All right, I think we're live. Good morning, everyone. Welcome to day two of Barclays 41st Annual Industrial Select Conference. I'm Brandon Oglenski, airline and transport analyst. Kicking it off today, I'm really excited to host CSX. Joining us from the company is Mike Cory, VP Operating Officer, as well as Kevin Boone, Chief Commercial Officer. Just like yesterday, before we jump into the questions, we're going to do the audience response system here for those in the room. Pick up the keypads. If we can queue up question one, please. All right. Do you currently own CSX? Yes, overweight, two, market weight, three, underweight, or no? Okay. Question number two. What is your general bias towards CSX right now? Positive, negative, or neutral? And Mike, we know your answers. Positive, positive. That's pretty favorable. And then question number three, please. In your opinion, through-cycle EPS growth for CSX will be above peers, in line with peers, or below peers? And thanks to everyone for participating. We'll send these around after the conference. All right. Well, gentlemen, thank you so much for being down here and starting the morning here. I don't know where to start. Mike, welcome back to railroading. Thank you, Brandon. Thank you. Haven't seen you here in a couple of years, but welcome to the U.S. So maybe we could start there. What's been your experience in the first few months on the job in Jacksonville? Sure. I've been around a while, so it's not like I'm learning how to railroad. It's a different railroad than what I'm used to. CN was very linear. I say it all the time, but you go 1,000 miles, you do some work, you go another 1,000 miles. Here, it's every 150 miles there's a customer or a yard or a facility or something that we touch. And so to get my head wrapped around that has been good because it's important I understand what, not just the traffic flows, but what the customer demands are. Really good team, very young, new to their positions, so the opportunity to teach and start to build that brand at CSX, and that was important to me coming back, has been great. And there's just a lot of opportunity that I'm really excited about. Anything on the operations side that you saw that was better than what you've experienced before or something that you wanted to change right away? There's always things that people do, and this is why it's important to respect culture when you go somewhere. There's things that they do that, yeah, they may slightly have been a little new, a little bit more smooth, whatever the case. But the organization, the structure of what we were doing in operations wasn't what I was used to. We really focused on developing the people around us so that everybody understood their accountabilities, had the clear direction on what they're supposed to do. They had competencies, or we built them with them. And you can see the CN folks that are out in the crowd. We focused really big on building people up and developing them. So that's really the big opportunity here. At the same time, there's opportunity for heavier trains, for faster trains, for interaction with some high-cost mates like our engineering department that's a $3 billion construction company that we could do a lot more in terms of tying them in with the transportation folks to save money, do better work. It's the regular opportunities that are out there that I've always seen, but really doing it through people, developing them so that when I'm long gone, they're continuing to do it. That's the goal. Appreciate that. I definitely want to keep this focus long-term. Kevin, I just want to ask about first-quarter trends and volumes because we saw yourself and everyone else in the industry had a pretty difficult January from a weather perspective. Where do you see underlying demand right now, and have you seen the recovery since January? Yeah, you're right. January was tough. Mike obviously experienced it every day. When you have a football game shut down or delayed in Buffalo, it's pretty bad out there. But it hit the southern part of our network pretty hard too, which is, they're not used to the snow. Yeah, it hit just east of the Mississippi, right down through Nashville and Alabama, where it hasn't happened before. So it set us back a bit, but. But I think when you see the volumes, and obviously, we report them every week, you see that we had a really nice rebound across some of our core franchise, like chemicals, forest products. We're starting to see a rebound that were really underwater last year and really got hit hard, largely from de-stocking, in my opinion. I think it was underappreciated how much supply, how much inventory was in the system with all of the challenges that we've had over the last few years with COVID and the supply chain. And I think that had to run its course, and it largely feels like it's run its course in some of our major markets. And that encourages me, even if we don't see a big pickup in the economy, that just the normalization back to run-rate demand means some growth for us, and that's what we guided to. So, some of our core franchises, like I mentioned, chemicals, forest products, those areas, metals, were quite encouraged in what we're seeing. Second derivative, maybe a little bit better than normal seasonality, what we would expect coming out of the fourth quarter and the first quarter, we're seeing that today. Even the international intermodal, obviously, on a much easier comp, but we are seeing a lot more activity there. And then the domestic side, we've talked about it late last year. We're pretty proud of what we were able to do during COVID and what that product service looks like today, and it continues to be positive for us. So we'll see what all of the things that are happening later this year with the election and other things that are coming. Hard to predict what the fourth quarter looks like, but early on, we're encouraged. We're probably running in some of these areas a little bit higher than planned. The only two that I would say are a little bit slower are autos, and that's just a couple of quality holds there, but we think that's deferred revenue, not lost revenue for us. And then on the ag side, the Southeastern crop was a little bit stronger than normal, and so we haven't seen those movements into the Southeast like we normally would. But our team expects that to start to ramp up in the second quarter. So no market that I see right now is really declining. They're all stable to improving. How can you help us put this in the context of your annual guidance this year for low single-digit to mid-single-digit volume and revenue? Yeah, I think there's a lot of mix issue. When you look at our business, there's a lot of volatility that comes along with the export coal side of our business. Every year, we want to come in with a conservative assumption. We're quite happy with where coal prices are today. So we'll see if that holds for the rest of the year. That wasn't necessarily our assumption, not that we have a better insight than anybody else, but that's what we want to assume and manage the business that way. We're seeing a lot of robust demand right now, actually, for the international side. And then you have fuel surcharge. Diesel prices were a little bit lower. They've ticked up above $4 now, so we'll see if that holds. That's a big factor in terms of revenue growth. And then just the overall mix within the business. If we do see intermodal come back, which we expect, and maybe have a little bit higher growth than maybe the rest of our portfolio, that would be a negative mix to our business. But we'll expect healthy pricing as the service continues to improve. We're really leaning into that. So nothing's really changed from the algorithm that we've talked about for so long and price above inflation. Yep. And if we look back at the last couple of years, you and your competitor in the east probably traded a little bit of a valuation discount to the rest of the group. I think some investors are concerned about that outlook for coal. If you dig a little bit deeper into your coal business, how much is export and domestic? Yeah, I mean, you look at it now. I mean, our domestic business over the last 10 years has declined significantly from where it was. We're much more heavily aligned to the international business, and we're seeing opportunities when we see weakness in the domestic market to push it in the international market. We have an asset like Curtis Bay, which is very strategic for us. It allows us to have a lot of flexibility. It's very strategic with our customers, and we leverage that quite a bit. So our domestic business is much less. I would say two years ago, we were hearing from customers all the time, "Hey, you ready for shutdowns coming?" I think that narrative has changed quite a bit in the last year. When I went to the last conference, the coal rodeo, they call it, I was quite surprised to hear a lot of the customers talking about deferring shutdowns of some of their coal-fired plants, particularly in the Southeast, just given all of the data centers and other activity they're seeing. And they're worried about just being able to serve all of the demand that's going to be there over the next five, 10 years. So we'll see. Coal is a very, very reliable source, particularly in winter months and summer months, and I think customers have realized that. When we come into this year, there might be a little bit of downside. We're seeing that in our volume today from the domestic side, but that's being made up on the international side. We do have minimums with a lot of our domestic customers, given what happened in the COVID period, and we expect them to continue to meet those minimums. So coal's powering AI? Yeah, it seems like it. On the positive side, well, and again, export's actually favorable right now? Very favorable, yeah. I mean, you see the benchmark prices. They're down from the peak, but they're very, very supportive of our business, and our customers are making a lot of money. What's the range of price now comes in the sensitivity to export coal prices on the contracts? We don't move in tandem. We obviously have minimums that will move down, and they're capped. The caps have been rising, given what we've experienced over the last few years. But where we are today with met coal, Australian, above $300, is a very, very healthy price for us. And we participate when they're doing very well, and that's what's happening right now. Okay. And the end markets that this is going into globally? India is a big market for us when you think about some of the met side of the business, but we touch everywhere in the world. We're seeing a lot of growth in India. That's a big market. Okay. And so, Mike, Kevin's been telling investors for a while now, "We have this industrial development process at CSX. How do we locate customers on the network?" And these long-term projects are now coming online in 2024. We'll talk about the volume impacts. But how do you work together with his team in planning capacity? In a variety of ways, Brandon. The one thing that we make sure of is we have a clearinghouse, and that's our service design group that reports up through me. Yet at a very early stage, the information is brought forward with Kevin. Kevin and I, whether it's every day, but for sure every week, we have us and the leadership team are going through any of the new business that's coming. But it's getting dissected in with the people that design the plan, and then that's coming back through me. So if we see and then that ties to locomotives that we need. That ties to people that we need. It also ties to us talking about how we're actually going to deliver the service because that's probably the most important thing. But through various parts of the organization, we're connected at the very end of Kevin and I. The industrial development side is probably the easiest to work because there's a long lead time, right? It takes a year or two to build these facilities. So it's planning the cyclical side and being connected on where do we think we could see supplies upside, right, and where are those corridors, and staying connected there. And our teams are working closer together than they ever have and sharing that information real-time. I wish our customers knew what fourth quarter looked like. In all honesty, they don't. But we know where we could be surprised and making sure we're resilient in those areas. The more I learn and the more the team learns about the capacity we have, we're able to feed it also back so that it's a cycle or a circle. Not one of the we're out there as well. Right down on the ground floor, our managers are working with the local marketing department, first of all, to deliver the service we should, but also to get insight as to what else may be available, and then we feed that information up. From a resource perspective, how are you thinking about headcount and labor, especially managing to the new agreements and pick time? Yeah. It'll cost us a few people, no question. However, right now, we're pretty comfortable with what we have. There's a couple of locations we're still trying to hire and attract. That's throughout. That's not just the conductors. That's other signal department people, so on. And there's definitely areas where the money has come into, whether it's Amtrak or somebody else, and they're able to attract people. We see that smoothing down or cooling off. And so from an asset perspective, we're good on locomotives. We're good on people. The key is to stay close with Kevin. And again, the industrial side, we have a long lead time before we have to go out and do anything. In the other areas, we're working hard to create that efficiency so that we are able to match the attrition that naturally happens, but at the same time, provide something to Kevin and the team to go out and sell. One of your comps said inflation this year mid-single-digit levels. Is that something you're seeing as well? Yeah. Yeah. I think we said inflation's coming down versus last year, particularly on the PS&O side and other areas. You know what our wage inflation looks like, right? Very visible. 4.5 to the union in July, right? That's already baked in. But it is less than what we've seen. And so we see it decelerating, and hopefully, the Fed sees that too. For me, Brandon, my goal is to not have to buy as much, whether it's rail, whether it's other components, locomotives. And that's just through efficiency. Okay. And Kevin, coming back to the industrial development project, some of those are slated to start delivering volumes this year. Is that correct? It is. Yeah. I think we'll really start to ramp up in 2025, 2026, but we'll see some second half of this year, mainly. These facilities can take a year or two to really ramp up to full production, but we're in the very early stages of that, really. A big factor. Could you walk through some examples of what's coming online? Yeah. I mean, food processing, we have a plant coming on this year on that side. On the steel side, we have a number of opportunities over the next three years that you'll see coming online for us. We're very excited about on the EV battery side. I know there's a lot of debate around how that evolves from here with some of the weakness in EV sales recently. But we've got capital on the ground on the CSX network, and obviously, one of the biggest facilities that has been announced has already shovels in the ground, right? And I think the capital is being spent. It's going to happen, and we're excited to be able to serve it. It's going to be a big opportunity. But really, across the gamut, you can see more development, I would say, on the forest products, the packaging side. We're seeing new facilities starting to come online. We did, over the last few years, have a lot of consolidation, and now they're building larger facilities. So it's something that, as you highlighted, our team has been very focused on, even at the senior levels, of how we really identify these projects and make sure that we're front and center in getting them. And I think we'll share through this year how we've been successful and how there's not really even a good data source out there that tracks us. And I think we were creating the first one that will really give you a sense of where all the activity's happening. It's happening in the Southeast, happening in our network, in the Midwest, and it's happening in Texas, right? Those are the centers of development, and we're fortunate to have two of the three in our network. How's this impacting your longer-term view on volumes? I think in the past, you said we should add maybe a point. Yeah, I think aspirationally, we set a point to two points. I think the bigger factor is when you looked at largely what our inability to grow as a rail industry was every year, we were having to offset this industrial decline because of the shutting down on our railroad every year. It's hard to grow when you're having to offset going away. I think we're going to start netting up rather than that being a detractor from our growth every year. That's going to be an additive, which is huge. It's a huge step change for what we've seen in our business for decades. By the way, if there's any audience questions, just raise your hand. We'll get you a mic. In that context, Kevin, what's the outlook going forward on pricing? Has that algorithm changed for CSX or the industry? No, as I mentioned, I don't think anything's changed. Obviously, inflation's coming down, so we were highly successful last year in passing through a lot of the costs that we were experiencing that our customers were getting priced. We recognize when our customers are getting priced that we should participate in that, especially when our service product is getting better and improving. We have aspirations, and I know Mike sees a huge amount of opportunity for that to continue to get better, and we'll sell through that. There's a lot of value. We turn their assets that they own. There are other things that we do that provide a lot of value. So I don't think anything's changed. I know there's been a lot of focus on that from an investor standpoint. But there's no question the environment this year is very different than last year, but it's still above average trend of what we saw prior to the inflation step-up that occurred over the last two years. David, [inaudible] Can you talk about the merchandise network for CSX? What challenges do you figure? Do you expect maybe some benefits from longer-having the credits on the manufacturing side? Oh, I can start with it. For me, I'm not used to seeing that much compaction with customers, especially the merchandise, as you say. So our focus, first of all, is to deliver the service, to get the business, to keep the business. But the longer trains allow us to have less movement along the network, so speeding things up. The ability to reduce our yard dwell, our connection standards, we're really focusing on that because, again, we want to work with the customer so they don't need a buffer supply. So we have the exact amount of cars, and it could be upwards of 5% for some customers that we take out of the fleet. That just creates fluidity. But it's strong. All of our major facilities are at full working capacity. And really, the last month has been last month and a bit. It's been a little difficult as compared to my first couple of months because of weather and a few other incidents that took place. But overall, it's strong, and it's fluid, and we have more capacity to do more there. Mike, can you talk about the rail connections you guys are building? Interline Agreement, I think both you and CP had a big announcement last year. Operationally, how does that manifest? Well, it's still ahead of us, Brandon. We haven't got the STB approval, but I mean, we're able to now and Kevin could speak to it better than I, but we're able to hit markets that we couldn't before using our connection with CP and our partnership. But it's like any interline agreement that we enter into, the opportunity to go further, excuse me to get our customers to different markets, that's something that this does. And like I said, Kevin could speak to the commodities, but it gets us into a market that we haven't had access to and from a market we haven't had access from. Yeah, clearly, the Mexico market is a big one that we're targeting with this strategic big alignment with the CPKC. And autos is a huge we have a lot of auto facilities down in the Southeast and in the parts. That's all getting trucked today. It's a poster child for truck conversion, and we think we're going to be able to deliver a pretty compelling product or service for those customers. It's going to deliver a lot of value, and we're excited about it. All those facilities are on us because it's also opportunities to go from east to west as well. So we'll look at those. Teams are working together. I actually just traded messages with my counterpart over there, and we're getting back together. But our teams have been working. We got a large pipeline of opportunities working with customers, and we'll hopefully get that up and running here in the fourth quarter. We'll see with the approvals and all the regulatory. We're working on the capital side of it, make sure it's fluid and running well when we're able to deliver the service. I'd also add Pan Am is really starting to, that acquisition, we're starting to see that. The capital payoff there and the pipeline there is growing significantly for that business, and we're pretty excited that that's going to bring incremental growth here in the back half of the year as that really starts to run well. Okay. If I could, Brandon, just and also the relationship between Mark and Keith and our operating team, we work very closely in sync because we do the same thing. We've worked together for a long time. My experience, anyways, was CNCP, so I'm looking forward to that just to think the same way, and that's important. And to Kevin's point, the Pan Am finally got up there a few weeks ago, and we've done a tremendous amount of work to bring the level of ability up there to where it needs to be. So, from track refurbishments, but we actually had the whole team together, and we've come up with a very solid operating plan where we've been able to even move some of the capital we had planned in certain areas to other areas and, at the same time, speed up the traffic and, again, go after the asset utilization and reduce what we need. It's been a good news story, and Kevin's building on it. Kevin, maybe an update on Quality Carriers. Maybe folks don't know, but you did buy a truck company in 2021? Yeah. So it's been more than a couple of years at this point, yeah. Look, it's focused on our largest market, which is our chemical market, right? And when we step back and take a look at chemicals, it's probably one of those markets where largely, if we serve it and we serve the facility that they want to reach, we probably are getting quality today, right? There's not a lot of truck in those lanes where if we serve it, we get the lion's share of that. And so the idea around Quality Carriers was, how do we extend the reach of some of our most profitable business? How do we reach customers that we traditionally haven't been able to reach? And obviously, front and center is the intermodal product. I just caught up with Randy the other day. We're seeing that really start to take traction. We're working with some of the largest customers in that segment that are now willing, as we turn the calendar, to look at options on that side and start to test the product. It's very exciting. And adoption, I think the great thing about Randy's business, and they do a phenomenal job, it's very sticky. I think also that creates challenges when you're introducing a new product and you need adoption from some of the largest players, and we're starting to get that tracked down. I think January was our highest month from an intermodal, and that continues to be an upward trajectory. So we're excited. It gives us another seat at the table when we're discussing with our customers. A lot of times, they're bifurcated. They have people on the procurement side that handle the trucking side, and then they handle the rail, and those aren't talking all the time. Now we get people both at the tables, and we get to get creative with what we can do with the rail side of it. So even on the merchandise side, I think it creates opportunities to really get that relationship even greater. So I'm very happy. The core business is doing very well. It's held up much better than every other trucking company that I can think of in terms of their pricing and their ability. And I think that's a testament to that team and the product that they're dealing with every day. It's very sticky business. Maybe bigger picture on intermodal as well. Historically, a lot of rail management teams will say, "Hey, there's lower margin business. We can get some volume, but maybe not the best contributor to the bottom line." Is that the view at CSX? What's the path forward? We've heard from J.B. Hunt yesterday that rail service has improved quite a bit here. I mean, when you look at, Mike will tell me we're running too short a train on the intermodal side. And when you think about putting things on the back of intermodal trains, the incremental margins are very, very healthy. So really leveraging what we have today, we don't have that on any side. Cost is really only the fuel, which is minimal that you're dreaming for, right, for that incremental move and the lifting costs, which we haven't. Great leverage in that area too with what we've been able to do from a terminal perspective. And I know it's only going to get better with some of the leadership we have over there today. So it's part of our growth. Merchandise is part of our growth. That's obviously 2/3 of our business, but intermodal is going to, we expect it to outgrow our merchandise over time. All right. If we can queue up question number four for the audience, please. In your opinion, what should CSX do with excess cash, bolt-on M&A, larger M&A, share repurchase, dividends, debt paydown, or internal investing? Sounds like we're one of the few doing share repurchases this year. Did you guys drive to a level? We didn't, but I think you can expect we've been pretty consistent over the last few years. Yeah. Question number five, please. In your opinion, what multiple of 2024 earnings should CSX trade? Clearly number six, right? Thank you. And then last question, number six. What do you see as the most significant share price headwind for CSX? Core growth, margin performance, capital deployment, or execution and strategy? And Mike, you did allude to CapEx. I think you added to, what, $2.5 billion spending this year, give or take. What are the opportunities to get more efficient on the capital side? Just in our process within our engineering function, we just brought in a new Vice President of Engineering I've worked with for many years. We're looking so closely at that because that's the big chunk of the capital that we spend here. That also involves the operating team. We have to have solid positive blocks, which we haven't done. We have to make sure the work we do is quality work. We have to make sure the inspections we take are bringing back information that we can either change the way we do the job, the components we use. Just a lot of opportunity to reduce and get more out of that capital spend in that sense. Every other piece of capital, we do everything we can operationally first before we go out to get it. We have a very good network in terms of capacity and the ability to run fast. We only have a couple of minutes left, so maybe we can summarize here. But when I looked at your annual outlook, and I think you guys are moving away from operating ratio, which I applaud because EBIT margins are just easier to discuss, but same outcome. But you guys didn't necessarily commit to better EBIT margins this year. What should investors expect from a profitability perspective when we add all this up? When you look at our ability on incremental margins, nothing in that story has changed. There is some volatility this year, particularly in the first half. We're going to lap in storage revenue. That's going away, but by the second and third quarter, that's really largely behind us. Obviously, export coal pricing is a factor. High prices last year, right? But we'll be lapping that as well. I think as you see into the second half, as Sean talked about this, you'll see those incremental margins really start to hopefully shine. And with all the things Mike's working on, I think you'll see that impact as well. We're quite optimistic. And I saw on the last question, I think the biggest challenge was core growth for us. I need to send that slide to my team. We're pretty excited about all the things that we have going on and what we can control. We obviously live in an environment where we have some cyclical businesses that we can't control, but I'm more optimistic about our pipeline and our share opportunities across a number of industries than I ever have been. I am seeing more collaboration with our Class I partners than I ever have since I've been here. That's encouraging. I think we're all leaning in together. There's this debate out there if we're leaning into growth. Does that come at the sacrifice of margin? It's quite the opposite. The more we're able to grow the business, the better our margins are going to be. That's just not how it works. We have a lot of fixed costs in our business, and that hasn't changed. I'm always surprised by if we talk about growth, everybody thinks we're talking negatively about margins. That's just not the case. Sean can show you the math. Certainly, they work hand in hand. I think growing margins and growing our business are kind of hand in hand, and we like that. We want to be compared to the best industrial transportation companies out there. That's why we've moved to margins. We want to be benchmarked to those over time. We're excited about some of the things we're seeing, and I'm being more excited to be working with Mike here. Our teams are sharing and collaborating like they never have been before. Well, Kevin and Mike, unfortunately, we're out of time, but really appreciate you guys coming by. Thank you. Thank you. Thank you.