csx Q2_2006

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<ul><li> 1. Second Quarter 2006 Earnings Presentation 11 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 managements plans, strategies and objectives for future operation, and managements 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 companys 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 companys SEC reports, accessible on the SECs website at www.sec.gov and the companys website at www.csx.com.22 </li></ul> <p> 2. Executive Summary Michael WardChairman, President andChief Executive Officer33 Second quarter overview . . . Surface Transportation Second Quarter produces record resultsEarnings Per Share$1.66 Pricing environment remains strong$1.16 $0.96$0.73 ONE Plan sustains strong momentumEquity actions supportReported Comparable shareholder value focus2005 2006Note: 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 2005.44 3. Operations ReviewTony Ingram Executive Vice President Chief Operating Officer55 Leadership, discipline and executionSafety performancecontinues to improve Operating momentum Reliable ReliablesustainedPerformance PerformanceService Execution Service ExecutionCapacity projects onschedule Productivity Discipline Productivity Discipline Safety LeadershipSafety Leadership66 4. Safety performance remains strongFRA Personal Injury FRA Train Accident13 Week13 WeekAverageAverage1.37 3.292.04 1.92 4.544.49 4.181.71 1.64 3.823.73 1.51 Q2 Q3 Q4 Q1 Q2Q2 Q3 Q4 Q1 Q22005 2005 2005 2006 20062005 2005 2005 2006 2006Rolling 12-month Averages 7 7 On-time performance is improving On-Time Originations On-Time Arrivals13 Week13 WeekAverageAverage77%60% 52% 65%46% 40%40% 57%39%51%50%50% Q2 Q3 Q4 Q1 Q2Q2 Q3 Q4 Q1 Q22005 2005 2005 2006 20062005 2005 2005 2006 2006Rolling 12-month Averages 8 8 5. Asset utilization is improvingDwell Time (hours) Cars-On-Line (000) 13 Week13 Week AverageAverage234.2 233.9 25.5 hrs223K233.129.7 29.729.6230.728.9227.627.7 Q2 Q3 Q4 Q1 Q2Q2 Q3 Q4 Q1 Q22005 2005 2005 2006 20062005 2005 2005 2006 2006 Rolling 12-month Averages99 Velocity stable through second quarter Consistent plan execution Velocity (mph) 13 WeekAverage Improved recoverability 19.5 mph 19.819.719.519.4 19.2 Increased asset utilizationImproving overall service reliability Q2 Q3 Q4 Q1 Q22005 2005 2005 2006 2006Rolling 12-month Averages1010 6. Looking forward . . .Safety momentum willcontinue Continue to build onReliableReliableONE Plan successPerformancePerformance Service ExecutionService ExecutionCapacity build stays onscheduleProductivity DisciplineProductivity DisciplineSafety Leadership Safety Leadership 11 11Sales and Marketing ReviewClarence Gooden Executive Vice President Sales and Marketing 12 12 7. Revenues increased 12%Record revenues of $2.4 Second Quarterbillion, up $255 million Revenue in Millions Revenue growth across all$2,421markets $2,166Overall volumes were flat Yield environmentremains strong20052006 13 13 Revenue per unit increased 12% Second Quarter Revenue Per Unit 2006 versus 2005Surface Transportation 12%Merchandise 16%Coal 7%Intermodal 7%Automotive6% 14 14 8. Merchandise revenue increased 14%Pricing remains strongSecond Quarter 2006 versus 2005Impact of prior Phosphateplant closures continue 16%14% Agricultural Productsgrowth strong Outlook favorable (2%) Revenue VolumeRPU 15 15 Merchandise volume growth was mixed Second Quarter Volume2006 versus 2005Agriculture 10% Emerging Markets6% Metals 3% Food and Consumer 0% Chemicals(1%)Forest Products(9%)Phosphates &amp; Fertilizers (20%)16 16 9. Coal revenue increased 10% Utility demand strongSecond Quarter 2006 versus 2005 Inventories are at target levels 10%Pricing strength continues7%Outlook favorable 2%Revenue Volume RPU 17 17 Automotive revenue increased 6% Volume was stableSecond Quarter 2006 versus 2005 New Domestics continue6% 6% to gain market shareIncreasing price and fuel surcharge coverageOutlook unfavorable 0% Revenue Volume RPU 18 18 10. Intermodal revenue increased 8%Volume slightly favorable Second Quarter 2006 versus 2005 Core business grows Off-core declines8% 7%Pricing strength continues Income improvement fornine quarters 1%Outlook favorableRevenue Volume RPU 19 19 Foundation for Intermodal growth in place On-Time performance continues to improve Syracuse Buffalo Boston Detroit Train capacity supportsChicago New York Cleveland growth in key lanesPhiladelphiaColumbia BaltimoreCincinnati St LouisEvansville Portsmouth Attracting new businessCharlotteNashvilleMemphis AtlantaCharleston Expect strong second halfSavannah volume growth Mobile JacksonvilleNew OrleansTampa Trucking capacityMiami expected to remain tight Intermodal Terminals Priority Intermodal Corridors 20 20 11. Looking forward . . .Manufacturing, importsEconomic Forecastand exports drive demand 2006-2008 Service improvements will 3.1% 2.8%support growth 2.6%2.4% 2.3% 2.1% Favorable pricingenvironment continues We remain focused on 2nd Half 2007 2008improving profitability2006 GDP IDPSource: Global Insight2121Financial ResultsOscar Munoz Executive Vice President Chief Financial Officer2222 12. CSX reports strong second quarter results Second Quarter ResultsDollars in millions, except EPS 20062005 VarianceSurface Transportation Operating Income $ 645$ 422 $ 223Other Operating Income19(8)Consolidated Operating Income $ 646$ 431 $ 215Other 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$ 0.9323 23 Comparable EPS increased 21% Second Quarter ResultsDollars in millions, except EPS 20062005 VarianceSurface Transportation Operating Income $ 645$ 422 $ 223Less Gain on Insurance Recoveries(126)- (126)Comparable Operating Income $ 519$ 422$ 97 Earnings Per Share$ 1.66 $ 0.73$ 0.93Less 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 24 24 13. Surface Transportation increased 23%Second Quarter Results Dollars in millions 2006 2005 Variance Revenue $ 2,421 $ 2,16612% Expenses Labor and Fringe 715706(1%) Materials, Supplies and Other468441(6%) Depreciation 216203(6%) Fuel 288176 (64%) Building and Equipment Rent132137 4% Inland Transportation 62 62 0% Conrail Rents, Fees and Services21 19 (11%) Operating Expenses1,9021,744 (9%) Operating Income$519 $42223% Operating Ratio78.6% 80.5% 1.9 ptsNote: 2006 results exclude Katrina-related gain on insurance recoveries 2525 Labor and fringe increased 1%Primarily driven by wageSecond Quarterand benefit inflation Dollars in Millions Includes almost 800 newT&amp;E employees $9$715Partially offset by lower $706incentive compensationand productivity 2005 Variance 2006 2626 14. MS&amp;O increased 6%Increase primarily driven Second Quarterby inflationDollars in Millions Cycling a prior year $27 $468supplier credit $441 Productivity gains fromimproved operationspartially offset increase: Increased locomotive utilization Reduced train accidents and related costs 2005Variance200627 27 Fuel increased 64%Primarily driven by higher Second Quarterfuel pricesDollars in Millions Impact of lower hedgeposition was $44 million $288 $112 Slightly higher volume- $176 related costs offset byfocus on fuel economy 2005Variance200628 28 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 WTI29 29 Rents declined 4% Asset utilization continues Second Quarter to improveDollars in MillionsLower equipment costs are driven by: $5$137 Improved cycle time$132 Fewer cars-on-line2005 Variance 200630 30 16. All other expenses increased 5% Second Quarter Dollars in Millions $299 $15$284$21 $19$62 $62$216 $203 2005Variance2006 DepreciationInland Transportation Conrail Fees 31 31 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 CashFlow with $1.4 billion in capital spending Momentum will continue; poised for growth32 32 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 timeline3333 Concluding RemarksMichael Ward Chairman, President and Chief Executive Officer3434 18. Looking forward . . . Momentum on core strategies continues RevenueOperationalPerformanceImpact DisciplineCulture Team delivering consistent, strong results Foundation in place for the long-term Transportation environment remains strong 35 35 Second Quarter 2006 Earnings Presentation36 36 </p>