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First Quarter 2007Earnings Presentation
First Quarter 2007Earnings Presentation
22
Forward Looking DisclosureThis 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.
33
Executive Summary
Michael WardChairman, President andChief Executive Officer
44
First quarter overview . . .
Core earnings power reflects secular strength
Strong pricing momentum continues
Sustained operational performance
First Quarter Earnings Per Share
$0.53 $0.53$0.52$0.50
Reported Comparable
2006 2007
Note: Comparable 2007 earnings per share excludes insurance recoveries
55
Sales and Marketing Review
Clarence GoodenExecutive Vice PresidentSales and Marketing
66
Total revenue increased 4% to $2.4 billion
First QuarterRevenue in Millions
$2,331
$2,422($90)$181
2006 RPU Volume 2007
Record quarterly revenues
20th consecutive quarter of revenue growth
Strong yield environment offsetting lower volumes
77
Price continues to drive RPU growth
Year-Over-Year Change
7.1%6.6%6.7%6.8%6.2%6.3%5.6%6.0%4.8%
8.6%9.6% 9.0%
11.0% 11.7%12.6%
11.8%
8.4% 8.1%
Q12005
Q22005
Q32005
Q42005
Q12006
Q22006
Q32006
Q42006
Q12007
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
88
Surface Transportation VolumeYear-Over-Year Percentage Change
(7.9%)
(3.8%)(4.9%)
(0.6%)
(5.5%)
(10.3%)
(6.1%)(4.5%)
(1.8%) (1.7%)(0.6%)
(1.5%) (1.6%)
1 2 3 4 5 6 7 8 9 10 11 12 13
Volumes reflect a combination of factors
Week
Construction softnessAutomotive softness
(4.2%)
Construction softnessAutomotive softnessWeather impact
Construction softnessAutomotive softnessWeather impact
(6.6%)(6.6%)
Construction/Auto softnessNew intermodal serviceGrowth in MT, CH, PF
Construction/Auto softnessNew intermodal serviceGrowth in MT, CH, PF
(1.4%)(1.4%)
99
Merchandise revenue increased 5%
First Quarter2007 versus 2006
5%
(5%)
10%
Revenue
Volume
RPU
$ 1,209$ 60$ 1,149Revenue
(millions)
675(32)707Volume
(thousands)
$ 1,791$ 166$ 1,625RPU
2007Change2006
20th consecutive quarter of revenue growth
Continued favorable pricing environment
Volume challenges in construction-related markets
Strength in ethanoland fertilizers
1010
Coal revenue increased 9%
First Quarter2007 versus 2006
9%
(3%)
13%
Revenue
Volume
RPU
$ 633$ 54$ 579Revenue
(millions)
462(14)476Volume
(thousands)
$ 1,370$ 154$ 1,216RPU
2007Change2006
Record quarterly revenue and revenue per unit
Utility volumes declined as inventories have reached target levels
Strong demand continues in export coal
Pricing environment remains strong
1111
Intermodal revenue decreased 5%
First Quarter2007 versus 2006
(5%)
(1%)
(3%)
Revenue
Volume
RPU
$ 318($ 16)$ 334Revenue
(millions)
509(7)516Volume
(thousands)
$ 625($ 22)$ 647RPU
2007Change2006
Reduction in ‘other’revenue impacted profits
Price gains offset by mix
Domestic volume grew on new services
1212
Automotive revenue decreased 12%
First Quarter2007 versus 2006
(12%)
(14%)
2%
Revenue
Volume
RPU
$ 203($ 28)$ 231Revenue
(millions)
109(18)127Volume
(thousands)
$ 1,862$ 43$ 1,819RPU
2007Change2006
Volume down on production declines
New Domestics continue to gain market share
Pricing opportunities continue
1313
Second quarter revenue outlook positive
AutomotiveEmerging Markets
Forest Products
Agricultural Products
Chemicals
Coal, Coke & Iron Ore
Food & Consumer
Intermodal
Metals
Phosphate & Fertilizer
UnfavorableNeutralFavorable
1414
Sales and Marketing wrap-up . . .
GDP and IDP forecasted to trend upward
Continued strong pricing environment
Overall volume outlook improving
Service and capacity improvements will support growth
Economic Forecast2007-2008
2.2%
2.8%
1.8%
2.3%
2007 2008
GDP Industrial Production
Source: Global Insight
1515
Operations Review
Tony IngramExecutive Vice PresidentChief Operating Officer
1616
Leadership, discipline and execution
Safety performance continues to improve
Service levels sustained in challenging conditions
Productivity and asset utilization improving
SafetySafety
ProductivityProductivity
ServiceService
LeadershipLeadership
DisciplineDiscipline
ExecutionExecution
ReliablePerformance
1717
Safety performance remains strong
Rolling 12-month Averages
FRA Personal Injury
1.691.55 1.44 1.41 1.38
Q12006
Q22006
Q32006
Q42006
Q12007
FRA Train Accidents
4.03 3.913.57 3.40 3.17
Q12006
Q22006
Q32006
Q42006
Q12007
13 WeekAverage
1.35
13 WeekAverage
2.84
1818
On-time performance consistent
Rolling 12-month Averages
On-Time Originations
57%65%
71% 76% 76%
Q12006
Q22006
Q32006
Q42006
Q12007
On-Time Arrivals
46%52%
57%63% 63%
Q12006
Q22006
Q32006
Q42006
Q12007
13 WeekAverage
74%
13 WeekAverage
64%
1919
Asset utilization improving
Rolling 12-month Averages
Cars-On-Line (000)
231228 226 225 225
Q12006
Q22006
Q32006
Q42006
Q12007
Dwell Time (hours)
28.927.7 26.8
25.6 25.2
Q12006
Q22006
Q32006
Q42006
Q12007
13 WeekAverage24.9 hrs
13 WeekAverage
225K
2020
Train velocity remains stable
Velocity (mph)
19.4 19.5 19.519.8 19.7
Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007
13 WeekAverage
19.9 mph
Rolling 12-month Averages
2121
Looking forward . . .
Safety performance momentum continues
Continuous improvement in service reliability
Productivity and asset utilization gains
2222
Financial Results
Oscar MunozExecutive Vice PresidentChief Financial Officer
2323
CSX reports strong first quarter results
)$ (5$ 245$ 240Net Earnings
)($ 0.01$ 0.53$ 0.52Earnings Per Share
))
(8(112
)))
(3(98
(150
)))
(11(99
(138
Other Income (net)Interest ExpenseIncome Taxes
)$ (8$ 496$ 488Consolidated Operating Income
)(891Other Operating Income
$ 0$ 487$ 487Surface Transportation Operating Income
Variance20062007Dollars in millions, except EPS
First Quarter Results
2424
Comparable EPS is $0.50
)(18-)(18Less Gain on Insurance Recoveries
)($ 18$ 487$ 469Comparable Operating Income
$ 0$ 487$ 487Surface Transportation Operating Income
)($ 0.03$ 0.53$ 0.50Comparable Earnings Per Share
)(0.02-)(0.02Less Gain on Insurance Recoveries
)($ 0.01$ 0.53$ 0.52Earnings Per Share
Variance20062007Dollars in millions, except EPS
First Quarter Results
2525
First-quarter results near all-time high
First Quarter Surface TransportationOperating Income in Millions
$169$204
$351
$469
2003 2004 2005 2006 2007
Note: 2004 excludes management restructuring charges
$487
2626
Core earnings momentum remains strong
Surface TransportationOperating Income in Millions
$469$487
$45($28)
($35)
Q1 2006
2006 FuelHedge
Brooks, KYDerailment
EarningsMomentum
Q1 2007
2727
Operating Income of $469 million
)(4%$ 487 $ 469Operating Income
)(1.5 pts79.1%80.6%Operating Ratio
)(6%1,8441,953Operating Expenses
))))
)
4%
(2%(17%(2%(5%2%
(2%
$ 2,331
71848225321112456
$ 2,422
73256325922112157
RevenueExpenses
Labor and FringeMaterials, Supplies and OtherFuelDepreciationEquipment and Other RentsInland Transportation
Variance20062007Surface Transportation ($’s in millions)
First Quarter Results
Note: 2006 results exclude insurance recoveries
2828
Labor and fringe increased 2%
First QuarterDollars in Millions
$732$718 $14
2006 Variance 2007
Primarily due to wage and benefit inflation
Partially offset by productivity gains
2929
MS&O increased 17%
First QuarterDollars in Millions
$563
$482
$81
2006 Variance 2007
Primarily driven by an increase in derailment related expenses
Continued higher than historical inflation levels
3030
Fuel increased 2%
First QuarterDollars in Millions
$259$253 $6
2006 Variance 2007
Consumed 150 million gallons at average gross price of $1.73
Comparison impacted by $35 million in lower hedge
3131
Rents decreased 2%
First QuarterDollars in Millions
$121$124 ($3)
2006 Variance 2007
Primarily due to lower volumes
Improved productivity offset inflation
3232
All other expenses increased 4%
First QuarterDollars in Millions
$211 $221
$56$57
$11
2006 Variance 2007
$267 $278
Depreciation Inland Transportation
3333
Dividend and share buyback update . . .
Annual Dividend Rate
$0.20
$0.26
$0.40
$0.48
Q32005
Q42005
Q22006
Q12007
Share RepurchaseDollars in Millions
$465
$1,000$1,050
2006 2007E 2008E
3434
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
3535
Concluding Remarks
Michael WardChairman, President andChief Executive Officer
3636
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
3737
First Quarter 2007Earnings Presentation
First Quarter 2007Earnings Presentation