Posts Tagged ‘E Hunter Harrison’

CSX Converts Cumberland Hump to Flat Switching

May 22, 2017

As expected, CSX last week converted its hump yard in Cumberland, Maryland, to flat switching.

It is the fifth such yard to have its hump closed since E. Hunter Harrison became CEO in March and implemented his precision scheduled railroading operating philosophy.

Among other things, that approach looks with disfavor upon hump yards in the belief that they add cost and transit time to freight movements.

Other hump yards that have been converted to flat switching are located in Toledo, Ohio; Louisville, Kentucky.; Hamlet, North Carolina; and Atlanta.

A memo sent to CSX employees last week indicated that the hump at Selkirk, New York, will also be closed in favor of flat switching.

The remaining CSX hump yards are in Waycross, Georgia; Birmingham, Alabama; Nashville, Tennessee; Cincinnati; Avon, Indiana (Indianapolis); and Willard, Ohio.

CSX managers have indicated that those yards are being evaluated and that the railroad expects it could have between two to four hump yards left in its system once that review is completed later this year.

Trains magazine reported that when CSX closes a hump, it does the flat switching on the receiving and departure tracks. The classification bowl tracks stand empty.

The railroad said track and switches from the classification bowls will in time be used elsewhere.

Harrison Has Medical Condition That Often Has Him Working From Home, Not CSX Headquarters

May 19, 2017

The Wall Street Journal reported this week that CSX CEO E. Hunter Harrison has a medical condition that often forces him to work at home.

E. Hunter Harrison

The newspaper gave few specific details about the condition and the 72-year-old executive said that he should not be judged by his medical record.

“I’m having a ball and I’m running on so much adrenaline that no one can stop me,” Harrison told the Journal. “Don’t judge me by my medical record, judge me by my performance.”

Harrison acknowledged that he carries a portable oxygen system, but his doctors cleared him for his position.

“There are times when I get a little shortness of breath so I take oxygen and it helps,”
Harrison said.” Sometimes I get a cough and the oxygen makes it go away.”

CSX Chief Financial Officer Frank Lonegro told an investor conference that Harrison is fully engaged in his job.

“We’re really running to play catch up with him,” Lonegro says. “He’s a 24-hour-a-day, seven-day-a-week kind of guy.”

Trains reported that CSX was well aware of Harrison’s medical condition when it hired him.

However, that was a point of contention at one point when CSX demanded that independent physicians review Harrison’s medical records, a request that Harrison refused.

CSX said it would not comment on Harrison’s health.

The Journal said that during his last two years at Canadian Pacific, Harrison frequently worked from home rather than in his CP office in Calgary.

2 More CSX Humps Set to Close

May 16, 2017

Add Selkirk and Cumberland to the list of humps that CSX plans to close.

An online report said the Cumberland hump will close on May 16. Five of the bowl tracks will be kept, but the other tracks will be out of service or used for storage.

The changes will mean that only Q372, Q398 and Q401 will originate in Cumberland. Terminating in Cumberland will be Q236, Q352 and Q400.

Other trains will make pickups or setoffs, including Q236, Q353, Q375, Q389 and Q416. Some trains will merely change crews in Cumberland.

The Times Union of Albany, New York, reported that members of the Brotherhood of Locomotive Engineers and Trainmen received a memo about the hump closing at Selkirk, New York.

The memo said that CSX management believes the yard costs too much to operate and some of its work will be shifted to other yards, including Syracuse, New York.

The news report did not indicate how many employees would lose their jobs but Mark Krajewski, chairman of the union local, called the move “heartbreaking.”

CSX has been closing humps at yards in the wake of E. Hunter Harrison taking over as the railroad’s CEO and implementing his precision scheduled railroad operating philosophy.

The railroad earlier said it would close humps in Atlanta; Louisville, Kentucky; and Toledo, Ohio. CSX officials have yet to confirm the closure of the Selkirk hump.

The Times-Union said Selkirk yard was the largest in the New York Central system.

Harrison views hump yards as inefficient and closed at least four of them during his time as CEO of Canadian Pacific.

CSX Makes Best Corporate Citizen List

May 5, 2017

CSX was named to the list of Best Corporate Citizens in 2017 by Corporate Responsibility Magazine.

The railroad ranked 55th and was the only rail company in the top 100. It is the fifth time CSX has made the list.

“CSX is committed to making a positive impact through our efficient, sustainable and environmentally friendly transportation of essential goods and products,” said CSX CEO E. Hunter Harrison in a statement. “Being a good corporate citizen is about making good decisions for our shareholders, our customers, our employees, and the communities where we operate, and we are proud of this recognition.”

The list has been compiled for 18 years using the Russell 1000 Index. Relative rankings were based on 260 data points of disclosure and performance measurements across seven categories: environment, climate change, employee relations, human rights, governance, finance, and philanthropy and community support.

Mantle Ridge Pushes CSX Stockholders to Vote ‘Yes’ On Additional Harrison Compensation

April 26, 2017

The campaigning has begun to win the votes of CSX shareholders as to whether new CEO E. Hunter Harrison should be reimbursed for the money he gave up when he retired early from Canadian Pacific.

Not surprisingly, the hedge fund Mantle Ridge is supporting giving Harrison the money. Mantle Ridge lured Harrison away from CP by promising to pay him what he would give up by leaving early. Now Mantle Ridge wants to be reimbursed for what it paid Harrison.

Mantle Ridge has launched a website, www.csxadvisoryvote2017.com to make its case.

“We believe that Mr. Harrison is the most effective and successful railroad leader of our times, having led the dramatic turnaround of three major railroads over the last 25 years,” Mantle Ridge founder and CEO Paul Hilal wrote in a letter to shareholders. “In those undertakings, he drove operating ratios to industry-leading levels while delivering total shareholder returns of 450 percent, 353 percent, and 319 percent, respectively.”

CSX stockholders will vote at the annual meeting on June 5 in a non-binding referendum on the reimbursement. Harrison has said he will resign if he doesn’t get the additional compensation.

The referendum seeks approval for CSX to pay Mantle Ridge $55 million and Harrison $29 million, which would pay his tax bill.

Hilal said the cost of the reimbursement amounts to less than 12 cents per share.

Papers filed with regulatory authorities last week indicate that Harrison gave up $89 million in salary and benefits to win release from his CP contract.

Many analysts expect the referendum to win approval because of the value that hiring Harrison has added to CSX stock.

The shares jumped in value by $12.91, an increase of 35 percent, after CP said it would allow Harrison to retire early.

The value of CSX stock rose against last week after the company announced its first quarter 2017 financial performance.

The CSX board of directors has not taken a position on the Harrison compensation referendum, but before hiring him the board had expressed concern about the size of the compensation package that he wanted.

The board did approve a statement to stockholders outlining the pros and cons of voting in favor of the compensation.

After acknowledging Harrison’s track record at Illinois Central, Canadian National and CP, the advisory noted that other side of the argument is that there is a risk that Harrison won’t be able to serve the full four years of his contract due to the potential for death, disability or other reasons.

It also said that Harrison may not be able to achieve results similar to those at IC, CN, and CP.

The board said it would take the referendum into account and “ . . . act promptly in the exercise of its fiduciary duties with respect to whether to commit to the reimbursement after the shareholders have voted.”

CSX Declares 11% Dividend for 1st Quarter

April 25, 2017

CSX last week declared an 11 percent increase in its quarterly dividend while also announcing that it will spend $1 billion to buy back shares of its stock.

The railroad expects to issue financial guidance as it applies the precision railroading model to its operations.

The quarterly dividend, which increased from 18 cents to 20 cents, is payable on June 15 to shareholders of record as of May 31.

“Although we are just in the beginning phase of making changes to our network, we are off to a great start,” said President and Chief Executive Officer E. Hunter Harrison in a news release. “These changes are critical to driving strong, sustainable service for our customers and superior value for our shareholders.”

During 2017, CSX said that it expects to achieve record gains in efficiency and a step-function improvement in its key financial measures this year given continued economic growth and stable coal markets.

It predicted that its operating ratio for the year will fall in the mid-60s and earnings-per-share will grow 25 percent off the 2016 reported base of $1.81.

CSX said that the stock buyback program should be completed by the end of the first quarter of 2018.

Harrison is the New CSX President, Too

April 24, 2017

E. Hunter Harrison has added another title to his resume at CSX. He is now the president of the company as well as its chief executive officer.

Harrison replaced Fredrik Eliasson, who was named CSX president on Feb. 21 after serving as the railroads’s chief marketing officer.

Eliasson will now become executive vice president and chief sales and marketing officer for CSX.

The moves in the executive suite mean that CSX has had three presidents in less than four months.

The year began with Clarence Gooden as president. The original plan was for Gooden to step down at the end of May when then-CEO Michael Ward also would retire.

Harrison assumed the CEO post on March 6. The good news for Eliasson is that he will get to keep the pay increase that he received when he was named president.

“There were no compensation adjustments associated with these title changes,” CSX said in a regulatory filing.

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 May be Ready to Reopen ex-Clinchfield Line

April 13, 2017

With hump operations closing, CSX is seeking alternative routes to move traffic, which has caused it to look at the dormant former Clinchfield line between Russell, Kentucky, and Bostic, North Carolina.

Trains magazine reported this week that an empty tank car train ran north on the ex-Clinchfield, which the railroad’s previous management had closed last October.

At the time, CSX said it was concentrating on a triangle of routes linking New York and Chicago, Chicago and Florida, and Florida and New York.

It is not publicly known yet if new CSX CEO E. Hunter Harrison and his team will continue to follow the CSX of Tomorrow strategy implemented during the administration of Michael Ward.

Since Harrison became CEO last month, CSX has closed three humps in favor of flat switching at yards in Atlanta, Louisville, Kentucky; and Toledo.

Until it was idled, the Clinchfield had hosted about a dozen coal trains a day as well as a few manifest and intermodal trains.

CSX Sets Annual Meeting for June 5

April 5, 2017

Under normal circumstances, the CSX annual meeting, which has been set for June 5 in Richmond, Virginia, would mean little except to the company’s shareholders and those who take a keen interest in the activities of the railroad.

But among the issues to be decided at the meeting is whether CSX should reimburse hedge fund Mantle Ridge the $55 million that it paid CSX CEO E. Hunter Harrison to retire early from Canadian Pacific. In doing that, Harrison forfeited various bonuses from CP.

If the shareholders vote against paying Mantle Ridge, Harrison has said he will step down as CSX CEO.

Harrison is also demanding $29 million from CSX and wants it to pay for a tax bill that he has incurred.

Many observers expect CSX shareholders to approve the compensation demands because CSX stock has risen 30 percent in value since word got out that Mantle Ridge was seeking to install Harrison as CSX CEO.

The CSX board of directors has not taken a position on how shareholders should vote other than to note that there are arguments for and against giving Harrison the money he wants.