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

Fredrik Eliasson

Baskin, this is Fredrik, yes. So if you look at the margins, when you exclude chemicals and coal, it’s pretty much in line with the rest of our merchandise business. Because of the fuel surcharge that we have in place in intermodal business that essentially mirrors the trucking industry, when you see price volatility, when prices comes down as they have done here on the fuel side, what happens is not so much that this is a volume play for the industry. It’s really the fact that our margins and intermodal business gets a little squeezed because we are more fuel efficient so more of the dollars from fuel surcharge in intermodal goes to the bottom line. Net-net for CSX , that’s not the case but just on intermodal business itself. So there is some margin squeeze when fuel comes down but it’s not significant and the statement that it’s in line with the rest of our business is still a true statement.

Baskin Majors

Okay, thank you for that color. Just one question on export coal and other pricing comps get much easier year-over-year as we go forward, what do you expect sequentially in 1Q as we think about that business?

Clarence Gooden

What do we expect sequentially in…

Baskin Majors

In export coal pricing?

Clarence Gooden

As far as the pricing goes we think it’s going to be flat.

Baskin Majors

Alright, thanks for the time guys.

Operator

Thank you. The next question is from Jeff Kauffman with Buckingham Research.

David Baggs

Good morning, Jeff.

Jeff Kauffman, Buckingham Research

Good morning, everybody. Thank you for taking my question. Mike, I have a question about a comment you made on your CNBC interview yesterday where you had mentioned that the suppliers that you were working with out of Bakken to ship the crude by rail to the East Coast, you had thought that at $35 oil they could be competitive. You obviously understand a little more about this than we do. Could you help us understand, because you mentioned the frac sand volumes were just fine, the crude by rail is moving fine, what gives you confidence that you would continue to see these types of volumes at $35 crude?

Michael Ward

Well one, it’s not at $35 but we think they could continue with the existing facilities to be competitive. As you know, once you’ve made that investment you could get back in there and refrac those and get additional without additional huge capital outlays, so we think that it’s short and intermediate term which certainly includes all of ’15. We think the shipments we’ve been seeing roughly 3.5 trains per day continues and maybe even grows a little bit. Longer term if the prices stay at those levels, there’s questions whether the capital will go back in for new facilities, Jeff.

Jeff Kauffman

Okay, no I just wanted some clarity on that. Mike, thanks so much and congratulations.

Michael Ward

Thank you.