CSX Corp (NASDAQ:CSX) Q3 2020 Earnings Conference Call - Final Transcript

Oct 21, 2020 • 04:30 pm ET


CSX Corp (NASDAQ:CSX) Q3 2020 Earnings Conference Call - Final Transcript


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Good afternoon, ladies and gentlemen, and welcome to the CSX Corporation Q3 2020 Earnings Call. As a reminder, today's call is being recorded. [Operator Instructions] 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, Head of Investor Relations for CSX Corporation.

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.

James M. Foote

Thanks, Bill, and thank you to everyone for joining today's call. The last six months have truly been surreal. On last quarter's call, we discussed the largest and most rapid sequential volume declines in CSX's history. Now, just three months later, record sequential increases. Think about that, volume declines and increases twice as steep as the largest wins we experienced in the great recession in a span of just a few months.

Managing this historic volatility is incredibly difficult, and I am extremely proud of the dedicated men and women of CSX, as they continue to deliver against these challenges. Their hard work allowed us to efficiently absorb the record rebound in volumes, while maintaining high level of service. This level of execution requires a commitment, in coordination of the entire organization. Throughout this period, it has been inspiring to see CSX employees band together to reassess every aspect of the business and figure out where we can be even better. We are already seeing the benefits of these efforts in this quarter's results and we'll continue to do so in the years to come.

Now let's go to Slide 5 for an overview of our financial results. Second quarter EPS declined a 11% to $0.96, and our operating ratio of 56.9% remained in line with last year's record results. Maintaining these record efficiency levels, despite the combined headwinds from the pandemic, significantly weaker coal markets and approximately 250 basis points of unfavorable margin impact from lower real estate gains is truly impressive.

Moving to Slide 6. Third-quarter revenue declined a 11% and 3% lower volumes, due primarily to reduced industrial activity, as a result of the pandemic. Merchandise revenue declined 7% and 5% lower volumes with all end markets experiencing volume declines. Intermodal revenue was flat on 7% higher volumes, as growth in both domestic and international volumes from inventory restocking and a tightening truck market, were all -- were mostly offset by declines in fuel surcharge revenues. Coal revenue decreased 36% and 27% lower volumes, as the coal business continues to be negatively impacted by reduced electrical demand, lower industrial production and lower global benchmark prices. Other revenue was down 12% due to lower affiliate revenue