CSX Corp (NASDAQ:CSX) Q2 2019 Earnings Conference Call - Final Transcript

Jul 16, 2019 • 04:30 pm ET


CSX Corp (NASDAQ:CSX) Q2 2019 Earnings Conference Call - Final Transcript


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James M. Foote

volumes as growth in domestic industrial markets was more than offset by export and utility declines. Finally, lower other revenues was primarily due to decreases in the mortgage charges and intermodal facilities.

Let's move to slide 7. Employee safety remains my top priority. We were again, the best in the industry FRA personal injury rates and set a new company record for the lowest number of FRA reportable train accidents this quarter. We're also finding new ways to utilize technology to further enhance safety. As one example, the use of automated track inspection cars help to reduce track cause mainline [Phonetic] accidents by 85% year-to-date. While I'm pleased with this progress there is always opportunity to operate more safely and we will work diligently to make our area the safest it can be.

Let's turn to Slide 8, and take a quick look at our operating performance. On the service side, velocity and dwell improved by 14% and 6% respectively. We also set another US Class I record this quarter by operating below one gallon of fuel per thousand hours [Phonetic] per miles as we continue to find new and incremental ways to improve efficiency and drive on productive cost out of the system. Most importantly our approved operations are transferring to better outcomes for customers. We dramatically improved our trip plan compliance over the last year and are seeing strong momentum exiting the quarter. We continue to hit new records and add some [Indecipherable] tightening the schedule in the form of shorter trip plans. We plan to roll-out our trip plan compliance data to our customers later this year and look forward to the opportunities the increased transparency will provide us to engage more deeply with them.

With that, I'll hand it over to Kevin, who'll take you through the financials.

Kevin Boone

Thank you, Jim, and good afternoon, everyone. Turning to Slide 10, I'll walk you through the highlights of the summary income statement. As Jim mentioned, toll revenue was down 1% in the second quarter, but the impact of lower volume, particularly in intermodal more than offset pricing gains across most of our markets.

Moving to expenses. Total operating expenses were 3% lower in the second quarter, reflecting continued strong efficiency gains. Labor and fringe expense was 3% lower, driven by a 5% reduction in headcount combined with favorable incentive compensation expense. These savings were partially offset by inflation and other items.

The operating team continues to drive efficiencies in a number of areas highlighted by fewer crew starts down 5% and lower T&E [Phonetic] overtime. Recruits are also down 77%, a significant improvement year-over-year. Active locomotive count declined more than 300 locomotives, down 11% year-over-year. The smaller fleet combined with fewer cars online and freight car repair efficiencies, helped drive a 6% year-over-year reduction in our mechanical workforce. MS&O expense improved 3% versus the prior year. Lower active locomotive count, thrift savings, materials and contracted services. Train accident culture also favorable in the quarter of the FRA train