csx 2006_Merrill_Lynch_Presentation_FINAL-REF22975
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Transcript of csx 2006_Merrill_Lynch_Presentation_FINAL-REF22975
11
Merrill Lynch Global Transportation Conference
June 2006
Merrill Lynch Global Transportation Conference
June 2006
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,” 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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Our core strategies are gaining momentum
RevenueImpact
RevenueImpact
OperationalDiscipline
OperationalDiscipline
PerformanceCulture
PerformanceCulture
Pricing momentum
Customer focus
Profitable growth
Safety leadership
Productivity discipline
Service execution
Drive to win
Personal accountability
Core values
Driving for reliability and growthDriving for reliability and growth
44
Focus on revenue impact is driving rates
Revenue Per UnitYear-Over-Year Improvement
7%8%
9%10% 9%
11%12%
Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006
RevenueImpact
RevenueImpact
Note: The second quarter of 2005 excludes a $17 million coal rate case settlement
55
Profitability focus is improving returns
2006
24%
76%
2004
65%
35%
Percentage of Rail CarsAbove Reinvestment Hurdle Rates
Above Hurdle Below Hurdle
RevenueImpact
RevenueImpact
66
Economic environment remains strong
Transportation demand still near record levels
Full-year outlook:— GDP 3.3%— IDP 3.9%
ISM Index stands at 55%
Continued strength in imports and exports
Transportation IndexIndexed: 2000=100
60
70
80
90
100
110
120
90 93 96 99 02 05
Source: Bureau of Transportation Statistics
RevenueImpact
RevenueImpact
77
Leadership, discipline, execution
Specific, clear roles and responsibilities defined
Compliance process developed
Exception handling process defined
Resources in place— Crews— Locomotives— Line capacity
SafetySafety
ProductivityProductivity
ServiceService
LeadershipLeadership
DisciplineDiscipline
ExecutionExecution
ReliablePerformance
ReliablePerformance
OperationalDiscipline
OperationalDiscipline
88
Train Accidents
2.0
2.8
3.6
4.4
5.2
6.0
Personal Injury
1.0
1.4
1.8
2.2
2.6
3.0
01 02 03 04 05 06
Operational discipline is driving safety
01 02 03 04 05 06
OperationalDiscipline
OperationalDiscipline
99
On-time Arrivals
30
42
54
66
78
90
On-time Originations
30
42
54
66
78
90
01 02 03 04 05 06
Discipline is driving on-time performance
01 02 03 04 05 06
OperationalDiscipline
OperationalDiscipline
1010
Cars on Line (000)
215
222
229
236
243
250
Dwell Time (hours)
18
21
24
27
30
33
01 02 03 04 05 06
Discipline is driving asset utilization
01 02 03 04 05 06
OperationalDiscipline
OperationalDiscipline
1111
Recrews
10
26
42
58
74
90
Train Velocity (mph)
16
18
20
22
24
26
01 02 03 04 05 06
Discipline is driving velocity and recrews
01 02 03 04 05 06
OperationalDiscipline
OperationalDiscipline
1212
Discipline is driving the operating ratio
Operating Ratio89%
85%87%
86%83%
81%83%
81%79%
Q12004
Q22004
Q32004
Q42004
Q12005
Q22005
Q32005
Q42005
Q12006
PerformanceCulture
PerformanceCulture
Note: The first three quarters of 2004 exclude $71 million of management restructuring charges
1313
Consistent, continuous improvement
Surface TransportationOperating Income in Millions
$487
$415$361
$422
$351$315
$250 $295
$204
Q12004
Q22004
Q32004
Q42004
Q12005
Q22005
Q32005
Q42005
Q12006
PerformanceCulture
PerformanceCulture
Note: The first three quarters of 2004 exclude $71 million of management restructuring charges
1414
Future growth leverages evolving trends
Transportation demand is increasing
Rail competitiveness is improving
Highest growth trends are in the South
1515
Transportation demand – imports and IDP
U.S. Consumption2000 Dollars in Trillions
$5
$6
$7
$8
$9
$10
2000 2003 2006 2009
Imports2000 Dolla
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
2000 2003
and IDPrs in Trillions
2006 2009
IDP Imports
Source: Global Insight
1616
Rail competitiveness – highway congestion
Highway Miles versusMiles Traveled
0%
50%
100%
150%
200%
250%
1980 1985 1990 1995 2000
Miles Traveled Lane Miles
Transport ForecastTon Miles in Trillions
2
3
4
5
6
7
2000 2004 2008 2012 2016 2020
Source: American Association of State Highway and Transportation Officials
Source: Department of Transportation
1717
Rail competitiveness – truck cost structure
Highway congestion
Driver shortages
New hours of service law
Increasing fuel costs
Emission requirements
Rising insurance costs
Cost per Mile
Q1 2003 Q1 2006
Trucks Rail
24-28%
8-12%
Source: Estimate based on CSX analysis
1818
Rail competitiveness – CSX set for growth
Volume Growth
4% 4%
(1%)
1%
(4%)
(8%)
(3%)
(5%)
(2%)(1%)
Q1 2004
Q4 2004
Q3 2005
2QTD 2006
CSX Intermodal
$110
$152
$24891%
89%
82%
2003 2004 2005
Op Inc (millions) Op Ratio
Note: Fourth quarter volume growth for 2004 and 2005 reflects comparable periods
1919
Southeast growth – industrial development
LT 5% 5-5.5%
5.6-6.0% GT 6%
Income Growth Miami
New York
Portsmouth
Philadelphia
Merchandise• Ethanol Facilities• Feed Mills• Aggregate Facilities• Plastics Plants
Coal• New Projects
Intermodal• Port Development• Logistics Centers
Automotive• Assembly Plant• Supplier Facility
60% ofprojects
New Orleans
Chicago
St Louis
Memphis
MobileJacksonville
Charleston
Baltimore
Boston
2020
Targeting strong long-term financial results
Surface TransportationOperating Income 10% – 12%
5 Year CAGR
Core Free Cash Flow 10% – 12%
Earnings per Share 12% – 14%
Operating Ratio Mid-70%’s
2121
Looking forward . . .
Core strategies are gaining solid momentum
Transportation environment remains strong
Capacity projects position CSX for the future
Volume growth will build momentum further
RevenueRevenueImpactImpact
OperationalOperationalDisciplineDiscipline
PerformancePerformanceCultureCulture
2222
Merrill Lynch Global Transportation Conference
June 2006
Merrill Lynch Global Transportation Conference
June 2006