Posts Tagged ‘CSX work force’

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.

No Turning Back, Foote Says

January 18, 2018

New CSX CEO James M. Foote wanted to make one thing clear. On his watch there will be no turning back from the commitment made to precision scheduled railroading that the late E. Hunter Harrison brought to the carrier last year.

James Foote

During a conference call on Wednesday to discuss the railroad’s fourth quarter financial results, Foote praised Harrison and said CSX would not be where it is today without him.

“I am committed to seeing his vision through and making CSX the best railroad in North America,” Foote said.

Speaking during the same conference call the newly-appointed CSX vice president of operations, Edmond Harris, said the carrier will continue what Harrison started, including operating fewer trains, putting more locomotives into storage, moving the same tonnage with fewer freight cars, and having a more fluid network.

“The table has been set,” Harris said, saying CSX will take advantage of technology and boost the use of distributed motive power.

Foote said he made changes to the sales and marketing structure to simplify the organization by reducing the leadership group to three business units and aligning certain functions into other departments.

He said he also implemented changes in the operating department at the staff and field levels in order to achieve more efficient operation and achieve service improvements.

Foote noted that one of his first moves as CEO was to order the hump to be razed at Tilford Yard in Atlanta.

The yard, which remains open as a flat switching facility, was one of eight hump yards that were converted last year.

As for what the future holds for CSX operations, Harris said that he favors run-through interchange trains and would like to see CSX bypass the Belt Railway of Chicago by running merchandise trains directly to BNSF and Union Pacific.

He will also seek partnerships with short lines railroads and other Class I carriers to create shorter, more efficient routes.

CSX will study creating directional running for longer trains and will continue to build longer trains pulled by fewer locomotives per train.

Foote said CSX will make it a priority to improve its on-time performance, which was just 56 percent in the fourth quarter of 2017.

Calling that unsatisfactory, Foote said CSX plans to create schedule plans for every carload as a way to improve on-time deliveries.

Foote acknowledged that the rapid changes that Harrison ordered at CSX before his death last Dec. 16, disrupted operations, resulting in angry shippers and additional regulatory oversight.

The railroad also lost some traffic, but Foote predicted that most of it will return. “We are seeing some of those customers return already,” Foote said.

However, CSX doesn’t expect to recoup the 7 percent loss it suffered in domestic intermodal business after it closed its Northwest Ohio Intermodal Terminal and ditched the hub and spoke strategy toward building intermodal traffic.

CSX’s intermodal strategy will be built on increasing container traffic to East Coast ports and not on seeking to develop low-volume service lanes.

Capital spending will fall by 20 percent to $1.6 billion in 2018 on top of a 25 percent cut last year.

That prompted some analysts on the conference call to express concern about CSX’s ability to maintain its infrastructure.

In response, Chief Financial Officer Frank Lonegro said CSX will spend $1.4 billion this year on track maintenance, which he said is about the same as it spent in previous years.

Lonegro said most of the curtailed capital spending would have been for new locomotives and freight cars. But with 900 locomotives in storage, and 20,000 cars sidelined, he said it would be many years before CSX needs to buy more rolling stock.

Looking ahead to a March 1 investors conference, CSX executives said they did not want to provide many details about their expectations for this year and beyond other than they expect the operating ratio to improve due to operations improvements and efficiency gains.

However, they did say that CSX expects to reduce its payroll by 2,000 people this year and that it ended 2017 with 3,282 employees than it had on the last day of 2016. CSX now employs 24,000. CSX also reduced the number of consultants that it hired by 1,418.

CSX Says 2nd Quarter Profits Fell 20%

July 16, 2016

A 34 percent decline in coal traffic played a major role in CSX seeing its second quarter profit drop by 20 percent.

Earnings per share for the quarter declined 16 percent to 47 cents on revenue of $2.7 billion. The net earnings of $445 million is a 20 percent decline from the second quarter of 2015.

CSX logo 3“This continues to be a challenging environment,” CEO Michael Ward said during the company’s earnings call.

CSX saw a 9 percent decline in overall traffic volume with every traffic category posting losses except for minerals and automotive, which were up 13 percent and 1 percent respectively.

CSX did manage to reduce expenses by 9 percent during the second quarter, but its revenue fell by 12 percent.

The railroad said it had efficiency gains of $96 million for the period, lower volume-related costs of $86 million, and $56 million from reduced fuel prices.

The operating ratio was 68.9 percent compared with 66.8 percent for the second quarter of 2015.

Chief Financial Officer Frank Lonegro said during the call that CSX expects to produce nearly $350 million of efficiency savings this year, which is an improvement of the original target of more $250 million.

Lonegro said CSX will continue to “turn over every rock” in an effort to bring expenses in line with revenue.

Among the measures CSX has taken to cut costs are mothballing 350 locomotives.

It still plans to take delivery of 65 new locomotives this year, which means additional active engines are likely to be placed in storage. The new locomotives were ordered in 2014.

CSX Chief Operating Officer Cindy Sanborn said the CSX active locomotive fleet has been reduced by 10 percent, which she said is in line with the decline in gross ton miles.

“I doubt you would see us in the market for new locomotives” in 2017 and 2018, Lonegro said.

Lonegro said CSX will probably rebuild some of its four-axle units used for switching and local service.

The employee head count for the quarter was on average 4,489 less than it was in 2015 for the same period.

Railroad executives said operational performance improved with on-time originations hitting 88 percent during the second quarter, which they said is a 33 percent improvement. On-time arrivals were 69 percent, a 44 percent improvement.

Ward said that “service continued to meet and exceed customer expectations.”

Fredrik Eliasson, chief sales and marketing officer, said that in a lower volume business climate improving service is critical to maintaining strong pricing.

Sanborn said CSX is trying to strike a balance between maintaining service levels and cutting costs by implementing such measures as running longer trains and using variable scheduling, Sanborn said.

“We are making the right tradeoffs between productivity and service,” Eliasson said.

CSX expects to see full-year volume and earnings declines with the third quarter presenting major challenges.