Economic Risk Factor Update: April 2024 [SlideShare]
csx Q2_2006
1. Second Quarter 2006
Earnings Presentation
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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.
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2. Executive Summary
Michael Ward
Chairman, President and
Chief Executive Officer
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Second quarter overview . . .
Surface Transportation
Second Quarter
produces record results
Earnings Per Share
$1.66 Pricing environment
remains strong
$1.16
$0.96
$0.73
ONE Plan sustains
strong momentum
Equity actions support
Reported Comparable
shareholder value focus
2005 2006
Note: Comparable earnings per share excludes Katrina insurance recoveries and income tax benefits in
2006 and debt repurchase expenses and a state income tax benefit in 2005.
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3. Operations Review
Tony Ingram
Executive Vice President
Chief Operating Officer
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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
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5. Asset utilization is improving
Dwell Time (hours) Cars-On-Line (000)
13 Week 13 Week
Average Average
234.2 233.9
25.5 hrs 223K
233.1
29.7 29.7
29.6
230.7
28.9
227.6
27.7
Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2
2005 2005 2005 2006 2006 2005 2005 2005 2006 2006
Rolling 12-month Averages
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Velocity stable through second quarter
Consistent plan execution
Velocity (mph)
13 Week
Average
Improved recoverability
19.5 mph
19.8 19.7 19.5
19.4
19.2
Increased asset utilization
Improving overall service
reliability
Q2 Q3 Q4 Q1 Q2
2005 2005 2005 2006 2006
Rolling 12-month Averages
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6. Looking forward . . .
Safety momentum will
continue
Continue to build on
Reliable
Reliable
ONE Plan success Performance
Performance
Service Execution
Service Execution
Capacity build stays on
schedule Productivity Discipline
Productivity Discipline
Safety Leadership
Safety Leadership
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Sales and Marketing Review
Clarence Gooden
Executive Vice President
Sales and Marketing
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7. Revenues increased 12%
Record revenues of $2.4 Second Quarter
billion, up $255 million Revenue in Millions
Revenue growth across all
$2,421
markets
$2,166
Overall volumes were flat
Yield environment
remains strong
2005 2006
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Revenue per unit increased 12%
Second Quarter Revenue Per Unit
2006 versus 2005
Surface Transportation 12%
Merchandise 16%
Coal 7%
Intermodal 7%
Automotive 6%
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8. Merchandise revenue increased 14%
Pricing remains strong Second Quarter
2006 versus 2005
Impact of prior Phosphate
plant closures continue 16%
14%
Agricultural Products
growth strong
Outlook favorable
(2%)
Revenue Volume RPU
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Merchandise volume growth was mixed
Second Quarter Volume
2006 versus 2005
Agriculture 10%
Emerging Markets 6%
Metals 3%
Food and Consumer 0%
Chemicals (1%)
Forest Products (9%)
Phosphates & Fertilizers (20%)
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9. Coal revenue increased 10%
Utility demand strong Second Quarter
2006 versus 2005
Inventories are at target
levels
10%
Pricing strength continues 7%
Outlook favorable 2%
Revenue Volume RPU
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Automotive revenue increased 6%
Volume was stable Second Quarter
2006 versus 2005
‘New Domestics’ continue
6% 6%
to gain market share
Increasing price and fuel
surcharge coverage
Outlook unfavorable
0%
Revenue Volume RPU
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10. Intermodal revenue increased 8%
Volume slightly favorable Second Quarter
2006 versus 2005
— Core business grows
— Off-core declines
8%
7%
Pricing strength continues
Income improvement for
nine quarters
1%
Outlook favorable
Revenue Volume RPU
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Foundation for Intermodal growth in place
On-Time performance
continues to improve
Syracuse
Buffalo Boston
Detroit
Train capacity supports
Chicago New York
Cleveland
growth in key lanes
Philadelphia
Columbia Baltimore
Cincinnati
St Louis
Evansville Portsmouth
Attracting new business
Charlotte
Nashville
Memphis
Atlanta
Charleston
Expect strong second half
Savannah
volume growth
Mobile
Jacksonville
New Orleans
Tampa
Trucking capacity
Miami
expected to remain tight
Intermodal Terminals
Priority Intermodal Corridors
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11. Looking forward . . .
Manufacturing, imports Economic Forecast
and exports drive demand 2006-2008
Service improvements will 3.1%
2.8%
support growth 2.6%
2.4% 2.3%
2.1%
Favorable pricing
environment continues
We remain focused on
2nd Half 2007 2008
improving profitability
2006
GDP IDP
Source: Global Insight
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Financial Results
Oscar Munoz
Executive Vice President
Chief Financial Officer
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12. CSX reports strong second quarter results
Second Quarter Results
Dollars in millions, except EPS 2006 2005 Variance
Surface Transportation Operating Income $ 645 $ 422 $ 223
Other Operating Income 1 9 (8)
Consolidated Operating Income $ 646 $ 431 $ 215
Other Income (net) 11 30 (19)
Debt repurchase Expense - (192) 192
Interest Expense (98) (110) 12
Income Taxes (169) 6 (175)
Net Earnings $ 390 $ 165 $ 225
Earnings Per Share $ 1.66 $ 0.73 $ 0.93
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Comparable EPS increased 21%
Second Quarter Results
Dollars in millions, except EPS 2006 2005 Variance
Surface Transportation Operating Income $ 645 $ 422 $ 223
Less Gain on Insurance Recoveries (126) - (126)
Comparable Operating Income $ 519 $ 422 $ 97
Earnings Per Share $ 1.66 $ 0.73 $ 0.93
Less Gain on Insurance Recoveries (0.33) - (0.33)
Plus Debt Repurchase Expense - 0.54 (0.54)
Less Income Tax Benefit (0.17) (0.31) 0.14
Comparable Earnings Per Share $ 1.16 $ 0.96 $ 0.20
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13. Surface Transportation increased 23%
Second Quarter Results
Dollars in millions 2006 2005 Variance
Revenue $ 2,421 $ 2,166 12%
Expenses
Labor and Fringe 715 706 (1%)
Materials, Supplies and Other 468 441 (6%)
Depreciation 216 203 (6%)
Fuel 288 176 (64%)
Building and Equipment Rent 132 137 4%
Inland Transportation 62 62 0%
Conrail Rents, Fees and Services 21 19 (11%)
Operating Expenses 1,902 1,744 (9%)
Operating Income $ 519 $ 422 23%
Operating Ratio 78.6% 80.5% 1.9 pts
Note: 2006 results exclude Katrina-related gain on insurance recoveries
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Labor and fringe increased 1%
Primarily driven by wage
Second Quarter
and benefit inflation
Dollars in Millions
Includes almost 800 new
T&E employees
$9 $715
Partially offset by lower
$706
incentive compensation
and productivity
2005 Variance 2006
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14. MS&O increased 6%
Increase primarily driven
Second Quarter
by inflation
Dollars in Millions
Cycling a prior year
$27 $468
supplier credit
$441
Productivity gains from
improved operations
partially offset increase:
— Increased locomotive
utilization
— Reduced train accidents
and related costs
2005 Variance 2006
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Fuel increased 64%
Primarily driven by higher
Second Quarter
fuel prices
Dollars in Millions
Impact of lower hedge
position was $44 million
$288
$112
Slightly higher volume-
$176 related costs offset by
focus on fuel economy
2005 Variance 2006
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15. Fuel hedges continue to decline
Hedge Benefit
Dollars in Millions
$77
$63
$58
$51
$35
$19
$1*
Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006
* Estimates based on $75 per barrel WTI
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Rents declined 4%
Asset utilization continues
Second Quarter
to improve
Dollars in Millions
Lower equipment costs
are driven by:
$5
$137
— Improved cycle time
$132
— Fewer cars-on-line
2005 Variance 2006
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16. All other expenses increased 5%
Second Quarter
Dollars in Millions
$299
$15
$284
$21
$19
$62
$62
$216
$203
2005 Variance 2006
Depreciation Inland Transportation Conrail Fees
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Looking forward . . .
Record first half operating income included:
— $126 million gain on insurance recoveries
— $54 million fuel hedge benefit
— $25 million favorable impact of mild winter
On track to deliver $300+ million Free Cash
Flow with $1.4 billion in capital spending
Momentum will continue; poised for growth
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17. Equity actions reflect strong fundamentals
Stock splits two for one
— Record date and effective date in August
Dividend increases 54% to $0.10 per share
— Effective with the September distribution
Share repurchase program of $500 million
— Targeting a 12-month completion timeline
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Concluding Remarks
Michael Ward
Chairman, President and
Chief Executive Officer
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18. Looking forward . . .
Momentum on core strategies continues
Revenue Operational Performance
Impact Discipline Culture
Team delivering consistent, strong results
Foundation in place for the long-term
Transportation environment remains strong
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Second Quarter 2006
Earnings Presentation
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