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csx 1Q_2006
- 1. First Quarter 2006 Earnings Presentation 1 1 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. 2 2
- 2. Executive Summary Michael Ward Chairman, President and Chief Executive Officer 3 3 First quarter overview . . . EPS from continuing First Quarter operations up 56% Earnings Per Share $1.06 Surface Transportation produces record results $0.68 Price environment remains strong ONE Plan execution gains solid momentum 2005 2006 4 4
- 3. Operations Review Tony Ingram Executive Vice President Chief Operating Officer 5 5 Leadership, discipline and execution Safety momentum remains strong ONE Plan execution is Reliable Reliable gaining solid momentum Performance Performance Service Execution Service Execution Capacity projects are on schedule Productivity Discipline Productivity Discipline Safety Leadership Safety Leadership 6 6
- 4. Safety momentum remains strong FRA Personal Injury FRA Train Accident 13 Week 13 Week Average Average 1.38 3.61 2.13 2.04 4.78 1.91 4.50 4.47 4.17 1.71 1.64 3.81 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2005 2005 2005 2005 2006 2005 2005 2005 2005 2006 Rolling 12-month Averages 7 7 On-time performance is improving On-Time Originations On-Time Arrivals 13 Week 13 Week Average Average 74% 61% 57% 46% 51% 50% 50% 48% 40% 40% 39% 38% Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2005 2005 2005 2005 2006 2005 2005 2005 2005 2006 Rolling 12-month Averages 8 8
- 5. Asset utilization is improving Dwell Time (hours) Cars-On-Line (000) 13 Week 13 Week Average Average 27 hrs 224K 234.1 234.2 233.9 29.7 29.7 29.6 233.1 29.3 28.9 230.7 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2005 2005 2005 2005 2006 2005 2005 2005 2005 2006 Rolling 12-month Averages 9 9 Velocity is improving Consistent plan execution Velocity (mph) 13 Week Average Improved recoverability 20 mph 19.9 19.8 19.7 19.4 19.2 Increased asset utilization Improving overall service reliability Q1 Q2 Q3 Q4 Q1 2005 2005 2005 2005 2006 Rolling 12-month Averages 10 10
- 6. Capacity expansion is on target Capacity Expansion Projects Chicago Chicago, IL – Nashville, TN Smith Hazelton Carlisle Targeted Completion Rankin Romney Q2 2006 Casky Q3 2006 Staughters Cedar Hill Q4 2006 Trenton Nashville Goodlettsville 11 11 Capacity expansion is on target Capacity Expansion Projects Atlanta, GA – Waycross, GA Rock Spur Lily Atlanta Targeted Completion N. Manchester N. Manchester Upton Completed Bartlett Q2 2006 Ambrose Waycross Q3 2006 Q4 2006 Haywood 12 12
- 7. Capacity expansion is on target Capacity Expansion Projects Albany, NY – New York, NY West Park Targeted Completion Albany Q4 2006 Newark / New York Fort Montgomery 13 13 Looking forward . . . Safety momentum will continue Sustain and build on Reliable Reliable ONE Plan success Performance Performance Service Execution Service Execution Capacity projects to stay on schedule Productivity Discipline Productivity Discipline Safety Leadership Safety Leadership 14 14
- 8. Sales and Marketing Review Clarence Gooden Executive Vice President Sales and Marketing 15 15 Economic outlook remains strong Transportation demand Transportation Index still near record levels Indexed: 2000=100 120 Full-year outlook: 110 — GDP 3.3% 100 — IDP 3.9% 90 80 ISM Index stands at 55% 70 Continued strength in 60 imports and exports 90 93 96 99 02 05 Source: Bureau of Transportation Statistics 16 16
- 9. Revenues increase 11% Record revenues of $2.3 billion, up $223 million Revenue growth across all markets Total volumes declined 1% — Principally phosphates and intermodal Yield environment remains strong 17 17 Revenue per unit increases 12% First Quarter Revenue Per Unit 2006 versus 2005 Surface Transportation 12% Merchandise 15% Coal 10% Automotive 9% Intermodal 4% 18 18
- 10. Merchandise revenue increases 11% 16th consecutive quarter First Quarter of revenue growth 2006 versus 2005 Record gain in revenue 15% per unit 11% Volume decline driven by Phosphates & Fertilizers (4%) Revenue Volume RPU 19 19 Merchandise volume growth is mixed First Quarter Volume 2006 versus 2005 Phosphates & Fertilizers (25%) Forest Products (6%) Chemicals (4%) Metals 1% Food and Consumer 2% Agriculture 4% Emerging Markets 8% 20 20
- 11. Coal revenue increases 14% Strong demand across First Quarter markets 2006 versus 2005 Favorable pricing 14% environment continues 10% Utility stockpiles remain below target levels 4% Full-year volume outlook is favorable Revenue Volume RPU 21 21 Automotive revenue increases 11% Strong yield improvement First Quarter 2006 versus 2005 First quarter production 11% increase drove volume 9% Inventories are now at target levels 2% Full-year volume outlook is unfavorable Revenue Volume RPU 22 22
- 12. Intermodal revenue increases 2% Yield management First Quarter success continues 2006 versus 2005 Volume declines in: 4% — Off-core business — Low margin traffic 2% Operating income increased 19% (2%) Full-year volume outlook Revenue Volume RPU is favorable 23 23 Intermodal growth targeted in key lanes On-time performance is the foundation for growth Syracuse Buffalo Boston Detroit — Chicago–FL 90% Chicago New York Cleveland Philadelphia — Chicago–NE 90% Columbia Baltimore Cincinnati St Louis — NE–FL 90% Evansville Portsmouth Charlotte Nashville Memphis Key service lanes have Atlanta Charleston train capacity for growth Savannah Mobile Jacksonville New Orleans Trucking capacity is Tampa expected to remain tight Miami Intermodal Terminals Priority Intermodal Corridors 24 24
- 13. Looking forward . . . Demand will remain strong Favorable pricing environment will continue Service improvements will drive volume growth 25 25 Financial Results Oscar Munoz Executive Vice President Chief Financial Officer 26 26
- 14. EPS from continuing operations up 56% First Quarter Results Dollars in millions, except EPS 2006 2005 Variance Surface Transportation Operating Income $ 487 $ 351 $ 136 Other Operating Income 9 3 6 Consolidated Operating Income $ 496 $ 354 $ 142 Other Income (net) (3) (2) (1) Interest Expense (98) (114) 16 Income Taxes (150) (84) (66) Earnings From Continuing Operations $ 245 $ 154 $ 91 EPS From Continuing Operations $ 1.06 $ 0.68 $ 0.38 27 27 Surface Transportation increases 39% First Quarter Results Dollars in millions 2006 2005 Variance Revenue $ 2,331 $ 2,108 11% Expenses Labor and Fringe 718 694 (3%) Materials, Supplies and Other 463 472 2% Fuel 253 179 (41%) Depreciation 211 203 (4%) Building and Equipment Rent 124 135 8% Inland Transportation 56 54 (4%) Conrail Rents, Fees and Services 19 20 5% Total Operating Expenses 1,844 1,757 (5%) Operating Income $ 487 $ 351 39% Operating Ratio 79.1% 83.3% 4.2 pts 28 28
- 15. Labor and fringe increased 3% Primarily driven by wage Labor and Fringe and benefit inflation Dollars in Millions Includes over 800 new $718 $24 T&E employees $694 Partially offset by productivity 2005 Variance 2006 29 29 MS&O declined 2% Improved operations MS&O driving productivity gains Dollars in Millions $9 Increased locomotive $472 $463 utilization Reduced train accidents and related costs 2005 Variance 2006 30 30
- 16. Fuel increased 41% Primarily driven by higher Fuel fuel prices Dollars in Millions Impact of hedge position $74 $253 was lower by $16 million $179 Partially offset by focus on fuel economy 2005 Variance 2006 31 31 Fuel hedges continue to decline Hedge Benefit Dollars in Millions $77 $63 $58 $51 $35 * $18 $1 * Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 * Estimates based on $70 per barrel WTI 32 32
- 17. Rents declined 8% Asset utilization is Rents improving Dollars in Millions Lower equipment costs $135 $11 are driven by: — Fewer cars-on-line $124 — Improved cycle time 2005 Variance 2006 33 33 All other expenses increase 3% All Other Expenses Dollars in Millions $286 $277 $9 $19 $20 $56 $54 $211 $203 2005 Variance 2006 Depreciation Inland Transportation Conrail Fees Variance 34 34
- 18. Financial wrap-up . . . First quarter was a record for operating income Solid performance and strong transportation environment expected to continue On track to deliver $300+ million in free cash flow with $1,420 million in capital Maintaining focus on driving consistent, continuous improvement 35 35 Concluding Remarks Michael Ward Chairman, President and Chief Executive Officer 36 36
- 19. Looking forward . . . Core strategies are gaining solid momentum Revenue Operational Performance Impact Discipline Culture Volume growth will build momentum further Transportation environment remains strong Capacity projects position CSX for the future 37 37 First Quarter 2006 Earnings Presentation 38 38