News Wire: CSX reports record earnings thanks to cost-cutting, efficiency gains

[Murphy Siding]

Euclid

Murphy Siding said this about the CSX comment: “It goes to say they are going to try lowering rates on some coal traffic. Yeah, that should help the old bottom line.” I took him to mean that he believes it will not help the bottom line. So I said I thought it would help the bottom line. His answer to me at that point seems extremely illogical, and sounds as if he perceives CSX as presenting this coal hauling pricing as something representing their new miracle of precision railroading while Murphy sees right through it as being a lot of smoke and mirrors.

     Let me remind you again that you are not capable of saying what I mean or what I think. That's up to me.

[Murphy Siding]

jeffhergert

Railway Age article.

https://www.railwayage.com/freight/class-i/csx-1q18-financials-records-broken-but-where-is-volume-growth/ 

CSX on April 17 posted record earnings and an all-time low operating ratio—based almost entirely on cost-cutting measures, headcount reductions, rate increases and stock buybacks, not volume growth.  

Jeff

 

 

Interesting that a lot of what is in that link from industry experts seems to be right in line with what a lot of people in this thread have said.

[Murphy Siding]

Somebody help me with some math logic please. This is from the linked article in the first post:

   "CSX’s safety figures continued to deteriorate in the quarter, continuing a trend that has concerned the Federal Railroad Administration. CSX’s FRA personal injury frequency index rose 14 percent, while the train accident rate increased 19 percent. While the number of accidents and injuries held steady, the rates rose because CSX employs fewer people and is running fewer trains."

     If the number of accidents and injuries held steady, but the percentages went up because of 11% fewer employees and less trains, shouldn't the 14% figure and 19% figure be relatively the same % number? With less employees and less trains, why didn't the % go down?

[BaltACD]

Companies don't grow from cutting their core.  Take the core out of a tree and it dies and can't support itself.

[Euclid]

tree68

 

Euclid

I took him to mean that he believes it will not help the bottom line.  So I said I thought it would help the bottom line.  His answer to me at that point seems extremely illogical, and sounds as if he perceives CSX as presenting this coal hauling pricing as something representing their new miracle of precision railroading while Murphy sees right through it as being a lot of smoke and mirrors. 

 

 

Once again, I think you'll find that many here feel that CSX's accounting is, indeed, a lot of smoke and mirrors.

The only way that reducing rates in this case "helps" the bottom line is because it keeps that line item from going to zero.  This has nothing to do with increasing revenue.

And, as Balt points out, CSX to some extent brought this on themselves due to the decreased efficiency with which the railroad is being run.

 

 

Murphy Siding and I started discussing this point by a mutual reference to “helping” or “improving” the bottom line.  At that point, neither of us said anything about this effect on the bottom line rising to the result of increasing revenue to a level higher than it was prior to lowering the coal rates. 

Murphy Siding only introduced that requirement to raise the bar in order to refute my claim that lowering coal rates could “help” or “improve” the bottom line.  Prior to the introduction of this new requirement, neither I nor CSX had claimed that lowering the coal rates would actually cause positive net growth of the bottom line.  However, merely preventing the bottom line from falling further does indeed amount to “helping” or “improving” the bottom line. 

Also note that “helping the bottom line” (i.e. creating “positive impacts” on the bottom line) can also be achieved by reducing expenses by increasing efficiencies, reducing wages, and limiting the cost of capital, for instance. 

In the cases of closing yards or selling locomotives, the positive impacts to the bottom line are not just the revenue from the sales of the equipment and materials, as many seem to suggest when they say that the positive effects are not sustainable over time, and that you cannot cut your way to profit.  The positive impacts from eliminating inefficiencies are permanent and beneficial every day going forward.  

Here are some references:

What is 'Bottom Line'

Most companies aim to improve their bottom lines through two simultaneous methods: growing revenues (i.e., generate top-line growth) and increasing efficiency (or cutting costs).

Positive Impacts on Bottom Line

Management can enact strategies to increase the bottom line. For starters, increases to revenue increase the bottom line. This may be done through increasing production, lowering sales returns through product improvement, expanding product lines or increasing product prices. Other income such as investment income, interest income, rental or co-location fees collected, and the sale of property or equipment also increase the bottom line.

A company can increase its bottom line through the reduction of expenses. In relation to products, items can be produced using different goods using more efficient methods. Decreasing wages and benefits, operating out of less expensive facilities, utilizing tax benefits, and limiting the cost of capital are ways to increase a bottom line. 

[Anonymous]

Murphy Siding

If the number of accidents and injuries held steady, but the percentages went up because of 11% fewer employees and less trains, shouldn't the 14% figure and 19% figure be relatively the same % number? With less employees and less trains, why didn't the % go down?

To get the accident rate you divide the number of accidents by the number of trains. With the number of accidents steady but less trains the denominator gets smaller and the percentage gets higher.

The given percentages of 14% and 19% are not the accident rates but their percental change: x number accidents, n number trains.

accident rate: x/n; with 10% less trains x/(0.9*n);

difference: x/(0.9*n)- x/n = 0.1*x/0.9*n

percental change: (0.1*x/0.9*n)/(x/n)*100 = change [%]
= 0.1/0.9*100= 11.1%

So a reduction of train number by 10% with steady accident numbers leads to an increase of the accident rate by 11.1%.
I hope that helps a bit. If I made a mistake please correct me, it is quite some time since I retired.
Regards, Volker

[Murphy Siding]

VOLKER LANDWEHR

To get the accident rate you divide the number of accidents by the number of trains. With the number of accidents steady but less trains the denominator gets smaller and the percentage gets higher.

The given percentages of 14% and 19% are not the accident rates but their percental change: x number accidents, n number trains.

     Thanks. I see that a little clearer now. It tells me that CSX is less safe than it was a year ago.

[tree68]

Murphy Siding

   Thanks. I see that a little clearer now. It tells me that CSX is less safe than it was a year ago.

A similar trend occurred back in 1974 with highway fatalities.  Because of the gas shortages and the resultant reduction of speed limits, total mileage dropped, but the fatality rate actually rose.

[Overmod]

tree68

A similar trend occurred back in 1974 with highway fatalities. Because of the gas shortages and the resultant reduction of speed limits, total mileage dropped, but the fatality rate actually rose.

You need to be careful with grammar here.  What I think you meant to say was that 'total mileage dropped SO the 'fatality rate' actually rose.  In other words, there were fewer overall deaths (so the proponents of the double-nickel boondoggle would say they were justified) but more deaths per passenger-mile (which I assume was only for passenger-miles on 55mph roads that used to have higher speed limits, but with Government statistrickcians, who knows?).\

If you wonder why I think an expanded version of How to Lie with Statistics should be a required course subject in elementary and junior high ... here is a magnificent example.

[tree68]

Overmod

What I think you meant to say was that 'total mileage dropped SO the 'fatality rate' actually rose.  In other words, there were fewer overall deaths (so the proponents of the double-nickel boondoggle would say they were justified) but more deaths per passenger-mile (which I assume was only for passenger-miles on 55mph roads that used to have higher speed limits, but with Government statistrickcians, who knows?).\

I have a copy of the chart, which was part of a magazine put out at the time by (I think) NHTSA.  I'd have to do some serious digging to find it.  Current NTHSA charts don't differentiate between private and commercial - it's just "Vehicle Miles Travelled."

Regardless of how it's phrased - the death rate went up.

I graphed the information on the chart at the time.  A better than ten year downward trend in highway death rates was reversed at that time.  The number of deaths dropped, of course, as did the miles driven.  But as I recall, the deaths per mile rose.  Or at least levelled off.

The general conclusion I drew from that was that it was likely the "safer" drivers tended to stay home or otherwise restrict their driving while riskier drivers continued to drive.  A couple of broad categories, to be sure.

Of course, this is all from memory.  And we know how that works.