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

Operator

Thank you. The next question is from Brandon Oglenski and with Barclays.

Clarence Gooden

Good morning, Brandon.

Keith Mori, Barclays

Hi good morning, this is Keith Mori on for Brandon. Could you give us an idea of the costs associated with improving service levels this quarter tied to the recovery? When should we think these costs start to go away? Oscar, you mentioned that service levels are starting to improve, the cost structure is starting to improve. Should we start to think that’s a first half event?

Fredrik Eliasson

Yes, so this is Fredrik. I think if you go back to the third quarter we were somewhere around $15 million to $20 million of what we call service related cost because the network wasn’t performing at level we wanted, the fluidity wasn’t there so extra overtime in equipment rents and and so forth. Here in the fourth quarter probably pretty similar to that and as Oscar outlined, as we get the additional locomotives we should see the fluidity improve and therefore see a reduction in overtime in improvement in our equipment rents, et cetera, and that’s going to come gradually. I think it’s unrealistic to think that it’s going to be meaningful here in the first quarter because while the weather has cooperated so far, we’re not through it yet and generally as you get to the second quarter when you get to the brunt of the equipment specific to the locomotives that we are expecting, I think at that point and late in the second quarter I think you should start seeing some significant improvements.

Keith Mori

Okay and then I guess the follow-up, what kind of inspired the recent workforce reduction program? When you look across the operations, are there any other strategic initiatives that you can point to or talk about that have similar type cost impacts?

Fredrik Eliasson

Well, I think in terms of the G&A workforce reduction it simply was an opportunity for us to streamline some functions, stop doing some of the things we have been doing and just process changes allowed us to be a little bit more aggressive there. We’ve had a program in place for six, seven years now to try to offset inflation and we’ve been able to do that. But this was just a way to be a little bit more aggressive on that side. We, through the pipeline of productivity initiatives that we have as a company, not just for ’15 and ’16 and ’17, where we tried to get that 130-150 a year, we continue to work very hard. It’s a big part of the value equation for CSX and has been over the last decade, it’s going to continue to be over the next decade.

Keith Mori

Alright, thank you for the time.