Posts Tagged ‘CSX capital spending’

CSX Aims for 60% Operating Ratio by 2020

March 2, 2018

CSX executives told an investor’s conference in New York City this week that the carrier will continue paring its locomotive and rail car fleets, and reducing its employment ranks as it works toward reaching an operating ratio of 60 percent by 2020.

Along the way the railroad expects revenue to grow at a compound annual rate of 4 percent.

The carrier also expects to trim capital expenses over the next three years.

If all goes to plan, the higher revenue, lower costs, and reduced capital expenses will allow CSX to generate $8.5 billion in free cash flow, a $5-billion increase over the previous three-year period, and that cash will be put into the pockets of stockholders through a $5 billion stock buyback program and higher dividends.

“Today marks the beginning of a new chapter for CSX, and we’re confident we have the right plan and the right team in place to achieve our goal of becoming the best railroad in North America,” said CEO James M. Foote. “The foundation of scheduled railroading has been set, and we expect to identify real growth opportunities that will benefit shareholders as our changes take hold.”

CSX said that by offering faster, more dependable service it expects to better compete with trucks, charge higher rates, and grow intermodal and merchandise traffic over the next three years.

Nonetheless, Foot acknowledged that he has had to apologize to shippers for service failures last year that occurred as CSX made rapid changes in its transition to the precision scheduled railroading operating model.

But Foote said the carrier has rebounded and that trains are moving 30 percent faster and freight cars are spending 22 percent less time in yards.

Capital spending will be trimmed to an average of $1.6 billion a year where it had been $2.5 billion three years ago.

“We are not reducing the emphasis on infrastructure and maintenance,” Chief Financial Officer Frank Lonegro said.

He said the railroad will install more miles of rail, replace more ties, and add more ballast this year than in 2017. Most of the decline in capital spending comes from withdrawing from buying locomotives and rolling stock and the completion of installation of positive train control.

Although CSX doesn’t expect this year to make such big changes as converting hump yards to flat switching facilities, the company did not rule out closing additional humps.

CSX expects that operating fewer and longer trains daily will enable it to do more with less.

At the start of 2017, CSX had 3,781 active locomotives. That fell to 3,000 by late last year and is slated to tumble another 20 percent to 2,400 units by 2020.

The railroad will cut its freight car fleet to between 104,000 and 109,000 cars. Officials say that speeding up the network and reducing car cycle times will enable this.

With fewer trains, fewer locomotives, fewer cars, fewer shops and fewer yards, CSX will also get along with fewer workers.

The payroll will be slashed to 21,000 employes by 2020, a 23 percent reduction from the 27,000 workers CSX had in late 2017. The latter number is also significantly less than what the railroad had at the start of the year.

Over the next three years, CSX expects to reap $300 million from selling surplus real estate and $500 million from the sale of rail lines.

CSX Vice President of Strategic Planning Amy Rice described the line sales as a by-product of broader network evaluation but did not provide any information as to how many miles it plans to sell.

She only would say that all lines under review will not necessarily be put up for sale.

CSX plans to add 600,000 units of lift capacity at six intermodal terminals during the next two years as it focuses on point-to-point service.

Lower-density intermodal traffic will be consigned to merchandise trains as CSX implements a balanced train plan with daily service.

CSX does not see a change in the long-term decline of coal traffic, but will work to move its coal traffic faster, more reliably, and more efficiently.


CSX 2018 Capital Plan Still Cloudy

January 16, 2018

CSX is still figuring out its priorities for capital spending.

Speaking last week at the National Railroad Construction and Maintenance Association conference in Los Angeles, Tod Echler, the railroad’s associate vice president, engineering, described the carrier’s 2018 capital plans as uncertain.

“We’re still figuring out where we want the capacity,” Echler said.

CSX has decided to continue upgrading and standardizing its 47 drawbridges, some of which are more than 100 years old and have outdated operating systems.

Another priority will be increasing clearances for auto rack cars.

With the onset of precision scheduled railroading at CSX last year, Echler said the railroad’s work window philosophy has changed.

Whereas workers once had 8- to 10-hour work windows, that has now been shortened to six hours.

“We took some projects that were scheduled for 24 hours and brought them down to 14 hours, and in some cases six,” he said.

Some major projects, most notably bridge replacement, are being done at night.

Last year CSX created 52 miles of new sidings or double track and installed 127 new turnouts.

Track workers used 470 miles of new or relay rail, more than 2.6 million ties, 23,740 bridge ties, and 5,400 switch ties. Workers also resurfaced 1,800 miles of track.

CSX 1st Quarter Net Income up 2%

April 21, 2017

CSX said on Thursday that its first quarter 2017 net income rose 2 percent to $362 million, or 39 cents per share.

In a news release, CSX said that discounting a $173 million restructuring charge, the adjusted earnings were 51 cents per share.

Those numbers compare with net income of $356 million, or 37 cents per share in the first quarter of 2016.

During the first quarter of this year revenue was up 10 percent to $2.87 billion compared with $2.6 billion in 2016.

CSX attributed the revenue growth to volume growth across most markets, overall core pricing gains and increased fuel recovery.

The railroad believes that its second quarter outlook is favorable because of anticipated growth in most markets, including agriculture and food, export coal, fertilizers, forest products, intermodal and minerals.

The business outlook is neutral outlook for automotive, chemicals, metals and equipment. The domestic coal market has an unfavorable outlook for domestic coal.

CEO E. Hunter Harrison said during a conference call that CSX expects to have an operating ratio in 2017 in the mid-60s, earnings per share growth of around 25 percent off the 2016 reported base of $1.81, and free cash flow before dividends of around $1.5 billion.

The CSX board of directors have approved a $1 billion share repurchase program, which management expects to complete by the end of the first quarter of 2018.

CSX began buying back shares of its stock in April 2015 and has spent $2 billion on that to date.

As for capital spending, CSX now expects to invest $2.1 billion in 2017, including approximately $270 million for Positive Train Control.

More than half of the 2017 capital spending will be used to sustain core infrastructure with the balance allocated to projects supporting profitable growth, efficiency initiatives and service improvements.

CSX trimmed its capital budget for this year by $100 million. Some planned capital projects are being paused as management continues to study its terminal and operating plans.

As expected, CSX plans to continue creating longer passing sidings, particularly in the Chicago-Florida corridor where train lengths are limited by 6,500-foot sidings.

Under the Michael Ward administration, CSX had announced plans to extending or add 27 sidings in that corridor. Harrison expects to move some sidings to create a longer siding elsewhere.

“If we have sidings that are too short for the longer trains, we’re certainly not going to leave those sitting in the ground and not being utilized,” he said. “We’ll pick up one 6,500-foot siding and move it 15 miles down the railroad and put it with another 6,500. We’ve got a 13,000-foot siding.”

Since Harrison took over as CEO last month, CSX has laid off 765 employees – about 3 percent of its workforce – and further announcements are expected of continued cost cutting initiatives.

CSX chopped a record $420 million of expenses in 2016 and expects to top that this year.

Among the expected moves will be consolidating the railroad’s nine divisions. Also likely to be consolidated are the nine dispatching centers CSX now operates.

The streamlining of operations will result in 550 of the railroad’s 4,400 locomotives being removed from service and stored by the end of the summer. CSX has already mothballed another 550 locomotives.  About 25,000 freight cars will be stored.

CSX wants to impose a balance of operations over seven days a week and reduce the average terminal dwell time from 26 hours to somewhere in the high teens.

During the conference call, Harrison suggested that he does not expect any mergers or acquisitions to occur during the four-year life of his contract.

CSX to Step Up Track Expansion in 2017

January 12, 2017

CSX plans to step up its track capacity expansion efforts in 2017.

CSX logo 1The company’s associate vice president—engineering, Tod Echler, told the National Railroad Construction & Maintenance Association convention this week that CSX will add 49 miles of new track in eight states as part of its capacity expansion projects.

He did not provide further details about other 2017 capital spending plans, saying only that track expansion will exceed what the railroad did in 2016.

Among the capital projects for this year is revamping the Howard Street Tunnel in Baltimore, a 1.7-mile single-track bore built in 1895. It will be enlarged to allow double-stack container trains to use it.

That project, for which CSX has yet to land all of the $1.3 billion funding, will take four to five years to complete.

In 2016, CSX added 20 miles of new track in four states and opened the first of its rebuilt Virginia Avenue tunnels. The second of those tunnels is expected to open in 2018, clearing the way for stack trains to operate between Chicago and Portsmouth, Virginia.

NS, CSX Outline 2016 Capital Spending Projects

January 9, 2016

Norfolk Southern and CSX laid out their capital spending plans for 2016 before an industry conference this week.

NS said its capital budget is $1.2 billion and includes installation of positive train control, 448 miles of new rail, 2.4 million new crossties and 2.4 million tons of ballast, $64 million for bridge construction and $15 million for contract bridge repair.

Other projects that NS plans to undertake include $125 million for new and continuing intermodal construction work, $50.7 million for capacity improvement work between Chicago and Conway Yard near Pittsburgh and $45 million for the North Carolina passenger capacity project.

NS also has budgeted work for the Indiana Gateway project, a public-private venture that has received $67 million from the Federal Railroad Administration. The project is seeking to alleviate congestion on the NS Chicago Line east Chicago.

A CSX presentation did not provide specific budgeted amounts, but instead focused on planned projects.
These include lengthening three sidings on the Main Line Subdivision (Louisville, Kentucky, to Nashville, Tennessee) and expanding Casky Yard in Hopkinsville, Kentucky.

CSX also has in the works several projects in the Richmond, Virginia, region plus the ongoing development of the National Gateway project to create double-stack clearance on a route linking Chicago with the East Coast.

Railroad officials said 14 of the 21 National Gateway projects have been finished and six are near completion.  However, the largest project, enlarging a tunnel under Washington, D.C., has just gotten underway.

The Louisville-Nashville route project seeks to make it possible to operate longer trains. Short sidings mean that trains are limited to 6,500 feet.

The Richmond projects include construction of two tracks that will enable trains to bypass Acca Yard.

CSX To Spend $2.5B in 2015 Capital Projects

January 30, 2015

CSX said that it plans to spend $2.5 billion in capital improvement projects in 2015 that it said will result in increased efficiency over its 21,000-mile network.

In particular, CSX will reopen a locomotive service facility in Buffalo, N.Y., and construct an intermodal terminal in Pittsburgh that will be part of the railroad’s National Gateway Project.

As part of the latter, CSX will also launch work on starting the enlargement of the Virginia Avenue Tunnel in Washington D.C., so that double-stacked container trains can use it.

Other highlights of the CSX capital budget for 2015 include:

  • Deployment of about 3 million tons of ballast.
  • Replacement of about 3.2 million crossties.
  • Replacing 500 miles of rail and resurfacing an additional 5,300 miles.
  • Repairing about 200 bridges.
  • The purchase and delivery of 200 General Electric ES44AH locomotives.
  • Rebuilding about 95 locomotives.
  • Rebuilding or purchasing about 3,300 railcars.
  • The purchase of 1,000 new containers.
  • Increasing clearances over 425 new miles to accommodate double-stack container trains..
  • Investing $105 million in technology enhancements.