Good afternoon, everyone. My name is Brianna and I will be your conference operator today. I would like to welcome everyone to the CSX Corporation First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. I would now like to turn the conference over to Matthew Korn, Head of Investor Relations. You may begin your conference.

Thank you, Brianna. Hello everyone and good afternoon and welcome to our first quarter earnings call. Joining me this afternoon are Joe Hinrichs, President and Chief Executive Officer; Mike Cory, Executive Vice President and Chief Operating Officer; Kevin Boone, Executive Vice President, and Chief Commercial Officer; and Sean Pelkey, Executive Vice President and Chief Financial Officer. In the presentation accompanying this call, you will find slides with our forward-looking disclosure and our non-GAAP disclosures for your review. With that, it is now my pleasure to introduce Mr. Joe Hinrichs.

All right. Thank you, Matthew. Hello, everyone. Thank you for joining our first quarter call. CSX had a solid start to 2024 that was in line with our expectations. I've learned that when it comes to routing, it never really is an easy quarter. And this year has already brought us a number of challenges. Thankfully, we have a great ONE CSX team of over 23,000 people. And as you've seen in our weekly volume performance, our railroad has kept moving forward after the early periods of severe weather in January. The latest incident, of course, has been the tragic Francis Scott Key Bridge collapse. CSX had a deep historical relationship with Baltimore, and we have important operations there, particularly with our export coal business. We're committed to doing our part to help the city recover. We are happy to see the progress already being made for reopening the port. Later in the call, Mike Cory and Kevin Boone will tell you more about what we are doing now to mitigate the impact of this event for our customers. All that said, we are very pleased with the momentum that we built over the quarter and are seeing in the business today. We knew we had the opportunity to grow our profitability compared to the fourth quarter, and we did just that. Our goal was to maintain our strong customer service levels while looking for ways to run the network more efficiently, and we have done so. We have more work to do and we are confident in our railroad and are excited about the rest of the year. Now, let's start with Slide 1 where we highlight some of the key results from our first quarter. Total volume grew by a solid 3% with strong support from our intermodal business franchise, which grew at 7% compared to last year. Our operating margin reached 36.8%, which represents a 90 basis point improvement compared to the fourth quarter. Revenue of just under $3.7 billion was about 1% lower than a year ago and flat compared to last quarter. Operating income was 8% lower than last year, but up 3% sequentially. While our earnings per share declined by 4% versus last year, EPS grew by 2% compared to the previous quarter. Now altogether, this was a good first quarter that reflected our solid progress. The entire ONE CSX team knows that there's much more that we can achieve given all the opportunities ahead and the great people we have across the entire railroad. But before we begin, I'd like to take a moment to recognize and remember Jim Foote, who passed away earlier this week. Jim was our President and CEO from late December, 2017, until I arrived in September of 2022. He guided this company through some very challenging and transformative times in our history, including rebuilding the network after the dramatic changes in 2017 and dealing with the COVID pandemic. I had several impactful and insightful conversations with Jim while I was being recruited to come to CSX, and I thank Jim for his support with our Board of Directors to bring an outsider in as CEO of CSX. We thank Jim for all his contributions to CSX and the railroad industry overall throughout his 40-plus year career. And our thoughts and prayers go out to his family and friends. Now let me turn the call over to Mike Cory who has brought a tremendous amount of new energy and new ideas to CSX to discuss our operational performance.

Yeah, thank you, Joe, and thanks for everybody for taking the time to be with us today. So let's look at the first slide on safety. While we found improvement in the FRA train accident rate year-over-year, in my view, our overall performance results in this quarter pale in comparison to what this team is capable and will deliver. So as a team we've begun to really work collectively to elevate and integrate the beliefs and actions that a strong safety culture requires. We recognize that in order to successfully change our safety performance, we need different and better skills. This includes proactive risk identification for our employees and their supervisors. And we thoroughly investigate every incident to determine the root cause and the necessary follow-ups for any recurrence. And we pass that information on to our employees through portals to ensure the information is shared, learned from, and used in improving everything from training to oversight of all our employees. Employees in both the union and their management provide a key opportunity to build a strong safety culture. We're starting to partner with our union leaders to help us change risk tolerances across our property. And this partnership is starting to provide real benefit toward creating a strong safety culture. This takes time and effort on all sides, but I'm very pleased with our progress so far. We're also listening to our employees' suggestions and we're applying it to our safety plan in order to become more responsive to our customers' needs in a safe and efficient way. Let's look at the next slide. And looking at this slide, you're going to see our standard velocity and dwell metrics that I'm sure we'll talk about today. Our focus this quarter has been on providing strong customer service while controlling costs. And while we've seen a slight decrease in velocity and an increase in dwell, our train sizes have grown in line with the increase in volume we've handled for our customers year-over-year. Crew starts have remained flat with GTMs up 1.5% and carloads up 3%. Our cost focus also includes management of the large capital program we have our engineering crews working on. And we're focused on making sure they have enough time for the work to be done properly. As a result, our crews are accomplishing all of their scheduled work and are also gaining efficiency. In both ties and rails, we've seen reductions in unit costs, good reductions. As we've enforced stricter compliance with planned track time for crews, we've seen slight decreases in velocity increases as well. Our intent is to build and execute a more inclusive plan that provides the right work window while minimizing loss of velocity. And I expect to see improvement as we continue to refine and develop this plan for the rest of this year cycle and beyond. Our focus on cost has also identified some strategic locations that are not as productive as they could be. We see cost-saving opportunities by reconfiguring and strategically utilizing these assets into our operating plan. This will reduce cars running out of route and excess handlings, and our customers will benefit as we increase speed and open up capacity in one of the corridors. And that's the most important part. It is we make these changes to our operation. There's no change to our goal of servicing the customer the best way we can. Having an efficient network that can consistently perform to our customers needs will allow us to gain share and build business from truck and attract new customers to rail. Over to the next slide.

All right, thank you, Mike, and good afternoon, everyone. The team continues to build momentum with our customers, targeting modal share conversion and quickly bringing solutions to the market that target profitable growth. Our ability to react quickly and provide solutions for our customers was highlighted by our efforts in Baltimore, where we rapidly stood up an alternative solution to meet the intermodal needs of the community. Despite a continuing weak truck market, the team has done a great job focusing on developing new opportunities, including truck to rail conversion, industrial development, working closer with our rail partners to identify joint opportunities and accelerating strategic discussions that allow our customers to benefit from our best-in-class service. Communication and collaboration between sales and marketing and operations is a key differentiator for CSX. Our recent voice of the customer survey results for the first quarter show the highest service scores since we began the survey, which highlights the positive trajectory that we are on. Let's turn to Slide 7 to look at our merchandise performance. Our merchandise revenues were up 1% compared to last year with flat volumes and a 1% increase in RPU as contract renewals and slightly favorable mix more than offset the effect of lower fuel surcharge. Across the business lines, automotive accelerated nicely after a slow start at several manufacturing plants. Chemicals, our largest market continues to gain momentum in plastics, food, and NGLs. Forest product volumes were flat overall but saw encouraging signs in pull board and building products as the construction season appears to be off to a stronger start. We told you that minerals face a tough comparison for aggregates, which were unseasonably strong in the first quarter of 2023. But total demand is very strong against a healthy backlog of large construction projects with infrastructure spending expected to accelerate. Metals volumes were a bit weaker year-over-year with the weather affecting flows in certain scrap markets. Finished steel has also been a bit sluggish, but we see opportunity for sequential improvement in the back half of the year. Fertilizer volumes continue to be unimpacted by phosphate production issues here in Florida, but an early application season in certain markets supported demand for longer-haul, higher-yield shipments of potash and other fertilizers, which lifted our RPU. Finally, our ag and food business remains relatively soft, constrained by a strong global soybean supply, which limits demand for US exports and still high availability of local crops in many of our customer regions. Underlying demand across grains, feed, and food products is solid and we're optimistic challenging conditions will normalize into the back half of the year.

Thank you, Kevin, and good afternoon. First quarter revenue fell by 1%, while operating income was down 8% or $110 million. These results include a number of discrete items versus the prior year with approximately $140 million of impacts from last year's insurance recovery, changes in net fuel, as well as declines in other revenue and export coal pricing. Across merchandise, coal, and intermodal, revenue excluding fuel recovery increased 4% in the quarter, benefiting from 3% volume growth and strong pricing across the merchandise portfolio. Expenses were 4% higher and I will discuss the line items in more detail on the next slide. Underlying results reflect continued momentum generated by the ONE CSX team, both in our service-driven top-line performance and broad-based cost-control and efficiency initiatives. Q1 was our second consecutive quarter of sequential operating income growth despite a $30 million net fuel headwind relative to Q4. In addition, sequential operating margins grew nearly 100 basis points, demonstrating this team's focus on growth and efficient service performance. This momentum positions us well to deliver year-over-year gains in the back half of 2024. Interest and other expenses were $9 million higher compared to the prior year, while income tax expense fell $25 million on lower pretax earnings net of a slightly higher effective rate. As a result, earnings per share decreased by $0.02, including $0.05 of impact from the previously mentioned discrete items.

All right. Thank you, Sean. Now, we will conclude our remarks by walking through our guidance for the full year 2024, which has not changed. Led by our customer service, we continue to expect total volume and total revenue growth in the low to mid-single-digit range. We expect our merchandise business to gain momentum through the year as effects from new business wins, truck conversions, and the ramp-up of industrial development projects build on favorable trends in many of our end markets. We look for steady growth in intermodal, supported by stable consumer demand and more normalized retail inventories, which are driving improved port activity. We continue to work closely with our channel partners, finding creative solutions to gain share even as the truck market remains soft. Global benchmark coal prices have fluctuated but remain high compared to history. And though the situation at the port of Baltimore limits some of the export volume in the near term, we are taking actions to effectively mitigate as much of the impact as we can. Our team at Curtis Bay and across the rest of the coal franchise will be ready to ramp back up as quickly as possible once the channel returns to full operation. On profitability, we made good progress this quarter and grew our operation margins sequentially. And as you saw in our results and heard from the team on this call, we benefited from volume growth, solid pricing gains, and focused efforts to improve efficiency and productivity. Our goal is to consistently grow our margins over time. And while Baltimore and global coal prices are near-term challenges, we feel very good about our ability to deliver strong incremental performance in the second half of this year. There is no change to our CapEx forecast of $2.5 billion. And as you heard from Sean, our balanced opportunistic approach to capital returns remains in place. To conclude, during the quarter, where there were many potential distractions, I am very proud of how the ONE CSX team stuck to our plan, focused on execution, prioritized our customers, and achieved good results. There is much more to come as we make every effort to run safer, faster, and more reliably for our customers so we can deliver profitable growth over the long term. Thanks to all of your interest in the company and, Matthew, we're ready to take questions.

Thank you, Joe. We will now move to our question-and-answer session. In the interest of time and to make sure that everyone on this call has an opportunity to take part, we ask you to please limit yourselves to one and only one question. Brianna, we're ready to start the process.

Thank you, Matthew. Your first question comes from Justin Long with Stephens. Please go ahead.

Thanks. And to start, our thoughts and prayers are going out to Jim's family. Obviously, he left a great legacy on the industry. But for my question, I wanted to ask about the second quarter. Typically, you see a seasonal improvement sequentially in both margins and earnings. Do you still think that's possible despite the impact from the Baltimore port closure? And then I guess along those lines, curious if you have any thoughts around coal RPU in the second quarter as well? Thanks.

Hey, Justin, happy to take both of those questions. So yeah, in terms of sequential improvement, that's normally what we see from Q1 to Q2. While clearly, the Baltimore impact is going to be felt in the second quarter, we still feel that we should be able to grow earnings sequentially from Q1 to Q2. And what I would say is, that's both top-line as well as being able to do it while containing costs and delivering really strong incremental margins from Q1 to Q2. The headwind clearly is export coal, not just the Baltimore impact, but in terms of RPU, I think pricing has come down. What we're seeing right now in the marketplace is probably something that's going to lead to a mid-to-high single-digit decline in coal RPU from Q1 to Q2. But even with that backdrop, still feel pretty good about our ability to continue this momentum.

Thank you, and good afternoon. Mike, as you indicated in your slides, you'd probably talk about velocity and dwell a little bit in this call. So obviously, there's been some disruption, whether it was weather in January or Port of Baltimore in the last part of March, but things have kind of filtered into a little bit into April as well. Can you just give us a state of the union on why some of those metrics have maybe moved in the opposite direction as when you first started and kind of how you get them back moving in the right direction as soon as in the next couple of weeks?

Thank you for your questions, John. I want to emphasize that these metrics are very important to us, and we are not satisfied with them. They are not at a significant level, so let me provide some context. We genuinely disrupted our system, and one of the initial steps we took was to assess the efficiency of our $1.5 billion engineering capital programs. Frankly, last year we did not complete the work we aimed for and ended up spending more than necessary. This year, we decided to enforce strict curfews while the track is being worked on, allowing large teams to perform necessary tasks on rail ties, bridges, etc., over a window of six to ten hours. We started implementing this around early February, after winter disruptions affected our southern corridors. We held our trains at terminals to align with these curfews and to manage congestion effectively, which we maintained for about a month. Since then, we have been working on redefining our programs and splitting up our workload. Previously, we tried to complete all the work in the south during winter due to the harsher conditions up north. We must find ways to distribute the work more evenly, as that was a factor affecting train speeds compared to previous years. We stayed under our rail and tie budget, and unit costs are now more favorable. However, the key outcome is the necessary safety enhancements to the track as we handle more volume each year. Last quarter, we also reduced crew starts by 5% while managing 1.5 GTMs and a 3% increase in carloads without increasing headcount. This allows us to focus on enhancing tonnage on trains, which increases locomotive utilization, optimizing operations without compromising parameters. Our strict management of the trip optimizer has also improved its use by over 10% this quarter, while still balancing efficiency and speed. Although there were disruptions last year, I’m confident in our initiatives to improve work blocks moving forward. We're also addressing constraints at our terminals and examining some strategically important yards for better efficiency, potentially reducing costs. We could have simply absorbed more traffic and added more trains, but our approach focuses on providing quality service and maintaining cost-effectiveness for sustainable growth. I'm optimistic about future improvements, and I see continuous engagement from our teams. This situation also offers a valuable chance to train our operating supervisors to manage costs effectively without sacrificing customer service. Notably, our performance in terms of arrival to placement for customers has improved by 10% in key industrial areas due to increased local service. We are committed to building trust with our customers and looking for ways to optimize fleet use while driving incremental business growth. I hope this clarifies our position, and thank you.

Yeah, good afternoon. I wanted to get some thoughts. I think just pricing and I know you got a bunch of moving parts. I'm thinking ex the coal item. But we've seen, I guess from J. B. Hunt and Knight and some of these surface transport-focused companies that there's weak demand and there's even more pressure on pricing. And so I just wanted to try to get a sense of if in your merchandise, you're getting good price, is there some headwind that affects what you do on price and revenue per car from this ongoing weakness. So just, I guess, trying to think about is price stable, is it going to get better and the way we model price, which ends up being revenue per car? Thank you.

Yeah, Tom. There haven't been any changes regarding pricing. We are currently facing a challenging truck environment, but I believe that will improve, and we will see significant benefits as the cycle seems to have hit its lowest point. In terms of the market, we continue to capture inflation through our pricing strategies, and I don’t anticipate any significant changes. It’s always about finding the right balance, and we adjust our portfolio as necessary. When there are opportunities for increased volume, we collaborate with our customers, as this is fundamental to our growth strategy which focuses on both volume and price, and nothing has shifted there. If cost inflation decreases, our customers will experience the benefits moving forward. The situation is certainly different from last year when inflation was quite high; we are starting to see some moderation. I hope the Federal Reserve has a comprehensive view of the situation with interest rates and related matters. Overall, I’m pleased with the results from the first quarter, and I think the team performed well, keeping us right on track.

Hi, afternoon. Thanks for taking the question. So I guess, Sean, I wanted to come back to your comments on headcount. I think you said that it's still relatively flat going into the second quarter, that was the plan. I don't know if that holds for the rest of the year, but it sounded like at least in the near term, so maybe you can elaborate on that a little bit. And also the comp per employee stepped down sequentially and you expect it to step down again into Q2. Can you just explain that trend? And of course, we should probably be thinking that that moves up in Q3 sequentially as you hit the new labor agreement with the 4.5% adjustment. So some additional thoughts on that and how that progresses and headcount overall will be helpful. Thank you.

Sure, Brian. Yeah. So on the headcount side, I would say we came into the year, we actually added a little bit from Q4 to Q1. Most of that was for the engineering work that Mike talked about and making sure that we could get everything done this year. We're going to manage that down through attrition. As we get to the second half of the year, we're going to watch business levels. We're going to see how we're running. But I think it's fair to assume that we're going to be relatively stable as we get to the second half, if not down a little bit sequentially. And so you're going to see a clear return to headcount labor productivity in the second half of the year. And then in terms of comp per employee, yep, second quarter will be another step down versus Q1. A couple of reasons for that. One is, first quarter, we had some winter-related costs. And then secondly, as some of the capital-related programs get a little more ramped up in the second quarter that has a benefit to cost per employee sequentially Q2 versus Q1. And then you're right, as we get to the second half of the year, the current labor agreement stipulates a 4.5% union wage increase. So we'll feel the impact of that as we go from second quarter into the second half.

Thanks for the update, Mike. It seems you're trying to balance service metrics with operating expenses. When we look at the costs, excluding fuel, there was a slight decrease from Q4 to Q1. How should we view the overall costs excluding fuel as we move from Q1 to Q2? Also, since we are now a quarter into the year, it appears that margins will be lower year-over-year again in Q2, but are expected to improve in Q3 and Q4. For the full year, do you think there's a chance for margin improvement, or is that unrealistic given the performance in the first half?

Thank you, Scott. I'm going to let Sean discuss margin because, as you know, I typically don't address that topic. However, your insights are correct. We are trying to find a balance between safety and customer service without compromising either, and we still have significant work to do regarding safety. The aspects we are examining are primarily focused on costs. If we can redirect some of the capital we intended to use by increasing productivity into different areas that we hadn’t initially planned for and make our yards more efficient, I see a clear cost benefit. It’s things like that. Sean is ready to discuss the numbers in more detail. Ultimately, our aim is to enhance margins on the cost side. Now, I’ll pass it over to Sean.

Thanks, Mike. Yeah. And what he says is true. We're focused on how do we deliver growth and how do we do it at strong incremental margins by maintaining the fixed cost profile and not adding a whole lot of variable costs along the way. If not finding opportunities where we can run things more efficiently. So to your direct question about cost ex fuel, I think, yeah, it's fair to assume we got a chance to improve that even further going from Q1 to Q2. And that ties in with the comments I just made about comp per employee and keeping headcount relatively flat. So we'll build some momentum. I think the year-over-year comps are a little more difficult in Q2 given the Baltimore impacts. If that hadn't happened, maybe could have even grown operating income and margin in the second quarter. But with it, it makes it more challenging. Second half of the year, we feel good about the setup. Some of these headwinds that we're facing, the first couple of quarters paid. And we're going to have labor productivity. We'll continue to grow the business. The industrial development projects Kevin talked about, a number of those start to come on as we get a little bit later into the year. So there's a lot to like about it. We are not going to give any specific guidance about full year operating income growth, margin growth. But clearly, sticking with the low to mid-single-digit total volume and revenue growth is very helpful, particularly when we're focused on what we can do to drive continued efficiency gains.

This is Joe. I just want to add that we will work hard to improve how we communicate our story moving forward. However, it's important to clarify that our commitment to our customers and customer service remains unwavering. As Kevin mentioned, we regularly receive surveys from our customers, and we achieved our highest score ever in the first quarter. We need to find ways to convey our story that go beyond just metrics like velocity, dwell time, or trip plan compliance. This is why we introduced customer switch data and other initiatives. For instance, our tonnage per train increased. By combining trains, we might reduce from three engines to two, resulting in a higher tonnage train that could be a bit slower, leading to more dwell time, but our customers are satisfied with this as it enhances our efficiency. Therefore, while these factors may show some increase in dwell and a decrease in velocity, our efficiency improves, and customer satisfaction remains intact. We prioritize customer feedback and work backwards instead of focusing solely on our internal metrics first. This distinction is crucial. Although some of our numbers might appear to decline quarter-over-quarter, our efficiency has improved along with the best survey responses we've ever received from customers. We need to find ways to help you understand this while enhancing efficiency and uniting our employees as ONE CSX team. We are focusing on teaching and collaborating to achieve this positive outcome. I’m grateful to Mike and the entire operations team for collaborating with Kevin and the sales and marketing team to make this happen. This effort involves teaching, listening, and finding creative solutions without fixating on a single metric. Ultimately, as long as we provide consistent improvements to our customers and our earnings, we can demonstrate how this leads to growth over time. Thank you.

Hey, good afternoon, and thanks for taking my question. Kevin, I wonder if we can come back to the industrial development pipeline that you guys have been mentioning, the new graphic in the slide is somewhat helpful. But can you talk about the 100 facilities that have already opened and some examples where that's delivering volume today? And then how you expect that works through the end of '24 and into the beginning of next year?

We are in the very early stages of this. When the facility becomes operational, there is typically a ramp-up period of 12 to 24 months, varying by industry. For this year, we see activity on the aggregate and metal sides, with a focus on where this activity will occur in the future. Some projects will take longer than others, but once they are operational, they will create a clear path for growth as we increase our capacity and enter the market. We are excited about this development and will provide more detailed updates as the year progresses. We wanted to highlight the diversity of our pipeline and how it continues to expand, which is encouraging because we are seeing opportunities across various industries, not just concentrated in one area.

Great. Thanks. And I'll throw in my condolences also to the Foote family, always had fun discussions with Jim over the last 20 years and appreciated his insights. So thanks for the comments earlier. Mike, just following up on another step here. Looking at flat headcount, low to mid-single-digit volumes and revenues. So when should we expect to see the service stats improve? When do we get the flow through? Have you seen that already in the data in April? And then I guess thinking about Baltimore and the impact of coal volumes now down 12.5% last week. So Baltimore is now impacting the results. How should we think about what percent of volumes can be moved to Newport and maybe improve some of the metrics? Thanks.

That's a good question. I thought I explained this earlier. I can't provide a timeline on when we expect service improvements because the service is performing well. I anticipate that over the next few quarters, we will see improvements in both velocity and dwell times. However, our service level will meet customer needs, and we are currently fulfilling that. We will be implementing various measures to test our facilities and processes, which will have an impact as we learn to adapt. I am observing improvements in our metrics already, although we still face some challenges, particularly related to our engineering teams who are currently collaborating with our operational and transportation teams to address restrictive curfews. As for the network, it remains fluid, and I'll let Kevin provide insights on Baltimore and our transition to Newport.

Yeah. I think just looking at last week, not that we live week to week, this is going to be a little bit choppy with some of the terminals we're working with in terms of taking on some additional capacity. I don't think last week necessarily the trend that we're seeing, we're seeing some good performance and then stepping up here this week on that. But when you look at the impact, I explained $25 million to $30 million net impact from the Baltimore incident, that will continue at least through May, and then we'll probably have a hopefully glide path end of June of improving that. But we're looking at offsetting a third of that business, maybe a little bit more if we can get all of the terminals to work with us.

Yeah. Hi, thanks. Just curious, can you talk a little bit maybe specifically what the international intermodal growth was in the quarter versus domestic? And based on your comments, it seems like international is outstripping domestic, maybe by a wide margin. I'm not sure. Why is that the case? And what gets domestic intermodal growth rate back up? You trip plan compliance looks really good. So I'm just sort of curious about those dynamic plans.

In the first quarter, the comparisons on the International side were relatively easy due to significant declines we experienced last year, as many companies faced destocking issues. We took advantage of that situation. Our team has excelled at discovering new services and areas that provided profitable growth opportunities, alongside establishing strong contract relationships. We are collaborating with the right partners, which has contributed to our success. As a result, we've witnessed double-digit growth internationally, while our domestic performance was slightly up this past quarter. However, the domestic market remains highly competitive, particularly in trucking. Recently, trucking companies have been facing challenges, and we're proud of the results we achieved despite that environment. We anticipate better days ahead, but it remains a tough market, and given the circumstances, we are satisfied with our performance.

Thanks for taking my question. Can you talk a bit about how some of the emerging uncertainty at your Eastern competitor has helped you perhaps capture some volume short term? And maybe longer term, has that uncertainty at another rail impacted the desire or intention of some of your customers to really start to use rail more as an outlet in their supply chains that you've been working for years now with industrial development and other efforts? Thank you.

Thanks, Bascome. This is Joe. Since I've been part of the ONE CSX team, our mission has been centered on enhancing employee culture and experience, which ultimately aims to improve service for our customers. We strongly believe that this will foster profitable growth for both us and our customers. This focus has remained consistent. In fact, recent months have shown customers expressing a desire for our commitment to service, as the entire industry seeks ways to grow without being sidetracked. We are concentrating on what we can control, which was evident in the sequential improvements across the board this past quarter, reflecting our confidence in maintaining this momentum. I take pride in our team's dedication to staying on course, prioritizing our customers and employees. Safety improvements are essential, as Mike mentioned, and we are continuously looking for growth opportunities. Feedback from customers indicates they are satisfied with the services we provide at CSX, appreciating the continuity and consistency in our messaging as well as our interactions and results. That is our primary focus. At a broader level, as noted, the industry must continually enhance service to our customers, which I have discussed at various conferences and events. I am observing increased collaboration within the industry aimed at this goal, and I find that encouraging. To realize the full potential of the industry, we must improve the fluidity of our networks, collaboration, and customer service. Achieving this will require us to work closely with all stakeholders in the industry. We can grow collectively when we enhance customer service and work in unison. This is the commitment at CSX. Our approach remains unchanged; there is no new plan or initiative in the pipeline. We will continue with the same ONE CSX strategy, focusing on our employees and customers while executing effectively. Thank you.

Thank you operator. Sort of along those lines, we've seen a huge shift on the intermodal side back to the over-the-road operators mainly due to price. And then I guess, last year, some operational issues at the Class I rails and some declining diesel prices. I guess two things. What percent do you think the gap has to close between where trucking pricing is now for domestic intermodal to start getting business back? And have you been able to quantify just how much freight shifted to the over-the-road market? Thanks.

Yeah. Thanks, Jason. Look, there's still a value proposition out there. Was it a little bit tighter than maybe a year ago when truck prices were a lot healthier? Absolutely. And I think the discussion is more about when you look at it, what can add value in the near term. I mean when you have to do nothing and you get price declines in your trucking business, then you're not as compelled to look at the intermodal option as you would be in a more normalized market. And so I think that all probably balances out as we get it through the year. It feels like we're at the bottom, bouncing along here. And as things solidify, I think those conversations accelerate. We've put up domestic growth, and we're pretty proud of that. The product that we're offering, the service that we're offering is compelling in the market even at these lows, and I can only imagine how compelling it’s going to be as the market recovers. So we're pretty excited about it. We're talking about it actively as a group of when the growth comes back that we're going to be prepared more than anybody else to handle it. So that's exciting for us. When that recovery happens, we're not certain, I think it's fair to say the trucking market is probably a little bit worse than what people anticipated coming into the year, but we were pretty resilient in a very, very challenging market.

Yeah, thanks. I was going to ask a little bit about the Baltimore impact, I appreciate the $25 million to $30 million a month. Just curious if that is predominantly coal or if there are any other impacts on maybe some of the other business lines? And then also in addition to the revenue impact, are there any cost impacts from rerouting to other ports or anything below the revenue line that we should think about?

I'll cover the revenue one. That one's easy. It's coal that we're seeing there, maybe some slight opportunities, but they're not large enough to be impactful to that number. On the cost side, Mike.

We experienced a bit of a rough start moving operations to Newport, but that has now improved. There haven't been significant additional costs associated with this transition. Most of the traffic continues to flow normally, apart from the coal point, so there are no major concerns in that regard.

I want to share a brief story because I frequently get asked about the benefits of our ONE CSX initiative and the culture we aim to cultivate. After the incident in Baltimore, we quickly reached out for engineers and conductors to temporarily relocate for a couple of months to assist with the changes needed for coal transport. We initially aimed for about a dozen volunteers, but we ended up with seven or eight times that number willing to help. This demonstrates that our people are eager to contribute solutions and support our customers, recognizing the importance of their role. It's a great example of our culture. Although there are some costs associated with relocation and transfers, it's worth noting that just over a year ago, we faced challenges in finding temporary transfers. This time, the response was overwhelming, which is a clear indication of a healthy, service-oriented culture that understands our mission to serve our customers. We have not hindered operations in any way; instead, we've been proactive. Kevin and I recently met with one of our largest coal customers, who expressed pride in our team's quick response and efficiency, highlighting the dedication of our employees. This reinforces the importance of maintaining our focus on culture and service, ensuring our team understands our commitment to safe and efficient customer service, and that message is clearly resonating as evidenced by our team's response.

And just one more point, Ben, I should mention this is. With this issue, we've been able to get a betterment in terms of our maintenance at Curtis Bay. We've been able to go in there and do work that we would have had to do it under load with a lot of volume moving through. So we've fully taken advantage of some pretty major restoration that we were able to accomplish that we're still working on. So that's been a good thing.

Thank you for answering my question. Sean, I wanted to clarify something quickly. In response to the first question about the first to second quarter, you mentioned profits being up. I'm not sure if you also mentioned margins being up. I may have missed that part, so I’d like to confirm it. Kevin, I would like to discuss interchange. If I’m correct, you interchange a substantial portion of your volumes. Is that interchange fairly evenly divided between the two West Coast rails? I'm trying to understand how much you actually interchange with Union Pacific and what portion of the total interchange is represented by the EP. Thank you.

Amit, it's Sean. I'll take the first part. Yeah, profit up Q2 versus Q1 and margins up. I think that's a fair expectation on both sides.

Look, I think we said roughly half of our business touches another railroad. And certainly, when you look at the Western railroads, particularly UP, they are a very large part of that. So they're a very important partner to us. All of our partners are very important. So it's encouraging to hearing a lot of signs to go after more business, and we're working collaboratively to do that. So a lot of opportunities out there that we see.

Thank you. Good afternoon, everyone. Sean, in comparing your outlook, which remains unchanged, I've noted some commentary about the challenges you've faced in the first quarter and how they might affect the rest of the year. January was a bit tougher, and Mike mentioned some operational metrics that are not quite where we want them to be. The coal market has worsened, there was an outage in Baltimore, and trucking has also taken a hit, yet you still maintain your guidance. I'm curious about what factors are helping you sustain your guidance in light of these challenges that have arisen so far in 2024.

Yeah, Walter, I'll do my best on that one. So yeah, I mean, certainly, a little bit of winter in January, a couple of things there. And then, of course, the Baltimore outage was unexpected, and that's a hit to the forecast. But still feel very confident about what the second half looks like, in particular, from a volume and revenue perspective and what it looks like on the cost side. We did an exercise here where we looked at every dollar of every budget and there's a lot of small wins that we're getting here, just $1 million, $2 million here and there across every line item, both within operations and across the business. So I think it's everybody focused on how do we deliver the kind of economic financial performance that sort of backs up all the momentum that we've got with ONE CSX, the goodwill that we've got with the customer. And to the extent there's revenue headwinds, how do we close the gap on some of those, but still a lot of confidence, I think, from the CSX team.

Hi, good afternoon, thank you. I wanted to maybe switch gears a little bit and talk about maybe capital allocation and maybe your focus on share repurchases, have seen it kind of come down a little bit over the last couple of quarters. So I just wanted to gauge your appetite in terms of incremental share repurchases as the year progresses. Thanks.

Thanks, Stephanie. It’s Sean. We're still dedicated to share repurchases and dividends. There was a decrease in the first quarter, but we saw the stock rise quickly. We aim to be opportunistic, adjusting our buyback amounts based on stock momentum. With the recent pullback, we're increasing our purchases a bit. We're committed to a significant amount of share repurchases this year, although it will be less than last year due to having less cash on the balance sheet. Last year, we raised some additional debt to enhance our capability, which contributed to more buybacks. We're still very committed, and you'll notice fluctuations quarter-to-quarter depending on market opportunities.

Thanks. Good afternoon, everyone. So, a two-parter here on the ports. One just on Baltimore, a follow-up. I think you've said you redirected about 33% of the traffic so far. Does that mean there's going to be like pent-up demand when the channel is kind of normalized in 3Q or late 2Q and beyond? Just wanted to confirm that. And also on the East Coast to West Coast kind of share shift, kind of what innings are we kind of on the normalization there? And are you hearing from your customers ahead of labor talks on the East Coast ports and maybe any preparations there? Thank you.

In terms of pent-up demand, there have been summer outages affecting coal miners, and it will be interesting to see how they manage that in light of the slowdown we've observed. There is a chance to recover volume in the third and fourth quarters, although that is not currently part of our plans. Prices remain strong, and there will likely be significant motivation to fulfill contractual obligations. On the East Coast and West Coast, substantial investments are underway, particularly in Savannah, which indicates a visible demand. We aren't seeing any signs of major trade shifting from the East to the West. If that were to occur and companies decided to move to the East, it could have a net positive effect for us. From our standpoint, the outcome would likely be neutral if that shift happened. In some cases, business that would typically come to the ports and use trucks could instead move over our railroad, creating additional opportunities for us. I don't perceive a high risk in this situation, but we will keep monitoring it. Over the long term, we expect significant capacity growth in the East, while the West is lacking in that regard.

Thank you for taking the question. This is JD Millan for David Vernon. Kevin, could you provide more details on what is driving the tenfold increase? Is it mainly traffic from the highway, or is it more related to your team's efforts? A bit more insight on this would be appreciated. Thank you.

I believe there is significant geopolitical risk currently. Many companies are reconsidering their supply chains in the post-pandemic environment. We previously discussed how these supply chains are increasingly viewed as competitive advantages, especially when it comes to being closer to the end consumer. Our network hosts some of the most valuable consumers worldwide, making this a priority, and we are witnessing substantial investments in this area. There is widespread activity in this regard, which I consider to be a key motivating factor. During the pandemic, disruptions highlighted the high costs associated with delivering products to consumers, which presents an opportunity for us to improve both inbound and outbound logistics, and that's quite exciting for us. This transition will unfold over time; considerable capital has already been invested, and we will engage in that. We are experiencing a shift from the patterns we've observed over the past three or four decades. Instead of a decline in our industrial base, we are actually seeing growth in that area, which should be advantageous for us in the long run.

Thank you very much. And our thoughts are with the Foote family as well, just a terrific guy. I want to go back to Bascome's question on any nervousness with customers using other rails, given all the media and the hype, maybe not so much in terms of customer wins, but at this point, what types of questions or what types of concerns are being raised to you? And is there an anxiety among the customer base?

I've noticed an increase in activity with our customers eager to share their truck files, which allows us to gain insight into their supply chains, especially considering the service performance we've been able to achieve in recent quarters. This is encouraging for us. We're focused on what we can deliver internally. Customers are looking for certainty and visibility, and I believe we're meeting those needs. They recognize the direction we're heading and support it, while also experiencing the service improvements. Last year, many customers mentioned that they wanted to see our service quality before discussing further opportunities. We're currently engaged in many of those discussions, and our team is putting in a lot of effort. The environment is challenging, as many markets are at cyclical lows, but those will recover. Right now, the goal is to increase wallet share. If we succeed in gaining wallet share and markets improve, it could lead to significant growth for us. We're very excited and focused on what we can achieve in these discussions.

This will conclude our question-and-answer session. And that does conclude today's conference. Thank you all for your participation. You may now disconnect.