Hunter Harrison: ‘No red carpet’ when I arrived at CSX Corp.
A month after CSX Corp. announced a shakeup of its executive suite, CEO Hunter Harrison last week conceded he didn’t get a warm reception when he joined the company in March.
“It wasn’t a team. There was no red carpet. It wasn’t ‘come on in, welcome to town.’ So I got my feelings hurt a little bit,” Harrison said at an investor conference held by Credit Suisse.
His predecessor as CEO, Michael Ward, along with CSX President Clarence Gooden, retired when Harrison came in.
Executive Vice Presidents Cindy Sanborn, Fredrik Eliasson and Ellen Fitzsimmons all left the company last month when Harrison brought in James Foote as chief operating officer.
Foote previously worked with Harrison at Canadian National Railway Co.
Harrison, who has a four-year contract at CSX, seemed to confirm that Foote is his likely successor.
“One of the steps in the succession was to bring Jim on,” Harrison said at Wednesday’s conference in Palm Beach, which was broadcast over the internet.
Harrison said he didn’t want to “point fingers” at anybody, but he said other executives didn’t agree with his sweeping changes in the railroad’s operations.
“When I came on board, the first thing I told people was there’s going to be change, and there’s going to be a lot of change and change brings issues. We as human beings resist change, so I knew that was coming,” he said.
As he implemented his plans, “at one point in time there was two of us in house that I could trust,” Harrison said.
He didn’t name anyone, but there are two remaining executive vice presidents from the pre-Harrison era: Chief Financial Officer Frank Lonegro and Chief Legal Officer Nathan Goldman, who was promoted from vice president of risk and compliance and general counsel last month.
CSX’s stock price jumped higher in January when word leaked that Harrison was interested in the job, given his track record of improving operations at other major railroads. That put pressure on CSX’s board to hire him.
“The reason I’m here is the shareholders,” he said. “That team in Jacksonville, I don’t think, independently would have brought me in.”
Foote also spoke at the conference and said he is a proponent of Harrison’s operating philosophy, called Precision Scheduled Railroading, which has a track record of results.
“It’s been proven that’s true at CN and CP,” Foote said. Harrison was CEO of Canadian Pacific Railway Ltd. before pursuing the CSX job.
“At times he and I agree to disagree,” Foote said, before joking that “he’s meaner than I am but I’m bigger than him, so we’re able to usually work it out.”
Harrison said he’s identified four or five people within CSX who will have a significant role, again without naming anyone.
“It’s a pretty good mix of people that are starting to come together,” he said.
“Jim has been a welcome addition. He’s fit right in with the team.”
The implementation of Harrison’s operating system has been bumpy, with well-publicized complaints from freight customers about disruptions in service.
Harrison said “concerns with the network were far overstated” and there are groups of people “trying to portray a weakness of CSX.”
He said recent metrics show operations have improved.
“The network is good. I’m proud to see it working so well.”
Harrison also wants to put the management issues behind him.
“Did we have the right chemistry, the right esprit de corps internally? No, probably not,” he said.
“I think that we should turn that page and all of us have got to move on.”
CSX consolidating buildings in Duval
Part of CSX’s plan to move on includes continued consolidation of its Jacksonville operations.
During the conference, Harrison said the company is reducing its footprint in Jacksonville from seven “structures” to two.
He gave no more details. A CSX spokesman said by email that Harrison was referring to a plan to consolidate its corporate offices into two campus locations.
“These campus locations will include our headquarters operations on Water Street downtown and the CSX command center in west Jacksonville,” he said.
As the Daily Record previously reported, CSX has filed building permits for about $4 million in renovations for its 15-story headquarters building at 500 Water St.
The company also intends to file a permit for renovations to the neighboring 550 Water St. building, the spokesman said.
CSX’s restructuring under Harrison has included a reduction of 3,000 full-time jobs in the first three quarters of this year, lowering total employment to 24,388 in September.
CSX’s operations cover much of the eastern U.S. and the company has not specified how many jobs have been cut in Jacksonville. But the downsizing did include 951 management-level positions, mainly in its Jacksonville headquarters operations.
Patriot earnings hit by lost customer, Hurricane Irma
While most Jacksonville businesses were shutting down and preparing for Hurricane Irma to pass by in September, Patriot Transportation Holding Inc. was ramping up operations.
Most of the Jacksonville-based trucking company’s business involves transporting gasoline and diesel fuel to retail outlets in the Southeast. As everyone in Northeast Florida knows, hurricane preparations include a rush to fill up gas tanks before the storm.
However, the flurry of activity was not good for business, at least in the short term, CEO Robert Sandlin said during Patriot’s quarterly conference call last week.
“While hurricane evacuation petroleum volumes are always high, this type of business is generally less productive with long lines, unpredictable traffic patterns and other negative occurrences leading to inefficient utilization of our equipment,” he said.
Sandlin said Patriot’s staff performed well getting fuel supplies to customers, and he hopes that bodes well for its business.
“We believe we will benefit from this service performance with our customers in the future,” he said.
Patriot’s earnings fell sharply in the fourth quarter ended Sept. 30 to 6 cents a share, from 63 cents in the fourth quarter of fiscal 2016.
The 2016 earnings included a 24-cent gain from a property sale, but it was still a big drop.
Revenue in the quarter fell 11 percent to $27.9 million.
Besides the hurricane impact on business, Patriot’s results also were hurt by the loss of a major customer’s business. Sandlin said the company would not lower its rates for the customer to match a competitor’s bid.
Despite the lower results, Sandlin said Patriot is in a good financial position with a strong balance sheet and no debt. He expects the company to be able to make up the lost business from that customer.
“We have experienced business losses in tough markets before and our management team will do as we have done in the past and build the business back,” he said.
Advanced Disposal gets neutral rating
KeyBanc Capital Markets analyst Joe Box last week initiated coverage of Advanced Disposal Services Inc. with a “sector weight” rating.
“We recognize positive industry dynamics and Advanced Disposal’s attractive valuation vs. its peer group, but believe this (rating) is warranted and prefer to remain patient awaiting an entry point,” Box said in his research report.
Box said Wall Street may be overly optimistic about the Ponte Vedra-based waste management company, with eight “buy” ratings and just one “hold” rating on the stock.
“We suspect expectations could exceed actual fundamentals, reducing the potential for beats/raises,” he said.
Bankrupt Titanic artifacts owner seeks auction date
The owner of 5,500 artifacts from the RMS Titanic is seeking to auction off its assets in February.
Premier Exhibitions Inc. and several subsidiaries, including RMS Titanic Inc., filed a motion in U.S. Bankruptcy Court for the Middle District of Florida in Jacksonville to set the auction for Feb. 6.
Premier is a publicly traded company headquartered in Atlanta, but it filed for Chapter 11 reorganization last year in Jacksonville because the company and some of its subsidiaries are incorporated in Florida.
The company has exclusive rights to recover artifacts from the wreck of the Titanic and hoped it could solve its financial problems by selling a handful of them after it filed for bankruptcy. Premier valued the collection at more than $200 million.
However, the court rejected that plan, so Premier in June said it would instead seek to sell the entire company.
Premier produces exhibitions of Titanic artifacts and other historical items, such as King Tut’s tomb. It makes its money by selling tickets and merchandise from its various exhibitions.