Slide 1: Fourth Quarter 2007 Earnings Conference Call
Fourth Quarter 2007 Earnings Conference Call 1 Exhibit 2
Slide 2: Proxy Statement Disclosure
Proxy Statement Disclosure 2 IMPORTANT INFORMATION CSX Corporation plans to file with the SEC and furnish to its shareholders a Proxy Statement in connection with its 2008 Annual Meeting, and advises its security holders to read the Proxy Statement relating to the 2008 Annual Meeting when it becomes
Slide 3: Forward-Looking Disclosure
Forward-Looking Disclosure 3 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 oth
Slide 4: Executive Summary
Executive Summary Michael Ward Chairman, President and Chief Executive Officer
Slide 5: Fourth quarter overview
Fourth quarter overview . . . 5 Strong earnings growth, despite fuel headwind Safety and service at all-time best levels and improving Revenues increase on strong service levels Operating ratio improves on continued price/productivity Note: Comparable EPS exclude gains on insurance recoveries and Co
Slide 6: Full year highlights
Full year highlights . . . 6 Strong double-digit growth drives record results Surface Transportation: Revenues exceed $10 billion for first time ever Record operating income of over $2.2 billion Operating ratio below 78% for first time in a decade EPS from Continuing Operations 2006 2007 Note: Compa
Slide 7: Operations Review
Operations Review Tony Ingram Executive Vice President Chief Operating Officer
Slide 8: Leadership, discipline and execution
Leadership, discipline and execution Leadership Discipline Execution 8 Safety results at historical best and improving Productivity gains driving the operating ratio lower Network performance and service at all-time highs Safety Productivity Service Performance Excellence
Slide 9: Helping lead one of the nation's safest industries
Helping lead one of the nation’s safest industries 9 Rolling 12-Month Averages 13 Week Average 1.26 13 Week Average 2.85
Slide 10: On-time performance at all-time highs
On-time performance at all-time highs 10 Rolling 12-Month Averages 13 Week Average 81% 13 Week Average 73%
Slide 11: Network efficiency provides strong service product
Network efficiency provides strong service product 11 Rolling 12-Month Averages 13 Week Average 21.2 mph 13 Week Average 22.2 hrs
Slide 12: Customer satisfaction levels remain at high levels
Customer satisfaction levels remain at high levels 12 Best results since inception of third-party survey Correlates to internal operating measure gains Strong service supports pricing initiatives Customer Satisfaction Indexed: 2004 = 100
Slide 13: Operations wrap-up
Operations wrap-up . . . 13 Taking safety performance to the next level Service reliability delivering value for customers Driving productivity to lower the operating ratio
Slide 14: Sales and Marketing Review
Sales and Marketing Review Clarence Gooden Executive Vice President Sales and Marketing
Slide 15: Revenues increased 8% to nearly $2.6 billion
Revenues increased 8% to nearly $2.6 billion 15 Record quarterly Surface Transportation revenues Improved service enabling revenue growth Yield management continues to offset softer volumes Uninterrupted revenue growth for nearly 6 years
Slide 16: Price continues to drive RPU growth
Price continues to drive RPU growth 16 Note: ‘Same Store Sales’ price increases exclude impacts from fuel and mix
Slide 17: Merchandise revenue increases 7%
Merchandise revenue increases 7% 17 Yield management continues to offset softer volumes Continued softness in housing/auto related markets Strength in agriculture, phosphates, and chemicals 2006 Change 2007 RPU $ 1,736 $ 195 $ 1,931 Volume (thousands) (25) Revenue (millions) $ 1,172 $ 83 $ 1,255
Slide 18: Coal revenue increases 13%
Coal revenue increases 13% 18 Export strength offsets decline in utility market Tons shipped up nearly 1% on flat carload volume Overall pricing environment remains favorable 2006 Change 2007 RPU $ 1,282 $ 174 $ 1,456 Volume (thousands) (2) Revenue (millions) $ 604 $ 79 $ 683
Slide 19: Automotive revenue increases over 2%
Automotive revenue increases over 2% 19 Softer economy and tight credit impacting auto sales Big-3 production decline drove CSX volumes 2006 Change 2007 RPU $ 1,875 $ 97 $ 1,972 Volume (thousands) (3) Revenue (millions) $ 210 $ 5 $ 215
Slide 20: Intermodal revenue is flat on lower volumes
Intermodal revenue is flat on lower volumes 20 Revenue was flat as yields and mix offset volume losses International down on slowing imports/customer losses Domestic traffic improved on new services/new terminal 2006 Change 2007 RPU $ 649 $ 23 $ 672 Volume (thousands) (19) Revenue (millions) $ 358 $
Slide 21: Intermodal reports record fourth quarter profit
Intermodal reports record fourth quarter profit 21 Bottom line focus drove record fourth quarter results Cost control driven by greater efficiency and productivity Operating ratio improved 2.5 points to 78.5%
Slide 22: First quarter revenue outlook is positive
First quarter revenue outlook is positive Agricultural Products Chemicals Coal, Coke & Iron Ore Metals Phosphate & Fertilizer Food & Consumer Forest Products 22 Favorable Neutral Unfavorable Automotive Emerging Markets Intermodal
Slide 23: Financial Results
Financial Results Oscar Munoz Executive Vice President Chief Financial Officer
Slide 24: Strong fourth quarter results
Strong fourth quarter results . . . 24 $ 0.11 $ 0.75 $ 0.86 Earnings Per Share $ 18 $ 347 $ 365 Net Income ) ) (16 (82 Consolidated Operating Income Other Income (net) Interest Expense Income Taxes ) (2 - Surface Transportation Operating Income Other Operating Income ) $ 181 (77 $ 2,396 1,891 $ 2,57
Slide 25: Comparable operating income increases 26%
Comparable operating income increases 26% 25 $ 123 $ 478 $ 601 Comparable Operating Income $ 104 ) $ 505 (27 ) $ 609 (8 Surface Transportation Operating Income Less Gain on Insurance Recoveries $ 0.28 $ 0.57 $ 0.85 Comparable Earnings Per Share $ 0.11 0.03 0.06 0.08 ) ) ) $ 0.75 (0.04 (0.06 (0.08 )
Slide 26: Key fourth quarter operating income drivers
Key fourth quarter operating income drivers . . . 26 Improving safety performance lowers reserve requirements Revenue strength and cost control overcome impact of fuel headwind Note: Exclude gains from insurance recoveries in 2006 and 2007
Slide 27: Expenses up 3% overall; down 2% excluding fuel
Expenses up 3% overall; down 2% excluding fuel 27 Note: Results exclude gains from insurance recoveries
Slide 28: Fuel price more than offsets efficiency and volume
Fuel price more than offsets efficiency and volume 28 $ 357 2007 Fuel Expense ) ) (9 (9 Increase in Price Change in Volume/Mix Fuel Efficiency $ 271 2006 Fuel Expense Fourth Quarter Fuel Analysis in Millions
Slide 29: Labor and Fringe increased 1%
Labor and Fringe increased 1% 29 Fourth Quarter Labor and Fringe in Millions 2006 Labor and Fringe $ 753 Year-over-year change 6 2007 Labor and Fringe $ 759 Wage and benefit inflation totaled $22 million Rightsizing resources drove 3% lower headcount Note: Headcount reflects the company’s Surface Tr
Slide 30: MS&O declines on lower personal injuries
MS&O declines on lower personal injuries 30 Fourth Quarter MS&O in Millions 2006 MS&O $ 496 Year-over-year change (29) 2007 MS&O $ 467 Sustained improvements in safety lower net reserves Partially offset by inflation and derailment costs 48% Improvement
Slide 31: Rents decline on volume and productivity
Rents decline on volume and productivity 31 $ 110 2007 Rent Expense ) ) (10 (4 Inflation Volume/Mix/Other Equipment Utilization $ 121 2006 Rent Expense Fourth Quarter Rents Analysis in Millions Note: Reflects equipment utilization in the carload network on freight cars where CSX incurs rent
Slide 32: Other expenses increase 2%
Other expenses increase 2% 32 Higher capital base increased depreciation expense Partially offset by lower rates from asset life studies Increased trucking expenses driving inland transportation
Slide 33: Price and productivity driving operating ratio lower
Price and productivity driving operating ratio lower 33 Note: Exclude gains from insurance recoveries in 2006 and 2007
Slide 34: Full-year results reflect strong double-digit growth
Full-year results reflect strong double-digit growth 34 14% Increase 22% Increase Note: Exclude management restructuring, gains on insurance recoveries and Conrail property, and income tax benefits
Slide 35: Full-year Free Cash Flow
Full-year Free Cash Flow . . . 35 Generated $145 million in 2007 Consistent with $100+ million target outlined at September Investor Conference Stronger earnings and cash flows supported: Locomotive capital investment Pension contribution Dividend increases
Slide 36: Cash flows and capital structure support buyback
Cash flows and capital structure support buyback 36 Note: Approximately $2.1 billion of the $2.6 billion has been repurchased under the current $3.0 billion program $2,639
Slide 37: Double-digit growth targeted off record 2007 base
Double-digit growth targeted off record 2007 base 37 $800M – $1B in 2010 Free Cash Flow Before Dividends Mid-low 70’s by 2010 Operating Ratio 15% – 17% CAGR Earnings Per Share 10% – 12% CAGR Operating Income 2008 – 2010 Guidance
Slide 38: Concluding Remarks
Concluding Remarks Michael Ward Chairman, President and Chief Executive Officer
Slide 39: Looking forward
Looking forward . . . 39 Delivering superior long-term value for shareholders Leveraging the growing secular strength of the industry Driving greater cost efficiency through productivity Capitalizing on growth potential with key investments Building on momentum to produce record 2008 results Relentl
Slide 40: Fourth Quarter 2007 Earnings Conference Call
Fourth Quarter 2007 Earnings Conference Call 40