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csx Q4_2005

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csx Q4_2005

  1. 1. CSX Corporation Fourth-Quarter 2005 Earnings g January 24, 2006
  2. 2. Forward L ki Disclosure Statement F d Looking Di l St t t 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 cost savings, 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 “b li h h “believe,” “ ” “expect,” “ ti i t ” “ j t ” and similar expressions. F t ” “anticipate,” “project,” d i il i Forward-looking d l ki 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. 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 include, Company s 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
  3. 3. Michael Ward Chairman, President and Chief Executive Officer
  4. 4. Fourth F th quarter overview . . . t i Fourth Quarter • New Orleans line reopened Earnings Per Share • Expansion plans on target $1.03 • Surface Transportation record 45% $0.71 • Pricing environment is strong •O Operations are i ti improving i 2004 2005 4
  5. 5. Tony Ingram Executive Vice President Chief Operating Officer
  6. 6. Performance reflects progress on all major i iti ti ll j initiatives • Safety momentum is strong Reliable • ONE Plan is gaining traction Performance Service Execution • New Orleans line restored Productivity y Discipline sc p e • Capacity projects are underway Safety Leadership 6
  7. 7. Momentum in safety performance continues M t i ft f ti FRA Personal Injury FRA Train Accident Rolling 12-Month Average 12 Month Rolling 12-Month Average 12 Month Injuries / 200,000 Man Hours Accidents / MM Train Miles 2.29 4.79 4.72 2.13 2.04 4.43 1.91 4.32 1.71 3.99 3 99 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 2004 2005 2005 2005 2005 2004 2005 2005 2005 2005 7
  8. 8. ONE Plan is gaining traction; on-time performance improving ti f i i On-Time Originations On-Time Arrivals Rolling 12-Month Average 12 Month Rolling 12-Month Average 12 Month 40.9% 40 9% 51.1% 51 1% 40.1% 50.3% 50.3% 39.6% 38.9% 49.0% 38.4% 48.2% Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 2004 2005 2005 2005 2005 2004 2005 2005 2005 2005 8
  9. 9. Dwell ti D ll time and cars-on-line remain stable d li i t bl Dwell Time (Hours) Cars-On-Line Rolling 12-Month Average 12 Month Rolling 12-Month Average 12 Month 234,132 233,876 29.7 29.7 29.6 29.3 28.7 234,165 233,271 233,118 233 118 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 2004 2005 2005 2005 2005 2004 2005 2005 2005 2005 9
  10. 10. System velocity expected to improve with New Orleans line restored ith N O l li td Velocity (MPH) Rolling 12-Month Average 12 Month Chicago New York 20.3 19.9 19.8 19.7 19.2 Nashville Memphis Atlanta Birmingham Montgomery Jacksonville New Orleans Q4 Q1 Q2 Q3 Q4 2004 2005 2005 2005 2005 Miami Year-Over- Year-Over-Year Decline in Velocity 5% - 10% 10% - 20% GT 20% 10
  11. 11. Expansion plans are on target E i l t t • Two-year investment Two- program is underway Chicago • High-impact projects are High- New York targeted for 2006 Nashville • C t ti began in Construction b i Memphis Atlanta fourth quarter 2005 Birmingham Jacksonville • Progressing on schedule New Orleans Miami 11
  12. 12. L ki f d Looking forward . . . • Safety momentum will continue Reliable • ONE Plan is gaining traction Performance Service Execution • Staffing will stay ahead of attrition Productivity y Discipline sc p e • Capacity projects on schedule Safety Leadership 12
  13. 13. Clarence Gooden Executive Vice President Chief Commercial Officer
  14. 14. Economic outlook remains strong Transportation Services Index • GDP and IDP remain strong Indexed: 2000 = 100 • Manufacturing still growing 120 110 • Continued strength in imports 100 and exports 90 80 • Transportation demand still 70 near record levels 60 1990 1993 1996 1999 2002 2005 Source: Bureau of Transportation Statistics 14
  15. 15. Revenues increased $156 million in the f th th fourth quarter on a comparable basis t bl b i Fourth Quarter Revenue on 13-Week Basis R 13 W k B i Dollars in Millions $20 $2,219 $66 $70 $2,063 2004 Merchandise Coal All Other 2005 Note: 2004 Revenue excludes $117 million from the 14th accounting week 15
  16. 16. Average revenue per unit increased over 11% in the fourth quarter i th f th t Fourth Quarter Revenue Per Unit Year-Over-Year Change Y O Y Ch 13-Week Basis Surface Transportation 11.0% Merchandise 12.9% Coal 10.9% Automotive 7.3% 7 3% Intermodal 6.7% 16
  17. 17. Fuel surcharge program continues to h l ff t hi h f l i t help offset higher fuel prices Fuel Surcharge Program 24% $70 20% $60 16% $50 12% $40 8% $30 4% $20 Dec-04 Feb-05 Apr-05 Jun-05 Aug-05 Oct-05 Dec-05 Surcharge (% of Revenue) Average West Texas Intermediate 17
  18. 18. Merchandise revenues increased $70 million on stronger yield illi t i ld Fourth Quarter • Revenue and yield gains Year-Over-Year Year Over Year Change in nearly all markets 13-Week Basis 12.9% • Volume affected by hurricane impact 6.9% •E Emerging Markets affected i M k t ff t d by mix changes • Overall 2006 outlook (5.3%) is favorable Revenue Volume RPU 18
  19. 19. Merchandise markets recorded stronger yields in nearly all markets i ld i l ll kt Fourth Quarter Revenue Per Unit Year-Over-Year Change Y O Y Ch 13-Week Basis Phosphates & Fertilizers 21.7% Metals 19.0% Food and Consumer 18.0% Forest Products 11.7% Agricultural Products 11.4% Chemicals 11.1% Emerging Markets (0.7%) 19
  20. 20. Coal revenues increased $66 million on stronger yield and volume t i ld d l Fourth Quarter • Strong demand across Year-Over-Year Year Over Year Change all markets 13-Week Basis • Favorable pricing environment continues 14.5% 10.9% • Stockpiles remain below St k il i bl target levels 3.2% • 2006 outlook is favorable Revenue Volume RPU 20
  21. 21. Automotive revenues increased $7 million on stronger yield illi t i ld Fourth Quarter • Price and fuel surcharge Year-Over-Year Year Over Year Change increases 13-Week Basis 7.3% • Production impacted by plant closures 3.2% •O Overall inventory near ll i t target levels (3.8%) • Overall 2006 outlook is neutral Revenue Volume RPU 21
  22. 22. Intermodal revenues increased $6 million on stronger yield illi t i ld Fourth Quarter • Yield management Year-Over-Year Year Over Year Change success continues 13-Week Basis 6.7% • Reduction in off-core and off- low margin traffic 1.7% • 2006 outlook i favorable tl k is f bl (4.8%) Revenue Volume RPU 22
  23. 23. Full year Intermodal income increased 63%, and th operating ratio improved 690 bps d the ti ti i d b 2003-2005 Intermodal Profitability Dollars i Milli D ll in Millions 91.2% $248 88.7% 88 7% $152 $110 81.8% 81 8% 2003 2004 2005 Operating Income Operating Ratio 23
  24. 24. Looking f L ki forward . . . d • Demand and growth remain strong • Favorable pricing environment continues • Increased emphasis on fuel surcharge coverage • Service improvements will drive volume growth 24
  25. 25. Oscar Munoz Executive Vice President Chief Financial Officer
  26. 26. Reported Fourth quarter earnings per share of $1.03 i $1 03 increased 45% year-over-year d Fourth Quarter Results 2005 2004 Variance Dollars in Millions, except Earnings per Share Surface Transportation Operating Income $ 415 $ 315 $ 100 Other Operating Income (3) (3) 2 (5) (5) Consolidated Operating Income 412 317 95 Other Income 62 38 24 Interest Expense (99) (99) (112) (112) 13 Income Taxes (138) (138) (84) (84) (54) (54) Net Earnings from Continuing Operations $ 237 $ 159 $ 78 Earnings per Share from Continuing Operations $ 1.03 $ 0.71 $ 0.32 26
  27. 27. Surface T Sf Transportation highlights . . . t ti hi hli ht • Revenue growth of 8% Fourth Quarter – Strong yield emphasis Surface Transportation – Expanded fuel surcharge coverage Op Income in Millions – Slightly lower volumes $415 • Expenses contained to 3% increase 32% – Increased labor costs from hiring, $315 compensation, inflation compensation – Higher fuel costs, partially offset by productivity and lower volumes – Net favorable experience in casualty and other related reserves 2004 2005 • Katrina reduced income by approximately $20 million in the quarter 27
  28. 28. Surface Transportation operating income improved 35% on a comparable basis i d bl b i Fourth Quarter Results 2005 Vs. 2004* % Change g Dollars in Millions Revenue $ 2,219 $ 156 8% Expense Labor and Fringe $ 731 ($ 55) 55) (8%) (8%) Materials, Supplies and Other 421 38 8% Fuel 240 (59) (59) (33%) (33%) Depreciation 208 (3) (3) (2%) (2%) Building and Equipment rents 132 12 8% Inland Transportation 55 11 17% Conrail Rents, Fees and Services C S 17 7 29% % Total Expense $ 1,804 ($ 49) 49) (3%) (3%) Operating Income $ 415 $ 107 35% Operating Ratio 81.3% 81.3% 3.8 pts 28 * Note: 2004 excludes the 14th accounting week
  29. 29. Fuel surcharges will help offset the d li i h d i th declining hedge in 2006 Percent of Total Fuel Hedged 54% 39% 25% 11% 1% Q4 2004 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Hedge Settlement Prices $0.89 $0.94 $0.97 $0.97 $1.04 29
  30. 30. Reported full year earnings per share of $3.17 increased 70% year-over-year i d Full Year Results 2005 2004 Variance Dollars in Millions, except Earnings per Share Surface Transportation Operating Income $ 1,549 $ 993 $ 556 Other Operating Income 1 7 (6) (6) Consolidated Operating Income 1,550 1,000 550 Other Income 101 72 29 Debt Repurchase Expense (192) (192) - (192) (192) Interest Expense (423) (423) (435) (435) 12 Income Taxes co e a es (316) (3 6 (316) 6) (219) (9 (219) 9) (9 (97) (97) Net Earnings from Continuing Operations $ 720 $ 418 $ 302 Earnings per Share from Continuing Operations $ 3.17 $ 1.87 $ 1.30 30
  31. 31. On an adjusted basis, CSX achieved full year earnings per share of $3.40 i h f $3 40 Earnings Per Share From Continuing Operations F C ti i O ti $0.54 $0 54 $3.40 $3.17 ($0.31) Reported EPS Debt Repurchase Ohio Tax Legislation Adjusted EPS 31
  32. 32. Full year Surface Transportation operating income increased 46% ti i i d Surface Transportation Dollars in Milli D ll i Millions Full Year Results 2005 2004 * Variance Vi Revenue $ 8,618 $ 8,040 $ 578 Expense 7,069 7 069 6,976 6 976 (93) (93) Operating Income $ 1,549 1,064 $ 485 Operating Ratio 82.0% 86.8% 4.8 pts 32 * Note: 2004 excludes $71 million in restructuring charges
  33. 33. Exceeded free cash flow goals E d df h fl l Free Cash Flow Dollars in Millions Dollars in Millions 2005 $1,030 Total Free Cash Flow $ 1,030 Net Proceeds from Divestiture ( (640) (640) $461 $513 Net Debt Repurchase Expense 123 $406 Adjusted Free Cash Flow $ 513 2004 2005 Note: Includes CSX’s share of Conrail free cash flow of $103M in 2005 and $115M in 2004 33
  34. 34. Total leverage is well below our long-range t l target of 50% tf All-in Leverage and Debt Outstanding Dollars in Billi D ll i Billions $10.7 $9.3 $9.1 $8.8 $8 8 $8.1 $8.1 65% 61% 60% 58% $6.7 56% 54% 46% 1999 2000 2001 2002 2003 2004 2005 Debt Outstanding Leverage 34
  35. 35. Capital spending will increase in 2006 to support expansion along key corridors t i l k id Surface Transportation 2006 Capital Spending Capital Spending in Millions 15% $1,420 14% $1,055 $960 53% 18% Infrastructure New Capacity 2004 2005* 2006* Locomotive Cars & Other Note: 2005 and 2006 excludes capital spending relating to Katrina 35
  36. 36. Free Cash Flow will remain strong, even with increased capital spending ith i d it l di Free Cash Flow Dollars i Milli D ll in Millions $1,030 $461 $513 $300+ $406 2004 2005 2006* 36 Note: 2006 includes estimated $100 million in net insurance recoveries relating to Katrina
  37. 37. Financial wrap-up . . . Fi il • Exceeded full year earnings and free cash flow guidance • Achieved all-in leverage targets all- • Generate solid 2006 cash flows with increased investment and fuel headwind • Reaffirm 2006 – 2010 long-range financial targets long- 37
  38. 38. Michael Ward Chairman, President and Chief Executive Officer
  39. 39. Looking f L ki forward . . . d • CSX enters 2006 stronger as execution and network take hold • The ONE Plan is beginning to yield better service for customers • The economy remains strong, and CSX is poised for growth • Transportation demand will continue to drive strong yields • CSX is building to leverage the environment for rail transportation 39
  40. 40. CSX Corporation Fourth-Quarter 2005 Earnings g January 24, 2006

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