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CSX Corporation (CSX)

CSX Update Call

December 15, 2017 07:30 AM ET

Executives

Kevin Boone - Chief Investor Relations Officer

James M. Foote - Acting CEO

Analysts

Brandon Oglenski - Barclays

Ken Hoexter - Merrill Lynch

Christian Wetherbee - Citigroup

Tom Wadewitz - UBS

Scott Group - Wolfe Research

Brian Ossenbeck - JP Morgan

Amit Mehrotra - Deutsche Bank

Walter Spracklin - RBC Capital Markets

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the CSX Corporation Update Call. As a reminder, today's call is being recorded. During this call, all participants will be in a listen-only mode. Following the opening remarks, we will be conducting a question-and- answer session. [Operator Instructions]

I'd now like to turn the call over to Mr. Kevin Boone, the Chief Investor Relations Officer for CSX Corporation. Thank you. You may begin.

Kevin Boone

Thank you, Caroline. Before we get started, I’d like to refer everyone to our forward-looking statement disclosure, which can be found on our company Web site. The purpose of today's call is to discuss last night's press release announcing Chief Executive Officer and President, Hunter Harrison, is on medical leave. Yesterday the Board appointed Chief Operating Officer, Jim Foote, as acting CEO.

I will turn over the call to Jim but before I start -- before we start, I would like to remind everyone that we have a busy today, and we will try to get to all your questions, but I'll be available after the call. Jim?

James M. Foote

Thank you very much, Kevin. Good morning everyone. This is Jim Foote. I’m here in Jacksonville with the senior leadership team, Frank Lonegro, the CFO; Nathan D. Goldman, our Chief Legal Counsel and Mark Wallace, our EVP of administration.

You’ve all seen the news that we released yesterday. I know there are a lot of questions regarding the status of Hunter's health and what that means. Here is what I can say, two weeks ago I participated with Hunter at the Credit Suisse Investor Conference. Last week, Hunter, personally conducted a multi-day Hunter Camp, but sometime after that he became ill and that lead to complications and he is now on medical leave. Beyond that, our respect his family, that's all we can say at this time. That said, on behalf of the entire CSX team, I'd like to again extend my well-wishes to Hunter and his family.

As you know I worked with Hunter for 11 years at the Canadian National, and now over the last couple of months here at CSX. I am always amazed at Hunter's vision and by his ability to transform railroads through the implementation of precision scheduled railroading.

Simply put, the plan works and most importantly Hunter knows how to position people to effectively work the plan. Although I followed CSX -- the CSX story prior to my arrival and never really fully know what to expect until you’re rooted in an organization. After spending some time with this group, I have discovered an outstanding team of railroaders. This company has a great mix of CSX veterans, supplemented by others from other railroads who know how to implement and execute the precision scale scheduled railroading operating plan.

Once joined CSX, I realized just how much progress has been made replicating the transformation we effected at Canadian National some years ago. I believe that the battleship here has turned. The precision scheduled railroading framework has been put into place and the company has the critical railroad challenge sufficient to follow through and execute on the PSR operating plan, because the team has implemented a foundation consistent with Hunter's vision, I do not see any reason to diminish our expectations concerning the pace and magnitude of our future progress.

My experience has shown me that there are two phases to the implementation of scheduled railroading. The first phase of the implementation of the new operating plan across the company's network, the replacement of the company's traditional operating plan with the new scheduled railroad plan. This require significant changes to the way the company operates from top to bottom.

Hunter forced the change and operating practices, made significant changes to the CSX network, including closing 8 hump yards and other facilities and probably most importantly instilled a new railroading culture, a culture that has everyone focusing on improving customer service, driving asset utilization and controlling cost. Again, it is astonishing how fast he has done it, faster I believe than the change that occurred at CP and I know having experienced it much faster than we did it at CN.

The second phase of the implementation of PSR is the daily -- is the pure daily execution of the railroad operating plan. Strict adherence to the plan, which drives performance is clearly underway across the network. Our performance metrics show the rate of change, train velocity in car dwell have significantly improved over last year.

Train velocity is nearly 18 miles per-hour, a 19% improvement over last year and car dwell dropped to 9.8 hours, which is 13% better than last year and we are seeing improvements in every other part of the company. There is still much more work to be done here, but again everyone is focused.

As a 40-year veteran of the railroad industry and someone with a long history with implementing precision scheduled railroading, I say with great certainty that we have a strong operating plan at CSX to deliver value to customers and shareholders. CSX railroaders know what we have to accomplish each day. When we need to make adjustments, we will make them quickly and communicate them effectively to our teams and our customers.

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