csx  3Q 07
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csx 3Q 07

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csx  3Q 07 csx 3Q 07 Document Transcript

  • Third Quarter 2007 Earnings Conference Call 1 1 Forward-Looking Disclosure This presentation and other statements by the company contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to, among other items: projections and estimates of earnings, revenues, cost-savings, expenses, or other financial items; statements of management’s plans, strategies and objectives for future operation, and management’s expectations as to future performance and operations and the time by which objectives will be achieved; statements concerning proposed new products and services; and statements regarding future economic, industry or market conditions or performance. Forward-looking statements are typically identified by words or phrases such as “believe,” “expect,” “anticipate,” “project,” “estimate,” and similar expressions. Forward-looking statements speak only as of the date they are made, and the company undertakes no obligation to update or revise any forward-looking statement. If the company does update any forward-looking statement, no inference should be drawn that the company will make additional updates with respect to that statement or any other forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, and actual performance or results could differ materially from that anticipated by these forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by these forward-looking statements include, among others: (i) the company’s success in implementing its financial and operational initiatives, (ii) changes in domestic or international economic or business conditions, including those affecting the rail industry (such as the impact of industry competition, conditions, performance and consolidation); (iii) legislative or regulatory changes; (iv) the inherent business risks associated with safety and security; and (v) the outcome of claims and litigation involving or affecting the company. Other important assumptions and factors that could cause actual results to differ materially from those in the forward-looking statements are specified in the company’s SEC reports, accessible on the SEC’s website at www.sec.gov and the company’s website at www.csx.com. 2 2
  • Executive Summary Michael Ward Chairman, President and Chief Executive Officer Third quarter overview . . . Core earning power is strong Third Quarter EPS and continues to improve From Continuing Operations $0.71 Safety and customer service $0.67 $0.67 at high levels and improving $0.54 Pricing gains supported by 24% strong service levels Increase Price/productivity continue to drive operating ratio lower Reported Comparable 2006 2007 Note: Comparable EPS from continuing operations exclude insurance gains and income tax benefits 4 4
  • Operations Review Tony Ingram Executive Vice President Chief Operating Officer Leadership, discipline and execution Safety at historical best; driving to industry leading levels Productivity helping drive Performance operating ratio to mid-low 70’s Excellence Service Execution Service Execution Network performance and service at all-time highs Productivity Discipline Productivity Discipline Safety Leadership Safety Leadership 6 6 View slide
  • Helping lead one of the nation’s safest industries FRA Personal Injury FRA Train Accidents 13 Week 13 Week Average Average 1.24 2.79 1.46 1.43 3.67 1.39 3.50 3.29 1.30 3.09 1.24 2.98 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 2006 2006 2007 2007 2007 2006 2006 2007 2007 2007 Rolling 12-month Averages 7 7 On-time performance at all-time highs On-Time Originations On-Time Arrivals 13 Week 13 Week Average Average 83% 76% 69% 78% 77% 66% 76% 76% 63% 63% 57% 71% Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 2006 2006 2007 2007 2007 2006 2006 2007 2007 2007 Rolling 12-month Averages 8 8 View slide
  • Asset utilization approaching all-time best levels Dwell Time (hours) Cars-On-Line (000) 13 Week 13 Week Average Average 21.9 hrs 221K 25.7 226 225 225 225 24.5 24.1 23.7 224 23.0 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 2006 2006 2007 2007 2007 2006 2006 2007 2007 2007 Rolling 12-month Averages 9 9 Network operations fluid with increasing velocity Velocity (mph) 13 Week Average 21.4 mph 20.4 20.1 19.9 19.9 19.6 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Rolling 12-month Averages 10 10
  • Productivity focus helping to drive operating ratio Adjusting resources to the Comparable market environment Operating Ratio 87.1% Delivering a pipeline of productivity initiatives 83.0% 80.4% 78.0% Leveraging technology to drive productivity Driving the Total Service Integration (TSI) initiative Q3 2004 Q3 2005 Q3 2006 Q3 2007 Note: 2004 excludes restructuring charges, and 2006 and 2007 exclude insurance gains 11 11 Operations wrap-up . . . Achieving new highs in safety performance Delivering service reliability for our customers Driving productivity with process improvement, technology and Total Service Integration 12 12
  • Sales and Marketing Review Clarence Gooden Executive Vice President Sales and Marketing Revenues increased 3% to $2.5 billion Pricing gains supported by Third Quarter strong service levels Revenue in Millions Yield strength continues to $83 $2,501 offset softer volumes $2,418 Uninterrupted revenue growth for more than five years 2006 Growth 2007 14 14
  • Price continues to drive RPU growth Year-Over-Year Change 12.6% 11.8% 11.7% 11.0% 9.0% 8.4% 8.1% 8.0% 6.9% 7.1% 6.5% 6.8% 6.7% 6.6% 6.5% 6.3% 6.2% 5.6% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2005 2005 2006 2006 2006 2006 2007 2007 2007 Price Increase on 'Same Store Sales' Total Revenue per Unit Note: ‘Same Store Sales’ price increases exclude impacts from fuel and mix 15 15 Merchandise revenue increased 3% Third Quarter Yields continue to offset the 2007 versus 2006 impact of weaker volumes Continued softness in RPU 9% housing related markets Volume (5%) Revenue 3% Phosphates, agriculture and chemicals led revenue gains 2006 Change 2007 RPU $ 1,711 $ 150 $ 1,861 Volume 713 (37) 676 (thousands) Revenue $ 1,220 $ 38 $ 1,258 (millions) 16 16
  • Coal revenue increased 8% Third Quarter Export market remains strong 2007 versus 2006 Utility inventory levels remain at target levels RPU 10% Volume (2%) Contract repricing to current Revenue 8% market levels continues 2006 Change 2007 RPU $ 1,267 $ 129 $ 1,396 Volume 475 (10) 465 (thousands) Revenue $ 602 $ 47 $ 649 (millions) 17 17 Automotive revenue increased 8% Third Quarter Light vehicle production more 2007 versus 2006 than offset SUV declines Yields remain strong and are RPU 6% expected to continue Volume 2% Revenue 8% Well positioned in changing automotive landscape 2006 Change 2007 RPU $ 1,830 $ 111 $ 1,941 Volume 100 2 102 (thousands) Revenue $ 183 $ 15 $ 198 (millions) 18 18
  • Intermodal revenue declined 7% Third Quarter Yields on same store sales 2007 versus 2006 increased over 3%; offset by impact of short haul traffic RPU (1%) International traffic declined Volume (6%) 17% on customer losses and Revenue (7%) slowing Asian import growth 2006 Change 2007 Domestic traffic improved 11% on new services RPU $ 645 ($ 9) $ 636 Volume 564 (34) 530 (thousands) Revenue $ 364 ($ 27) $ 337 (millions) 19 19 Fourth quarter revenue outlook is positive Favorable Neutral Unfavorable Agricultural Products Automotive Food & Consumer Chemicals Forest Products Coal, Coke & Iron Ore Intermodal Emerging Markets Metals Phosphate & Fertilizer 20 20
  • Financial Results Oscar Munoz Executive Vice President Chief Financial Officer Strong third quarter results Third Quarter Results Dollars in millions, except EPS 2007 2006 Variance Surface Transportation Operating Income $ 552 $ 489 $ 63 Other Operating Income 3 - 3 Consolidated Operating Income $ 555 $ 489 $ 66 Other Income (net) 17 25 (8) Interest Expense (102) (97) (5) Income Taxes (173) (89) (84) Net Earnings from Continuing Operations $ 297 $ 328 $ (31) EPS from Continuing Operations $ 0.67 $ 0.71 $ (0.04) 22 22
  • Comparable EPS increased 24% Third Quarter Results Dollars in millions, except EPS 2007 2006 Variance EPS from Continuing Operations $ 0.67 $ 0.71 $ (0.04) Less Gain on Insurance Recoveries - (0.02) 0.02 Less Income Tax Benefits - (0.15) 0.15 Comparable EPS from Continuing Operations $ 0.67 $ 0.54 $ 0.13 Surface Transportation Operating Income $ 552 $ 489 $ 63 Less Gain on Insurance Recoveries (1) (15) 14 Comparable Operating Income $ 551 $ 474 $ 77 23 23 Surface Transportation operating income up 16% Third Quarter Results Dollars in millions 2007 2006 Variance Revenue $ 2,501 $ 2,418 $ 83 Expenses Labor and Fringe 746 736 (10) Materials, Supplies and Other 503 497 (6) Fuel 305 300 (5) Depreciation 220 213 (7) Equipment and Other Rents 116 135 19 Inland Transportation 60 63 3 Operating Expenses 1,950 1,944 (6) Operating Income $ 551 $ 474 $ 77 Operating Ratio 78.0% 80.4% 2.4 pts Note: Results exclude insurance gains 24 24
  • Labor and fringe increased 1% Primarily due to wage and Third Quarter benefit inflation Dollars in Millions Partially offset by lower $10 $746 $736 volumes and improved productivity Surface Transportation headcount declined over 500 2006 Variance 2007 25 25 MS&O increased 1% Increase primarily driven Third Quarter by inflation Dollars in Millions Mostly offset by reduced train $503 $6 $497 accidents and related costs 2006 Variance 2007 26 26
  • Fuel increased by 2% Driven by a $0.16 increase in Third Quarter fuel price per gallon Dollars in Millions Fuel efficiency reduced $5 $305 $300 consumption by nearly five million gallons Lower volumes also resulted in lower consumption 2006 Variance 2007 27 27 Rents decreased 14% Lower Merchandise and Third Quarter Intermodal volumes Dollars in Millions Operations driving better $135 $19 asset utilization $116 2006 Variance 2007 28 28
  • All other expenses increased 1% Higher capital base increased Third Quarter depreciation expense Dollars in Millions Lower intermodal volumes $280 $4 $276 reduced inland transportation $60 $63 $220 $213 2006 Variance 2007 Depreciation Inland Transport 29 29 Share repurchase update . . . Cumulative Shares Repurchased Dollars in Millions $2,074 $882 $1,192 $644 $465 $1,192 $422 $149 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Note: Approximately $1.6 billion of the $2.1 billion has been repurchased under the current $3.0 billion program 30 30
  • Double-digit growth targeted on higher 2007 base 2007-2010 Capital 2007-2010 Guidance Spending in Billions Operating Income* 10% – 12% $1.7 $1.7 $1.6 $1.6 Earnings Per Share* 15% – 17% Free Cash Flow $800M – $1B Before Dividends in 2010 Operating Ratio Mid-low 70’s 2007 2008 2009 2010 Note: Operating income and earnings per share reflect four-year CAGR’s 31 31 Concluding Remarks Michael Ward Chairman, President and Chief Executive Officer
  • 33 33 Third Quarter 2007 Earnings Conference Call 34 34