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CSX (CSX)

Participants
Bill Slater Head, Investor Relations
James Foote President and Chief Executive Officer
Sean Pelkey Vice President and Acting Chief Financial Officer
Kevin Boone Executive Vice President of Sales and Marketing
Jamie Boychuk Executive Vice President, Operations
Allison Landry Credit Suisse
Amit Mehrotra Deutsche Bank
Christian Wetherbee Citi
Ken Hoexter Bank of America Merrill Lynch
Tom Wadewitz UBS
Scott Group Wolfe Research
Fadi Chamoun BMO
Justin Long Stephens
Brian Ossenbeck JPMorgan
Jordan Alliger Goldman Sachs
David Vernon Sanford
Walter Spracklin RBC
Cherilyn Radbourne TD Securities
Ravi Shanker Morgan Stanley
Jonathan Chappell Evercore
Jeffrey Kauffman Vertical Research
Call transcript
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Operator

Good day and thank you for standing by. Welcome to the CSX Corporation Second Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to hand the conference over to Bill Slater, Head of Investor Relations. ahead. go Please

Bill Slater

good and Thank afternoon, you everyone.

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

James Foote

Great, on thanks joining Bill, and thank you the for us call today.

want highlight customers environment. quickly most in first our very the to record as the of This our just quarter's for thank each business deliver hard as service as growth have severe of economic results unwavering all lines experienced to of commitment railroaders how to I operating CSX's they volumes impacts lapped rebounded their a very of we worked three pandemic. the difficult

second year, enter we continuing our of growth. on squarely the this As is focus half the

to own our year kept the resources throughout we customers ongoing have and chain recovery the yards continue moving in open their this and taking the fluidity order steps increase meet will to disruptions. and and growth necessary add targets freight terminals help We supply despite

$X.XX. property Operating of to Slide the sale increased rose to from the begin the of and rights $X.XX figures presentation results. per per in to Commonwealth quarter million X and share financial income impact Let's our $X.XX with and include of an Virginia. second share overview earnings $XXX billion These

the an XX.X Virginia XX.X was transaction. point percentage ratio including impact operating from Our

improved earnings income increased per operating and increased Excluding points. the basis share these impacts, XXX XX%, XX%, operating ratio

markets. XX% East and and increased higher average as benefit record increased to significantly services improved utility Both XX% as Domestic all volume from from Other usage as strong daily driven transportation on from export volumes benefited equipment revenue net domestic revenue demand Merchandise and XX% higher across storage volume a X, by continued Slide meaningfully. revenue increased new was increased well for international intermodal revenue equipment thermal both volumes higher as setting demand coal in core volumes growth coal growth to for by and ports. on on well affiliates. industrial XX% led markets. automotive, Coal with increased Ag revenue and XX% Intermodal volumes and Coast growth XX% XX% increased on from higher metals growth. Turning rebounded growth XX% volume. and revenue

X, Slide accidents to number Turning we reduce continuous factor being on achieved increased remain by new low and a our education. train year the the initiatives Safety remainder of accidents. caused the safest for education quarter we focus the In driven human focus record to communication, communication will and committed culture, railroad. to second of on

behavior. Combined As to a rather to workforce. further approach new lasting these and engagement will reduce incidents, expanded changes top designed increase summits education with an The testing of safety employees. instructive protect programs face example, risk employee and and operational in we've introduced be to for T&E is our than modified to causes program new create disciplinary face of recently

throughout Carload this as of the for our we positive X, the of work and we performance through volumes sequentially let's all the rest trip to are over Intermodal for trip Slide surged. last of Moving continuing focused perform performance kept this year our the operating open XX% continues year. intermodal plan and have to and the intermodal team, momentum plan our improved terminals quarter on well. the review to system quarter reservation quarter's metrics. XX% The this segment intermodal averaged hard

half and remains and in we further sequentially further to working to the positively also On resource the of network Velocity in began industry. I are year. metrics are see actions We take both taking second in Slide the the network improvements of growth. the to the the turn quarter dwell lowest the we for to opportunity to improved X, want highlight expect some improve Car to exiting fluidity.

continue As calls, half year on the the previous mentioned the growth to we add and second headcount to expected year. in the of I entered community planning response through we'll adding

classes in serve we enacted of existing locomotives Over place programs also have to well. and new network several the the as and improve to our rising of increased the incremental capture conductor volumes. months prepared employees customers to ensure we the for our demand have past the size staged resources across and number new availability then we that We

and and with these our ways network. the We of our demonstrated the assets have efficiency this are growth react and in growth are we balanced to customer programs. maintaining ample plan network we capital continue capital our the improve additional our across working are and to throughout spending to demand, operating impact on investing safety still While flexibility a find sustainability provide by reliability focus to pandemic the we of spend We to and new a long-term we maintaining commitment capacity for invest the business. and of

are software increased Slide improving the while sustainability use management XX, focus safety, the expanded of through for energy technology, further future fuel advancement reductions CSX's and and extends technologies. operations of through the saving the to our through use of driving our we of emissions Turning productivity investing on

in the to we of powertrains to number XX% addition equipped locomotives. In almost distributed power the expand year-over-year, increase continue distributed

XXX in all locomotive are rebuilds performing. we approximately in that year the adding that this locomotives are addition including We to to capability

expanding efficacy use our increase of of repair and to of track technologies programs. the safety operations also then inspection and the are improve We maintenance our

of We need our are by increased highlighting track performing better with inspection cars drone inspections improving of roughly and of areas flights year XX% use this autonomous our safety repair. in

the inefficient to manual digital or of the paper Lastly, processes we tools communication field replace employees providing based increase to our are railroad. across with speed

tablets employees both distributed real are information to productivity which sharing allowing safety XXXX feedback. time improving and by We roughly have and

CSX. see and are efficient investments improve are only we dispatching pace these planning customers opportunities we beginning our pleased We With the to our and value network and more of see now interactive the to bring. over making Sean to are programs We to quality the through can across changing with success decision numbers. potential technology date these the to it leverage significant to I'll turn business. run of

Sean Pelkey

growth. pleased I'm as here our company we to continue and I'm history the excited time opportunity and Thank culture, on this today you, in Jim. an focus important serving to for be at innovation

results expenses unit Slide prior increased revenue or million growth in surcharge impact Virginia related revenue. as on XX, million This of across reflects the the a higher included results price. Looking quarter. X% market X% XX% the rights $XXX cycle the of versus includes impact the revenue, fuel COVID-XX. which at offset combined to financial gain we lower by was higher and growth fuel per These a X% the sale with Total were other from second to higher Revenue partially impacts year. of favorable pricing $XXX property quarter of every

on fuel the up would Excluding a of been expenses XX%. gain impact price, and volume X% property increase of the have

and inflation. address supply vast I critical topic inventory unit line, we've get news Before and by the the to XXXX. like costs adequate majority into lock for of would specifics worked materials commitments in for good have is, The I to of secured we

don't fuel, half. second locomotive this Excluding was move we just inflation X% above expense going to quarter much and that expect into the

year. don’t working and capital cost next to pressures things for for year on Several are shifts are any expect the sourcing of so critical and this productivity, increased infrastructure going into management. remain to supplier contracts materials We We overall on are to indicators, budget inventory ensure inventory core lagging change that will through our materials closely seeing offset capital adequate. we continue and monitor based levels

expense moving expense. for drove QX, to items increase the Higher in XX%. specific labor and Now, up $XX was inflation together volume fringe million down and a line

impacts. year higher payouts million downward incentive compensation for adjustments increased $XX COVID with projections prior award Additionally, related year on this to coupled

network sustain absorb on productivity to continue gains. the growth We and

we As increased the of conductors, continue to the power optimize we've work use and hire to plan. distributed

up active or Locomotive in is third productivity drivers. year, MS&O headcount $XX the continued million increases in the expense XXXX, the in measured total second expect from the year. this sequential second were quarter as horsepower per primary higher While and hour quarter and last increased count volumes flat available quarters. compared we GTMs fourth inflation to of X% the improved is year-end and roughly XXX approximately X% T&E

We expect recover. and further as even velocity this to cycle going times forward improve

as well are prices volume. by we our lift absorbing driving $XXX expense that terminals increased down intermodal XX% Fuel driven year-over-year. at cost container fuel efficiencies average with doubled addition, nearly and as million In per growth higher

state During settlement we to the fuel tax benefit matter. recorded also million the quarter related the $XX an of

to other earnings base. at offset on $X due at of expenses, increased Looking XX%. higher volume increased freight expense a primarily depreciation larger net affiliates. in quarter by was asset impact car Equipment partially million million The or $X higher rent rents the

a property transaction, significantly As result the dispositions the quarter. second increased on Virginia of gains in

to already this received, a year. transaction. phase are the As $XXX of million later gain proceeds million first next million expected Total reminder, $XXX the expected the $XXX related be and was during quarter to the remaining $XXX year, the including million

increased coupon XX.X% change Income approximately lower of and benefit points ratio million, out Closing as million higher held. quarter. debt statement, The increased legislative lower Turning tax favorable lower operating pre-tax and operating expense XXXX impacts partially $X a improved this of reported to mostly million, income. delivered Other due weighted expense by billion. rate below due a effective average were $XX the the including $X.X offset tax basis was balances. was property XX.X%, from The cash was line, on state income income gains. interest impacted income interest by $XXX a average pension to CSX

X% closed include expenses. results revenue acquisition Carriers operating will and related Quality these on The due to acquisition, impact line. expected of recorded to neutral July Quality Now relatively and will from integration this is year be in do approximately tracking X. other income the revenue revenue, which EPS to transaction to be the add and impact not CSX's the any

the quarter the split between cost On labor is of one of MS&O. side, rents. will and thirds fuel the it two depreciation About be expense rest hitting and about with

accelerate to products, leverage multimodal Going rail transaction our integrating CSX Quality growth forward supply chains. the to new further our customers extending expect offering reach into by and we

XX. on Now turning to cash Slide flow

Through As is cash XX% year. the flow team. free prior for $X.X was free major second quarter focus dividends up flow a billion versus know, you this cash the before

full of to income net year on basis. to Just is $XXX than in a remain free remains nearly in it elevated more that all $X flow cash XXXX. and flow company's generated billion. XXX%, Year-to-date million we expect at conversion balance The put cash that's level cash that context, near free on we

that Our million return buybacks. continue in our approach expectation and back opportunistic billion, business, $X.X for as $XXX remains this capital over are in returns shareholders. We to invest and balanced excess a shareholder Jim turn let time cash dividends. that, returning to and will remarks. to nearly we buybacks me approximately shareholders Year-to-date it committed to billion his $X.X including to the normalize remain with closing to With in

James Foote

Great, XX, maintaining we year thanks, with Concluding Sean. revenue full Slide a are outlook.

the from Carriers, Quality year. project to for double-digit growth the impact we revenue Excluding continue

As Sean growth this add annualized about be we year incremental to basis, will an approximately and of impact expect revenue half the X% that. mentioned, acquisition the on

a targets growth these with quality achieve service will product. providing by our customers We high

As taking ensure to commitment. I on steps this we deliver are we said, necessary

to at Our continue Demand year to remains the strong outlook expenditure returning cash does $X.X and capital commitment to customers. for shareholders. our so billion will $X.X remains we and

for are We network growth. the resourcing

driving are improvements through asset utilization. operational add We to increased capacity

we and design today, investing with our in We are to for freight and creative long-term for continue solutions customers move the come. to years our and new more business through to CSX

to the Bill back Now for Q&A.

Bill Slater

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

Operator

Allison Landry with Suisse. first from instructions] comes [Operator Your Credit question

Your now line open. is

Allison Landry

pricing a the and underlying you directionally and pressures cycle? more in Thank for from was hoping scope then price core myriad maybe you. seeing if the very just when just, Good could you QX? do you you're of afternoon the truck specifically rapid tight cost even capacity, think see acceleration inflationary talk on what there environment And contract is given renewals thanks. I about

Kevin Boone

is Hey this Kevin. Allison,

it I'm market, those whether they're and in the year. quarters it the renewal achieve expect long pricing. and inflation generally we'll communicating quarter. XX% cost throughout and those we're In in Sean cost obviously the or labor and lot seeing that some of first and What our annual them their transitory concentrated today, are price have do look really is other keeping are for occur at of what of seeing about that out They're evaluate so material really continue them. to the to customers terms of our to term that. close what and we're of transparent to really the see so to pressures our contracts business. we'll represents contract in in we at be is activity, with inflation we none and a inflation that They can here surprise They're are transparent When to and continue look with and our close our things with that that a We're trying explain costs. in understand renewals fourth that seeing there we certainly these terms staying to customers you of if through

Allison Landry

Okay, you. thank

Operator

Your with next Mehrotra Deutsche Amit comes question from Bank.

now is line open. Your

Amit Mehrotra

second, on everyone I the you, underlying that in and we of is year have mix repricing half? at just negative would think half like second to this that operator. that towards back Thank second Hi XX% just end better of the would getting the towards of year revenue. if half guess that Quality operating XX.X%, and the just performance. in to a $XXX add I if Thank gets just, OR have the add on that I the maybe just about you bps great I it the of the can table in moderates [ph] of help quarter, performance you. any maybe quarter looks the half. for Kevin hopefully reason is that in half take so But Sean, XXX the second congrats this underlying there back into in the stellar versus if talked the it's given you ratio that? look Carriers the ex-the Quality the that, of expect end you about acquisition us better year. or million the impact mix, and this it's Carriers in

Sean Pelkey

Yes, thanks Amit.

of about tax second unique there the in talked not transaction, Virginia think you the the when fuel So, settlement then lot items there. of and other quarter, I a whole about than impact

positive, on If there'll to cost that here we're on. improves availability network have bringing be the do, carry to the there. and going the what's to got the of able So the hiring a Quality, second right, of operating second We'll half some we're going crews. also the year, in you're and going ratio the some strip and I those we you're volume We've the those fluidity year on crews increase half out but a forward bringing will move to it crews be to to to the doing to be so crews. impact of think correctly math bring some incentives

And So the half. looks look albeit relatively biggest through been volume probably is here, able half second good, variable will highly volume in then, but the like second the a that is to comp margins that drop what be will the demonstrate on the in be dependent what an like. the does pretty easy We've on impact.

Amit Mehrotra

year. they're fits Right, workforce labor but the side, to X% X% I every of on that think it the then

or a color growth is attrition or that number bit in about net talking just of headcount, you're you when that gross on as So, sequential a can little number labor well? if net provide

Sean Pelkey

expect the hiring to we're through sequential move I and probably little mean, in going in rest order going quarter. to bit a we increase quarter on as a to basis, headcount volume to fluidity. so go as of and net need would and third up the year I the is long the continue the Yes, both fourth

Amit Mehrotra

you Thank it. sense. I makes Okay, appreciate much, very

Operator

question next Wetherbee comes Your Citi. from with Chris

Your line now open. is

Christian Wetherbee

thanks. hey Yes, everybody. afternoon Good

And in you the incremental like what the be year. sort about sort you It Just may we feel kind back on that revenue need I you? back do improvements the half is when do feel running you're you order volume are perspective of of half? the think the mean, demand provide going of service, some below environment or to you be outlook context, network a guess all are your you made volumes, would of whether at question I for be and to maintaining reach then in volume? take otherwise I do back constrained full are from there to sounds the about think able potential that growth the how those coming on think, heads in outlook on maybe to

Kevin Boone

the look Yes all we're is challenges Chris. a same out there not their second that facing challenges. unique. challenges, across able sector yards, and at boxes fair the now you getting weren't very create you for us was is when to say opportunity things up transportation not quarter, those the we when move pick a good trucks look out there Yes those of whole, to the I'd of transportation having our modes probably so. challenges fluidity all as right assessment. Look, Everyone that's The we're in

around as more customer fluid, will As additional capacity react to crews, more we capacity more we do customers next to to as year. to bring with starting want that we're our that on everything generate already on We're conversations and we opportunity. certainly having those today. we get suspect They bring conversations those serve quickly I We're needs. committed can to can people, as have

our service with that delivering resources. having we every with to any commit when and and of to expect out can other do. they can ahead, we we need Jamie I'm plan We with So so day customers it I'm what communicating ahead discussions get can

Christian Wetherbee

you. thank it, Got

Operator

from Bank of Ken with America. comes next Your Hoexter question

open. now is line Your

Ken Hoexter

a the on wanted questions congrats a bit on, little and afternoon handle on going if you congestion the to in Hey, congestion you to so especially about about and employees results. great, at I you solid there had going to is good obviously that's just just talk backlogs? down couple of it. starting in believe terms to Maybe a I do your larger that we've any cost bit that come network, talk of that to per ability of metrics we've that seen rails scaled, about, any talk just two is going if Thanks. kind seen forward? we embargoes on on create can Western the traffic. spread you're performance, look that really of, on should that Eastern And different your what's anything fear then note, kind on of in Chicago time address the starting see kind employee points there's

James Foote

hard an it's any want else, the have to way follow to a anticipate committed didn’t we environment No be these us enormous find expected challenge things details they anything just Ken be railroad, in and open employees that, with like sideways six that of lot Jamie I to entire by were are that. said on be difficult. I of very, the make would people I'll in to railroad go comment when that Jim. unbelievable realize keep going a else to to sure was I conductors challenge. new going January able to in fully this then to on very, and to been transportation people necessary. Despite want an Yes people did it's and well. I've has to very that runs because terminals up find this and same it's the how did to seems or out been all quick hope got is kind at seen any In Chicago, be days. career very, work thing get a our we property. have very anybody been XXX do call, we decide it were try anymore. work this continue Nor that the I going or people want we can the It like baristas on We've for we growth. everything last we let time. never my come It making to hiring the where to I'll that now about months if in to difficult anticipated T&E I

half attrition had of expected. much So first we higher the in year what was the than

employees, because So be now fell would we on thought there though we going demand. we the short we even we where year of going brought be to XXX into by was anticipated new that strong

to and there you run for expect continues a to because we customers' we're put need hire going serve that need as this and be be to we'll are to our customers to as continue continue demand, do, to managing where move on the so employees, as assets strong needs, bring employees and freight, to demand, forecast into the is they can company railroad. there places we simple that. what to That's to We long them be, our

Jamie Boychuk

need for I'm next we I months, is six the we up mean, I attrition, this as be great what and do they headwinds that we're what far think we with nailed in as really the think T&E look metrics we there. by under attrition, this where we Jim's means been faced at Amit hiring XXX. We we've hiring and it quite people respect mentioned the to environment is confident what but was the need is as stock we've going into above we're for respect I know that I for that out been mentioned in to for count at, be some to sit. can has there, to on We've that trainees a but metrics an We've can that to some look in X% couple look which the our the well. team providing assets what to we eight it of it are forward industry, of sitting our as was operating going here numbers of team that's get do to environment got attrition these us the able as XXX forward. to comments Jim's the and going need. got better great is with opportunity It's point and to his think that team proud we're with we we Kevin rolling

to numbers. You after know what us is for We to about our that there's go going all the it's more know and number we're the and customer. reliability

as yes So plan continues as benefits with particularly to is on the some fluidity as costs but side. up, look the which move drop, the of picks we along, we better, ultimately, see we dwell and it there rest and trip better performance at getting intermodal our

the it the where we need On carload side reliability is be. to

than that's that forward. to for any Without Kevin we're his going us it the service to push got which continue that we're continue and and we've sell the key anybody order So else, able grow to service, take product, to out to different reliability get to which is and us. required in go so are not where to capture has be there team steps to and and allows

Sean on I'll the really maybe So cost let touch per employee.

Sean Pelkey

Ken, quickly that. Yes on just

plummeting the on We've with you're volumes. a the over comp called scaling were and if over a then time labor bit is there's versus looking incentive few first we I little year So to last we've time about, got think as higher out. things the side got year-over-year down obviously inflation

have didn't you along with Just factor the about status reserve we employees had there. who emergency those significant their had year, boards, emergency wages so from other remember XXX we last

some bit seasonal first reflecting actually trends. normal the a little from quarter down we're sequentially looking So

Ken Hoexter

Great, thanks and Jim, I it. Sean, Kevin, appreciate

Operator

from from comes Tom question next UBS. Your Wadewitz

is open. line Your now

Tom Wadewitz

This Kevin a Yes, I good well. as is think for Jim, maybe afternoon. question

shippers were in momentum share or before your truck. talked You've good the for about it's shippers think about, having I of opportunity affects circumstance, carload I the to lot a not, an carload gain wallet And does think wondering, not kind gain you when some back rail but from how it think And that challenges? that it's track you ability that some gain hurt a get in but had share you mean, they're kind ability momentum continue to am further network gain that the think of of and I for these that versus unusual your on I with share do program control, these with couple to shippers? good of to given developing years you do COVID. is share?

James Foote

cost to load if ability grow above Sure car we explain cost Tom. tried merchandise Many in have to said times because why in we traditional business the have along our moving a gives that in be been significantly in lower And in better customer reliability. as level and it that's a than as of it were similar we solution, would was was will develop our getting coming you XXXX, so transportation confident the reliability XXXX. can truck starting where XXXX we're rates we we like advantage had our into product

mid XX% number to plan range. car compliance was in XX%, Our high high the load trip

compliance having who him had truck and for we ago have XX the much or one was from product about a in very sideways good to get And switching That so with to interesting sense and customer skeptical We on them we're conversations number be would months months the track going switch, in still a going record, as back. now rail. trip this, our number makes here, I better XX I is ago, it the and than compelling plan Is much plan look at. It's it's was or unfortunate to to and trip to much have world say with just disillusionment number XX higher. was about our for went Yes, narrative XXXX? before ability as so but it customer just to a XX. simply not my compliance have to sit so why good but base, it

same employees doing to do and velocity time, number we did as truck had run been and here can conversations similar -- I here our a have the and to new having and service back position ain't now. speed now, As and find hiring having that it get reliability much we of in easy and our whatever do that higher possibly would right we're being a we would and by said, the before. hoped by with as XXX to customers improve have At now, the conductors we we'll we to

we're it's on one we're we tremendous other us. we for to So get opportunity the good hand, where the back hand we the as not if unfortunate were, we when not work, right there -- really, is that but as on

I coming at nothing a we're really be we're us that outsized while. more strategy sideways changed and terms we we we'll So optimism than move were that here back has But just It's drive growth our to as will went where even of us coming said, unfortunate, as get this running forward. the things strong, about in back, get as for all for right. on time we better world

Tom Wadewitz

something of Is on XXXX quickly, back do that, think shippers or and discussion again? bounces be have you that share you on the some gain track to readjustment kind like that that could period reengage

James Foote

I of in an get Again, the now, last be year. to extremely yes, transportation great I numbers metrics, community And said the the back so hope position has service by call, expect on product. as kind shape it by we those said, I that in I end our good service as the we'd ourselves of

year, again now. next conversions So going truck we're into getting

to large degree a trucking to growth road haul intermodal. converting coming over long is the from intermodal Our

car at Our the growth certain in expense coming certain truck. segments the with of the in is customers side load

doesn't it's achievable. they easy in, think to just to more should why harder. to are how to talk today not man have for we the and great we'll easy as seeing are about and was still it's just again, XXXX. the, in that go fall rail themselves, convert I the woman It It not mean a work of customer in means or that. it we than traffic as So it's not we're just not and

Tom Wadewitz

Okay, great. appreciate Thanks I perspective. for all it. the

Operator

next from Your Group Research. Scott question comes Wolfe with

Your line now is open.

Scott Group

Hey, afternoon, good thanks, guys.

just in going So, coal Kevin, what order feels thoughts favorable volume Maybe it we've for from executive Jim, the any about And and just on got way? on expecting you and talk for standpoint forward. reacting the coal. RPU think any you're guys a about then like responding how separately, now environment just

Kevin Boone

lot demand the is same. a that of other outstripping is to Yes, Its we're, the the talked markets coal market we is supply. about similar today

They've coal their side. catch mines investments. of the some the are They up having under having are on trying they the invested, struggles on of catching are same so some to people You're up. we

all seeing today. we're So that

it's underlying lapse coal and in of or start natural all met into the prices will easy the internationally, continue uptick thermal to back coal half gas prices, the commodity U.S. comps volume and some and year. lapse they're very see in the here whether internationally, of an You to supportive prices

continue saw back do and a in lot up but on supply with based try we the XXXX is levels to So we that demand. to expect that growth, of the chain not the catch to

But, look for right customers already does it on customers. the quickly replenish low. year levels next recovered. we're up, burn we're so continue and very week, domestic where to the discussions side, last serve what keep the here and particularly a critical inventories, our is how see to about were coming. didn't discussions where situation So I are trying environment levels They having like inventory do continue to now, market and turned to those their they We're can this had with above surprised how quickly we in they levels, inventory

on international there. bit kind met the that market similar forward, domestic that our and how the of quarter and end transportation can outlook, going trying price in is deliver relatively RPU can be where they their follows particularly deliver so the communicating saw supply so can how all customer. second dynamics we're good side, to a you so look commodity better, we favorability, and little And to they the you very they services side at when see do how price the side, on But, on understand we'll good will can the really

James Foote

long little a what to but it relates able Yes, Scott it been appears sitting a released, out, to Surface on for in for it and administration agenda the a out it, any, items and better the we tech, much that when got some had moving heard I was executive it Transportation the as about businesses. it, about. the it but digest guess especially pretty viewpoint like first order, and agenda been everybody, lot if has of had the actually railroads, years. it, at and the all to covered seemed information it find for we got were and of that Once everything steamship full railroads new not out reason And before Board the we be

working, it move So a time lobbyists, are are of was personal regulatory all have chain, are these at so afoot workers railroad out we singled the these to in that’s forward point Board, of a a industries. pushed made of opinion, and things who and other kind the hard, the up of of rules time these job my And, and regulations, the and which doing every push supply just forward kind when when listed working really along industry other regulatory Transportation that essential upend suddenly ideas, of of our like, to what this decided should who now going take unfortunate, difficult all really on all with there as, that in it's change during it's regulatory in pandemic, everybody's all employees Surface agenda. we're advantage out kind try are and amazing an been by at is really want

much not I it but in somewhat we'll about used it disillusioned forward. then was we're it's was handling and move what So really to new.

Scott Group

Thank you for guys. the time

Operator

from Your with BMO. next question Fadi comes Chamoun

is Your line now open.

Fadi Chamoun

an if on are clients, if Quality was give on with Carriers, can first secondly, we thinking mentioned contribution into perceiving question income as some for going A we to as you sorry. are operating this XXXX, us breakeven I think the business year, how that go to of your And about how had maybe I'm combination? on communication go hi. impression, we basis. mute you Yes, operating they income? into this you XXXX, it's I But

Kevin Boone

quality team Quality looking the from imagine their and This of the has got market. Kevin. team, far July customer our we XX and feedback our that teams integration for in so quickly you along capacity They're with sales could together sales is after The been overwhelmingly positive.

when that service, Jamie that service business currently his the will several all ongoing have and with we that our that bring We're doing initiatives that that with team sure on and they're for. communicate we making standard expect. We of we offer we to capacity diligence, can the looking customers

market market. our very we'll overwhelming and So that feel But is particularly do that in that's it we ahead their surveyed going we value. we carefully very today. was, in would we that, them the diligence and they response surveyed is did knew in this we our -- asked we yes, they the needed something of and this there's methodically, because this in this is a market, customers the And the customers like see product

will thoughtful bring on we be We on. it how

of lot to on. additional been inbound us, we'll customers looking with a And far. up But bring have come We those solutions. it's great calling so

Our and together closely others. teams closely very, working very we're are working with

understand And lot about so in more And they network. it. Sean bringing a in ways can the thinking that let of financial opportunities the the side into we're I'll handle

Sean Pelkey

has year, core business truck get into and of terms the like so trucking in Yes, next the we impact margins. as Fadi, financial

that's should to do and the see up on able place, that that a growth the We've we've the and in year. of has up time. ramp that all drive that significant. next been got need it got rail, see today some trains, over to the moving you year, be about to we're equipment in can but conversion ramp So to on over to incrementals that the should but over road sure talking next pretty it's about, the business you Kevin when existing We expect that make piping

Fadi Chamoun

thanks. Okay,

Operator

from Your next with comes question Stephens. Justin Long

open. now Your line is

Justin Long

wanted saying comment earlier XXs back you to getting Thanks mid the plan high the going and the I of to compliance you load trip Jim, that made good afternoon. on clarify progression to by car from talked forward. but about talk year we've possible a your about the a end? locomotives well? And back then year you as in lot resource redeploying plans the for headcount, perspective, of was can half Are

James Foote

but see be that's Jamie that Where we know associated I'll to to achievable. able where if we about Yes, people, we let would of goal in we with challenging to right back locomotives, could. terms hope don't my hire now talk what I are were, get to yes being from better That's goal. then achieve my until I'd in there. be not changes to happen. dramatically now see able I like right or hiring not we'll like that. the us whether That's situation, whether get say I'd something And or can't to

Jamie Boychuk

even going where fluidity side, locomotives. as get now, can locomotive improve On need we're we from we and are faster, the we our less to out there

now. our at where necessarily numbers isn't question the So

efficient. locomotives We out a in that have are next locomotives we locomotives. that rebuilt down We got aren't continuing hundreds got program our allow here of We've rebuild more some do. coming the over XX good what to still for us to storage. great with three months, locomotives as will we're put got which fuel We've

on zero-to-zero through So we'll There's track that move we to nothing Vitronics opportunities, to but and our particularly continued we on Optimizer continue side, a gain to as lot continue Trip forward work along with that as and, program [ph]. the front. technology continue

Justin Long

Okay, great. I appreciate the time.

Operator

Your next Brian question comes JPMorgan. with from Ossenbeck

open. Your line now is

Brian Ossenbeck

Good afternoon. Hi, thanks.

industrial site development from those your backdrop, guess Kevin changed, given those portfolio, I how for expectations things on and the on conversations labor, the also land timeline would be an noticeable. for demand are ask that's just really like the what's for key those that to more you it just for think wanted you sounds pipeline, trending? If efforts labor but like Just it question that something update you the getting or have it to up it's of pretty then come resources, for the everybody. hard would sounds And and follow like

any as pull hard levers a it that confidence your there ends the you help can just there's up now. different sense if as you deployments -- asset being doesn't that. in get network will then us maybe give right the And can across other the of So looks labor you if

Kevin Boone

do team and about development industrial and how we there to our want going opportunity pandemic are rail Are customers how way the changed posing it. CSX do supply the it. there really well that what that new to on there to facilities, be they're in need is served. new we is chains touch thinking reevaluating onshore how and to the I'm The on production they're me put conversation get let sell they that to we're has the that we're and viewing warehousing, new are Well, the really

gives that. throughout the of environment the the our in that able the they options an been understand think have increasingly of that have where reliable and seeing move pandemic. global challenged, that freight, freight, be I opportunity continued chain particularly move freight can in their value them terms be customers the to railroads supply are And the and to

marketing of with So about excited We're I'm leveraging the there. build they estate sites can that real portfolio, estate and, seeing our ready lot traction closely team along today. we some real that a on have

it's So exciting.

out it's start think more to opportunity get early, our but over customers there. I'm months we'll that hopeful see we next as front get I bit and the in a little XX of

James Foote

no some work in question I've side, about eight new On our applications Sorfleet gone the HR months our the jobs. people forward, to been with crew. working through flows Diana been and it. and last sure department, closely difficult, there's right we the labor have Really really her get making with it's ebbs We've come

that of helped their couple allows up better than we've an We've deal with SMART-TD has sure our done us that it make things for is us. Just availability a conductor to which conductors been. come with that's our agreement, recently, closely work there's a availability with and

been railroad sometimes being has that it's believer stick around here people So couple railroads get in. of successful best that And weeks, kicked since it not, from railroader, you I'm believe past over a agreement the actual that people generation are for or families. the fourth a

around there's situation. others same the in think I a table this few

just applicants a bring XXXX through two-week of we refer to people and to we're right to going put offering I application would for people a went to a work a CSX, have to that together, as our few railroad XXX employees incentives We within program conductors. well to now on our over period, say, referral from

has gotten will then and job strong the understand about, lifestyle. what the they understand out referrals pipeline know and people of until is, they stick helped course help has it's the So around very this the program and

to really is help to hiring. continue our us program this going as do we So move forward

Brian Ossenbeck

thanks right, for it. All time. I the appreciate

Operator

with Alliger next Sachs. comes Your Jordan question Goldman from

now is line Your open.

Jordan Alliger

East could the think little in the was the Do on will that international procedures you to could out I west you service gating front, and retailers coast or Thanks. ports wondering are keep intermodal as the in that lead your diverting some of season, the that's, Chicago. assuming Hi, up. and peak towards could move that again, we others, the Coast opportunity just perhaps more lead you to traffic issues additional talk Yes. for that and is if about a

James Foote

a really move another trend you very freight trend I look I that's done We particularly option his port to our the team a The of partner working have continue the, intermodal identified fluid. here think through job, that's so East freight in Jamie This picked going remain Yes, east. remained think, that terminals and shippers and to reason thing and the partners open. and, moving for for here. the our see good are with great struggled, the the pandemic West all and Coast. that continue secular why as a freight the Coast to has up franchise to ports demand have really more is we to

it. in want other sure invest inland we serve We to freight of that continuing and to we We're continue move and ports it. more to make can areas

Jordan Alliger

you. Thank

Operator

Sanford. with comes question next Your from David Vernon

open. Your line is now

David Vernon

Hey, next that talk you you your start issue up, a are this me market you're of or to are what now of restart guys to hey specifically relations having here? as Kevin, make a Could to Jamie, is resource of year? unclear custom guys, initiatives having a worried just impact of get be follow kind recruiting trying more ability taking -- function when on or the having off then in or the whether the the sand thanks way sort pretty is do core to the you're gears on And going the the whether Jim good the down, deep it's item boards still for to whatever. time. getting service

James Foote

employees hire the but question correct? people, to think with your the and associated fuzzy, little is, trying issues A I we're

David Vernon

Yes.

James Foote

Yes.

don't I trend a business this think challenge. for not, It's right we're a I Now, now. is think, every

extremely about good evolving whistles, I enough. think we jobs, do attractive. these to way with and in of figure with in today's paying They're to all good think jobs this have other things extremely and world, out the kinds we're not that's benefits, and make but to more try bells

people the perspective I short-term a Jamie a we make where sure of, people do they to at weekends, as we I'm team right to to now say, before coming a said this, that and do winter to look to long-term need of to we that lot to don't holidays, on going think what pipeline kind doing need need kind we're nice doing is of really the enjoy referrals, basis that that terms doing convinced what that, a getting and anymore. fill things doing work, have the want that do. do of So convinced, and outside, that all long-term they And, stable, of this in [ph] that, of need from delight

and that, have we we'll that. railroads at to to picture whole need because such run look big employees we do as the So

and our change processes And people thoughts, is going the throwing we're to our these money at so not days answer.

David Vernon

starts you kind there to take impact now, are was service that worried and the get to maybe into other issues XXXX? guess start to having ability I rate in you of up question whether And when the your

James Foote

right that where get think need that we end the to have of the now, by because I I the, be I'm Well, think will we worried in us place plans not year.

in has right our doing them and where help able earlier, willing have, with to said the make sure to are been we Jamie union the ready full tremendous a we're everything up. possibly we and had facing plan I can making thought it we to get and us response flared press. work that As customers. we serve court to that to to now to needed personally leadership and a in as of in we everybody But surprised, caught issues were is my I somewhat us remarks place and as kind be much we

[indiscernible] and right we So and not well absolute about working I like It out today. feel [indiscernible] should working the alive pandemic good it's is be hello, here. is where pretty growing there,

of we'll the feel knows we assume what things, at in in have couple going of next that rare good who country. pretty we Well, I conditions to what's weeks, some go time a the months? happen to we make reasonable So, let's health have the and of into pipeline labor that in future. sure positions coming continue the all will us XXXX couple

Operator

next Your with question from comes Walter Spracklin RBC.

is now Your open. line

Walter Spracklin

change afternoon good different of thanks come or trucking have changing of at or to high back Yes, negotiating can particular, changing you are there in angle prior the And So I'd just how whether questions might current just in all. structuring would have contract to a and to capture everyone. and pricing, much. you be preserve and question I type your contracts contracts? is we're all a with you terms under that longer the sustainable? in customers intermodal. are otherwise pricing. some prior, your to you of take period your I on is, lengthen of at or you're particularly the environment out better on my restructuring them you're your structure pricing terms very wanted But quickly, than in The in

James Foote

environment to It's it. this in facing pressures about we about go and win comes impacted That's, conversations we cover they more overall markets. things to markets, how to help approach in have can We is have the it with realize cost grow the being I'm to the to how expect, are being perspective that the with having we business. interested that understand market, with them win. I'm They we're the help customer. costs. our discussion. anything service, all they customer and to focused really our markets the that's They're we're business from how them what I'm expect their there's in in compete the facing around if the we trying think don't changes I issues what get to secondary in a they're do winning to same our help our next and the today, advantages Well, partner market. trying Those going a to really When and business that in new discussion our them about. to a that. compete I'm around grow year, share, their customers how transparent

want conversations we to combination Certainly, a cover so happening of really, with grow business be those of costs lot a growth, And are we we them growing their but forward, want to and going forward. today. to our customers, our it's going expect successful volume and

Kevin Boone

Yes, okay, capacity it a to where through advantage, wants can come terms. to in accommodate very higher much is take wasn't for but an to maybe longer, that you so more to and agreement tight, customer longer lock

pricing that where happening. wanting sounds capacity any as keep not if longer to to that well, as that for and if is customers that's for curious lock coming for you longer a of Just in up desperate can, in wants like -- result

James Foote

And service going every volume is going XXX% on day that year, better we to we're more I'm we're this asking do what I having customers like. how tell next discussions And our we're confident. what volume. better customers. look, of with talk those is a and No, us enter our network to Jamie looks that able and to get to bring

the can all headcount So the and we have locomotives. certainly We perspective a from crews. resource prepare

there We have go service to the business. and assets out that

get to we sure trying markets volumes it, how there of what make incredibly recovery. much we've about to we know the ahead out the the way to get out we're so going surprised been forward. of customer It's for ahead do are we're what and all we But get to So need hard do of shape to been predict that. going and in hire and to want front, that

Walter Spracklin

Makes time. I appreciate the sense.

Operator

with question TD Securities. comes Cherilyn Your from next Radbourne

Your open. line now is

Cherilyn Radbourne

a lot, but about much. where are be. automotive could question to up Good as I presumably not much volumes wanted a as very they Thanks afternoon. ask

to you volume might could tailwind talk have that that extent chip So once be to above And when improve? happens the do about you that could pent-up contribute which that the growth a could visibility you the think shortage into trend demand be XXXX? to released might

James Foote

the you're and probably same looking Well, at I am. data

the are constraints inputs auto lot a going pent-up of do close out to the stay all out be will the so the And supply continued it that are That's watching. everybody into car, to come into supply to When We've see we with came close we with customers can't year, The But to demand market, today supply. And serve. to into plastics, what new other of? impact going It's pulled problem close to you run demand problem. that there's used down third I incremental a the auto to global a into there's, long growth given another markets in will into It's metals the industry serve, to find question into shortages? another rolling quarter it how production in continue -- extend car. today. we constraints remains, our going started Are help of all It's to pent-up we can't next we know a seems lever year and sees that is we hopefully persist. You shutdowns plants we has the provide year? chain fourth there and The will what's the market supply goes But materials other market, that move continues the the that those that does as that move could our and that right. there's where we're And, outstripping We're next to there. thing stay XXXX. a other find provides demand. we quarter. be auto think, next that auto and customers. seen the

Cherilyn Radbourne

from Thank me. That’s you. all

Operator

Ravi next with comes Stanley. Morgan Your question from Shanker

is line Your now open.

Ravi Shankar

term, Thank Good your afternoon follow that everyone. food or I now not throwing or whatever. you. follow-ups. Couple throwing the the labor money the solve retail problem, given structural industries going which or of it's near whether a trucking problem, But fast comment of earlier in sense, make to I think up wanted lot is to issues. Jim, are other on doesn't the money some the

So of point do we back employee that? in are And half down go route that you I or that not year? what all you're mean, the saying per about do do you how think at going at to also, revenue the of, kind

James Foote

that period need I Well, we're, we what the we at over a need long workforce to happy personally think have to time. as I make said, look at, we to content sure look fundamentally that of do

do. And so that's to what trying we're

job fulfilling, dollars a and put the are order rates your is to I capacity and their intermodal street that I'm decide driving bottom in out year over most whether when quarter think happens the to driver business. year drive you kind good. in or excess work and the tank, a then to a truck the model company business the a thing of in to as make all I to the always so my and doesn't people need gas in pay for a drops do bringing there but trucking next to work more trucks the smart that's after, truck or year, maybe Not is do the an company plan is that's great. businesses, on whatever of might If to million it it's trucking

managing So we approach more workforce. holistic our term try to to take a longer

Ravi Shankar

in $XXX run Is over quarter. for follow up, good back revenue this Got [ph] that at look year? million I a other was to the can squeeze half rate it. If the a the about of

Sean Pelkey

Ravi. Yes,

the intermodal issues shortages So, chain that was the driver the that storage supply been here. fees impacted truck talking are due in to about by we've that,

here But quality the of it on in quarter. those really half. So, second that's the happens persistence I with think And then year? hit course, does continue impact what driver you've into fundamental got second revenue in the that second the half depends of issues. the will of the the other that

don't So forget about well. as that

Ravi Shankar

you. Thank Perfect.

Operator

Jon from question Your next with Evercore. comes Chappell

line open. now Your is

Jonathan Chappell

to three new having Kevin, what their for rail, seat, cost your just pitching take afternoon, as your business? your rail start for to bit a are a you Good quick you. opportunity benefit the benefits, the everyone. time, emissions from going having in a side, using their interest you addition first in Thank scope of wallet one as in either more an mission the for give [ph] to are more or well to impact

Kevin Boone

solve can and the to definitely to you, the high executive from I flow with from easy deck the when moved And we're and our of buyers, an marketing realized environmental I transportation think tell the they to priority. solution that’s we fits level customers. discuss through starting that. top, Well, down to And, coming the front an initiative it's to

to team I've to something asked it's press. the So sales continue

resonated, discussion in frankly. forward, are quite have we incorporating every it's going We and

the trends don't a that I huge so That's when you huge, help have think fixed soon. And it's the gets driver about continue going that and advantage Investors a grow. environmental things for are us. We think into anytime the grow then powerful, I have it CSX can all to shortage. you going it secular forward, have Very, supply the seen the We've want the capacity market. it. market will side. and in very all happened to

Our employees want it. it wants the and our consumer customers and

to So going pretty We're and it's it's something continue incredibly exciting. I'm it passionate sell to about.

Jonathan Chappell

like you it think future? Have it's more immediate or translate the do yet you of seen just

Kevin Boone

-- win but winning another more hard reason truck. we're It's friendly environmentally always business it's business measure, that think today. to because than I the it's we're we

it's business, as why know perspective I to that. deliver we're go responsibility and are factors why just, is have The capacity capacity obviously most capacity have it winning is out on continue can other grow to From we're I'm year. tailwinds confident all going that we – along into my capacity, in a and team those we best will our growth don’t It Jamie the the next to and But, we're customers the our reason, winning to with constrained, going to we're recover, into simple the going there. to recover. play going market. so, offer operating --

Jonathan Chappell

Kevin. Thanks, it. Got

Operator

Research. from last Jeff question Your comes with Kauffman Vertical

is line Your open. now

Jeffrey Kauffman

to for market because right much have very at side, the to be this you focus side you been customer point. seems questions all that in the squeezing just thank But Jim, the in. and me now. Thank Sadly, intelligent back asked come me let a

the ability you well and that service should asset you I people would when challenge that longer much yes all internally issues this your you transport XXX the fixed, much what's to be the How our talked element of had are want could you every back Because to trip equipment by or and could and going of let's handoffs on service T&E you of that little just holding you the but and than had partners. on, If they to equipment today, railroad the companies, our the tell talk put getting or how plan customers fix wanted? in to about summer, just say they other if me, trouble some with we've a had solve? getting timely you would

James Foote

reliability on that in terms able it better. employee up trip help the so number, thing, shortage of The our making the sort it so that's majority drive that of we can will of It's but our going our supply will employee and it's call the compliance again, vast and congestion and correct chassis, be Nirvana, noise therefore Engine get velocity, service to not issue, not to back it draining containers issue, to or correct a will and will chain. will still as up have Train and and port or was, but it shortage what us focus being show the better product improve will issues we clean certainly There plan even where of of to our going in overall the improve a dwell. not of down we

Jeffrey Kauffman

be internally lion's Okay, getting share need say to more you would resources? with you so you something to handle of the can where is

James Foote

years always mean, I changing, mean capacity up over this we've company fundamentally that. said I changing we've almost we've by way network. now, the -- the Yes, freed the across last four runs

so capacity. growth track of can amount capacity significant have add investing in we We track without

available. said have Jamie earlier, As locomotives we

have standby. We on locomotives

We have them. we locomotives in storage to use need if

workforce, like business was, if hire, didn't during because pandemic country, the problem went figure it's like certainly performance had the pandemic. a our right we in yes, to is the say ways, can the occasional But in in exclusively, or out else I now the you our we when impediment primarily hurricane. replenish hire everybody primarily, to throw We So pandemic primarily to if I'd business, the because this to not have away.

X% we back, workforce We X% hire they're more our have plus retires growth. of our retired, bit available. back thought, And to year. X% that workforce the the business bounced our of every handle okay, employees we'll of not little a

So yes, it longer get the did running we'll way just get and we'll railroad fix taking expected even done, the be us back better. It's we and than when that. will we it that before

Jeffrey Kauffman

Okay, you team very environment. to and Thank a congratulations in challenging your you.

James Foote

Thank you.

Operator

questions at further joining. for This conference time. no today's are concludes you Thank There this call.

may now You disconnect.