csx  Q3_2006
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csx Q3_2006

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    csx  Q3_2006 csx Q3_2006 Document Transcript

    • ` Third Quarter 2006 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 Third quarter overview . . . Surface Transportation Third Quarter produces record results Earnings Per Share $0.71 Pricing environment $0.54 remains strong $0.36 $0.36 ONE Plan sustains strong momentum Economic environment Reported Comparable remains positive 2005 2006 Note: Comparable 2006 earnings per share exclude Katrina insurance recoveries and income tax benefits 4 4
    • Sales and Marketing Review Clarence Gooden Executive Vice President Sales and Marketing 5 5 Revenues increased 14% Record revenues of $2.4 Third Quarter billion, up $293 million Revenue in Millions Overall volumes increased $2,418 nearly 2% $2,125 Renewed growth in Intermodal Yield environment remains strong 2005 2006 6 6
    • Revenue per unit increased 12% Third Quarter Revenue Per Unit 2006 versus 2005 Surface Transportation 12% Merchandise 17% Coal 9% Automotive 4% Intermodal 4% 7 7 Merchandise revenue increased 16% Pricing remains strong Third Quarter 2006 versus 2005 Impact of prior phosphate plant closures continues 17% 16% Housing market softening Outlook favorable (1%) Revenue Volume RPU 8 8
    • Merchandise volume was mixed Third Quarter Volume 2006 versus 2005 Agriculture 16% Metals 3% Chemicals 2% Emerging Markets 1% Food and Consumer (2%) Forest Products (7%) Phosphates & Fertilizers (16%) 9 9 Coal revenue increased 18% Utility demand strong Third Quarter 2006 versus 2005 Coal production strong 18% Pricing strength continues 9% Outlook favorable 7% Revenue Volume RPU 10 10
    • Automotive revenue decreased 9% “Big 3” volume down on Third Quarter production decline 2006 versus 2005 New Domestics continue 4% to gain market share Continued contract renewal opportunities (9%) Outlook unfavorable (12%) Revenue Volume RPU 11 11 Intermodal revenue increased 8% Volume favorable Third Quarter 2006 versus 2005 Pricing strength continues 8% Income improvement for ten quarters 4% 4% Outlook favorable Revenue Volume RPU 12 12
    • Economic forecasts remain positive Economic Forecast 2006-2008 4.3% 3.4% 3.1% 2.3% 2.2% 2.1% 2006 2007 2008 GDP Industrial Production Source: Global Insight 13 13 Looking forward . . . Surface Transportation 2006 Volume Growth Service improvements supporting growth 2%–3% Favorable pricing 1.8% environment continues 0.1% Remain focused on (1.0%) profitable growth Q1 Q2 Q3 Q4 Fcst 14 14
    • Operations Review Tony Ingram Executive Vice President Chief Operating Officer 15 15 Leadership, discipline and execution Safety performance continues to improve Operating momentum Reliable Reliable sustained Performance Performance Service Execution Service Execution Capacity projects on schedule Productivity Discipline Productivity Discipline Safety Leadership Safety Leadership 16 16
    • Safety performance remains strong FRA Personal Injury FRA Train Accident 13 Week 13 Week Average Average 1.37 3.14 4.65 1.92 4.41 1.71 3.98 1.64 3.85 1.51 3.52 1.37 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 2005 2005 2006 2006 2006 2005 2005 2006 2006 2006 Rolling 12-month Averages 17 17 On-time performance is improving On-Time Originations On-Time Arrivals 13 Week 13 Week Average Average 77% 63% 71% 57% 65% 52% 46% 57% 40% 40% 51% 50% Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 2005 2005 2006 2006 2006 2005 2005 2006 2006 2006 Rolling 12-month Averages 18 18
    • The network is more fluid Dwell Time (hours) Cars-On-Line (000) 13 Week 13 Week Average Average 25.5 hrs 225K 233.9 233.1 29.7 29.7 28.9 230.7 27.7 227.6 26.8 225.8 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 2005 2005 2006 2006 2006 2005 2005 2006 2006 2006 Rolling 12-month Averages 19 19 Train velocity is stable Consistent plan execution Velocity (mph) 13 Week Average Improved recoverability 19.8 mph 19.7 19.5 19.5 19.4 19.2 Increased asset utilization Improving service reliability Q3 Q4 Q1 Q2 Q3 2005 2005 2006 2006 2006 Rolling 12-month Averages 20 20
    • Looking forward . . . Safety momentum will be sustained Continue to build on Reliable Reliable operating improvement Performance Performance Service Execution Service Execution Capacity projects will remain on schedule Productivity Discipline Productivity Discipline Safety Leadership Safety Leadership 21 21 Financial Results Oscar Munoz Executive Vice President Chief Financial Officer 22 22
    • CSX reports strong third quarter results Third Quarter Results Dollars in millions, except EPS 2006 2005 Variance Surface Transportation Operating Income $ 489 $ 361 $ 128 Other Operating Income - (8) 8 Consolidated Operating Income $ 489 $ 353 $ 136 Other Income (net) 25 11 14 Interest Expense (97) (100) 3 Income Taxes (89) (100) 11 Net Earnings $ 328 $ 164 $ 164 Earnings Per Share $ 0.71 $ 0.36 $ 0.35 23 23 Comparable EPS increased 50% Third Quarter Results Dollars in millions, except EPS 2006 2005 Variance Surface Transportation Operating Income $ 489 $ 361 $ 128 Less Gain on Insurance Recoveries (15) - (15) Comparable Operating Income $ 474 $ 361 $ 113 Earnings Per Share $ 0.71 $ 0.36 $ 0.35 Less Gain on Insurance Recoveries (0.02) - (0.02) Less Income Tax Benefit (0.15) - (0.15) Comparable Earnings Per Share $ 0.54 $ 0.36 $ 0.18 24 24
    • Surface Transportation income up 31% Third Quarter Results Dollars in millions 2006 2005 Variance Revenue $ 2,418 $ 2,125 14% Expenses Labor and Fringe 736 725 (2%) Materials, Supplies and Other 478 455 (5%) Depreciation 213 204 (4%) Fuel 300 188 (60%) Building and Equipment Rent 135 129 (5%) Inland Transportation 63 54 (17%) Conrail Rents, Fees and Services 19 9 (111%) Operating Expenses 1,944 1,764 (10%) Operating Income $ 474 $ 361 31% Operating Ratio 80.4% 83.0% 2.6 pts Note: 2006 results exclude Katrina-related gain on insurance recoveries 25 25 Labor and fringe increased 2% Primarily due to wage and Third Quarter benefit inflation Dollars in Millions T&E employees increased by over 400 primarily due to advanced hiring $11 $736 Partially offset by lower $725 incentive compensation 2005 Variance 2006 26 26
    • MS&O increased 5% Primarily driven by Third Quarter inflation and costs related Dollars in Millions to higher business volumes Partially offset by continued improvement $23 $478 in locomotive productivity $455 2005 Variance 2006 27 27 Fuel increased 60% Consumed 144 million Third Quarter gallons at average gross Dollars in Millions price of $2.09 a gallon $112 $300 Comparison impacted by $76 million lower hedge $188 CSX has no hedge positions going forward 2005 Variance 2006 28 28
    • Rents increased 5% Current year expenses Third Quarter moving with volumes Dollars in Millions Year-over-year change primarily due to prior year item $135 $6 $129 2005 Variance 2006 29 29 All other expenses increased 10% Third Quarter Dollars in Millions $28 $295 $267 $19 $9 $63 $54 $213 $204 2005 Variance 2006 Depreciation Inland Transportation Conrail Fees 30 30
    • Looking forward . . . $500 million share buyback program initiated, with $272 million repurchased — Shares repurchased year-to-date total $422 million, including prior programs On track to deliver $300+ million Free Cash Flow in 2006 — Including Katrina insurance recoveries 31 31 Concluding Remarks Michael Ward Chairman, President and Chief Executive Officer 32 32
    • Looking forward . . . Core strategies sustaining solid momentum Revenue Operational Performance Impact Discipline Culture Team delivering consistent, strong results Rail and intermodal environment remains strong Volume growth is building further momentum 33 33 Third Quarter 2006 Earnings Presentation 34 34