CSX_Corporation_-_2005_Citigroup_Conference_Presentation-REF22448
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CSX_Corporation_-_2005_Citigroup_Conference_Presentation-REF22448 Presentation Transcript

  • 1. CSX Corporation Citigroup Transportation Conference November 9, 2005
  • 2. Forward Looking Disclosure Statement This presentation and other statements by the Company contain forward-looking statements within the 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 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 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 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 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 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 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 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 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 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 statement, no inference should be drawn that the Company will make additional updates with respect to that statement or any other forward-looking statements. that statement or any other forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, and actual performance 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 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 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 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, 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, 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 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 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 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 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. the SEC’s website at www.sec.gov and the Company’s website at www.csx.com. 2 2
  • 3. For 2005, our core strategies remained intact, building on the foundation laid in 2004 Operating Revenue Organizational Improvements Initiatives Structure • Test Price Ceilings • Safety • Empowerment • Focused Growth • One Plan • Measurement • Offset Inflation • Process Improvement • Accountability 3 3
  • 4. These strategies have improved the company’s core earning power significantly Operating Income Key Drivers Rolling Twelve Months • Price and volume Dollars in Billions Dollars in Billions • Productivity improvements $1.4 $1.4 $1.3 $1.3 • Fuel surcharge and hedge $1.2 $1.2 $1.1 $1.1 $1.0 $1.0 $1.0 $1.0 $0.9 $0.9 Earning the right to spend • Dividends Q1 Q2 Q3 Q4 Q1 Q2 Q3 • Capital Investment Q1 Q2 Q3 Q4 Q1 Q2 Q3 '04 '04 '04 '04 '05 '05 '05 '04 '04 '04 '04 '05 '05 '05 Note: Excludes provision for casualty claims, management restructuring and the effect of the 53rd week Note: Excludes provision for casualty claims, management restructuring and the effect of the 53rd week 4 4
  • 5. Increasing yields reflect the strong pricing environment Revenue Yield Year-Over-Year Improvement 9.7% 9.7% 9.3% 9.3% 8.6% 8.6% 7.9% 7.9% 6.6% 6.6% 2.4% 2.4% 0.1% 0.1% Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 5 5
  • 6. In addition, the operating ratio has steadily declined, driven by price, productivity and fuel Surface Transportation Operating Ratio 89.3% 89.3% 87.1% 87.1% 85.5% 85.5% 85.2% 85.2% 83.3% 83.3% 83.0% 83.0% 80.5% 80.5% Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Note: Excludes provision for management restructuring and the effect of the 53rd week Note: Excludes provision for management restructuring and the effect of the 53rd week 6 6
  • 7. The company’s stock has performed well, exceeding the S&P 500 and Transport indexes Stock Performance Indexed: March 31, 2004 = 100 160 160 150 150 140 140 130 130 120 120 110 110 100 100 90 90 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Jul-05 Sep-05 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Jul-05 Sep-05 CSX DJ Transporation Index S&P 500 Index CSX DJ Transporation Index S&P 500 Index 7 7
  • 8. Yet, the company’s price-to-earnings ratio price-to-earnings continues to trail the other major railroads CSX Price-to-Earnings Ratio Relative to the Other Major Railroads 6 6 4 4 2 2 0 0 (2) (2) (4) (4) Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 8 8
  • 9. Velocity on the Southeastern Corridor should improve as the New Orleans line is restored Year-Over-Year Year-Over-Year Decline in Velocity Chicago New York 5% – 10% 10% – 15% Nashville Memphis 20% – 25% Atlanta Birmingham 25% – 30% Montgomery Jacksonville New Orleans 9 9 Miami
  • 10. . . . And other key measures are already improving Year-Over-Year Improvement Key Operating Performance Measures Since Katrina 10% 10% 9% 9% 1% 1% 1% 1% (6%) (6%) Velocity Cars-on-line Dwell Time On-time On-time Velocity Cars-on-line Dwell Time On-time On-time Originations Arrivals Originations Arrivals 10 10
  • 11. Carload growth is in-line with peers, while in-line CSX is streamlining its intermodal business 2005 Year-to-Date Volume Growth 9.7% 9.7% 9.4% 9.4% 4.6% 4.6% 4.2% 4.2% 1.9% 1.9% 1.6% 1.6% 1.6% 1.6% 0.5% 0.5% (1.0%) (1.0%) (1.4%) (1.4%) (2.6%) (2.6%) (4.6%) (4.6%) CSX NSC BNI UNP CNI CP CSX NSC BNI UNP CNI CP Carload Intermodal Carload Intermodal 11 11
  • 12. Intermodal operating income has more than doubled; operating ratio improved 890 bps Year-to-Date Year-to-Date Operating Income Operating Ratio (Dollars in Millions) $175 $175 91.2% 91.2% 82.3% 82.3% $85 $85 2004 2005 2004 2005 2004 2005 2004 2005 Note: Excludes provision for 2004 management restructuring Note: Excludes provision for 2004 management restructuring 12 12
  • 13. The headwind associated with the declining fuel hedge in 2006 will be managed Key Drivers Fuel Expense • Expanded surcharge coverage • Fuel management programs • New fuel efficient locomotives • Headwind of about $100 million $450M Headwind of Headwind of About $100 Million About $100 Million 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 Gross Fuel Expense Net of Surcharge Net of Surcharge and Hedge Gross Fuel Expense Net of Surcharge Net of Surcharge and Hedge 13 13
  • 14. Even with the headwind, CSX expects steady double-digit growth over the next five years double-digit 2006 – 2010 CAGR Operating Income 10% – 12% Earnings 12% – 14% Core Free Cash Flow 10% – 12% Return on Invested Capital Meet or Exceed COC 14 14
  • 15. CSX is well positioned, connecting the rich northeast with the growing southeast 1994-2004 Income Growth 2004 Income 1994-2004 Chicago Chicago Chicago Chicago New York New York New York New York Jacksonville Jacksonville Jacksonville Jacksonville New Orleans New Orleans New Orleans New Orleans LT 5% LT $50B LT 5% Miami LT $50B Miami Miami Miami 5.0% – 5.5% $51B – $150B 5.0% – 5.5% $51B – $150B 5.6% – 6.0% $151 – $250B 5.6% – 6.0% $151 – $250B GT 6.0% GT $250B GT 6.0% GT $250B 15 15 Source: Bureau of Economic Analysis Source: Bureau of Economic Analysis
  • 16. Creating Shareholder Value . . . • The company’s earning power is accelerating – Solid revenue growth and productivity drives results • Capital structure remains strong – Solid free cash flows and improving returns enhance value • Continued investment for reliability and growth – Focus will remain on earning the right to spend 16 16
  • 17. CSX Corporation Citigroup Transportation Conference November 9, 2005