Well, good afternoon, everyone. We're going to get this keynote lunch started here. So appreciate everyone coming down to Barclays' 43rd Annual Industrial Select Conference. This is our third day, so thank you for making it through. It's been a very eventful conference again. I'm Brandon Oglinski, airline and transport analyst, but I just want to very quickly thank our corporate access and event marketing teams. There's a lot of folks that work around the clock at Barclays that really made this event possible, So thank you, Martell, and to all of your team, and Aaron Bruno, and everyone else. So today we're going to have a keynote with CSX, a new CEO. Steve is not foreign to this conference. In fact, he's been here before in his capacity at Linde and Praxair historically and started your career at GE and on the board of Vernova, correct? So Steve's got quite a bit of perspective here. I really appreciate you coming and spending a little bit of time with us today.

Thank you, Brandon.

So definitely have a lot of questions about railroads, M&A, CSX, your new job. But maybe more broadly, given that this is such a great industrial conference, the themes that we've been hearing over the last three days, it's like AI disruption, reindustrialization, and yet we haven't seen really much industrial production growth for the last three years. So just from your perspective, are these big themes going to drive some growth across these industries, or are we just looking at another 2026 of flat growth?

Let me just start kind of with the AI question. And there's some people in this room that I think are better positioned to answer that question than I am on AI. But I'll just tell you what I observed, because to your point, I just came off, I was at the G. Vernova board meeting yesterday, and every board meeting has some discussion around the impact of AI, the impact of automation, the impact of robotics. And I would say everybody's kind of figuring it out. I do think it's going to be the traditional industrial businesses that potentially could benefit the most. When you look at simple things like the way they prepare proposals, which can be very complex in certain industries, AI can help a great deal there. The whole customer service, the whole backroom, the way they manage their entire fleet of assets, the whole service side of the equation, the repair side of the equation. If I talk to people, I sit around a table and ask people like the people in this room, I said, do you think AI really is going to bring benefit to what you do? And I get a lot of extreme positives in terms of real-time applications that they're using that can save either a lot of time, more efficient, whatever, better customer service, the whole gamut. And I was kind of surprised myself because I thought I'd get something more high level in terms of their opinions and their views. They gave me very practical applications. So I do think about it in terms of there's a lot of discussion about, you know, AI and the companies leading that charge. But I really think it's going to be a lot of the traditional older industries that could reap the most benefit from the whole AI side. You asked me about industrialization, and I can tell you, you know, I'm in the railroad today, but I used to think about this in my prior job in chairing that board and so forth. When you look around the world, there really isn't much growth. You know, China was a growth engine. China's not a growth engine today. Europe's never been a growth engine. It's not going to be a growth engine. so I don't offend anybody by saying that but I've seen that movie for so long I know what's going to happen a lot of people talk about India yes India is growing it's nowhere near on the scale of a China or the US or the EU it's a positive but what I kind of figured out in my old job I said really all roads lead back to the United States because in terms of growth potential and sustained growth, the U.S. is still your best bet. And this tariff noise aside, which I do think creates issues in terms of people's willingness to commit capital, the latest tax law that went into effect basically cemented a low tax rate for business. It also provided accelerated depreciation benefits. So if you're a global company and you're sitting here thinking, I need to grow, a lot of companies ask that question. They go into strategy reviews, the board meetings, a lot of it is about how do I grow. And if you think through that, your best bet is going to probably be in the United States. And now there are benefits to doing that, which I just described. Is it happening? if it is it's a very low level today and I do think all the tariff noise creates enough doubt in people's mind that maybe we should wait let's see how all this plays out let's let all these things be decided and then we can decide whether or not to pull the trigger but when I look at the long-term prospects of the United States I think it's in a favorable situation so we'll see how fast it comes it isn't coming in 26 i certainly didn't build it in my guidance uh that i gave for 26 but i i have to think it's going to come and um so i think you know if you're looking for a positive i'm usually not a guy that goes around you know sprinkling positives in meetings like this but if you're looking for a positive i think that is a positive Appreciate that response, Steve.

I guess you've been at CSX now about four months or five months. Yeah, I'm an expert. Well, as an outsider to the railroad industry, what's been your perspective thus far?

It's a, I mean, there's nothing like railroads anywhere, anywhere on the planet. I've never seen an industry like this. In many ways, railroads are the heartbeat of the American economy. The U.S. was built on railroads. There's a lot of lore and history in this industry. You're not going to walk into the offices at Meta or Google and meet fourth- and fifth-generation employees. I mean, it's that kind of heritage. It runs that deep. You know, it's a fascinating industry, and I enjoy it. You know, I used to sell many years ago, actually the last century. How about that? You don't have many people sit up here and can relate back to the last century. But I sold locomotives when I worked for GE to the railroad industry. And I got a chance to interact with all of the characters, saw how they ran the railroads, their operating philosophy, really got an appreciation for the history of the railroads and the importance to the American economy. and you know a lot of times people would ask you especially after career as long as i've had you know what was the best job you ever had but you didn't have that question on there did you no okay so what's the best job you ever had a lot of people would think well ceo lindy ceo or whatever actually i think one of the most fun jobs i ever had interesting jobs is when i sold locomotives to the railroads back in the late 90s and so that's kind of was an attraction to me it never really left me, even though I went off and, you know, had a long career of GE and other electrical products and industries, then chemical industries and whatnot. You know, that never really left me.

And I guess, what attracted you to CSI? Can you talk to that process?

Well, I flunked retirement. I tried to, it's boring. I chaired a couple boards. It's boring. It's, I'm kind of wired for the day-to-day. What I really enjoy is working closely with the teams, you know, helping them solve problems, making progress. I don't want my whole day to be about solving problems, but, you know, that doesn't bother me too much either. So I kind of like the grind of the business, working with the teams, you know, progressing the business, learning the business. I think it's a fascinating business, fascinating industry, fascinating company. So I was not out actively seeking. I had people would call me and say, how would you be interested in this company? And I'm not going to throw names out there because it wouldn't be a good thing to do. But would you be interested in this company? And I think about it and I go, no, I don't really like what they do. I don't like the product. In some cases, I knew something about the culture. I said, I don't really want to be part of that. But when this hit me, you know, I remembered what it was like in the old days, and I remember the fact that, you know, I really think it's a fascinating industry. So everything about this industry is fascinating to me.

And so that brought me off the sidelines. Well, specific to CSX, how did you find the culture when you arrived?

Great group of people, like I said, fourth, fifth generation employees. They love what they do. There's something about, there's a magnetism about the railroad industry. You know, people come to work in the railroad industry, they don't leave. And if they leave, a lot of them come back. Because I just think there's something about this industry that's very attractive to people. And once it gets in your blood, you know, you stay. But it's a great group of people in Jacksonville, Florida, and all up and down, you know, our system on the East Coast. I think they're very receptive to leadership. They want people to come in that, you know, care about what they do. that, you know, are going to be there for a sustainable period of time and work with them and stabilize the business and improve the business and kind of restore performance to where it has been in the past. But they take a lot of pride in what they do in the company. And, you know, as I come into it, I really want to help. I kind of want to help everybody accomplish what they want to accomplish. Obviously, I want the company to be successful, and that's kind of how I'm wired. But, you know, it's been a great reception, and, you know, I couldn't be happier with that. No regrets after four months. How about that?

Well, we've covered CSX for quite some time. And your predecessor, when he took over a few years ago, CSX was running quite well. And then obviously he had some network issues, some investment projects. But nonetheless, the company maybe wasn't running quite as well as it could be. Do you think today you've got that resolved?

I wouldn't say I've got everything resolved after a short period of time and keep in mind everything I do is working with somebody else I don't know how to do anything but I can work with the team help focus them on what's most important and help them execute but if you look there was some misfortune for the CSX team back to the hurricane that unfortunately created those floods in Appalachia that wiped out a 60-mile corridor of rail. And if you think about that, something that stood for 150 years is gone with 40-foot floods that roared down that tight little canyon and wiped out the entire rail system. And if you want to think about heroic efforts, a lot of times you want to go build a project, you say, well, show me the drawings, let me look at the drawings. there are no drawings. There's nothing. You're going to rebuild a railroad from scratch from people who have experience, intuition, can get the right teams together, and they did all that in one year. And the reason that's important is we basically have two corridors that connect us north and south, and that was one of them. So if you take that out, you can imagine the issues. You know the issues. You were here. Matthew was here. You saw the issues that created an entire railroad system. But as of the end of September last year, reopened that subdivision. They also completed a project called the Howard Street Tunnel that enables double stacking through that system. So there were some major infrastructure projects that were, particularly the Blue Ridge that was completed last year, that helped alleviate a lot of the issues that we had last year that we don't have this year. So I think it's always a very positive sign when those things are behind you and you can look forward to a stable railroad, a railroad that runs more fluidity, it has more resilience because of the completion of those major projects.

We also made some moves on the executive leadership team as well. Do you feel you have the right people in the right place?

Yes. and if I said no people would be worried about that but you know look I've been around long enough that you know you can walk into a business you can spend some time with the people and you can kind of quickly figure out who's in the right spot and is this I mean I look for two things I mean, if you talk to, you know, hydric struggles, corn fairies, you talk to those people, it'll give you 64 attributes you should look for in any kind of leader. I look for two things. I look for people who have great leadership skills. And there's a lot that goes into that statement, but people that are great leaders of people. And then I look for people that can move the needle. So in its simplest form, you know, when I look at Matthew, I say, does he have great leadership skills? Can he move the needle? But I look at that, and I start with the most important jobs. It kind of makes sense, doesn't it? And you kind of work through that. And if you don't, you need to make a change. And if there's anything I've learned over a long career is you're better off making those changes sooner than later. And so it looks like I made a lot of radical changes quickly. To me, I was very thoughtful and deliberate in terms of how I went through that. But at the end of the day, that's when I'm trying to figure out, do I have someone who's got outstanding leadership skills, and can they move the needle in that role? And I want to make sure with the key positions in the company, and I start with that, that I get that right. Then you kind of work down the rest of the organization. So in any company, and I did this at Linde, and I do this at CSX as well, I kind of look at, you know, what are the 20 most, 20, 25, pick a number, most critical positions to get right in the company? And then you kind of go through and you look at it from the standpoint of, okay, who's in that role? Do we have the right people in that role? The answer is yes. Let's work with them. Let's develop them. And if we don't, then we need to make a change, and we need to build a pipeline of talent underneath that. And I'll give you an example. In my Lindy life, I would look at one of the key 20 positions in the company was the person that ran China, but it wasn't the person that ran Asia. And I'd say don't take this personally, but, you know, the individual running China is more important to me than you sitting in Singapore running Asia. You've got to have that thought process around what are the critical positions, do you have the right people in the critical positions, and build a pipeline of talent underneath it so that you can have sustainable performance. You know, a lot of these things are basic, but, you know, you kind of learn over time, you know, that it's important to do. It's important to spend my time and the time of the organization to get those things right.

Well, you came into the industry in a pretty interesting time, too, because as we all know, there's a pending merger application with Union Pacific and Norfolk Southern, which in our view would be very transformative and obviously change up an industry dynamic that has been in place for a number of decades now. I guess, what's your broader perspective on rail M&A?

Well, I was a proponent of M&A. I mean, I led a merger where I put Fraxer and Lindy together. I'm going to answer your question, but there's a couple points. It's a long process. People forget that. From the time I picked up the phone and called my peer at Lindy until the time we were able to run the company without restrictions, it took three years. and a lot of that was a regulatory approval process. Some of that was social issues that needed to be sorted, a lot of stuff. But it's a much longer process than I think people give it credit for. And it took me, I ran practice there for 10 years before I did it. So when I look at this, I think anytime you have consolidation inside an industry for the rest of the participants, it can create some challenges in terms of risk that you need to go manage, which is what CSX will do. But it also creates opportunities at the same time. And so you kind of need to manage the risk, manage the challenges, and capitalize on the opportunities. And it's going to be a long process. We really don't know how it's going to play out in the end. I don't know what conditions may be part of that I don't know how this whole thing gets resolved I'm kind of new to the industry I've worked with regulatory authorities before I do know they listen to customers very closely so whatever customers are going to have to say about this pro or con, they're going to listen very carefully to that but it's a long process and so you've got to what do you have to do in the interim If you're somebody like me, you're running the company well every day, and that's our focus. And what I like about CSX, first of all, I wouldn't trade our geography with another railroad anywhere. I like our footprint. I like our infrastructure. I like where we are. If you think in terms of industrial development, which we started off this conversation with, you know, reindustrialization, if it's going to happen, it's going to happen on our network. And we do see those opportunities coming along. and we work on a lot of it from a development standpoint. But it's going to be a long game. It's a long process. It takes time. There's a lot of opinions that are going to have to be factored in. There's a lot of comments that people are going to have to wade through, and you'll have to see how this plays out in the end from a condition standpoint. And, you know, having been through this, you know, I went through this with Lindy and Praxair, and I know with my board, you have a lot of board meetings when you've got mergers going on, and one thing, I had a line across the chart, and I said, if the value creation falls below this, I should pull the plug. And I probably showed them that math, that thermometer, probably eight times, because it was important to me, because I went into this with a certain set of assumptions that value is going to be created, and I need to make sure that that was real. and you know every drop of the shoe turn of the screw this regulatory authority decided this sometimes it works in your favor sometimes it's more negative than you think you know i went back and make those adjustments and i'd say we started off this merger discussion we approved this value creation so where are we now based on the latest information and that goes on for many months and even years before I got to the final resolution of that so that's why I always caution people that it's you know it's a long process and you know we may have five people maybe not that many you know at Jacksonville that work on this every day and I got 23,000 people trying to run a railroad better and so we have lots of opportunities to improve CSX as a standalone company which is where we're we're focused and we'll participate in this you know consolidation uh phenomena that's taking place and uh you know we'll be well positioned i'm confident we're going to be well positioned no matter how it shakes out but i'm not going to get hyper focused you know on that when i know what i've got to do every day and can do every day you know running csx i want

to ask specifically about the plan at CSX, but let's say we fast forward a year, year and a half, mergers approved, a significant competitive dynamic that you view negatively?

I don't know what the conditions are. I don't know what may happen between now and then. It's a, how about this brand? It's a hypothetical I'm not going to answer.

Have you spent any time with customers? I'm sure you have at CSX? What's been the feedback that they are providing you?

You know, it's kind of interesting. That's a very interesting question because some of these are very sophisticated customers. What I've probably heard more than once is they're going to keep their options open. And so they're not going to make any statements or express a strong viewpoint until at some point down the path. And keep in mind, it's still early days, you know this, it's, you know, we're going to have an application that's going to be filed again, I forgot what the date is, by such and such a date, and then, you know, then the clock starts, and then they go through the valuation process. But I think there's, I think, I would, and it would make sense, I think keeping your options open probably is a smart thing, you know, to do at this point for anybody, and it's, you know, it's too early to declare anything.

Okay. I guess feedback specifically, too, on what CSX could do better regarding service?

Oh, there's always opportunity. I mean, you know, every day, you know, you can, one thing that's nice about this industry is there's a lot of information. There's a lot of data available. And so I can go in every day and see, you know, what's the car, you know, what's the train velocity? How many cars do we have online? What's the dwell time? Trip compliance, on-time departures, on-time arrivals. If you add two hours, what's the percentage? And there's been certainly improvement. And it kind of goes back to the earlier question you asked me. As we came into this year, we have had some stability that we didn't have, certainly during the early part of 25, that we're benefiting from. But as I look at that and I look at the improvement, I mean, we're nowhere near. and Mike Corey and his team that run operations will tell you, you know, we're nowhere near where we could be or what we can be in terms of our potential. I think the improvement's great, and I definitely recognize the team for a lot of good work they've done, a lot of hard work they've done, and some of you probably noticed we had some severe weather in the eastern part of the United States that pushed all the way down to places like Jacksonville, Florida. you know we had heavy snows and severe cold and you know that's um that's a difficult environment when you're running trains in the middle of the night you know at 10 degrees below uh and your crews have got to go out there and man that train so it was a challenging environment um and they i thought they did a great job coming through that so that gives me encouragement that We can weather things like that, no pun intended, and we can kind of build from that going forward. But back to your specific question, I do think we have opportunity on the service side. Of course, the better we are at service, the more consistent we are at service, the better our prospects are at increasing volumes, at being able to penetrate markets like you know as well as anyone, like the intermodal market. because I have asked those customers how they feel about rail service, and what they will say is it's not the cost, it's not the service when you provide it, it's the consistency of service. So I think being consistent in our performance I think is really important, and I know that hasn't been our history over sustained periods of time, but I think consistency of service is really important.

If there's any audience questions, just raise your hand. and I think we have mic runners. Steve, I guess I still want to combat this idea, though, because I've covered the rails for so long. If we look at volume growth relative to economic growth, the industry really hasn't shown a lot of expansion. Now there's been a shift in coal, because obviously we used coal a lot more to generate power. That's more Nat gas today. But even then, the merchandise business hasn't shown a ton of growth. I guess from your perspective, can CSX get to a better volume profile in the future?

Well, if you look at our guidance, I've often said I love growth, but I trust costs. And we guided to kind of a low single digit and said we're going to increase operating margins 200 to 300 basis points. During the course of the year, we're going to increase pre-cash flow 50%. But we didn't put a lot on the top line. And what I'll say is, Brandon, that there's a lot of industrial companies that are struggling with growth, because industrial productions have been flat pretty much around the world and in the United States for several years. So it's not a phenomenon, I think, that's unique to the railroads. So what I look at, and I don't think of it in terms of, gosh, I need mid-single-digit growth to really be able to deliver the kind of operating performance I want to deliver. a little bit of growth is all we really need and if we get a lot of growth if the macro economy blesses us if housing starts pick back up automotive picks back up gdp picks back up you know because interest rates came down enough that it triggers you know some economic activity if that happens then by working so hard on productivity and leaning out our cost structure i know those margins fall through very heavily so that's the way i think about it so i don't come at this as gosh, I need 5% volume growth, I come in at the standpoint of we just need a little bit of volume growth every year, a little bit of price every year, productivity every year, and we can deliver the kind of result we want. If I look kind of within the merchandise category, and you asked a very good question, I don't think it's any secret. And there's like 100 categories within chemicals alone. I don't think there's any secret that chemicals struggle globally. There's an oversupply situation coming from China that weighs on that industry. Obviously, a lot of chemicals go into housing starts, automotives, the broader industrial marketplace. it's a mature industry. Just like you brought up coal, which is seeing a little bit of a rebirth of the domestic side for reasons that we all understand, but it's kind of a mature industry. I think And forest products is kind of a mature industry, you know, and unfortunate for us, and part of this is why it was inherent in our guidance, is, you know, we've got the full-year effect of plant closures in pulp and paper that really, you know, started in 2025. But then I can also go through it and see pockets like minerals, which is basically rock aggregates that are used to build out infrastructure. Go back to what I said earlier. we have a great geographical footprint and a lot of that infrastructure is right here in the southeast so that's a market that's growing for us fertilizers happens to be a market that's growing for us because we've got some new phosphate production that's come online that's helping us we said domestic coal is doing a little better obviously our intermodal growth is better year over year and there's some good reasons for that so it's a little bit of a mixed bag you know at the end of the day i'm not sitting here saying gee if you just give me five percent volume i'll be fine i'm sitting here thinking i don't really need that much i'll take it and if it comes we'll capitalize on it but i think you know i like a lot of probably people in the railroad industry and people in broader industrial world generally speaking you know have gotten used to having a low growth environment to work in what are the financial metrics that you are holding the team accountable to, what do you like to look Because railroad investors will fixate on the operating ratio or the EBIT margin. And that's kind of a bit humorous to me because it's an operating ratio, which no other industry uses that, by the way. And so I go, well, isn't that kind of like operating margins flipped upside down? So what they're focused on is how they're compensated. which is, and we simplified the compensation structure. It was, and I've seen this play out before on other companies. I've been on a bunch of boards. I've done a lot of things. And people like to add things to the compensation structure around, I'm not picking on any one thing. I'm just saying sustainability, diversity, you name it. They come up with lots of things they want to hold management accountable for. And they think, well, if I just make it part of the incentive compensation scheme, they'll do it. The problem is the organization loses track on what's most important. One of the things I did with the team was we simplified the metrics. So the most important metrics to me are operating income growth. To get earnings per share growth, I need operating income growth. I don't think I've got to explain that one to anybody. Operating income percent margin. and the reason that's important is to me that says what's the quality of the business you're running how good a job are you doing running your business and the best metric for that is operating margin so i've always found that very important and then the other metric i'm talking about annual incentive is safety it's a sacred responsibility in this industry and you have to get that right so safety is an important metric and the other two on the financial side operating income dollar growth operating income percent i think are the most important and the other things we had are gone we had some other stuff they're gone and then on the long-term incentive side it's really uh for performance shares it's down to two metrics it's return on capital it is a capital-intensive industry, so I think return on capital is a very important metric for this industry. You know, in my old job, I used to say it's the truth serum. You know, it encapsulates all the decisions you made in the past, good or bad, and the quality of the business you're running today, and that all gets netted out in a return on capital metric, so I think that's a a very important metric, and then total shareholder return, which I think people in this room, I don't have to explain that one to them either. So that's it. I mean, the metrics are very simple, you know. And the reason that's important, I know you get this, is you've got to be able to stand up in front of the organization and say, what I've said is the most important things in running the railroad, it's also how you're compensated. So everything I repeat and harp on every day is also how we're compensated. And by the way, this is how we're doing. When I said we need to improve X number of basis points to return on capital, this is how you do it. You've got a numerator, you've got a denominator, this is how it works. We're going to improve the quality of the business, we're going to get more productivity, more pricing, more operating income, and we're going to manage our capital tightly. We're going to be very disciplined. And guess what? You get an improved return on capital performance out of that. So that was a longer answer than probably you were anticipating.

No, I appreciate it. We're down to just a few minutes left. What is the right level of return on invested capital for CSX?

Well, in a regulated industry, you've got to give a thoughtful response to that. Higher than what it is today. If you go back to Lindy, it's at 25%. about 2x the next competitor, I'm not guiding that. And Matthew looks up and says, thank you. But I do think we can improve every year. Just like I think we can improve operating margin percent every year, I do think we can improve return on invested capital every year. And I think doing these things, and then it's not all about financial metrics. You've got to be very safe. You've got to have good service. You need to have an engaged workforce if you want to have sustainable performance. All of those things are important. You've got to have the highest integrity and ethics, and you never compromise on that. All of those things are very important. And kind of a continuous improvement mindset that we can get better. There's plenty of potential. I know there is. Everybody believes there is. We can get a little bit better all the time, every year, and we keep moving these metrics north.

Just given the unionized nature of the business with all your frontline employees, what's achievable with the unions?

Well, you know, it's interesting. When I went through the merger practice here in Linde, I basically was told, well, Steve, you know that co-determination is the law of the land in Germany. Works councils are represented all the way up to the board of directors. you know it's really impossible to do anything and I thought some of that not that I'm relaying it to this but I thought some of that was a smokescreen because when you really sat down with them and said this is kind of how we're performing we would like to do better here you kind of go yeah I understand that but how are you going to do it so actually they asked very good questions they would say things like okay Steve I buy into we need to be more cost competitive. We need to do those things so we can win more business. We can provide better service to customers. The business will be better off going forward in the long term. So show me, though, the organization chart looks like this today. What will it look like in the future? I go, that's a good question. So we go back and go through that iteration and you come back and say, this is what it looks like. And they go, okay, well now we've got to go through the social hierarchy in terms of who occupies of charts, but it was very sophisticated, but I didn't, I never felt sitting there talking to them like they're diametrically opposed to everything I say. And I don't believe that's the case here. I mean, I've been out, I've rode trains, I haven't done enough, and I've met with people, talked to people. They're good people. And I think you really have to have an engaged workforce. And again, I'm not here to do things drastically. You know, I'm not here to say operating, and we'll get 10,000 basis points out of operating ratios next year. You know, that's not how I think. I think everything has to be done in balance. We've got a lot of criteria we want to perform well against, a lot of metrics, and we can do that together and kind of holistically, but just do it in a very intentional way. And I believe that if we work in a very respectful way, if we engage them, I think we can do a lot. So long-winded answer, but that's my answer.

Stephen, and on that note, I think we're running over time here. Yeah, thank you, Brandon. All right, thank you.