CSX Corporation (CSX)’s Fourth Quarter 2014 Earnings Conference Call Transcript

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Operator

Thank you. The next question is from John Larkin with Stifel Nicolaus.

David Baggs

Good morning, John.

John Larkin, Stifel Nicolaus

Hi, good morning, gentlemen. Thanks for taking the question. Just with the service levels having remained stable but maybe not where you’d like to see them or your customers would like to see them, what was the decision thinking behind keeping your CapEx just a little bit greater than last year? There was one railroad in the West that dramatically increased their CapEx. Why didn’t you decide to do that to try and accelerate the service recovery?

Michael Ward

Well, I think we took it up slightly and that’s really a reflection of the fact that we do need to get the power and that’s where the biggest area is for opportunity to make an impact on the service recovery. So maybe we could have gotten more locomotives but the reality is we can’t get more locomotives right now. But even with the locomotives we’re getting and our internal repair opportunity because we do have a fair amount of locomotives internally that we’re bringing back in the revenue service that perhaps other railroads might not have that opportunity and that’s a cheaper form of capacity than buying new ones.

John Larkin

Got it, thanks and then as a follow on to the service related issues, some of the service problems I guess are caused by issues beyond your control, that is, all the connecting traffic over Chicago. Can you talk a little bit about how Chicago is operating now and how the railroads have worked together to try and increase the fluidity over that critical hub?

Oscar Munoz

John, it’s Oscar. You know what? We’ve had, knock on wood, a good almost 11 plus weeks where Chicago has been on what we call a “normal alert level” and so that’s the good news. The communication and coordination you referred to, we’ve always known it’s been critical, it’s been ramped up both at the most senior levels of the industry but also at the local level with that Chicago terminal coordinating office and the efforts around that, and so everybody is working closely around that. We’ve had a couple of fits and starts. Chicago was incredibly cold last week. We mustered through that. We all take our turns in the barrel of being a little struggling through various interchange points. But by and large, the industry, the entire industry, is working very closely and very well so far with that. Now, the next few weeks we’ll test again and of course when volume returns in the spring peak, Week 9 or so, we’re focusing on that but so far so good, John.

John Larkin

Appreciate it, thank you.

Operator

Thank you. The next question is from Baskin Majors with Susquehanna Financial.

David Baggs

Good morning.

Baskin Majors, Susquehanna Financial

Good morning. You’ve talked before about the intermodal margins and your portfolio rising to level fairly in line with the rest of your business with the exception of coal and chemicals. Can you just give us a little update on where intermodal margins are tracking directionally versus your other businesses today, and whether or not the big drop in diesel prices can impact the profitability of intermodal going forward?

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