CSX Corp (CSX) 2008 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the CSX Corporation fourth quarter 2008 earnings call. As a reminder today's call is being recorded. During this call, all participants will be in a listen only mode. For opening remarks and introductions, I would like to turn the call over to Mr. David Baggs, Assistant Vice President, Investor Relations for CSX Corporation.

Well, thank you and good morning again, everyone and welcome again to our fourth quarter earnings presentation. The presentation material that we'll be reviewing this morning, along with our quarterly financial report and our safety and service measurements, are available on our website at CSX.com under the investor section. In addition, following the presentation, a web cast and podcast replay will be available on the website for your review.

Here representing CSX this morning are Michael Ward, the Company's Chairman, President, and Chief Executive Officer, Tony Ingram, Chief Operating Officer, Clarence Gooden, Chief Sales and Marketing Officer and Oscar Munoz, our Chief Financial Officer. Now before we begin the formal part of our presentation this morning, let me remind everyone that the presentation and other statements made by the Company contain forward-looking statements and actual performance could differ materially from the results anticipated by these statements. and with that, let me turn the presentation over to CSX Corporations Chairman, President, and Chief Executive Officer, Michael Ward. Michael?

Well thank you, David. Good morning everyone. As we confirmed yesterday in our press release, CSX completed 2008 with a 6% increase in fourth quarter earnings per share on a comparable basis. Revenues were up 4% to $2.7 billion as fuel recovery and strong core pricing offset the impact of lower volumes. At the same time, sustained momentum in safety and continued high service levels combine to help increase operating income 16% on a comparable basis to $692 million. As a result, CSX drove its operating ratio to 74.1%, a 270 basis point improvement.

In making the necessary changes to compete in this economy, CSX employees stayed diligently focused on things we can control. Responding with a sense of urgency and in fact, achieved record safety results and solid financial performance in the fourth quarter. For the year, revenue increased to $11.3 billion while operating income increased 24% to $2.8 billion. We reached a new milestone for CSX, driving our operating ratio to 75.4%. Our committment to excellence also enabled CSX to operate in 2008 at one of the best safety levels in Company history, and to maintain high service levels for our customers throughout the year. At the same time, we sustained our shareholder focus by implementing over $1.5 billion of our share repurchase program and increasing our dividend by more than 45%.

As we look into 2009, make no mistake, our environment will be challenging. Low consumer confidence and high unemployment are stifling consumer demand. The housing and automotive market declines continue unabated. Manufacturing is stalled as businesses seek to correct inventories and volumes are declining. At the same time, the service we provide and the relative value of rail versus other modes of transportation have never been more vital. We recognize that we will have to make material adjustments to our business if we are going to continue to be successful. We will work diligently to right size our resources and control costs. We will maintain our focus on safety and the higher service levels will allow us to maintain strong pricing.

Bottom line? This team remains relentlessly focused on maintaining a strong financial position and we enter the year with a strong balance sheet and committed employees. Over the course of the presentations this morning, Clarence, Tony and Oscar will provide more detail on the challenges we faced in 2009 and the aggressive actions we are taking to sustain our momentum in this difficult economy. With that, I'll turn it over to Clarence.

Thank you, Michael and good morning, everyone. In the fourth quarter of 2008, we began to see the full impact of this recession across the many markets we serve. That said, we delivered positive results due to a strong service product and our continued focus on yield management. This morning I'll highlight our results for the quarter, the key driver of those results, and also give you a sense of what we see ahead in 2009.

And now let us look at the results. CSX achieved another quarter of revenue growth despite the broad based volume weakness and the significant downturn in the economy that occurred in the last part of the year. Revenues increased 4% to nearly $2.7 billion, as fuel recovery and strong market based pricing more than offset the impact of the lower volume. These yield improvements continue to reflect the value we are providing to our customers through a consistently high level of service, as well as the relative value of rail versus other modes of transportation.

Now let's look at the key drivers affecting the volume on the next slide. As you can see in the chart, a significant economic downturn during the middle of the fourth quarter drove volume lower by 9%. This was the result of several changes taking place in the economy, four of which I will highlight here. First, the housing and automotive related markets weakened further in the quarter. Second, the global recession has significantly affected the industrial sector, especially in metals, as production was reduced by half during the quarter. Third, we have experienced reduced demand for many commodities as buyers are waiting for commodity prices to further decline. This was especially true in the area of phosphates and fertilizers, where CSX is the leading transportation provider in the industry. Finally, the intermodal market softened due to declining consumer spending and weakening international trade.

While we were experiencing a decline in volume during the quarter, our pricing remains strong, and as you can see on the next slide, as we've reviewed with you in previous quarters, the line on this chart highlights the year-over-year change in total revenue per unit, which includes the impact of price, fuel, and mix. During the fourth quarter, overall revenue per unit increased 14%. The bars on the chart show the increase in price on the same-store sales basis. This excludes the impact of fuel and mix. Same-store sales are defined as shipments with the same customer, commodity and car type and the same margin and destination. These shipments represent approximately 75% of our total traffic base. Same-store sales price increases were 6.5% for the quarter, consistent with the increases you've seen over the last few years. Based on the service and value we're providing our customers, we expect our pricing momentum to continue in 2009.

Now, let us look at each of the major markets we serve. Quarterly merchandise revenue decreased 2% to nearly $1.3 billion. Merchandise revenue per unit increased 15% as revenue per unit gains were achieved across all markets, even when adjusted for fuel, and our housing related markets' further weakness lead to lower volumes in forest products, food and consumer, and emerging markets. We saw the most significant volume declines in our industrial markets as metals and chemicals experienced reduced demand and major inventory corrections. Phosphate and fertilizer volumes fell significantly due to the previously mentioned reasons. Finally, volume was flat in agricultural products as growth in ethanol offset the declines in feed grains and exports. Looking forward, these trends are expected to continue along with a weaker global economy.

Turning to the next slide, let's review the results in coal. Quarterly coal revenues were $849 million, an increase of 24%. The yield environment for coal continues to be strong with revenue per unit increasing 24% in the fourth quarter. Price and fuel recovery were again the primary drivers. Volume was flat as continued strong demand for export coal offset the weakness in domestic utility coal. In 2009, export coal is expected to weaken to approximately 2007 levels, while lower electrical generation will continue to impact utility demand. On a positive note, additional legacy contract negotiations will create a favorable environment for price.

Turning to the next slide, quarterly automotive revenue of $182 million was 15% lower than last year; however, pricing actions and increased fuel recovery resulted in an increase in revenue per unit of 21%, which helped to moderate the impact of the lower volume. Light vehicle production once again declined during the quarter, and automotive plant shut downs and idling have accelerated. As a result, CSX volume declined significantly. In addition to sales and production declines, field vehicle inventories continued to rise for the most recent end of year domestic total, exceeding 90 days with 60 being about optimal. In 2009, the key drivers will continue to be excess inventories as well as reduced vehicle production. As the latest North American light vehicle production forecast of 9.5 million units is 25% below the 2008 total. In contrast to prior years, when declines at the traditional big three were offset by gains at the new domestic manufacturers, in 2009, the new domestic producers are also facing production cutbacks.

Turning to our intermodal results, intermodal had fourth quarter revenue of $334 million, down 7% versus 2008, driven primarily by 6% lower volume. Volume decreased as a result of the continued softness in imports and a leveling off of domestic growth from earlier in 2008 as consumer demand fell off sharply in the fourth quarter. Revenue per unit was flat for the quarter as the benefit of increased fuel recovery was offset by traffic mix impact. As we look forward into 2009, the key drivers we are facing are lower global trade, weakening consumer demand, and an increase in the all water traffic diversions as steam ship lines look to further reduce cost. Against this back drop, we will continue to look for ways to convert freight off the highway and on to intermodal, and for ways to reduce cost as we continue to believe in the long term fundamentals for this business remaining strong.

As you are aware, we are in the midst of an unprecedented economic downturn and there is still much uncertainty around the future. That said, let me share some of the latest estimates about the economy in 2009, and the implication for CSX and its customers. As you can see in the chart on the left, the latest 2009 projections for industrial production and GDP are negative, with industrial production falling by more than 10% in the first quarter. In contrast to prior forecast, neither indicator is expected to turn positive in 2009. Each is expected to become less negative as inventories are reduced and as the anticipated stimulus package makes an impact on the economy. As for CSX volumes, the chart to the right again shows our weekly traffic volume for the fourth quarter and for the first three weeks in 2009. As you can see, volume has continued at depressed levels into this year, and we expect these double digit levels to continue through the first quarter.

Based on these run rates, and the current economic forecast, we expect our volumes will remain unfavorable throughout the year, but as we turn the slide, let's look at the yield expectations for the year. Looking at the chart on the left, fuel recovery is expected to drop year-over-year, resulting in an unfavorable revenue per unit change. At the same time, we still expect to achieve a 5 to 6% improvement in same-store sales pricing. Our core pricing is expected to remain strong in 2009 as over 80% of our pricing plan has already been negotiated. The remaining negotiations will occur in the first half of the year. It is also important to point out that rail prices are still significantly below the 1980 inflation adjusted levels. We also believe that the rail value proposition versus other modes of transportation remains strong. The bottom line is that we remain committed to improving yields reflecting the excellent service and the value that we are providing our customers, yet these yields are expected to only partially offset volume declines as you can see on the next slide.

Our first quarter revenue outlook is unfavorable. The outlook is unfavorable across seven markets neutral for two and favorable for one. Value pricing will continue to be the key driver across all markets. Merchandise should see growth in agricultural products. coal, coke, and iron ore and emerging market revenues are expected to be neutral. The remaining markets are all expected to be unfavorable as a result of the global recession and continued weakness in housing and automotive, yet even with this challenging economy, let me end my comments on our continuing focus on customer needs both now and in the future.

First, we will continue to sell the value of rail transportation especially as shippers look for the most cost effective and environmentally friendly business solutions. Second, we will continue to pursue new industrial development as customers undergo change and prepare for an eventual turnaround in the economy, and finally, we continue to work closely with customers in these challenging times to coordinate traffic levels, make the appropriate resource adjustments, to improve service, and to look for new opportunities. Thank you, and now let me turn the presentation over to Tony to review our operating results.

Thank you, Clarence. Good morning, everyone. Our focus on leadership, discipline and execution continues. That's what drives results in this business, even during challenging times. In 2008 our employees delivered the lowest injury rate in CSX history. This was achieved through leadership across all levels of the organization. Network performance recovered well in the fourth quarter and remained at high levels for the year. Finally, we continued to deliver productivity to deliver our operating ratio lower, and let's look at the details.

Looking at slide 21 shows our safety performance for the quarter. Personal injuries were 1.07 for the quarter, a 16% improvement from prior year and a fourth quarter performance record. Train accidents which came in at 2.39 improved 17% compared to prior year. Continued improvements in both areas come through leadership and the relentless focus of our employees, who are committed to work safely every day. Even at these strong performance levels, our goal is to avoid all accidents. We can and will continue to improve.

Now let's look at our service performance on the next two slides. Looking at slide 22, train originations and arrivals recovered from a challenging third quarter and returned to historical high levels. Originations increased to 85%, a 5% improvement from the same quarter in 2007. Train arrivals also improved 5% to 77% for the quarter. We remain focused on running the plan and will raise the bar higher in 2009.

Now let's turn to slide 23. Average dwell increased to 23.2 hours for the quarter but remained at good levels. Business conditions contribute to higher dwell in the quarter as lower demand for freight cars created a surplus. Average velocity remained stable at 21.2 miles per hour in the quarter and was down slightly for the year. Overall, our network is fluid and trains are running well.

Let's look at slide 24. Productivity initiatives are delivering good results. In 2008, productivity gains offset 80% of inflation excluding fuel and have to drive the operating ratio lower. During this period of lower demand, our focus on productivity will be more intense. Our traditional process improvement efforts will continue, and at the same time, we're taking aggressive action to improve the efficiency of our network and reduced costs.

Now let's turn to slide 25. In the fourth quarter, we started reducing the size of our scheduled train network as volume declined. We do this by adjusting our one plan, not through tactical daily reductions. A smaller train network requires fewer resources and we continue to manage resource levels down and reduce costs. Finally, ongoing productivity initiatives will continue. We will look for opportunities across all cost areas, including those that are not variable over the short-term.

Let's look to slide 26. This chart shows weekly trends for car loads and road crews. You can see the crew starts, the goal line are moving lower as adjust the train network for lower car load volumes, the blue bars. The scheduled train network does not move directly with volume, unlike our unit trains, we must adjust the plan. We will continue to aggressively manage the scheduled train plan to business levels going forward.

Now let's turn to slide 27. To realize the value of a smaller network, we right size key resources which are the drivers of costs. This slide shows a trend for active locomotive and train and engine employees over the same time period. As you can see from the chart on the left the number of active locomotives have declined roughly 400 units or 10% since October. As the train network has been reduced, all leased locomotives have been returned and we are storing the older CSX locomotives to reduce maintenance cost. The chart on the right shows C& E employees, including both engineering and conductors. Here again, you see that a smaller train network requires fewer train crews and T& E employees. As shown on this slide, we have furloughed over 1100 T& E employees. In total, 1600 operating employees have been impacted by declining volume. This is unfortunate but unavoidable in the current business environment. They will be called back to work when business conditions warrant.

On slide 28, you can see that we're taking a fresh look at the one plan. This is already under way. Volume levels and traffic flows have changed since the original one plan design was rolled out in 2004. While the plan has been adjusted many times over the years, we expect to find the current plan is not optimal and that efficiencies can be improved. As we did in the original one plan design, we are using new modeling tools to maximize the efficiency of the plan. The process is under way and plan changes will be implemented in the second quarter.

Now let's look at slide 29. In summary, we're operating high levels in safety, service and productivity. Safety performance is at record levels and we will raise the bar again in 2009. We will also continue the positive momentum in service and deliver even more reliable service to our customers. Our productivity initiatives are delivering as expected and current business conditions require us to do even more. We're aggressively adjusting Resource levels and manage our cost structure. As always, we'll deliver results with leadership, discipline and execution.

Now let me turn the presentation over to Oscar to review the numbers.

Thank you, Tony. Good morning, everyone. Today, I'm going to review the quarter at a high level and spend more time focusing on the coming year and what we're doing to insure we remain strong through the current economic environment. Now, some of my normal presentation material that we detail has been put into the appendix for your review and we'll take any questions on them, but again we'll focus mostly on the quarter. The results of the quarter as shown on slide 31, revenue increased 4% to $2.7 billion, reflecting a favorable fuel benefit and continued core pricing gains partially offset by lower volume. This revenue growth, along with flat operating expenses, drove operating income of $692 million. As we move below the line, other income decreased $252 million versus last year. You may have noticed that our flash now separates real estate and resort operations. A review of that detail will show that income from resort operations declined $179 million in the quarter due to previously announced asset impairment charge and the quarterly operating losses at the Greenbrier resorts. The other line item, income from real estate operations declined $48 million primarily driven by the cycling of large gains from property sales last year. As we look forward into 2009, you can expect this line item, other income, to be about 1 to $2 million per quarter from normal recurring activities.

Continuing down the slide, interest expense increased $21 million in the quarter as a result of incremental debt issued in 2008. These below the line items and our lower income tax base drove reported EPS of $0.63 which was down $0.23 versus last year. Additionally the number of fully diluted shares outstanding was 30 million lower than last year due to the impact of our share repurchase program. Since 2006, the Company has repurchased over $4 billion or more than 90 million shares of its stock. As we look forward in this area, any future repurchases would have to be supported by improved market and business conditions.

Now let's turn back to the quarter and look at the results on a comparable basis on slide 32. After removing the impairment charge this quarter, and prior year insurance recoveries, EPS improved $0.05 to $0.90, representing an increase of 6% over last year's results. Moving down the chart, after removing the gain on insurance recoveries for prior year, operating income increased $95 million or 16%. Now let me review the significant revenue events that impacted our fourth quarter results on the next slide. As Clarence outlined earlier, volume declined 9% in the quarter; however, we continue to see strong core pricing gains reflecting the high quality service product we are providing our customers. Finally, fuel prices dropped significantly in the quarter creating a benefit due to the two month lag in our fuel recovery programs. As you can see from the graph to the right, in times of rising fuel prices as experienced prior to the third quarter of 2008, the lag in our fuel surcharge recovery yields a negative impact on our results; however in recent times as fuel prices have fallen, the opposite effect has occurred, resulting in a lag benefit of approximately $150 million in the fourth quarter.

Now turning to expenses on slide 34, you can see from the chart that cost increases on a year-over-year basis were driven by two primary factors. First, we cycled $63 million in favorable casualty reserve adjustments and second, normal quarterly inflation increased $43 million associated with contract wage increases and higher material costs. At the same time, these increases were largely offset by three items. A reduction in incentive compensation of $45 million, and fuel price favorability as the average price per gallon declined $0.34 or 13% on a year-over-year basis, and lastly, volume related and other expenses which declined a net $14 million. Now, with respect to the volume related savings, we are actually able to realize about $40 million in areas such as fuel, car hire and crews, but these savings were partially offset by increases in depreciation and other fixed cost items. So this concludes our fourth quarter review and as a reminder, you can find our normal expense detail and other charts in the appendix in this presentation, and given the environment we are operating in and reinforcing some of the things you heard from Tony earlier, let me give you a sense of how we're looking at our cost structure on the next few slides.

Now while the railroad industry has a relatively high fixed cost base, all costs are variable in the long run and as we look at our business, we can divide our cost structure into four broad categories. Direct operating costs such as crews and fuel, indirect operating costs including track maintenance and technology, asset based related expenses which include depreciation and amortization and support costs such as G & A and operating taxes. As you would expect we are pursuing opportunities in all of these categories to generate savings in 2009 and beyond. To that end let me further break down these expenses by A -- degree of variability and B -- the time it takes to affect most of those expenses on slide 36. Now this is a busy chart so let me, if I could walk you through it. Starting on the left, you can see the cost categories we discussed on the prior slide. You will note as well that we have further categorized direct operating cost into both a short and long term variable designation. Continuing towards the right, you can see the break down into the individual drivers and the percent of the overall cost structure they represent. That cost structure is shown on a pro forma basis and normalizes fuel to reflect the current environment.

Generally speaking as you look at the chart, we show a 50/50 split between fixed and variable expenses. Looking at the variable cost structure, short-term expenses such as fuel and car hire can be eliminated more quickly and you can expect us to address a good portion of these expenses during the first quarter. Long term variable costs such as crews for the schedule network, the yard and local service take more time to adjust. This is in essence the analytical rigor and work that is being done, one example being the one plan redesign that Tony mentioned. Now you can expect to begin to see savings in the second and Third Quarter related to these drivers.

For the remaining 50% of our cost base that is more fixed in nature, 35% represents indirect operating and support costs and we are pursuing opportunities to further right size our resources in these areas as well. One example of this includes our G & A expense initiative that we have previously outlined which targets over $50 million in savings driving G & A costs below 2007 levels. Now as we experience additional changes in the economic environment we will further adjust our resources to match current volumes. I could wrap up on the next slide.

As you heard Michael mention earlier our core financial foundation remains very strong. Our key credit ratios continue to support our investment grade profile and this coupled with over $700 million in cash, short-term investments at the end of 2008, and access to lines of credit totaling $1.25 billion, all of these underscore our sound liquidity and position and will allow us to weather any economic downturn. It should also be clear at this point that managing our cost structure and right sizing our business to current levels will be a key focus for CSX during 2009. At the same time, we remain very committed to pricing our service for the value we create for our customers and doing all this will continue to support our margins. So let me turn the presentation back to Michael for his closing remarks.

Well thank you, Oscar. So this morning we have given you a more complete picture of our actions and our relentless committment to excellence in these difficult economic times. We view this period as an opportunity to demonstrate once again that the fundamentals of our transportation network are sound. While volumes remain low, we expect yields to reflect the strong service we are providing. At the same time, we're staying even more focused on safety and cost control and sizing our resources to match up with the demand. CSX is a great company with a strong balance sheet, healthy margins, and accountable culture and the network that serves two-thirds of the US population.

As stewards of one of the country's most critical assets, we'll be working diligently to demonstrate to the Obama administration and Congress the importance of balanced regulation to preserve the industry's ability to invest and meet the long term demand for freight transportation. Investment tax credit incentive, investment tax incentive legislation has been reintroduced in the current Congress and we believe that this, combined with public/private partnerships are vital to stimulating investment and upgrading America's infrastructure. CSX and the nation's other railroads other offer vital solutions to some of the most pressing issues facing our country, a growing population, the need to reduce emissions, highway traffic and energy independence. Our employees take a great deal of pride in the fact that we've dramatically improved our ability to meet those needs and they will be fighting hard to protect and build on those gains.

For us, this isn't just about withstanding a tough economy. It's about coming out on the other side more capable than we were before the recession. So with that, we will now take your questions.

(Operator Instructions). Our first question comes from Tom Wadewitz with JPMorgan.

Yeah, good morning. Clarence, I appreciate your comments on pricing. I think that's obviously a point of a lot of interest for people. I was wondering if you could give a little more granularity on how things are playing out near term because I think there's probably some degree of skepticism about the rails ability to maintain this positive pricing story given how weak the economy is, so can you give us any sense of recent contract repricing that you had in the car load business and how the discussion has gone and whether the rates have actually been up on those contracts in line with what you're talking about for the kind of 5 to 6% in '09.

Tom, I would say the discussions this year have been more tense than they were in the past. As I said, we are getting price increases it looks like in the total aggregate in the 5 to 6% range which is pretty consistent with what we got in the past. We have 80% of our contracts for next year are already signed and in place, and the remaining 20% of our contracts that we have left to negotiate are either in the process of being negotiated or will be renegotiated here within the first half and significantly and specifically in coal, we have two fairly large legacy contracts that we were able to renegotiate, so we're very very positive about what we can do in our price.

Have you seen a change in terms of a car load contract that you negotiated in say August and what you were able to achieve and then a car load contract that you negotiated in November or December and what you were able to achieve in price or have those levels been pretty similar?

Been pretty similar.

Okay. And then I guess one Oscar for you, on the margin side. We appreciate the transparency in terms of the fuel benefit. Obviously it was pretty significant with the timing lag. If you take that out, that's a pretty significant change to the margin so I guess that it would have been down something like 290 basis points. Maybe you offset some of that with the casualty comparison that's difficult, but is it fair to think that ex the fuel impact that margin deterioration would continue in first quarter, you think that will get a lot worse given that it's tough to react on the cost side or are there any comments you can give us on margin near term?

Yeah, Tom. As you can imagine, the numbers on a year-over-year basis when you adjust for the items that you said does have some impact and we did decrease and all are based upon that math. I think as you look forward that's the challenge that we're trying to outline. I think we'll continue to focus on the things that we've been able to do well and certainly that's pricing, the cost structure is a big focus for us, and one of the reasons we're not giving a lot of future guidance is that the times are uncertain, so we do expect to continue to see the volume declines. We don't see the fuel benefit coming in the future and hence our focus on cost.

So but I mean is it fair to assume that you're going to have a pretty significant margin decline at least in first quarter because you really haven't had enough time to do as much as you'd like on some of the variable or semi-variable costs. Is that a fair way to look at it do you think?

Clearly that's going to have an impact. Yes.

Okay, great. Thank you for the time.

Thank you. The next question comes from Ken Hoexter with Merrill Lynch.

Great. Good morning. Just can you, Oscar, maybe quantify maybe some of the pension impact potential coming up for 2009 just looking Con Rail assets seemed to have take in a beating on the balance sheet, I know probably because of some pension impact. What about just for core CSX as well?

Yeah, I think there's a lot of conversation going as to the valuation method that may be used. As we look at all the various methods and do the calculation on an after-tax basis, it ranges from 10 to $60 million in the year so not overly significant and we have obviously until September to make those decisions and you're right. On that Con Rail line that is an accounting adjustment for our ownership with regards to their pension plan at Con Rail.

Now you noted that you're not going to start the one plan adjustments until the second quarter. Any reason why you need to wait another three months to make those adjustments? Do you have to reengage multimodal? Anything you can get started on a bit quicker just having run the program already?

Ken, this is Tony. We're in the process of running the plans now at the current levels of business, so we don't know exactly yet what those are going to say, but it will probably toward the end of the first quarter to get those things looked at and massaged and get them up and running and probably see some benefits in the second quarter.

Well, Ken, just to be clear, we are taking action. Tony has been reducing the train network, taking out trains,furloughing people in the anticipation of what we might expect to see out of the one plan. Once we officially run it we think there will be even further efficiencies and refinements, but we're not waiting for that to take action. We are responding to the volumes going down now.

What is the cost for a furloughed employee relative to either a lay off or keeping them on the books?

Well, this is Oscar, Ken. A furloughed employee from a base wage perspective kind of goes off the book relatively quickly. There is about a four month hail if you will for health and welfare benefits and that is about a let's say a $4000 cost per employee.

Okay. Now, the Greenbrier charge-- go ahead, sorry.

About $4000 for the time period, for the four month period.

Okay. The Greenbrier, did you ever quantify exactly what is going on, why the asset impairment charge? Is that marking to market the value of the property or have you inflated it previously? What is going on with the Greenbrier? It's quite a large charge.

That is writing down the asset to basically a zero base level. The impairment, the accounting aspect of impairment is you think of the future cash flows that may be generated and you discount them back and you figure out the value of the property and the according adjustment was made to reduce it down to zero.

So are you putting it up for sale then now?

We are reviewing all strategic options at this point.

Okay. Last question if I may, on you just took out a $500 million debt deal. I think Oscar you threw something in about buybacks you've now got $700 million of cash. Did I mishear or are you going to stop your buybacks or use that $700 million to continue your buybacks?

I think we said future repurchases will have to be supported by improving market and business conditions. The cash that we have, we found a great window and opportunity at the time to take out some debt. We do have some refinancing to be done later in this year, and so that cash level will be used for general corporate purposes.

Well how much do you have this year coming due?

About 400.

Okay, great. Thanks for the time. I appreciate it.

Thank you. The next question comes from Bill Greene with Morgan Stanley.

Yeah, hi. Clarence, I just wanted to ask a point of clarification. You mentioned 80% is signed. I think in the answer to an earlier question you said for next year. Did you actually mean 2009?

Right. 2009.

Okay, fine, and for 2010, do you have any locked in already?

Not a lot, Bill. We got a couple of multi-year contracts but nothing significant.

Okay, now the pricing story in part started a few years ago on the basis of an idea of supply constraint and a notion that the Corporation would be willing to walk from some business to get returns in margins higher. I would assume given what we've had happen with the volume we can no longer argue for supply constraint so how are you going to balance the decision between walking away from volumes today to try to get pricing versus trying to keep some of them maybe at a little bit less of an increase in price. How do you weigh those two?

We do it very carefully. It depends on what the contribution is of that business, is it high, is it really high, does it fit into the network? Is it something that we assign value to to keep for a longer period of time? Does it help us maintain our pricing discipline?

But your overall schematic is not greatly changed from what we've been before, which is we will sacrifice the volume for pricing in most cases.

That's true.

All right if we return to the productivity question, the safety bill is obviously going to cause you to have to alter the operations a bit. I would think that that would limit your ability a little bit to reduce headcount. How much could that affect your ability to change your headcount going forward?

Bill, I think that the safety bill fits probably our operation a little better than some of the other guys, and we don't have, we don't foresee a big problem of increase in the headcount. Maybe a little bit, but not much to meet the requirements of the safety Bill.

All right and then just one quick question. Oscar in 2009 CapEx, how much is really discretionary from here? How much could you cut if you needed to?

Well, again, depending on what happens, a lot of decisions can be made but as we look at our approved CapEx budget from our board, about 90% is sort of maintenance oriented today and with 10% strategic, and so that's the makeup in what would be cut for various reasons and it's something we would have to look through.

All right, thanks for your help.

Thank you, the next question comes from Edward Wolfe with Wolfe Research.

Thanks, good morning guys. Oscar just a follow-up to the last one, you haven't provided any CapEx guidance off of the $1.74 billion from last year have you?

Yeah, I think generally we said 1.6 and that's kind of where we're staying.

Okay, thank you. Tony, you noted the 1100 crew furloughed. Can you talk about the timing of when that's occurred?

Well it's 1100 employees in the T&E side, and we're past that a little bit now and it's probably going to be growing a little bit as we go along here and I gave you the number of 1600 for total operating employees and that brings in to the mechanical side primarily from the maintenance of locomotive and cars which has been greatly reduced.

And you've been taking those out basically over the last three to four weeks as we've seen the dramatic volume declines because it does take a little time to adjust that train network and to get those reductions.

Okay, but if I think of 1100 on the 13,000 you show, that's 8 or 9%. How do I think of the other 20,000 employees that you list, how should we think about that headcount?

I don't follow your question there. Can you clarify that a little bit. The 1100 that we've already taken out is because we reduced a number of train operations that had shrunk our train plan, with some support group of maintaining cars and locomotives growed it up more. We are waiting to see what our one plan would do, maybe I think what we'll see is more improved movement of cars and locomotive and crews probably not reducing the train plan because we've been reducing it all along.

And I think you're asking about the other crafts. I'd say in the engineering side probably limited opportunity for change there because we do need to maintain an infrastructure and there will be opportunities for mechanical crafts where we are maintaining cars and locomotives.

So if I look at the 33,452 average employees in November, how should I think of that, it was flat year-over-year as of November. When we look at that in three months how should, should that be down where?

Ed it's Oscar. It will be lower and it will be lower by at least the numbers you're hearing today and possibly more I think is what Tony is saying and let's see how the business continues and we'll obviously adjust resources accordingly but it will be down.

Clarence, the two coal legacy contracts you noted, what was the timing of them and what was the length of the contracts that came up and what's the new length for them going forward?

The length that came up for one was 10 years, 10 years for both as a matter of fact, and the new contracts that are in place are 10 years.

And what type of makeup do you get on a contract like that?

Meaning the amount of price?

Yes.

That's a secret.

Is it fair to say that the amount to catch up-to-date hasn't changed but maybe the amount going forward given the climate is less good?

No, that would not be fair.

So you're saying both are equal to where they were six months ago in what you were getting?

We got very significant and fair rate increases.

Okay. Clarence, you talked about as favorable ag and phosphates. What gives you confidence? Can you give a little bit more specificity?

In our agricultural business, although culture production in this country is down about 10%, some of the capacity has been idle was idled on non-CSX served facilities. In addition to that, over the last five years we've opened up nine new feed mills on CSX and that in turn has started to pay off for us, and although ethanol's growth is not as steep an incline, Ed, as it was, it is in fact still growing under the mandated fuel so we feel fairly positive about that. And then I think you asked me about phosphates?

Yes.

Phosphates is not good right now. It's our orders are slightly starting to pick up in the last few weeks but because it's a commodity product and because as you are aware, commodity prices have been declining significantly and people are hoping to find that bottom, we expect to have a very short, quick spurt in our phosphate business in the spring, and hopefully things settle out for the fall.

That's helpful. When I look at your intermodal EBIT, down 27% and the railcar loadings EBIT up 20, how much of that is because you've got direct competition with truckload pricing on particularly the domestic intermodal? How much of that is the timing of fuel and what other things are impacting the difference in profitability of the two businesses?

Three major items. Our volume was down. We are seeing an impact on the trucking side and the pricing around the margins, and our fuel surcharge there has a much shorter lag period than does the rail side of the business and those combination of those three factors impacted the intermodal earnings.

Okay, last question. Michael? Can you give just some general thoughts has the new board met yet and is there any changes in direction or thought or things that surprise you or in those meetings?

No, actually we've had several meetings with new board members, Ed, and I'd say the entire board is focused on how do we help the Company with the aggressive steps necessary in this uncertain and dynamic economy, and I would actually describe the relationship with the new board members as being very constructive and very collegial.

Thanks everybody for the time. I appreciate it.

Thank you. The next question is from John Barnes with BB & T Capital Markets.

Hi, good afternoon, guys. Sorry about that.

John?

Yeah, can you hear me okay. Sorry, I've got telephone issues. Real quick, Tony, as you talked about going through the employee furloughs and that type of thing, can you talk a little bit about the sacrifice of on time performance in order to maximize train starts and crew utilization and do you give up a little bit on productivity, or do you make up a little bit on productivity and give up a little bit on on time? Just can you walk us through how you balance those two out?

Well, I think the first thing, john, you may see a little degradation in our on time performance because remember, we measure our train to the minute. When you take the locomotives down, the crews down sometimes when you're cutting it pretty tight, so there may be a little bit of degradation in our on time performance but it's not anything to hurt. We should make that up on line of road. Our arrivals should be a good, velocity should be good, so we should be okay here because you're running less volumes online of road. I don't see a big issue in the service numbers, there may be a little bit decline in our on time performance just because we're cutting it so close and we're measuring it so tight.

Okay, but the on time performance that you're measuring and reporting is really more of an internal measure. I'm just trying to make sure that nothing you would do on on time would hinder your ability to realize the pricing gains that you're seeing.

No. We just took the discipline to the on time because it drives everything else we do, if we start the train on time we arrive it on time, we get it on the road on time so those kind of things is the way we drive it. I don't think it's going to have anything to do with our productivity as we got it planned.

Okay, Clarence? In terms of the 20% of contracts that you're in the process of renegotiating that will happen in '09, are there any that have become contentious enough that you'll see some type of rate case filing or have you seen any of your customers prying to protract the negotiation process in order to get to a potentially more favorable administration in kind of fighting some of the rate increases?

John, let me answer them in reverse order. I'm not aware of anyone who has waited for President Obama to come into office to negotiate any contracts. Number two is they are all contentious n these kind of environments. People posture themselves and they do everything within the balance of reasonability and common sense to try to mitigate what the price increases are. What we try to do is price to the market, and try to price as fairly as we can for the values that we offer. I think it's still important to note that our rail pricing are significantly below what they were more than 28 years ago in 1980, and we've got a long way to go to get back to where rail pricing was nearly three decades ago, so I still believe that it's a very favorable pricing environment that we're in, John.

Okay, very good and then Oscar lastly, on your CapEx, the $1.6 billion for 2009, with volumes already, I mean, I recognize that the first three weeks of January are probably not reflective of what we're likely to see for the entirety of '09 but how long would you have to go with volumes down as sharply as they are before you see a fairly major correction in your CapEx? I mean, would you go six months and then make adjustments in the back half or are you going to, is there likely to be a change in your CapEx strategy sooner if volumes don't recover meaningfully?

Well, John, this is Michael. As Oscar said earlier 90% of the CapEx is about doing the long term maintenance we need to do on our railroad and in all likely cases unless something really dramatic happened we would be wanting to join those investments because it is necessary for the long term future we see. I think the bigger risk to our CapEx spend would be on the regulatory side. If some sort of unbalanced unfair regulation came in where we would not be getting adequate returns and not have a chance to earn return on replacement cost of those assets, clearly that would be the thing most likely to effect our CapEx spending.

Okay, very good. Thanks for your time guys.

Thank you. The next question is from Chris Ceraso with Credit Suisse.

Hi, thanks, good morning. The pricing story that you mentioned for 2009 still strong at plus 5 to 6% but that is a bit lower than what you've seen over the past few years at about 6.5%. Can you talk a little bit about where the delta is? Where are things a little bit weaker? Is it any particular category? Is it intermodal? Can you help us with that?

Chris, this is Clarence Gooden. First let me say that I think that 5 to 6% is really strong and pretty good, because when you go back and you look at the rail industry over the last 20 years, it was either no percent or 1 to 2% so we've been able to maintain that over some period of time. Secondly, most of the legacy contracts over the last three, four years have been priced, and in some cases repriced one or two times. So is it as strong as it was in 2004? Probably not. Is it strong by historical standards? Absolutely. Does it look like it's going to stay strong for as far as we can reasonably see? Absolutely through 2009, we feel very confident about where we stand on our pricing.

So it's more a function of the fact that a lot of the legacy contracts have already turned over not necessarily pressure in a particular category.

Right, correct, yes, sir.

Okay. Could you just share a minute of your views on the new administration and the new congress and how real do you think the risk is that we get some sort of increase in regulation for the industry?

This is Michael. I'd say obviously there's going to be with the change in the congressional leadership we are going to see increased discussion of the role and regulation of freight rail transportation. We still believe though that there are leaders and many of them understand that going back to the old days would reduce investment and actually hurt the economy, hurt our national transportation infrastructure. As you know, these reregulation discussions have been around since the Staggers Act passed in 1980 and I think if you really step back the rail industry is a great example where the balance regulation has benefited customers with the lower prices that Clarence talked about earlier, and our ability to invest, help the transportation infrastructure so we think there will be more dialogue, but we believe that they will come up with balanced regulation that does not enter our ability to continue to invest for the future.

Okay. And then the car load declines just to clarify your comments, the double digit declines you think will carry through the first quarter and then we moderate after that but end up down for the full year, am I reading that correctly?

Yeah, we think we'll end up down for the full year. We've got a reasonable clear visibility in the first quarter is why we said the double digits. Beyond that, we just don't know.

Okay. And just the last one on the stimulus program. Can you maybe outline a few areas where you think this will have an impact and the timing on what that would be for the railroad?

Well one, we're hoping as you know legislation was introduced last year for this investment tax incentives for new rail infrastructure. Last year I think it had 61 sponsors in the House, 17 in the Senate and that's pretty good traction. We're hoping that might be passed as part of the stimulus package which I think all railroads probably make some additional investments. I guess on the market side, Clarence we might expect to see growth in our aggregates and metals business if there's a lot of infrastructure spend, right?

Yes.

Okay, thank you very much.

Thank you. The next question comes from Jason Seidl with Dahlman Rose.

Good morning, gentlemen. If I can go back to the export coal commentary you made about going back to 2007 levels, can you break out the declines between met and thermal coal, please?

It's mostly in the thermal coal. I don't have an exact, hold on a second. I can give you an exact number. It's going to be down about 5 million tons in the thermal side and about 3 million in in the metallurgical side.

And you guys run at about 50/50 split?

60/40. 60 met, 40 thermal.

Okay. That's good. Clarence, when you're looking at how the first couple of weeks started out in january, obviously you said you expect double digit declines for the quarter but there are some exacerbated declines and some line items particularly automotive which is down over 70% thus far and I haven't seen any projections for production to be down anywhere near that for the year. Is there anything going on? Have you heard any news about plants being reopened or shifts restarting from not only automotive but some other businesses?

Well of the 71 automobile plants that we either directly serve or indirectly serve via the line haul, 49 of those plants are either down or idling and that doesn't include the plants that have taken reductions on days of week, and if you look at that chart that we had in both my presentation, but more particularly, in Oscar's presentation what you saw was a fairly significant decline in December that has been followed by a fairly significant decline in January, and we are equating that to really a couple of factors. Number one, industrial production itself is down. Global Insights has it down around 10 plus percent, two there have been fairly significant inventory corrections by all businesses as you and I have been reading and following in the past few weeks so we don't expect that it will stay down at that level throughout the first quarter. We think it will begin to moderate some as those inventory levels are finally reduced.

Okay, fair enough. On the pricing side, have you, Clarence, had any shippers come back to you and try to renegotiate their existing contracts?

I have not. I'm not aware of any. I had that question asked earlier this morning and I checked around briefly but I'm not aware of any.

Okay, fantastic. Gentlemen, thank you for the time as always.

Thank you, the next question comes from David Feinberg with goldman Sachs.

Hi, this is Josh Pollard on for David Feinberg. First question on pricing. Can you walk me through the timing on 2010 pricing, so how much have you booked by the end of Q1, Q2, et cetera, and the question, the second part of that question is how have you booked that in the last two to three years and is there any reason to rework the timing given your forecast for the economy to worsen?

Now your question surrounded 2010.

Yes.

Okay. Most of our contracts for 2010 will be renegotiated in the last half of the year. I'm not sure how pricing in 2010 will ultimately play out in early 2009, but if I were a gambling person and suspected things, here is how I would see it playing out. If this economy moves up, meaning much better, as a result of stimulus or whatever in a fairly significant way, I believe the rail industry will be in one of the best situations it has found itself in years in pricing, because capacity is the enemy of price, and capacity, transportation capacity is coming out of the transportation industry in large increases, and in March and April of this year, as truckers go to renew their taxes and their tags, you're going to see major league bankruptcies in the trucking side of the business. There's not a lot of investment going into rail car capacity this year, and so we will find ourselves in a very attractive position going into 2010 should the economy turn.

And the economy does not turn, do you feel as confident in 2010 pricing as you do 2009 with sort of 5 to 6% pricing?

I do, yes.

And my second question is on the locomotive side. You've cut about 10% from October. How deep could you go, 3000, 25 00 locomotives?

Well that depends on the car loading business. I mean, we are still trying to keep up our number of cars per train so that all depends on the volume, if the volume keeps shrinking to the point that we can reduce our train starts and then we'll put more locomotives up.

Got it. Last question is on incentive compensation. There was a $45 million reduction relative to 2007's fourth quarter. How much was incentive comp in 2007 overall, and were there accruals for incentive comp all throughout 2008 that you reversed in this quarter or was this a "straight cut"?

It was more of the accrual process being reversed to a degree but also on a year-over-year basis that number represents in essence a more lucrative payout we had last year so we accrued more last year for payment and we'll be accruing less and have accrued less than 2008 so that's a majority of it and there's some also forward-looking for some future performance objectives which is a small part of it.

So when we look forward to 2009, you'll accrue less than you had originally accrued in call it 2008, and then when I think back to 2007, what was, how much was incentive compensation in '07?

I don't think we've ever reported that number publicly.

Okay. Thank you, guys.

The next question comes from John Larkin with Stifel Nicolaus.

Yes, good morning, everybody. Had a question on the national gateway strategy. Clarence, you mentioned that you are anticipating additional all water diversions to east coast. Does that give you a reason to continue with the national gateway strategy, speed it up a little bit or is the volume decline so dramatic that you might actually push that out some.

John, this is Michael. We're going to continue to actively push that and we're getting pretty good traction. As you probably know, Governor Rendell recently announced his strong support for it, pledged the state funds for the work that's going to happen in the state of Pennsylvania and we're actively working with the other states to push forward so we're hoping some of the infrastructure incentive moneys can go toward these sort of projects with the various state DOTs. We're working on the new facility in northwest Ohio which we're constructing, so now we're not slowing down. We think it's a great project for the future.

And then your major eastern railroad competitor has also unveiled another initiative to sort of compliment their heartland corridor called the crescent corridor which is more of the New Orleans to Harrisburg initiative primarily to perhaps take traffic off of I-81 and other congested interstates. Does CSX have a plan to respond to that with something of their own?

I think we already have an infrastructure that allows us to make those kind of moves as we exist today.

Okay, so no incremental CapEx required there?

No.

Okay. Tony mentioned that the terminal dwell was up a little bit in the fourth quarter and mentioned that that was primarily due to surplus freight cars more or less clogging up the yards. What can you do? What step can you take here quickly to unclog the yards and essentially get those unneeded cars out of the way?

Well, we started storing the cars as you know, the volume really fell off in the last six or seven weeks, so it was a real quick fall off, and to see what the real impact was, if we have now stored over 24, 25,000 cars. A lot of that is multi-levels as the automotive industry has took a vacation in those kind of things, so we'll continue to take those cars out as volume goes down and defer some of the maintenance on those cars that's not needed until the longer to some time out in the future when the commercial guy says they need the cars then we can put them back in and fix them up.

So as you adjust to the reduced volume levels we might see terminal dwell continue to decline and perhaps even system velocity increase. Is that a fair?

That's our game plan as we go forward.

Okay. Maybe a question for Oscar here. Obviously fuel prices have dropped precipitously. One of your competitors layered in some hedges at much higher prices. Is there a price point for fuel here, where you think layering in new hedges anticipating perhaps fuel price increases over the next couple of years would make some sense for you?

Yeah, I think as we think of a forward curve, we think of the volatility and we think of our existing fuel recovery programs that we have within the industry, we don't see pursuing a hedge derivative instrument sort of objective is a good idea for us at this point.

You do not think it'sa good idea?

Do not think it's a good idea.

Is there a price that at perhaps it does become a good idea for you if you were to drop another $10 a barrel or something?

I think we always review those issues but again our fuel recovery program that we have in the industry is a good way we feel with our customers to deal with that issue of fuel.

Okay. And if I understand it correctly, there is one rate case with the STB filed by a Florida utility; is that correct?

Actually, there are two out there now. One is Florida utility, Seminole Electric. We made some very market based fair reasonable proposals to Seminole. They didn't quite see it that way and that one will go to the STB, in addition, Dupont has filed a rate case as well on numerous routes and commodities.

Okay, and what is the timetable for the resolution of those rate cases?

Both of these are the standalone railroad cost cases and normally these have a two to three year time frame to complete the work and get them rolling.

So those were not filed under the so-called streamline system?

No. Both of them are the standalone cost.

Got it and the Dupont case was separate from the series of smaller moves that they contested

That's correct.

A year or two ago?

Yes.

That's in addition?

Yes.

Thank you very much for your time.

The next question comes from Gary Chase with Barclays Capital.

Good morning, everybody. Just a couple quick questions for Oscar. As you think about the quarter, there were a couple of factors that influenced earnings power. You had the fuel tail wind but you also got caught certainly in the month of December with quite a bit less volume than you anticipated. I think you sized the fuel impact at $150 million, I might have heard that wrong but does the cost impact or the volume surprise does it come close to offsetting that?

Say that again, Gary?

In other words, I think you sized the fuel impact at $150 million.

That's correct.

But volume also surprised you in a big negative way for the month of December so you wouldn't have had time to resize the network as you were talking about earlier in the call. If you had the opportunity to resize the network, would it have been enough cost drag to offset the $150 million positive you got out of fuel?

That's a hard one to answer, Gary but that 150 was a pretty significant amount of benefit. I don't know that in a given quarter with all the right information we might have been able to catch that much cost up.

And one of the areas you experienced a lot of inflation over the years on the cost side is in the MS& O line, and I notice in your appendix as you go through the variances year on year you don't even mention volume and there's an inflation entry in there. As you look into 2009, how much volume related impact should we expect in MS& O if any and then additionally, how much benefit could you get out of a much lower commodity price environment?

If you think, it's a great question. MS& O as you know is mostly O, the material and supplies component of that line is relatively minimal, and so yes, inflation is in there and yes, volume would affect it to a degree, but not as significant given that the others are really big line items, property taxes, legal issues, environmental, and safety issues all flow into that number which aren't necessarily volume related so some but not a lot.

Is there a way to think about how much savings you might get out of a much different commodity price environment?

I think as you think about our overall inflationary rates, absent labor and fuel, which are the two big components, we've seen them spike over the last couple of years up into the 6 to 8% range. I would certainly see those coming down to a more normalized basis, and in some case kind of maybe in the low three over the next 12 to 18 months.

All right, I appreciate the clarity.

Thank you, the next question comes from Walter Spracklin with RBC Capital Markets.

Thanks very much, good morning. On the pricing question asked a little while ago, whether a customer can come back on a contract, I know you said that you didn't, you don't remember that having happened, is this a legal aspect, what hoops would they need to jump through really to come back on a contract that's already been signed and delivered for you guys?

Well first they would contact their sales person and go through the reasons of why they felt the change was necessary and we would in turn evaluate that. We want to work with our customers. At the end of the day, it all starts with the customer but essentially once you got a deal done, you move forward.

It's no different than any other contract you have with somebody. There's no legal proceeding they can bring. It's a binding contract between two parties.

A lot of other industries obviously we're hearing reneging, we're hearing people are backing down but I guess things in railroads is obviously a little different and just wanted to confirm, you haven't heard a lot of pushback in terms of contracts already signed that customers are coming back wanting to reopen?

Correct.

In terms of the slide that you showed us on the favorable and unfavorable, can you talk to us just a little bit about the varying degrees on the unfavorable side, particularly the ones where you would see the most area of concern, and perhaps on the flip side, are there some unfavorable out there, and I'm thinking maybe the housing sector where you've seen this is something that predated the current economic recession that we're in, can you get a sense, are you seeing visibility on a bottoming in any of those unfavorable segments?

I would say the three sectors that we see that are experiencing the most difficulty is first, carbon steel. It is significantly down. The second area that we're seeing is our phosphates and fertilizer. Because it is a commodity it's behaving like a commodity and people are looking at the bottom, and I think the third sector which is related to a lot of things we do in this country everything from PVC pipe to some applications in the fertilizer business to plastic bottles to packaging is in our chemicals business. Those three areas seem to be suffering the most.

That's great color. Appreciate that, and just the last question, when you guys look at right sizing yourselves and I know you've showed us good graphs on an overall aggregate basis, are there particular product segments that for whatever reason due to high margin or regulatory aspects, or geography that are more difficult to right size on a product segment basis than other areas?

Probably the toughest is the automotive because the volumes are down so dramatically and we did run a network and dedicated to the automotive so Tony and his team have been doing what they can to shrink that network some, perhaps run them on an intermodal train or a regular merchandise train but that's probably the toughest one to adjust don't you think, Tony?

Well our biggest issue is in house capacity for a certain line or certain subdivision where we tried to size the maximum train size or the number of trains through an area where the downturn in business or the uptick in business would cause us to have to go back and regroup and readjust, but we've got models, now our systems models we've got very high sophisticated type models that we can do a testing environment and then switch it over, so we feel pretty comfortable that we can adjust to those pretty quick.

Okay. That's all my questions. Thanks very much for the color guys.

Thank you. Our final question will come from Matt Troy with Citigroup.

Yes, thanks. Now that you've got those two legacy coal contracts nailed down, how much of the remaining traffic base of your total traffic base would you classify still under legacy contracts? What's the total opportunity going forward?

Well, it's about 7% of our contracts are still under legacy, what you and I would refer to as legacy, and Matt they are spread out between now and 2013, 14, 15, so they are more or less what's left is onesie and twosies.

Now when we talk about legacy everyone defines it differently. What is it for CSX? Is it a contract that hasn't come up for air in five years, seven years? What's the cutoff or how are you defining a contract as legacy at this point?

It hasn't come up for renewal since 2004.

2004, okay. Thank you, and the last question I had was just Oscar on that $160 million of strategic growth CapEx for 2009, is there a short list of major projects we're thinking about in that number or is it a whole bunch of smaller projects? What are the key initiatives under that $160 million or 10% of your total capex?

It is probably roughly half a couple of major projects and the other half some smaller issues.

Okay so there is discretion within that 10% need there be in the back half of the year?

Well, but one thing to clarify, about half of that amount is technology deployment to increase our productivity, so we think those would still be wise investments to make to deploy that technology to help our productivity. The others probably more on intermodal terminals which again for the long term we think are important.

Got it. Running long so I'll cut my questions. Thanks for the time.

Thank you. This concludes today's conference. Thank you for your participation in today's call. You may disconnect your lines.