csx 2007-q2-bwslides
Post on 10-Jul-2015
71 Views
Preview:
TRANSCRIPT
11
Second Quarter 2007Earnings PresentationSecond 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,” “estimate,” 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
Second quarter overview . . .
Second QuarterEarnings Per Share
$0.83
$0.58
$0.71 $0.71
Reported Comparable
2006 2007
Core earning power is strong and increasing
Pricing actions produced record quarterly revenues
Safety and customer satisfaction at all-time best levels
Price/productivity driving operating ratio lower
Note: 2006 comparable EPS exclude insurance gains and resolution of certain tax matters
22%Increase
55
Operations Review
Tony IngramExecutive Vice PresidentChief Operating Officer
66
Leadership, discipline and execution
Excellent trends in safety and service
Customer satisfaction levels at all-time high
Productivity gains working against inflation
SafetySafety
ProductivityProductivity
ServiceService
LeadershipLeadership
DisciplineDiscipline
ExecutionExecution
ReliablePerformance
77
Strong safety trends continue
Rolling 12-month Averages
FRA Personal Injury
1.58
1.46 1.431.39
1.31
Q22006
Q32006
Q42006
Q12007
Q22007
FRA Train Accidents
3.963.62
3.453.25
3.09
Q22006
Q32006
Q42006
Q12007
Q22007
13 WeekAverage
1.04
13 WeekAverage
2.85
88
On-time performance trending upward
Rolling 12-month Averages
On-Time Originations
65%71%
76% 76% 77%
Q22006
Q32006
Q42006
Q12007
Q22007
On-Time Arrivals
52%57%
63% 63% 66%
Q22006
Q32006
Q42006
Q12007
Q22007
13 WeekAverage
80%
13 WeekAverage
69%
99
Asset utilization sustaining gains
Rolling 12-month Averages
Cars-On-Line (000)
228226 225 225 225
Q22006
Q32006
Q42006
Q12007
Q22007
Dwell Time (hours)
27.726.8
25.6 25.2 24.8
Q22006
Q32006
Q42006
Q12007
Q22007
13 WeekAverage24.0 hrs
13 WeekAverage
223K
1010
Network operations fluid and consistent
Velocity (mph)
19.5 19.619.9 19.9
20.1
Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007
13 WeekAverage
20.4 mph
Rolling 12-month Averages
1111
Customer satisfaction at all-time high
Over 2,000 customer surveys each year
Measures 15 aspects of customer service
Achieved highest rating in four years of study
Customer SatisfactionIndexed: 2004=100
10097
103
112
2004 2005 2006 2007YTD
1212
Operating productivity is improving
Execution is driving better asset utilization
ONE Plan flexing with market conditions
Process improvement enhancing efficiency
Total Service Integration (TSI) initiativewill further improve productivity
1313
Operations wrap-up . . .
Excellent safety and service performance, with further improvement ahead
Productivity gains will continue to improve the operating ratio
Improving execution will continue to drive higher levels of customer satisfaction
1414
Sales and Marketing Review
Clarence GoodenExecutive Vice PresidentSales and Marketing
1515
Revenues up nearly 5% to $2.5 billion
Second QuarterRevenue in Millions
$2,530$2,421
$164 ($55)
2006 RPU Volume 2007
Pricing actions produced record quarterly revenues
Leveraging yield strength to offset softer volumes
Uninterrupted revenue growth more than 5yrs
$109 million
1616
Price continues to drive RPU growth
Year-Over-Year Change
6.5%7.1%6.6%6.7%6.8%6.2%6.3%5.6%6.0%
9.6% 9.0%
11.0% 11.7%12.6%
11.8%
8.4% 8.1%6.9%
Q22005
Q32005
Q42005
Q12006
Q22006
Q32006
Q42006
Q12007
Q22007
Price Increase on 'Same Store Sales' Total Revenue per Unit
Note: ‘Same Store Sales’ price increases exclude impacts from fuel and mix
1717
Merchandise revenue increased 5%
Second Quarter2007 versus 2006
5%
(4%)
9%
Revenue
Volume
RPU
Record quarterly revenues
Leveraging yield strength to offset softer volumes
Strength in agriculture, driven by ethanol
Softness in housing and automotive related markets continues
$ 1,268$ 61$ 1,207Revenue
(millions)
703(26)729Volume
(thousands)
$ 1,804$ 148$ 1,656RPU
2007Change2006
1818
Coal revenue increased nearly 8%
Second Quarter2007 versus 2006
8%
(1%)
9%
Revenue
Volume
RPU
Record quarterly revenue
Strong demand in export offsetting utility declines
Tons up nearly 1% on higher tonnage per car
Pricing environment remains strong
$ 638$ 45$ 593Revenue
(millions)
466(4)470Volume
(thousands)
$ 1,369$ 107$ 1,262RPU
2007Change2006
1919
Automotive revenue remained flat
Second Quarter2007 versus 2006
0%
(4%)
4%
Revenue
Volume
RPU
Price increases offsetting volume declines
‘Big 3’ production down; additional plant closures
New domestics continue to gain share
$ 223$ 0$ 223Revenue
(millions)
119(5)124Volume
(thousands)
$ 1,874$ 76$ 1,798RPU
2007Change2006
2020
Intermodal revenue declined 4%
Second Quarter2007 versus 2006
(4%)
(1%)
(2%)
Revenue
Volume
RPU
International traffic down
New services increase domestic traffic
Price gains offset by mix
$ 343($ 13)$ 356Revenue
(millions)
539(8)547Volume
(thousands)
$ 636($ 15)$ 651RPU
2007Change2006
2121
Intermodal operating income up 16%
Comparable Operating Income in Millions
$32
$55$61
$71
Q22004
Q22005
Q22006
Q22007
ComparableOperating Ratio
90.2%
83.3% 82.9%
79.3%
Q22004
Q22005
Q22006
Q22007
Note: 2004 excludes restructuring charge and 2006 excludes insurance gains
2222
Third quarter revenue outlook is positive
Food & Consumer
Forest Products
Intermodal
Metals
Agricultural Products
Automotive
Chemicals
Coal, Coke & Iron Ore
Emerging Markets
Phosphate & Fertilizer
UnfavorableNeutralFavorable
2323
Sales and Marketing wrap-up . . .
Economic Forecast2007-2008
2.1%
2.8%
1.7%
2.4%
2007 2008
GDP Industrial Production
Economy forecasted to improve in second half
Expect strong revenue growth to continue
Overall volume outlook improving in second half
Strong service levels support long-term growth
Source: Global Insight July 2007
2424
Financial Results
Oscar MunozExecutive Vice PresidentChief Financial Officer
2525
Strong second quarter results
)$ (66$ 390$ 324Net Earnings
)$ (0.12$ 0.83$ 0.71Earnings Per Share
))
-(3
(21))
11(98
(169))
11(101(190
Other Income (net)Interest ExpenseIncome Taxes
)$ (42$ 646$ 604Consolidated Operating Income
-11Other Operating Income
)$ (42$ 645$ 603Surface Transportation Operating Income
Variance20062007Dollars in millions, except EPS
Second Quarter Results
2626
Comparable EPS increased 22%
)($42$ 645$ 603Surface Transportation Operating Income
$ 84$ 519$ 603Comparable Operating Income
126)(126Less Gain on Insurance Recoveries
$ 0.13$ 0.58$ 0.71Comparable Earnings Per Share
0.08)(0.08Less Income Tax Benefits
0.17)(0.17Less Gain on Insurance Recoveries
)($ 0.12$ 0.83$ 0.71Earnings Per Share
Variance20062007Dollars in millions, except EPS
Second Quarter Results
2727
Record Second Quarter Results
Comparable Surface TransporationOperating Income in Millions
$603
$519
$73
$30($19)
Q2 2006
2006 FuelHedge
InjuryReserves
EarningsMomentum
Q2 2007
2828
Operating income up 16%
16%$ 519 $ 603Operating Income
2.4 pts78.6%76.2%Operating Ratio
)(1%1,9021,927Operating Expenses
))))
5%
(4%(4%(0%(2%17%3%
$ 2,421
71548928821613262
$ 2,530
74150728922110960
RevenueExpenses
Labor and FringeMaterials, Supplies and OtherFuelDepreciationEquipment and Other RentsInland Transportation
Variance20062007Surface Transportation ($ in millions)
Second Quarter Results
Note: 2006 results exclude insurance gains
2929
Labor and fringe increased 4%
Second QuarterDollars in Millions
$741
$715
$26
2006 Variance 2007
Primarily due to wage and benefit inflation
New labor agreement provides long-term benefits
Train crew headcount declined over 300
3030
MS&O increased 4%
Second QuarterDollars in Millions
$507$489
$18
2006 Variance 2007
Increase primarily driven by inflation
Personal injury reserves improve $30 million on strong safety record
3131
Fuel remained relatively flat
Second QuarterDollars in Millions
$289$288 $1
2006 Variance 2007
Cycling $19 million fuel hedge benefit from 2006
Lower fuel price and reduced volumes
Fuel efficiency reduced consumption by two million gallons
3232
Rents decreased 17%
Second QuarterDollars in Millions
$109
$132 ($23)
2006 Variance 2007
Lower Merchandise and Intermodal volumes
Operations driving better asset utilization
Favorable impact from the settlement of car hire expense with other rails
3333
All other expenses increased 1%
Higher capital base
Updated asset life study impacts depreciation
Second QuarterDollars in Millions
$216 $221
$62 $60
$3
2006 Variance 2007
$278 $281
Depreciation Inland Transport
3434
Focused approach to managing costs
20072007 2008-092008-09 2010+2010+
Plan long-term and execute short-term
Productivity and effectiveness targets established
Cross-functional and end-to-end process
Benchmarking best-in-class
Helping drive the operating ratio to the mid-low 70’s
3535
Recent actions reinforce shareholder focus
Cumulative Shares Repurchased
Dollars in Millions
$644
$465$422
$149
$548
Q22006
Q32006
Q42006
Q12007
Q22007
Quarterly DividendQ3 2005 - Q3 2007
$0.05$0.07
$0.10
$0.12
$0.15
Q32005
Q42005
Q32006
Q12007
Q32007
$1,192
Q2
3636
Financial wrap-up . . .
Mid-low 70’s
Exceed COC
Operating Ratio
ROIC
15%–17%Earnings Per Share
10%–12%Surface TransportOperating Income
2007–2010CAGR
Execute and
MonitorProgress
Execute and
MonitorProgress
Set goalsSet goals
Create plans
Create plans
Consistent Consistent continuous continuous
improvementimprovement
3737
Concluding Remarks
Michael WardChairman, President andChief Executive Officer
3838
Looking forward . . .
Driving excellent value for shareholders
Meeting the growing needs of our customers and the entire nation
Investments geared to accomplishing both
Committed to balanced approach to continue driving superior long-term value creation
3939
Second Quarter 2007Earnings PresentationSecond Quarter 2007Earnings Presentation
top related