csx Q3_2006

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<ul><li> 1. ` Third 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 Officer 3 3 Third quarter overview . . . Surface TransportationThird Quarter produces record resultsEarnings Per Share $0.71 Pricing environment$0.54 remains strong$0.36 $0.36ONE Plan sustains strong momentumEconomic environmentReportedComparable remains positive2005 2006Note: Comparable 2006 earnings per share exclude Katrina insurance recoveries and income tax benefits 4 4 3. Sales and Marketing Review Clarence GoodenExecutive Vice PresidentSales and Marketing 5 5 Revenues increased 14% Record revenues of $2.4 Third Quarter billion, up $293 millionRevenue in MillionsOverall volumes increased$2,418 nearly 2% $2,125 Renewed growth in IntermodalYield environment remains strong20052006 6 6 4. Revenue per unit increased 12% Third Quarter Revenue Per Unit 2006 versus 2005Surface Transportation 12%Merchandise17% Coal9%Automotive4% Intermodal 4% 7 7 Merchandise revenue increased 16% Pricing remains strong Third Quarter 2006 versus 2005 Impact of prior phosphate plant closures continues17%16%Housing market softeningOutlook favorable(1%) Revenue VolumeRPU 8 8 5. Merchandise volume was mixedThird Quarter Volume 2006 versus 2005 Agriculture 16% Metals 3%Chemicals2% Emerging Markets1% Food and Consumer(2%) Forest Products (7%)Phosphates &amp; Fertilizers (16%) 99 Coal revenue increased 18% Utility demand strong Third Quarter 2006 versus 2005 Coal production strong18%Pricing strength continues 9% Outlook favorable7%Revenue VolumeRPU1010 6. Automotive revenue decreased 9% Big 3 volume down on Third Quarter production decline 2006 versus 2005New Domestics continue 4% to gain market shareContinued contract renewal opportunities(9%) Outlook unfavorable(12%) Revenue Volume RPU1111 Intermodal revenue increased 8% Volume favorable Third Quarter 2006 versus 2005 Pricing strength continues8%Income improvement for ten quarters 4%4% Outlook favorable Revenue Volume RPU1212 7. Economic forecasts remain positive Economic Forecast 2006-20084.3% 3.4% 3.1% 2.3% 2.2%2.1%200620072008GDPIndustrial Production Source: Global Insight1313 Looking forward . . .Surface Transportation 2006 Volume GrowthService improvementssupporting growth2%3%Favorable pricing 1.8% environment continues0.1% Remain focused on (1.0%)profitable growthQ1Q2Q3Q4 Fcst 1414 8. Operations ReviewTony Ingram Executive Vice President Chief Operating Officer1515 Leadership, discipline and executionSafety performancecontinues to improve Operating momentum Reliable ReliablesustainedPerformance PerformanceService Execution Service ExecutionCapacity projectson scheduleProductivity Discipline Productivity Discipline Safety LeadershipSafety Leadership1616 9. Safety performance remains strongFRA Personal Injury FRA Train Accident13 Week13 WeekAverageAverage1.37 3.144.651.924.41 1.713.981.643.85 1.51 3.52 1.37 Q3 Q4 Q1 Q2 Q3Q3 Q4 Q1 Q2 Q32005 2005 2006 2006 20062005 2005 2006 2006 2006Rolling 12-month Averages 17 17 On-time performance is improving On-Time Originations On-Time Arrivals13 Week13 WeekAverageAverage77%63%71%57% 65%52% 46%57%40%40% 51%50% Q3 Q4 Q1 Q2 Q3Q3 Q4 Q1 Q2 Q32005 2005 2006 2006 20062005 2005 2006 2006 2006Rolling 12-month Averages 18 18 10. The network is more fluidDwell Time (hours) Cars-On-Line (000) 13 Week13 Week AverageAverage 25.5 hrs225K233.9 233.129.729.7 28.9 230.727.7227.626.8225.8 Q3 Q4 Q1 Q2 Q3Q3 Q4 Q1 Q2 Q32005 2005 2006 2006 20062005 2005 2006 2006 2006 Rolling 12-month Averages1919 Train velocity is stable Consistent plan execution Velocity (mph) 13 WeekAverage Improved recoverability 19.8 mph 19.719.519.5 19.419.2 Increased asset utilizationImproving service reliabilityQ3 Q4 Q1 Q2 Q32005 2005 2006 2006 2006Rolling 12-month Averages2020 11. Looking forward . . .Safety momentum willbe sustained Continue to build on Reliable Reliableoperating improvementPerformance PerformanceService Execution Service ExecutionCapacity projects willremain on schedule Productivity Discipline Productivity Discipline Safety LeadershipSafety Leadership2121Financial ResultsOscar Munoz Executive Vice President Chief Financial Officer2222 12. CSX reports strong third quarter resultsThird Quarter ResultsDollars in millions, except EPS 20062005 VarianceSurface Transportation Operating Income $ 489$ 361 $ 128Other Operating Income - (8)8Consolidated Operating Income $ 489$ 353 $ 136Other Income (net) 251114 Interest Expense(97) (100)3 Income Taxes(89) (100) 11 Net Earnings$ 328$ 164 $ 164 Earnings Per Share$ 0.71 $ 0.36$ 0.35 23 23 Comparable EPS increased 50%Third Quarter ResultsDollars in millions, except EPS 20062005 VarianceSurface Transportation Operating Income $ 489$ 361 $ 128Less Gain on Insurance Recoveries (15)-(15)Comparable Operating Income $ 474$ 361 $ 113 Earnings Per Share$ 0.71 $ 0.36$ 0.35Less Gain on Insurance Recoveries (0.02)- (0.02) Less Income Tax Benefit (0.15)- (0.15) Comparable Earnings Per Share $ 0.54 $ 0.36$ 0.18 24 24 13. Surface Transportation income up 31% Third Quarter Results Dollars in millions 2006 2005 Variance Revenue $ 2,418 $ 2,12514% Expenses Labor and Fringe 736725(2%) Materials, Supplies and Other478455(5%) Depreciation 213204(4%) Fuel 300188 (60%) Building and Equipment Rent135129(5%) Inland Transportation 63 54 (17%) Conrail Rents, Fees and Services199(111%) Operating Expenses1,9441,764(10%) Operating Income$474 $36131% Operating Ratio80.4% 83.0% 2.6 ptsNote: 2006 results exclude Katrina-related gain on insurance recoveries 2525 Labor and fringe increased 2%Primarily due to wage andThird Quarterbenefit inflation Dollars in Millions T&amp;E employees increasedby over 400 primarily dueto advanced hiring $11 $736Partially offset by lower$725incentive compensation 2005 Variance 2006 2626 14. MS&amp;O increased 5%Primarily driven by Third Quarterinflation and costs relatedDollars in Millionsto higher business volumes Partially offset bycontinued improvement $23 $478in locomotive productivity $455 2005Variance200627 27 Fuel increased 60%Consumed 144 million Third Quartergallons at average grossDollars in Millionsprice of $2.09 a gallon$112$300 Comparison impacted by$76 million lower hedge $188CSX has no hedgepositions going forward 2005Variance200628 28 15. Rents increased 5% Current year expenses Third Quarter moving with volumesDollars in MillionsYear-over-year change primarily due to prior year item $135 $6 $129 2005 Variance 200629 29 All other expenses increased 10%Third Quarter Dollars in Millions$28$295$267$19 $9$63$54$213$2042005Variance 2006 DepreciationInland Transportation Conrail Fees 30 30 16. Looking forward . . . $500 million share buyback program initiated,with $272 million repurchased Shares repurchased year-to-date total$422 million, including prior programs On track to deliver $300+ million Free CashFlow in 2006 Including Katrina insurance recoveries3131Concluding RemarksMichael Ward Chairman, President and Chief Executive Officer3232 17. Looking forward . . .Core strategies sustaining solid momentum RevenueOperationalPerformanceImpact DisciplineCulture Team delivering consistent, strong results Rail and intermodal environment remains strong Volume growth is building further momentum 33 33 Third Quarter 2006 Earnings Presentation34 34 </p>