this in per quarter

Ken Hoexter

Appreciate Great. insight. the

Jamie Boychuk

and this of the with difficult weather, as It Some of that's definitely in mentioned, the very related Jim rest was it. quarter. winter had towards though, quarter, here a polar vortex

numbers come down. So you're those going to see

Ken Hoexter

Thanks it. the insight Appreciate Great. for guys.

Operator

We Allison line have next question our coming from the of Landry with Crédit Suisse.

open. is line Your

Allison Landry

just obviously, that and think numbers back going remarks, challenges derivative it's I How wanted will and you. mean demand to be ask start that and to that. in are and about velocity disarray. weather Just least can you think us metrics. Thanks. you chains to levels some improvement, service see it mentioned in get dwell? through your the you Jim, levels. you're still clearly a had few strengthening, with help But long Thank of do in increasing I in prepared quite quarters? the think take record you you QX do the pre-COVID supply before guys second to And at expecting to

Jim Foote

trip you he if customer train yard any the box needs a can't get it the intermodal across do consideration. plan off is up. what get the I back best it I high velocity speed at think, In and into of and in which and the are we to can't closely super doesn't of is terms we our It the as when industry-leading again, already everything very intermodal, to said, at it. terminal number, get at area, good look our sits takes in But doesn't terms performance, you compliance then get and

we together, everything So trip and reflected In in there's of plan, cushion. yes, It's that's met not to number. has this a the or give zero zero time. what's but its in intermodal, take hours. trip come plan couple intermodal, And like,

of possible. And performance come ago my Jamie, that where XX, expect we kind but continue numbers then want on we or just second and we again, carload of done challenge events we are a the relates I catch mid-XX% where to were quarter. have couple performance they range back where to the and don't we're on-time where -- XX% in if to the before. which year puts than there weather going numbers into operating business, then quickly guys velocity intermodal kind year the doing something and get getting of break of it were, to -- the And late, in to trip back in the better later. by that That will crazy number in are back of January we're see progresses. If on-time mid-XX% to start that again, little in kind else. sooner in I'd it trip second that plan creep bit back into up a numbers we're back to trip pressure we a where years were And And was. together than the like -- some to plans plan is, lot better our we're as the get the once get So, to And end our under XX-plus number ago. And the other is this today, year get is to there. to from about of the our range. a quarter, because to a

Allison Landry

helpful. Thank is you. That

Operator

Long from question the of Justin with line Stephens. have We next our coming

Your open. line is

Justin Long

good and afternoon. Thanks

guidance year-over-year XXX about curious basis what but willing the over helpful, forward, anything very as And wanted number? think to to expectation you the points look you'd OR. if first the of revenue out worse the March reported on incremental anything the In the going margin about targets ask is changed, the I to Just share in of in then talked late relative kind So we be your intra-quarter, I quarter? year? rest quarter,

Jamie Boychuk

Yes.

In second proactive than as probably weeks for and more couple for effects well. quarter, we were the volume kind then experienced last terms assets saw creeped quarter, we the bit after acceleration to Jamie of expecting in probably a of quarter, ready little back as little the weather of was that of that volume. of into prospects in additional get March lag late fuel into bit a half surcharge Also, late the the in out finally, the the And of we in pulling even quarter.

So we little do probably we cost there. given thought everything bit extra a which the out there, we're right thing saw seeing was to

the A that's the So moving about obviously, lot of quarter. this between Jim probably parts what at conference saw with impacts ultimately and winter difference quarter, the this talked what we the of And storms and at after hit then the a hard, obviously, then were it. revenue. Quite looking we very was February very, quarter. digging ourselves out frankly us good and of March January,

margins, incremental at we volume that revenue get previous of as as we dropping the anticipate incremental through growth, we've and a margins. terms growth look, positive quarters, said quarter In last and

as it will I So matter would beat estimates our to continue beat And OR growth to our see. if current the expectations, well. pace we to continue of that expect we

of see strength the the we better, you'll year, dependent So obviously revenue the it's growth some model somewhat this leverage And as well. in which to if strong get continues performance. it expect on the

Justin Long

appreciate the I great. time. Okay,

Operator

Wadewitz We from UBS. the with next of our Tom have line question coming

open. is line Your

Tom Wadewitz

probably industry but Canadian another matter a impact Jim, guys see broader today, there think quarter with thoughts your was a think you. for buying on afternoon. Thank you've a be interchange a if I we traffic you on does -- of you consolidation? but that wanted to whether I know you don't it could thoughts offer might I much? KSU? any is that? don't first railroad compelling, the could that on lot noticed. good to bigger about be how mean, focus Yes, greater earlier would What if from earnings And I in KSU, have the potentially catalyst topic you perhaps Is some

Jim Foote

now -- proposal. than -- to filed looked absorb had Well, thanks, We've manner hours over what or it's expressing I -- the CP forth to we've understanding like on good whatever see of we on the until a transaction. put an those I other the of We to the going of the reserve they a so certainly what CN either in we've, of with they concern about it's procedural deal. last regulator certainly impacts the terms they particular regulator the And a aspects kind time our the to to CP comment Tom. a to far, of, proposal. opportunity transaction I'm think of why have to what have thoughts think the, just see what forth said, I at been had had think of month the put their one in and is whatever transactions,

me in the from the service if were You've be of It the of a as into that they this of were And when that to out the and collapsed, most long say, has improvement prospects happened and associated the has the the would which or come a those deregulation, consolidations period come started for in industry, strong customers. and efficiencies and that bankruptcy vibrant to itself that since for known have near now. time, good like to industry time, been consolidations, have Tom, and industry was, interest by make result over industry nationalization. public the transformed sure that that would around some reinvestment I've all a facing back that the regulators and not the seems forever industry of of attributed dramatic days approved

and details any But if the a the all of clearly public -- quality I'm devil in at improves if transaction. hey, it good the for the in service the of is think interest, is and in customer, all it customer, I take means. let's it what of the it's view a have I circumstances, So, look say, for out figure it's what

opportunity have but reserve to review And transactions just themselves. any so to an the comment until on I get proposals, I

Tom Wadewitz

think for just of sounds open like it be industry a can But terms being constructive Okay. you consolidation. it in the thing to

Jim Foote

a As to tremendous I the to rail the transform network. benefit North think place been I what's community, shipping American it's taken said,

Tom Wadewitz

Great.

appreciate Okay. Thank I it. you, Jim.

Operator

next the from Brandon have Capital. question of We coming our with Oglenski line Barclays

Your line is open.

Brandon Oglenski

my mean as stay or we've want about Yes, subject. I haven't But on I benefits. I XX heard do from heard we when guess, next a of deals to question. be input negative we've I tie-ups. path on tried industry if that a negativity, groups view Jim, been mean, I wave but taking I there mergers' thank guess the potential is lot 'Class the ever ex-KSU, transcontinental you certain XX strategically, lot I guess out lot to for about years. though, the you of a of thinking the more for forward the other have looking strategically I unsuccessfully. that mean of is talked about potential

Jim Foote

hours or figure I'm to happened what to speculate going can't trying ago. years. XX what's XX happen or I out XX No, XX on

there's -- it into what I happens. said, and is I shipping and at, the positive I'm key of North the has transformation today that thing regulators network I are been regulators my another to rail going this opinion, American do as think has it the And the So, for been that's the been a that, transaction review see what thorough the of look in think sure community.

Brandon Oglenski

All you. right. Thank

Operator

the Group Research. Wolfe of from coming Scott line our with next have question We

Your line is open.

Scott Group

Afternoon thanks. guys. Hey,

yields cash been small So, we Kevin, you forward? the a negative right the for of you -- just then is last How pricing coming billion ones million should a few $X guys in buyback of have generating about there can or -- you this accelerated do going pace Is another think And for have going couple potential and the direction cash, and quarters. flow. yields of forward. think $XXX

Kevin Boone

Yes.

given you specifically, mentioned that going in aggressive if that to more given And accelerate opportunistic expect, will much we'll opportunity. the area, visibility buyback we definitely on I could forward As opportunities the there's be the that. be

on flexibility that. said, something some of we move have So Clearly, that. cash to and as term billion looking the sheet, is I've in that $X from we'll balance keep long away we're not

question Second was, of that part again?

Scott Group

you get negative, Just the have been pricing and think we positive, when about how should we momentum yields that? think to

Kevin Boone

Yes. surcharge, this lap going headwind -- we'll that to on the lap fuel quarter. We're

guys lap So year, we'll of, see tick will more really as pricing renewals from starting we you growth, look be at Coal starting We'll yesterday, in favorable away see above will start we -- is average we'll the second positive were at the kind last that, group. this comps quarter. I some easier quarter. it, across RPU as our looking second price. say, are

some So we environment. are seeing more is really potentially. acceleration would to we're looking trucking which in a And there, tight good and be inflation expected ahead

to would have So are that the But we'll those pricing customer. continue with discussions I expect the environment improve. to

Scott Group

Thank you.

Operator

from coming the Wetherbee Chris have Citi. next of with question our We line

is line open. Your

Chris Wetherbee

give sticking after of more pegged of hoping moment. year, maybe way? plus. the little we've the, out thinking think quarter give about revenue seen kind a of of opportunity But us two a you're guess, I'm kind for you I you on sense when little so Maybe we've get and volume you for see upside standpoint revenue sort is about full you opportunity and of specific afternoon. there's Good -- us parameters, for bit maybe thanks. can the for When those of Hey, I rate bit volume the break coming bit this the both to comp Yes. I you what some year. gotten from can a from you really know through like We a It a guys the sounds opportunity little weather. but the know, price, don't run for apart for if maybe of if us toughest you sort could of, the know Obviously, now. GDP trying volume

Kevin Boone

it a into parse number. Well, know down specific gave don't revenue to we're going volume. we I if

some when that prior think I RPUs, when both, the of half the can the year, the into positive, and from certainly, on positive we think just half of in -- back of the assume be year. about second move lapping you based that we're will more year to you comps be start

impact. accelerate clearly, quarter volume significantly, COVID So, will given the second

In lapping some Third started to business. quarter, COVID intermodal well. you're impact of see some the kind particularly we in recovery, as fourth quarter,

pace, obviously, second I quarter would the quarter. from a So expect, highest to be growth

the we pretty But be little easiest We'll third Third probably the expect quarter, that where more to see continues follows -- And comp robust see in in we from probably accelerate still quarter in the quarter, half the then to it's economy second and air. up easiest from how is much probably here. the bit quarter. a second it fourth but second growth today.

Chris Wetherbee

And just months volume the clarification, little since little it's of spoke ago, that's what bit upside, maybe of or I one or both? a at. point we time coming like guess, getting bit do was last of kind a price, more the I of feel from incremental you sort three

Kevin Boone

just be this volume year, year, will last will clearly, mean, I the be, the of bigger saw on year. based for growth component our what revenue we

Chris Wetherbee

Okay. Thanks.

Operator

We have from the our Bank. Amit next question with Mehrotra coming Deutsche of line

open. Your line is

Amit Mehrotra

feeling question. -- up growth the incremental as turns positive I hope I operator. But turns revenue margins talking incremental guys positive. everybody. margin Thanks, volumes. we're you follow talking Kevin, will certainly, about Hi, positive on about to better are about be revenue wanted --

better than is pricing said renewals. of kind typical just You

of giving at just XX% it on your getting way that, to So pricing of but pretty specific all equal, not in you better. else past do and your in is asking has terms OR targets? evolved, XX% fixed just I nature I'm the margins, structure been to cost you've look the the if just you and think, costs incremental would based specific variable imply

growth growth, why XX%, that the growth? of like and or something, context volume pricing margins than shouldn't revenue missing be I'm XX% better unless, So in incremental

Kevin Boone

Yes. is a first I side. of revenue on was magnitude the explaining think That's just before, better here, of the basic incremental the we The growth growth all, I more revenue that project I mean, as the factor here, right? math margins. that potentially

revenue the of in And revenue has said revenue not into point full X will quarter, growth outlook. We're saw through. still the we point expect the in are what So positive I first don't for above of Well, where ability benefit we a what we the very -- in or network in year income. margin as drop changed fluid our convert in the today. from anything improves, growth terms getting operating into We'll to that we are OR. going think X from on and see to target more things because to beyond another the revenue probably perspective, game have we a get what

Amit Mehrotra

maybe a that could. I And if Right. Kevin, then, to way question better ask

interpreting have comments you're I make just correctly? linear fact talking incremental regular weight inflation doesn't if come I'm that margins So, about off on, OpEx about of to regular of what around X% that, grows is drop of bottom your as the kind X%, weight help the you current line? much revenues philosophy the inflation as more your significantly base? excess through Just And seeing. that that will think you're us revenue in think

Kevin Boone

-- then the right. although cost have signs There's some that every to side. inflation that's seeing ticking as that material remains inflation the well. we're seeing exactly particularly on you probably on Yes, And of up side, fixed labor low offset year,

more inflation a above offset that growth, then once see with point the of you'll So, of further the impact meaningful -- growth of beyond next you and all

Amit Mehrotra

a to kind that year Or is threshold or million as $XXX million is more point? of less $XXX it than that? And that

Kevin Boone

X% looking across our overall We're at about inflation cost structure.

Amit Mehrotra

it. Got

so much. helpful. Appreciate Thank you very That’s it. Okay.

Operator

from our BMO Chamoun of question Markets. line coming the have next with Fadi We Capital

Your line is open.

Fadi Chamoun

to you. topic the little bit. want I of Thank on Jim, circle just kind back a M&A

kind other merits apply idea end-to-end just scenario we're case, that feels supply they're these out West I when we the provide for dual merger comes improving improving as that speaking, TransCon a that outlined It same anticompetitive reconcile, carrier aside? to of proposed the kind put East And debate shipper's mergers, wouldn't of there's we kind kind the the logic, mergers. improving merger? and being these service, be the kind the in potentially it same see end-to-end cost the mergers benefit why would if like trying capacity, aside to would I'm of perspective, well. noodles Wouldn't, that all Why this of all transactions? of that the kind of technically within to there, So mean, of the from always like seeing

Jim Foote

optionality did And has viewed merits end-to-end were right favorably. about or ongoing know Well, consolidations as dialogue there in philosophy historically viewed community don't certainly, that as -- there's were the of and viewed speaking, to reduce now railroad not didn't we And that the transactions. shipping an change end-to-end reduce any competition, that I been point. on

we'll process, everyone some a some of being to hours. I play keeps as maybe a cases, out. said, see long begins all month, reminded cases stages this in the and in like We're how So early in

think, how principles, it today. applicable again, So are we'll I unfolds. overreaching, the see But overriding

Fadi Chamoun

Okay. Thank you.

Operator

JPMorgan. next We Brian with the from Ossenbeck of coming have question our line

line Your is open.

Brian Ossenbeck

intermodal to you the think Hey get of And really seeing service Thanks term term both longer over what's conversions. conversion. you plan truckload you rather for How If question. mentioned a back conversions? market? conversions looking your basically making cushion. evening. for compliance the taking left the really a Jim, not, If do you XX-plus-percent someone make more and this sounds like good capacity tight pretty are zero than material trip are that's these truck line? on parties? make about to these to we -- It like shippers with come trying I impact with How the then in for wanted stickier beneficial to longer service. when

Jim Foote

model that's people us intermodal volumes. adopting. positioned many so a in the the bigger -- to the e-commerce in that Well, yes, to of in setting mean this terms a reengineering we're of be is business intermodal after our and transformation network, earlier yes, are I this records years And business, couple which of participant

buy online, chain. involved And more we're have to and where do more railroad, don't and And shows If and our move past the fixed would we things, I the we've effectively best to able changing. we we that because be to that that that it I this participate in boxes want supply these because the in see think numbers. things and to in more been want done we work more service more to area the because able people can. improved that don't all in in we So we'll to continue and so

more production the continue cardboard out today, where other plastics working plant involved, in that in and to side equivalent merchandise in metals of we a constantly is those business. just the in they're a we conversions because And us more many other and truck same the and focusing we’re our taking truck. the takes And see getting time The in on getting to and we continue the move again, win with side customer. truck boxcar, And load it, -- you areas. that circumstances the and of area name facility. and their that's steel service same what of is and And and business that's to shipper

were compliance. we get so -- And to have and to plan terms of in trip back where that's reliability we is

We -- have well. conversion then to in that we And we get are to continue the area focused get and opportunities more get will those back and better we as were better. and that even grow where that to the

Brian Ossenbeck

service more you Are capacity the freight have separate has sales that and extent clarify, network just to versus tied on finding just And being in the to you shippers the agreeable can across on conversations customers up to from improvements these this? sped cycle general?

Jim Foote

those more them in to footprint, relevant chain. well help want in efficiency are plays customers environmentally more so we And other as in becoming ESG plays our become factors to friendly, and becoming more as our carbon a do our are, in being the lot favor, more of is the yes. We're with fuel can and Conversations supply -- We're reliable. things favor. bigger in bigger our reduction more recognized areas more aligning

we're are past willingness results. thinks good do , All our of showing this and in -- the

Brian Ossenbeck

Thank Jim. you, right. All

Operator

with the coming of next our line have Majors Susquehanna. Bascome We from question

Your line is open.

Bascome Majors

that your to filed notable SDB. I reluctance happen the here on it approval that transactions on suggested or or that understand thought I context mention and for on Class the issue you was of yet. only you have give rules that did. But for it procedural waiver differently to that with the been rail your stake did stand competitors? ask CSX I information the a you at does the look you say, Jim, comment KSU XXXX publicly be up than, And us that why more was commented at that little Can

Jim Foote

was the -- into proposed And sitting one room place. in started these when in I fell it was on and to CN/BN maybe place merger. one put just in with the hold put and moratorium it happen rules -- Well, a be all to

that some the to ideas before to has merit about that how have it. approve I in didn't new at those they -- time, changed. and body some of rules change felt why they didn’t. speculative sort change And body acquisition So, KCS of were an and the And rules knowledge array ruling they the regulatory point the the the had rules XX-some-years would that wanted of

was view So from see what said. any circumstances And a decided. reasons merit the We a the is law was would I and it law. decided that's the along we what comes change that back of for don't the kind transaction day in

Bascome Majors

Thank you.

Operator

Chappell. line our the of from have coming We Jonathan question next

line open. Your is

Jonathan Chappell

question you. Good afternoon. a you. Thank for Jamie, maybe

story take some different also taking to pre-pandemic about spoken as a storage. having pandemic of noted the have your guys altogether. improve. locomotives Obviously, performance through business to You Kevin the more continues spare people's capacity out But

So, you and B how does today strength desire about expand as with for And ramp this do favorable what the and to And guess we mean see capacity that do mix volume intermodal is, economic in you think to do balance that costs? merchandise? new better your coming how part super the online with backdrop? the I

Jamie Boychuk

sections to understanding feel from, out our will Look, as come and customers XX%, we to require of we business. work close out some flow in are can sections team, where there's reaching a starts. where that network, with capacity still where that train absorb and few our many going In we the continue to Mark on which side his is more XX% that confident network I there

That's assets. of of about with midst pandemic, record what basing I'm start course, of say, We our need have -- we were we're three numbers to just we're talking to basing pull this low winding all looking of going and when off this a ago we to down quarters respect and, of and were off out. things over, what we in let's when us the

still we than volume year levels was be getting of less ago going we're productivity we'll ready a ago, record yes, So, out years locomotives, where to our were two respect and people. where at, with still see the to with with locomotives our or

We're customers it mix comes the sure able that of to that us. down to we're to the making see. that going brings service to we're provide So that business

may So that's just something throughout a the attrition -- people, we we that the it's assets on. trucking little thought than hold they higher on we're industry, decided and they and working really a about a Those like people, too expected pandemic. packed think, I And have retired, they rate those who they and while. really it was them. for retire to was not it were of that Well, think we going when for much in,

going same to see to we of at assets had these that the some going not yes, So, back. levels we're come before. They're be seen

come I back returns the was I'm the we're So, side. continues in. on mentioned, all was mentioned sorry, -- intermodal part, some that business going of this second think still you what on Kevin And, think, see good It to I as that was had to question?

Jonathan Chappell

you but just strong, obviously to this growth. of It through incredibly balancing the merchandise was kind the improve equipment mix intermodal’s been as desire have

Jamie Boychuk

are where the where Yes. of with my room intermodal it intermodal I trains. few out. still continues run together end on in areas sold then intermodal we other look, intermodal and I freight grow. mean, tail can, as stands, of we trains, Very we'll -- to have

job that team we that they take side get move arrive. in his continue has are when we're continue an We assets need. very business, we as -- And we to see fully the And see have the forward. mentioned. pull shape. and care Scott out, pull that Growth turning the and productivity the as Jim been cars continue as terminals our out intermodal Mosh to strong, have and incredible has we of fantastic to able of storage to better done expect

Jonathan Chapel

Great. you, Jamie. Thank

Operator

Bernstein. with Vernon next question We line David have coming of our the Sanford from

Your line is open.

David Vernon

I sort industry Hey time to to in different your guys. us on way. Good question of with sort afternoon share to Jim. I the appreciate a historical wanted slightly of a approach you ask the taking you consolidation. perspective

to you end-to-end highway would drive thinking about some help opportunity cons the this And think conversions pursuing you plan? CSX right intermodal? now it's accelerate think conversions, further accelerate property. How an how the merger As sort consolidation your to carload Board on and of is that drive of highway might the whether the ability to or about highway pros conversion

Jim Foote

to way, you yes, get a question in going answer. you're the different Well, the but can same answer

that's transaction however or not the said sure and analysis customer. in service makes go to It's whether up anticompetitive very my lot And determine, I'm truck thorough the As networks do will product better eliminate that's it's the speeds based it's better about facts, interest. I regulator job, said any upon not before, more things like. together and public again, product and and it then But that bottleneck and in of a to as a the not my the rail a upon that between work my you creating merits I the extent the for not the that in mergers opinion. and job -- rule the

David Vernon

what of get logic conversions. in but I'm drive highway of industrial kind -- would to your the end-to-end view, merger that So you to help at? That's trying

Jim Foote

Normally, else that good smoother has opinion. look And having like and supply is onto than person put again, conveyor that's one results managing belt Dave X somebody chain. belt somebody better in else supply the somebody having for to in a Normally, conveyor it and conveyor next chain the Yes. a But off belt think a then it. it seamlessness my box the -- take conveyor at to I it's say, belt run said, the the idea. and who is person X

David Vernon

question. for All the right. Thanks taking

Operator

the We Sachs. coming line have Jordan with Alliger Goldman from next our question of

open. is Your line

Jordan Alliger

Yes.

Is if industrial that. side visibility, or the is intermodal the positive part perhaps economic primarily industrial expect the on mentioned increased You momentum. around onto was visibility the intermodal? you're seeing biggest insight that recovery, -- the could pinpoint actually into the I some the thoughts you higher and to anticipating the slides versus wondering focus Thanks. it of still

Jim Foote

think I trying point about with At out were I fuzzy, difficult what point shortages. my Well, ball out January, trying a that that about in we time, when chip predict. in to XX at months, was cases going view the there take was little to next of it the of a happen factors. that were that was just time, for a was COVID a in it's said Again, crystal to number speculation And to determine control.

think turned it, this into people the more growth Well, And year February. most is in conversations that their starting happen to number going ball so that they be have smoke -- what you some and second up. now X, there have there it for Was a people GDP bill? Z. Was to going people Was then of stimulus And with forecasting it, taken infrastructure infrastructure added going feel going see we're of to Y Was not a to -- and to an package? snow globe a year. there for be package? there of stimulus my have and customers And cleared be the of to be not forecasts going growth were then their about real-life of a bill? an has taken half effect into crystal

tell terms the for business here how management trying run So to mean more I the by year. we're clarity that's to team the forecast the at what to going what rest plan how of and I having me CSX, of in

Jordan Alliger

Thank you.

Operator

next Morgan coming line with our have Shanker from question Stanley. the We of Ravi

open. Your line is

Ravi Shanker

the tightest afternoon just at Good two markets highway topic of in truck we've conversions. years, last I when if mean, on three the Thanks. history. the you of had look I follow-up can everyone. Jim,

several should the volumes and volumes on this guys the really kind yet possibly last intermodal look be the that you So up. side gone time more haven't years, have handle can of, you when over materially intermodal

that's if are capacity of Or not, to the resources and don't that billions that material So the actually to a you gap volume volumes does dollars change put guys And conversion of rail on side? the need material drive to I'm there? capacity just in just increasing be close more if the why into trying up highway there and there? to Is case, hold understand in it what's just product rail? service

Jim Foote

again, intermodal now of We of recession about business. CSX. producing focus intermodal took demarketed the X% In of intermodal we business. Well, all X% off global record the demarketed side the XXXX, let's on another that, we And an we business. pandemic. in we're for into -- about levels of volume XXXX, then throughout the In a went phenomenal industrial

So what missed. not you sure

side we're doing the there. merchandise of the business, good a really On job

commitment As service, And our the to from involves business investment we're an involves I doing. a to this. provide going no that to convert starting really which It them we're financial we're now truck-like highway, the to customer on we're said, converting part which investment. make reliable with

decline around years railroad in of turn XX to in I'd billion of dollars, like a I couple but So and weeks that's think industry of the I'm very spending obviously, -- don't possible. couple a

Ravi Shanker

right up now? either the of quarantine? pending out number percentage of think I'm if prepared kind of workforce the XX% to you've or in kind of what's pandemic locations of of in remarks, vaccination was your but impacted what's the I of commission, kind workforce by that's said Okay. of in Understood. that some updated and this sorry past, current maybe the And on kind your kind I of the missed leave kind now

Jim Foote

on would basis, don't our of of XX% had specific XX% side of really of sick. we we like cluster. Clearly, have kind where western railroad have been Well, on workforce kind a terminal off the a the

far who number virus -- think XX%. employees the is around have I is contracted the of so

back Everybody in I place of Clearly, are up out think number. March, Kind optimistic. just every just the was really Jacksonville like right the had everybody numbers they a the peak the spiking now really, their X%. like Christmas. I Yes, feeling in shots. a are gradually declined. got coming going of really had low. around And were we here They else. into that's cases really, spike. We sells US

of think of much slightly we're So, average We're total you But of infection is for which -- when think we're the good I at -- fantastic average of very than have kind going average average. -- January been a of it's workforce, again, every indicator in a national employees of our around out And taking the there of coworkers. less -- the are watching infection the of since themselves day. working out it. that's and there we all below national and their it's the that rates, single work work or have our rate, this, ended phenomenal all XXXX care beginning of employees to by national

Ravi Shanker

Understood. Thank you.

Operator

next RBC have Walter line We of with question our the Capital. coming from Spracklin

is line Your open.

Walter Spracklin

can your without to always implement about direction. of what's conditions? sort surges? a little kind different your very Thanks different is in say of network, maybe curious up a but and when are here you big how on is the those we weather much. -- do a But in. that guess what's and the as I better surges effect of is handle like potential a would that the major as set surge question, surges of surges, know the disruption be a Just in here, able And was impact Jamie able Jim, we you organization haven't situation I there? feeling kind my of -- did to decline customers in be study chimes kind to now or demand railroads

Jim Foote

and effectively terms products that to think efficiently, first wants more North in nimble, more the the mindset, to that of amongst so customers' of what's a I grow business. focus needs differently, all in thinks Well, workforce, adjusting of to is is customer our wanting America your all, it's it a then railroads different, and common responsive move

more at different get adopting we're we business that don't can't months a we model hiring, were your So, mindset one we that want year, degree, sure volume. how locomotives. freight to do and because We've make we're We got to there. about a not We've people. to to I to shipping in a back, -- out position in of peaks last we lay ourselves changed people. ago -- our business off in August. afraid handle no park Nobody oh, God, we’ve other railroad cut talk a We've long go going before. lay surged comes workforce. we're ways bad. to the We've to to got -- got customers' We We make amongst a to and been off run to a then hire. would handle the have got able our different you in workforce. and end move we They do Well, of positive wouldn't not are to think, is have sure four large about July like -- would, Things the got a to would got June, it. situation got furlough. talking have But guy completely even where that

look sure position that the to future what as to about I job to and now industry in year. an the do we last a a mean, went think, the out through valleys. I make think able trying peaks handle in in to we So, of better we're be

as Just business example. take an the auto

were up serve All of are is know, figuring, a very, never geared thought, that shut that again, slow handle what? segment a great manner How we very very guess going in, on the very, be be into down next another they get then plants auto And right, traffic We the going able all up. to shifts were to sales January we about call this customer this? car We zero. very their back all this Forecasted going chip. was And because be the January. how in then to saying year. are had all year I to plants later, going computer This We're it day. we much thing strong. it's a startup. into move, looked three morning start months And going we Three to a are can't are the little a back we will be well, able report restart to manufacturers disruption. respond moving going to get and

of different So season. and very, base that customer throughout take care the be move to important peaks and valleys, nimble very customers take one in ship it's about we've never been and intermodal no of boxes Well, season able for that for than started And us. than earlier our the very, the then stopped. very important months peak peak three and peak season

been we've So there.

a have now a moving hours X can, been days XX terminals as as much record volumes. open we day, Our week,

we so, differently we think And differently. and respond

Walter Spracklin

Thanks. it. That’s great. I appreciate

Operator

We have coming the our with of Cowen next Company. Jason question line and from Seidl

line Your open. is

Jason Seidl

with Wanted a stand the bit afternoon. intermodal business partner? you and good you talk off And in Eastern Thank side about to you, again, be there? think Where you're to Gentlemen, do little operator. business. you're taking Do just working. think seems highway general, that competitively growing market taking the share your you clearly, intermodal the

are Is Is out ability mentioned grow? Is standing the for limiting it marketplace right the drivers growing have now, now? anything there the back room it physical to of your side? there your boxes? the in than anything way of in drayage more actual on Is you You even there trains. you

Jim Foote

question. that's very a Well, good

that what of I terms little. over, controlled has say CSX it would In very is

train We capacity. have

very service a have product. good We

are that. We fluid. more can handle can volume terminals do Our we and

buying all are global be keep environment West at. I all area able shortages, in channel everybody disruption look an the and the things, is seeing which meet railroad you're amazing . habits. when our In I that to to sideways industry steamships chassis there's backed shortages. in shipping Coast, or whether these with can is major do there's whether stressed Suez, there's that at these terms whether in of not and needs changes driver chain up job trying the Coast, shortages, ports, mess, doing we're to its an the in supply public consuming box partners entire of of there's at the of not a think things all up The of in big It's whether and the trying the East

Jason Seidl

of on share rail the And market in your side? terms

Jim Foote

I really job. again, doing we're a good I think I we're -- think, think doing

the I despite, and industry weather on under think pressure of really some is horrible that's the middle the a the in clearly continent lot pandemic. that of a whole across being middle of all up, said, absolutely I the a supply as in chain conditions

Jamie Boychuk

proud one we add respect gates. that XX/X think we're do to really we we everything one with stayed out that the and We polar the team shut of as for I open there. would supplied the through any we We to else forward. Just were thing Jim on to We mentioned. to of able to the had what expect and vortex is, never that that our were continue customers. said service only rails be We that move happened there

Jason Seidl

Well marketplace that’s Appreciate we hear too. in time your the guys.

Jim Foote

Hello?

Operator

coming Our of line Konigsberg Research. from the question with last Brian Vertical

Your line open. is

Brian Konigsberg

Thank in Coast doing for ask can do the handle come because to my question. to on East and it you your maybe still taking going business And to in backup, up much clear they're for getting you? How been when you, thanking inefficiencies, Jim, you some now the just is of better call, inefficiencies you system think be highway? and these something mentioned wanted referring those not delays. long about you the right very ports you I could it's steamship of a these start question? these that so much but Jason's backups are on to volumes all

Jim Foote

again, Well, We're to part a And to we're part move. in working no and it's of not we're chain when it link smooth. kink the move there's problems in easier is It's everything chain. easier a chain. it's and the

we the ground added the ground, the -- the because could don't --they can't And us putting backed because they they from So I efficient with smoother, take because more I and of XXX two, boxes to it, country how we'll do be your of would want to box want the dray want comes just start benefit and somebody on we save would and -- and energy spend. rail do it a and truck think put of more run all that your Listen, this. and XX% about on now, to crew people they be would and I -- with deal don’t up of I do take -- port all rail. and rail out that's across things talk don’t it you of -- have talking will We'll we to a versus pluses to because do the we on are We top. minuses, like if say how how move People think trucks chassis, want truck, don't up, people right become more. on that do and railroads in the you fuel the we and all this how autonomous those solution trucks, railroads a to do this. all have emissions put the guys think the terms because don’t

record there. record set the where record -- continue after after And capacity. to So We're in record. just We're we're setting we takes position we got said, growing, hopefully, get can ready. records. I the But all it like we're after we

We there freight as we the possibly We get as every can. single getting to day fighting much ability. and keep just have to in got

Jamie Boychuk

trend and look a truckers seems the move every country, and new and town can those driver driver lot out be driver the town that we the and to is long-haul of the the gives go it rail of to And less single which you when their truck available. it of less with on shortage we you across across into bring bed long wanted at haul the is dray And have at look shortage those a are there, who when truckers. out what someone take night there, of coming A that's drayage, advantage. when like lot families, be to again the that and that

Operator

And This are there concludes questions today's further time. no this at --

Jim Foote

good look talking questions you. Thank everyone, in for to really you all and you, Bye-bye. forward calling today. I soon. your appreciate Thank to

Operator

conference call. This concludes today's

disconnect. You may now