Two months after offering a voluntary buyout program to reduce 300 positions, CSX Corp. came pretty close to reaching that goal, Chairman and CEO Michael Ward said Wednesday.
“Two hundred and ninety-eight people elected to take that, all of which were very happy to take it because some of them were planning to retire anyway,” Ward said in an interview after the Jacksonville-based railroad company reported strong fourth-quarter earnings.
CSX had told employees that the company might have to resort to layoffs if it didn’t reach its goal of 300 positions, mostly in its Jacksonville headquarters operations.
It is still possible that some employees could lose their jobs because the 298 people who took the buyouts did not necessarily align with the positions the company wanted to cut, but Ward said he expects the final impact to be “minimal.”
He said the company will complete the process of shifting staff in the next two weeks.
CSX actually increased its overall employment during 2014, saying in its fourth-quarter report that total estimated employment in December in all of its operations, which cover much of the Eastern U.S., was 32,178, an increase of 765 from December 2013.
The company employs more than 3,500 in Jacksonville, including headquarters office staff and rail operations.
Its headquarters staff operates out of its Downtown office along the St. Johns River and an adjacent building at 550 Water St. CSX had been leasing its space at the 550 Water St. building but exercised an option last month to buy the property for $30 million.
Ward said Wednesday the company’s finance department examined the pros and cons of buying the building versus continuing to lease space.
“We asked if it makes financial sense to do so and it does,” he said. “We think it’s a good building and we like being in the building.”
CSX has been looking for ways to cut costs to improve its operating ratio, which is its operating expenses divided by total revenue.
Its operating ratio in 2014 was 71.5 percent, about the same as 2013, and analysts say it’s higher than other major U.S. railroads. CSX has a goal of reducing its operating ratio to the mid-60s over the long term.
Ward said he expects to improve the ratio in 2015, but the company is not issuing a forecast.
CSX did say it expects earnings per share to grow by a double-digit percentage in 2015, after the company late on Tuesday reported fourth-quarter earnings rose 17 percent to 49 cents a share.
Investors have been concerned that rapidly falling oil prices will hurt railroads’ earnings this year, because it could reduce shipments of crude oil by rail. However, Ward sees nothing but good news in falling oil prices, for several reasons.
“All in all, there are no negatives to us,” he said.
First of all, lower oil prices mean “more money in people’s pockets,” which helps the economy.
Crude oil shipments represent only about 2 percent of CSX’s carloads, Ward said, and he doesn’t expect to see that business drop anyway.
“Talking to our customers, we think it will have no impact on us in 2015,” he said.
However, continued low oil prices may discourage oil companies from increasing production, which could affect business in 2016, he said.
Meanwhile, CSX’s expenses will not benefit from lower fuel prices, because the company passes fuel costs on to customers.
“We’re largely indifferent to where fuel prices are because of our fuel surcharge program,” Ward said.
Some people have wondered if lower gasoline prices will reduce railroads’ competitive pricing advantage and move more freight shipments to the trucking industry, but Ward thinks driver shortages will prevent trucking companies from taking business away.
Ward is very optimistic about the outlook for freight shipments in 2015.
“We see strong demand out there, except for the exports. We see no weak spots” domestically, he said.
That has Ward confident about CSX’s prospects for this year.
“I’m feeling pretty damn good,” he said.
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