csx  Q1_2007
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csx Q1_2007

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csx  Q1_2007 csx Q1_2007 Document Transcript

  • First Quarter 2007 Earnings Presentation 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,” 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 3 3 First quarter overview . . . First Quarter Core earnings power Earnings Per Share reflects secular strength Strong pricing momentum continues $0.53 $0.53 $0.52 $0.50 Sustained operational performance Reported Comparable 2006 2007 Note: Comparable 2007 earnings per share excludes insurance recoveries 4 4
  • Sales and Marketing Review Clarence Gooden Executive Vice President Sales and Marketing 5 5 Total revenue increased 4% to $2.4 billion Record quarterly revenues First Quarter Revenue in Millions 20th consecutive quarter ($90) $181 of revenue growth $2,422 $2,331 Strong yield environment offsetting lower volumes 2006 RPU Volume 2007 6 6
  • Price continues to drive RPU growth Year-Over-Year Change 12.6% 11.8% 11.7% 11.0% 9.6% 9.0% 8.6% 8.4% 8.1% 7.1% 6.8% 6.7% 6.6% 6.3% 6.2% 6.0% 5.6% 4.8% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2005 2005 2005 2005 2006 2006 2006 2006 2007 Price Increase on 'Same Store Sales' Total Revenue per Unit Note: Price increases on a ‘Same Store Sales’ basis excludes fuel surcharge and mix impacts 7 7 Volumes reflect a combination of factors Surface Transportation Volume Year-Over-Year Percentage Change (4.2%) (6.6%) (1.4%) Construction softness Construction softness Construction/Auto softness Automotive softness Automotive softness New intermodal service Weather impact Growth in MT, CH, PF (0.6%) (0.6%) (1.5%) (1.6%) (1.8%) (1.7%) (3.8%) (4.5%) (4.9%) (5.5%) (6.1%) (7.9%) (10.3%) 1 2 3 4 5 6 7 8 9 10 11 12 13 Week 8 8
  • Merchandise revenue increased 5% 20th consecutive quarter First Quarter of revenue growth 2007 versus 2006 Continued favorable RPU 10% pricing environment Volume (5%) Revenue 5% Volume challenges in construction-related 2006 Change 2007 markets RPU $ 1,625 $ 166 $ 1,791 Strength in ethanol Volume 707 (32) 675 and fertilizers (thousands) Revenue $ 1,149 $ 60 $ 1,209 (millions) 9 9 Coal revenue increased 9% Record quarterly revenue First Quarter and revenue per unit 2007 versus 2006 Utility volumes declined RPU 13% as inventories have Volume (3%) reached target levels Revenue 9% Strong demand continues 2006 Change 2007 in export coal RPU $ 1,216 $ 154 $ 1,370 Pricing environment Volume 476 (14) 462 remains strong (thousands) Revenue $ 579 $ 54 $ 633 (millions) 10 10
  • Intermodal revenue decreased 5% Reduction in ‘other’ First Quarter revenue impacted profits 2007 versus 2006 Price gains offset by mix RPU (3%) Volume (1%) Domestic volume grew on Revenue (5%) new services 2006 Change 2007 RPU $ 647 ($ 22) $ 625 Volume 516 (7) 509 (thousands) Revenue $ 334 ($ 16) $ 318 (millions) 11 11 Automotive revenue decreased 12% Volume down on First Quarter production declines 2007 versus 2006 New Domestics continue RPU 2% to gain market share Volume (14%) Revenue (12%) Pricing opportunities continue 2006 Change 2007 RPU $ 1,819 $ 43 $ 1,862 Volume 127 (18) 109 (thousands) Revenue $ 231 ($ 28) $ 203 (millions) 12 12
  • Second quarter revenue outlook positive Favorable Neutral Unfavorable Agricultural Products Emerging Markets Automotive Chemicals Forest Products Coal, Coke & Iron Ore Food & Consumer Intermodal Metals Phosphate & Fertilizer 13 13 Sales and Marketing wrap-up . . . GDP and IDP forecasted Economic Forecast to trend upward 2007-2008 2.8% Continued strong pricing 2.3% environment 2.2% 1.8% Overall volume outlook improving Service and capacity 2007 2008 improvements will support growth GDP Industrial Production Source: Global Insight 14 14
  • Operations Review Tony Ingram Executive Vice President Chief Operating Officer 15 15 Leadership, discipline and execution Safety performance continues to improve Reliable Service levels sustained Performance in challenging conditions Service Execution Service Execution Productivity and asset Productivity Discipline Productivity Discipline utilization improving Safety Leadership Safety Leadership 16 16
  • Safety performance remains strong FRA Personal Injury FRA Train Accidents 13 Week 13 Week Average Average 1.35 2.84 4.03 3.91 1.69 3.57 1.55 3.40 1.44 1.41 1.38 3.17 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2006 2006 2006 2006 2007 2006 2006 2006 2006 2007 Rolling 12-month Averages 17 17 On-time performance consistent On-Time Originations On-Time Arrivals 13 Week 13 Week Average Average 74% 64% 63% 63% 76% 76% 71% 57% 65% 52% 46% 57% Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2006 2006 2006 2006 2007 2006 2006 2006 2006 2007 Rolling 12-month Averages 18 18
  • Asset utilization improving Dwell Time (hours) Cars-On-Line (000) 13 Week 13 Week Average Average 24.9 hrs 225K 28.9 27.7 231 26.8 228 25.6 226 25.2 225 225 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2006 2006 2006 2006 2007 2006 2006 2006 2006 2007 Rolling 12-month Averages 19 19 Train velocity remains stable Velocity (mph) 13 Week Average 19.9 mph 19.8 19.7 19.5 19.5 19.4 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Rolling 12-month Averages 20 20
  • Looking forward . . . Safety performance momentum continues Continuous improvement in service reliability Productivity and asset utilization gains 21 21 Financial Results Oscar Munoz Executive Vice President Chief Financial Officer 22 22
  • CSX reports strong first quarter results First Quarter Results Dollars in millions, except EPS 2007 2006 Variance Surface Transportation Operating Income $ 487 $ 487 $ 0 Other Operating Income 1 9 (8) Consolidated Operating Income $ 488 $ 496 $ (8) Other Income (net) (11) (3) (8) Interest Expense (99) (98) (1) Income Taxes (138) (150) 12 Net Earnings $ 240 $ 245 $ (5) Earnings Per Share $ 0.52 $ 0.53 ($ 0.01) 23 23 Comparable EPS is $0.50 First Quarter Results Dollars in millions, except EPS 2007 2006 Variance Earnings Per Share $ 0.52 $ 0.53 ($ 0.01) Less Gain on Insurance Recoveries (0.02) - (0.02) Comparable Earnings Per Share $ 0.50 $ 0.53 ($ 0.03) Surface Transportation Operating Income $ 487 $ 487 $ 0 Less Gain on Insurance Recoveries (18) - (18) Comparable Operating Income $ 469 $ 487 ($ 18) 24 24
  • First-quarter results near all-time high First Quarter Surface Transportation Operating Income in Millions $487 $469 $351 $204 $169 2003 2004 2005 2006 2007 Note: 2004 excludes management restructuring charges 25 25 Core earnings momentum remains strong Surface Transportation Operating Income in Millions $487 ($35) $45 $469 ($28) Q1 2006 Fuel Brooks, KY Earnings Q1 2006 Hedge Derailment Momentum 2007 26 26
  • Operating Income of $469 million First Quarter Results Surface Transportation ($’s in millions) 2007 2006 Variance Revenue $ 2,422 $ 2,331 4% Expenses Labor and Fringe 732 718 (2%) Materials, Supplies and Other 563 482 (17%) Fuel 259 253 (2%) Depreciation 221 211 (5%) Equipment and Other Rents 121 124 2% Inland Transportation 57 56 (2%) Operating Expenses 1,953 1,844 (6%) Operating Income $ 469 $ 487 (4%) Operating Ratio 80.6% 79.1% (1.5 pts) Note: 2006 results exclude insurance recoveries 27 27 Labor and fringe increased 2% Primarily due to wage and First Quarter benefit inflation Dollars in Millions Partially offset by $732 $14 $718 productivity gains 2006 Variance 2007 28 28
  • MS&O increased 17% Primarily driven by an First Quarter increase in derailment Dollars in Millions related expenses $563 $81 Continued higher than $482 historical inflation levels 2006 Variance 2007 29 29 Fuel increased 2% Consumed 150 million First Quarter gallons at average gross Dollars in Millions price of $1.73 $6 $259 $253 Comparison impacted by $35 million in lower hedge 2006 Variance 2007 30 30
  • Rents decreased 2% Primarily due to lower First Quarter volumes Dollars in Millions Improved productivity $124 ($3) $121 offset inflation 2006 Variance 2007 31 31 All other expenses increased 4% First Quarter Dollars in Millions $278 $11 $267 $57 $56 $221 $211 2006 Variance 2007 Depreciation Inland Transportation 32 32
  • Dividend and share buyback update . . . Annual Dividend Rate Share Repurchase Dollars in Millions $0.48 $1,050 $1,000 $0.40 $0.26 $465 $0.20 Q3 Q4 Q2 Q1 2006 2007E 2008E 2005 2005 2006 2007 33 33 Financial Wrap-up . . . Earnings power continues to improve despite softer economy Dynamic environment propelling long-term financials above 2006-2010 targets — Maintaining double-digit growth on higher base — Stronger results creating new investing opportunities — Continue balanced use of cash with higher returns 34 34
  • Concluding Remarks Michael Ward Chairman, President and Chief Executive Officer 35 35 Looking forward . . . Producing strong results for shareholders Industry positioned to continue its renaissance Leveraging better service for long-term growth Targeting greatest success in our 180th year 36 36
  • First Quarter 2007 Earnings Presentation 37 37