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csx 2007-Q2-bwslides
1. Second Quarter 2007
Earnings Presentation
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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,” “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.
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2. Executive Summary
Michael Ward
Chairman, President and
Chief Executive Officer
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Second quarter overview . . .
Core earning power is
Second Quarter
strong and increasing
Earnings Per Share
Pricing actions produced
$0.83
record quarterly revenues
$0.71 $0.71
$0.58
Safety and customer
22%
satisfaction at all-time
Increase
best levels
Price/productivity driving
Reported Comparable
operating ratio lower
2006 2007
Note: 2006 comparable EPS exclude insurance gains and resolution of certain tax matters
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3. Operations Review
Tony Ingram
Executive Vice President
Chief Operating Officer
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Leadership, discipline and execution
Excellent trends in safety
and service
Customer satisfaction
Reliable
levels at all-time high Performance
Service Execution
Service Execution
Productivity gains working
against inflation Productivity Discipline
Productivity Discipline
Safety Leadership
Safety Leadership
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6. Customer satisfaction at all-time high
Over 2,000 customer
Customer Satisfaction
surveys each year
Indexed: 2004=100
112
Measures 15 aspects of
customer service
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100 Achieved highest rating in
97
four years of study
2004 2005 2006 2007
YTD
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Operating productivity is improving
Execution is driving better asset utilization
ONE Plan flexing with market conditions
Process improvement enhancing efficiency
Total Service Integration (TSI) initiative
will further improve productivity
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7. 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
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Sales and Marketing Review
Clarence Gooden
Executive Vice President
Sales and Marketing
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8. Revenues up nearly 5% to $2.5 billion
Pricing actions produced
Second Quarter
record quarterly revenues
Revenue in Millions
($55)
$164
Leveraging yield strength
$2,530
to offset softer volumes
$2,421
Uninterrupted revenue
$109 million
growth more than 5yrs
2006 RPU Volume 2007
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Price continues to drive RPU growth
Year-Over-Year Change
12.6%
11.8%
11.7%
11.0%
9.6% 9.0% 8.4% 8.1%
6.9%
7.1%
6.8% 6.7% 6.6% 6.5%
6.3% 6.2%
6.0% 5.6%
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2005 2005 2005 2006 2006 2006 2006 2007 2007
Price Increase on 'Same Store Sales' Total Revenue per Unit
Note: ‘Same Store Sales’ price increases exclude impacts from fuel and mix
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9. Merchandise revenue increased 5%
Second Quarter Record quarterly
2007 versus 2006 revenues
Leveraging yield strength
RPU 9%
to offset softer volumes
Volume (4%)
Revenue 5%
Strength in agriculture,
driven by ethanol
2006 Change 2007
RPU $ 1,656 $ 148 $ 1,804
Softness in housing and
automotive related
Volume 729 (26) 703
markets continues
(thousands)
Revenue $ 1,207 $ 61 $ 1,268
(millions)
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Coal revenue increased nearly 8%
Second Quarter Record quarterly revenue
2007 versus 2006
Strong demand in export
offsetting utility declines
RPU 9%
Volume (1%)
Tons up nearly 1% on
Revenue 8%
higher tonnage per car
2006 Change 2007
Pricing environment
RPU $ 1,262 $ 107 $ 1,369
remains strong
Volume 470 (4) 466
(thousands)
Revenue $ 593 $ 45 $ 638
(millions)
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10. Automotive revenue remained flat
Second Quarter Price increases offsetting
2007 versus 2006 volume declines
‘Big 3’ production down;
RPU 4%
additional plant closures
Volume (4%)
Revenue 0%
New domestics continue
to gain share
2006 Change 2007
RPU $ 1,798 $ 76 $ 1,874
Volume 124 (5) 119
(thousands)
Revenue $ 223 $ 0 $ 223
(millions)
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Intermodal revenue declined 4%
Second Quarter International traffic down
2007 versus 2006
New services increase
domestic traffic
RPU (2%)
Volume (1%)
Price gains offset by mix
Revenue (4%)
2006 Change 2007
RPU $ 651 ($ 15) $ 636
Volume 547 (8) 539
(thousands)
Revenue $ 356 ($ 13) $ 343
(millions)
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11. Intermodal operating income up 16%
Comparable Operating Comparable
Income in Millions Operating Ratio
90.2%
$71
$61
$55
83.3% 82.9%
$32
79.3%
Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2
2004 2005 2006 2007 2004 2005 2006 2007
Note: 2004 excludes restructuring charge and 2006 excludes insurance gains
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Third quarter revenue outlook is positive
Favorable Neutral Unfavorable
Agricultural Products Intermodal Food & Consumer
Automotive Metals Forest Products
Chemicals
Coal, Coke & Iron Ore
Emerging Markets
Phosphate & Fertilizer
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12. Sales and Marketing wrap-up . . .
Economy forecasted to
Economic Forecast
improve in second half
2007-2008
2.8% Expect strong revenue
growth to continue
2.4%
2.1%
1.7%
Overall volume outlook
improving in second half
Strong service levels
support long-term growth
2007 2008
GDP Industrial Production
Source: Global Insight July 2007
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Financial Results
Oscar Munoz
Executive Vice President
Chief Financial Officer
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13. Strong second quarter results
Second Quarter Results
Dollars in millions, except EPS 2007 2006 Variance
Surface Transportation Operating Income $ 603 $ 645 $ (42)
Other Operating Income 1 1 -
Consolidated Operating Income $ 604 $ 646 $ (42)
Other Income (net) 11 11 -
Interest Expense (101) (98) (3)
Income Taxes (190) (169) (21)
Net Earnings $ 324 $ 390 $ (66)
Earnings Per Share $ 0.71 $ 0.83 $ (0.12)
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Comparable EPS increased 22%
Second Quarter Results
Dollars in millions, except EPS 2007 2006 Variance
Earnings Per Share $ 0.71 $ 0.83 ($ 0.12)
Less Gain on Insurance Recoveries (0.17) 0.17
Less Income Tax Benefits (0.08) 0.08
Comparable Earnings Per Share $ 0.71 $ 0.58 $ 0.13
Surface Transportation Operating Income $ 603 $ 645 ($42)
Less Gain on Insurance Recoveries (126) 126
Comparable Operating Income $ 603 $ 519 $ 84
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14. Record Second Quarter Results
Comparable Surface Transporation
Operating Income in Millions
$73 $603
$30
$519 ($19)
Q2 2006 Fuel Injury Earnings Q2
2006 Hedge Reserves Momentum 2007
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Operating income up 16%
Second Quarter Results
Surface Transportation ($ in millions) 2007 2006 Variance
Revenue $ 2,530 $ 2,421 5%
Expenses
Labor and Fringe 741 715 (4%)
Materials, Supplies and Other 507 489 (4%)
Fuel 289 288 (0%)
Depreciation 221 216 (2%)
Equipment and Other Rents 109 132 17%
Inland Transportation 60 62 3%
Operating Expenses 1,927 1,902 (1%)
Operating Income $ 603 $ 519 16%
Operating Ratio 76.2% 78.6% 2.4 pts
Note: 2006 results exclude insurance gains
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15. Labor and fringe increased 4%
Primarily due to wage and
Second Quarter
benefit inflation
Dollars in Millions
$26 $741
New labor agreement
$715
provides long-term
benefits
Train crew headcount
declined over 300
2006 Variance 2007
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MS&O increased 4%
Increase primarily driven
Second Quarter
by inflation
Dollars in Millions
$507
$18
Personal injury reserves
$489
improve $30 million on
strong safety record
2006 Variance 2007
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16. Fuel remained relatively flat
Cycling $19 million fuel
Second Quarter
hedge benefit from 2006
Dollars in Millions
$1 $289
$288
Lower fuel price and
reduced volumes
Fuel efficiency reduced
consumption by two
million gallons
2006 Variance 2007
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Rents decreased 17%
Lower Merchandise and
Second Quarter
Intermodal volumes
Dollars in Millions
($23)
$132
Operations driving better
asset utilization
$109
Favorable impact from
the settlement of car hire
expense with other rails
2006 Variance 2007
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17. All other expenses increased 1%
Higher capital base
Second Quarter
Dollars in Millions
Updated asset life study
$3
impacts depreciation
$281
$278
$60
$62
$221
$216
2006 Variance 2007
Depreciation Inland Transport
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Focused approach to managing costs
2007 2008-09 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
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18. Recent actions reinforce shareholder focus
Cumulative Shares Quarterly Dividend
Repurchased Q3 2005 - Q3 2007
Dollars in Millions $0.15
$1,192
$0.12
$0.10
$548 Q2
$644
$0.07
$465 $0.05
$422
$149
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q3 Q1 Q3
2006 2006 2006 2007 2007 2005 2005 2006 2007 2007
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Financial wrap-up . . .
2007–2010
CAGR Set goals
Set goals
Surface Transport 10%–12%
Operating Income
Consistent
Execute
Execute
continuous
and
and
Earnings Per Share 15%–17%
Monitor
Monitor improvement
Progress
Progress
Operating Ratio Mid-low 70’s
Create
Create
plans
plans
ROIC Exceed COC
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19. Concluding Remarks
Michael Ward
Chairman, President and
Chief Executive Officer
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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
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