CSX Corp (NASDAQ:CSX) Q4 2019 Earnings Conference Call - Final Transcript

Jan 16, 2020 • 04:30 pm ET

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CSX Corp (NASDAQ:CSX) Q4 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good afternoon, ladies and gentlemen, and welcome to the CSX Corporation Fourth Quarter 2019 Call. As a reminder, today's call is being recorded. During this call, all participants will be in a listen-only mode. Following the presentation, we will be conducting a question-and-answer session. [Operator Instructions] For opening remarks and introduction, I would like to turn the call over to Mr. Bill Slater, Chief Investor Relations Officer for CSX Corporation, you may begin.

Executive
Bill Slater

Thank you, and good afternoon everyone. Joining me on today's call are Jim Foote, President and Chief Executive Officer; Mark Wallace, Executive Vice President of Sales and Marketing; Kevin Boone, Chief Financial Officer; and Jamie Boychuk, Executive Vice President of Operations. On Slide 2 is our forward-looking disclosure followed by our non-GAAP disclosure on Slide 3.

With that, it is my pleasure to introduce, President and Chief Executive Officer, Jim Foote.

Executive
James M. Foote

Thank you, Bill, and good afternoon. I want to begin by thanking all of our CSX employees for another great job this quarter. They continue to show that they are the best operators in the industry. For both the fourth quarter and full year, they once again broke their own records and set new all-time low operating ratios. Our service is the best it has ever been and getting better. The key here is reliability. Our [0:01:23] operating a simpler, more efficient network, we are able to offer rail users a service that is truck-like inconsistency, but with lower cost and more environmentally responsible. More shippers are selecting us for their shipping needs when we have tremendous opportunity for growth.

Let's now turn to Slide 5 of the presentation. Our financial results are straightforward with only a few unique items, which Kevin will point out in a few minutes. Fourth quarter EPS declined 2% to $0.99. The operating ratio improved by 30 basis points to a new record of 60% as continued operating momentum offset top line headwinds. For the full year, EPS increased 9% to $4.17, and the operating ratio improved by 190 basis points to 58.4%. These are truly great results considering the industrial economy's second half performance.

Turning to Slide 6. Fourth quarter revenue declined 8% year-over-year, due to the continued impact of the softer industrial economy, intermodal lane rationalizations and coal headwinds. Merchandise revenue and volume declined 3% as growth in Ag and Food & Minerals markets was more than offset by declines in chemicals, auto and other markets. The Philadelphia refinery explosion and GM strike accounted for more than two-thirds of the volume declines in the quarter. Intermodal revenue declined 9% on 7% lower volume, primarily due to the impact of lane rationalizations implemented around the 2018 peak season. We have now lapped the impact of these changes. Coal revenue decreased 22% on 17% lower volumes with declines in both export and domestic markets, due to the impact of lower export demand and benchmark prices, as well as low natural gas prices. Lastly, other revenue declines resulted from lower storage revenue at