csx 2007_bb&t_conference-ref23583
DESCRIPTION
TRANSCRIPT
11
BB&T Transportation ConferenceFebruary 2007
BB&T Transportation ConferenceFebruary 2007
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.
33
CSX registered another breakout year in 2006
Generated record financial results
Produced step-function service improvements
Delivered significant value for shareholders
Driving towards 2010 targets
Positioned for long-term profitable growth
44
CSX produced record financial results in 2006
Dollars in millions, except EPS
Surface Transportation
RevenueExpense
$ 9,5667,608
Operating Income
Operating Ratio
$ 1,958
79.5%
Consolidated EPS $ 2.22
Note: Excludes insurance recoveries and income tax benefits
Year-Over-YearImprovement
11%
26%
31%
55
Earnings improving; momentum to mid-70’s
$902M$1,064M
$1,549M
$1,958M
Surface Transportation Operating Income
2003 2004 2005 2006
Surface Transportation Operating Ratio
87.9%
84.6%
82.0%
79.5%
2003 2004 2005 2006
Notes: Excludes provision for casualty claims, management restructuring and insurance recoveries
66
Over $1 billion deployed for investors in 2006
Growing Cash Generation& Improving ROIC
DebtHoldersDebt
HoldersEquityHoldersEquityHoldersCompanyCompany
Maintain target debt levels
Competitivedividend yield
Share buyback program
Focused, strategic investmentfor growth
77
Recent actions reinforce shareholder focus
Initiated $2.0 BillionShare Repurchase
Represents over 10% of outstanding shares
Consistent with capital structure objectives
Targeting year-end 2008 completion
Increased Annual Dividend 20%
$0.20$0.26
$0.40
$0.48
Q32005
Q42005
Q32006
Q12007
20%Increase
20%Increase
88
Double-digit growth targeted through 2010
2006–2010CAGR
Surface TransportOperating Income
10%–12%
Earnings Per Share 12%–14%
Free Cash Flow 10%–12%
Execute and
MonitorProgress
Execute and
MonitorProgress
Set goalsSet goals
Create plans
Create plans
Consistent Consistent continuous continuous
improvementimprovement
99
Surface Transportation above target growth
Note: 2006 excludes benefits from insurance recoveries
Operating Income in MillionsFive-year Target: 10%-12% CAGR
$1,549
2005 2006 2007 2008 2009 2010
$2.5–$2.7Billion
$2.5–$2.7Billion
$1,958
26%Increase
26%Increase
1010
Earnings per share above target growth
Note: 2005 and 2006 excludes debt repurchase expenses, insurance recoveries and income tax benefits
Earnings Per ShareFive-year Target: 12%-14% CAGR
$1.70
$2.22
2005 2006 2007 2008 2009 2010
$3.00–$3.30$3.00–$3.30
31%Increase
31%Increase
1111
Rail earnings growth among leading sectors
Long-term Earnings Growth Expectations
5.6%
7.7%
10.9%
12.8%
12.9%
14.9%
15.3%
15.4%
18.2%
Telecom
Utilities
Financials
S&P 500
Industrials
Health Care
IT
Railroads
Energy
Source: Standard & Poor’s as of February 13, 2007
1212
However, rail PE’s continue to lag S&P 500
NTM Price-to-Earnings Ratio
11.2
13.9
16.5
16.6
17.1
17.7
18.3
21.6
22.5
Energy
Railroads
Utilities
Industrials
Financials
Telecom
S&P 500
IT
Health Care
Source: Standard & Poor’s as of February 13, 2007
1313
Rail Renaissance environment remains strong
Tight Transportation Tight Transportation CapacityCapacity
2006
StrongStrongEconomyEconomy
PricingPricingStrengthStrength
2007
Tight Transportation Tight Transportation CapacityCapacity
ModeratingEconomy
PricingPricingStrengthStrength
ExtendingExtendingSupply ChainsSupply Chains
ExtendingExtendingSupply ChainsSupply Chains
1414
Moderating economy continues to grow
GDP and Industrial ProductionYear-Over-Year Change
1.6%2.5%
3.9%3.2% 3.3%
2.7%0.8%
4.1%3.2%
4.1%
2.2%
(3.6%)
0.0%(0.3%)
2001 2002 2003 2004 2005 2006 2007
Gross Domestic Product Industrial Production
Source: Global Insight
1515
Demand remains high and increasing further
Transport ForecastTon-Miles in Trillions
3
4
5
6
7
2004 2006 2008 2010 2012 2014 2016 2018 2020
Source: AASHTO
1616
Highways are constrained and getting worse
Today 2020
CSX Territory
Source: USDOT FHWA Freight Analysis Framework
1717
Rail Renaissance is driving improving yields
Year-Over-Year Change
6.6%6.7%6.8%6.2%6.3%5.6%6.0%4.8%
8.6%9.6% 9.0%
11.0% 11.7%12.6%
11.8%
8.4%
Q12005
Q22005
Q32005
Q42005
Q12006
Q22006
Q32006
Q42006
Price Increase on 'Same Store Sales' Total Revenue per Unit
Note: Price increases on a ‘Same Store Sales’ basis exclude fuel surcharge and mix impacts
R2 = P + V
1818
Imports showing strong long-term growth . . .
United States Imports2000 Dollars in Trillions
$1.5 $1.4 $1.5 $1.6$1.7
$1.8 $1.9 $2.0 $2.1$2.2
$2.3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Global Insight
1919
. . . with volume focused at the major ports
4.5
15.8
NY/NJ
1.85.6
Virginia
1.9
6.6
Charleston
1.7
9.4
Savannah1.4
6.2
Houston
TEU in Millions
2020
2004
Source: Containerization International and TranSystems.
CSX Intermodal NetworkCSX Intermodal Network
13.1
LA/LB
59.4
3.67.0
Seattle/Tacoma
2.0 3.4
Oakland
2020
Increasing port volumes will drive rail volumes
Today 2020
CSX Territory
Source: TranSystems and USDOT Federal Railroad Administration Office of Policy
2121
New CSX/BNSF service leverages that trend
BNSF BNSF–MemphisCSX Charlotte
BNSF–MemphisCSX Florida
BNSF Atlanta
February 26th start-up
Enhanced PSW-SE service
Seamless connectivity
February 26th start-up
Enhanced PSW-SE service
Seamless connectivity
2222
Broader industrial development is growing
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
New Orleans
Chicago
St Louis
Memphis
MobileJacksonville
Charleston
Baltimore
Boston
2323
Access to new fertilizer receiving warehouses
Unit-train service
New Warehouses
— McLeansboro, IL
— Templeton, IA
— Mitchell, SD
— W Millbank SD
— Hutchinson, KS
— Yuma, CO
— Loomis, NE
— Oakland, NE
— Tamora, NE
— Ross, ND
2424
CSX creating industry-leading ethanol network
CSX Ethanol Terminals
Albany, NY
Sewaren, NJ
Linden, NJ (new)
Providence, RI (new)
Philadelphia, PA (2 new)
Baltimore, MD, (2 new)
Albany
Baltimore
Philadelphia
RI
NJ
2525
CSX well positioned in Rail Renaissance
Serves every major market in the east
Direct access to all Atlantic and Gulf ports
Access to Pacific ports with BNI/UNP alliances
Miami
Chicago
Savannah
Charleston
Baltimore
Memphis
Charlotte
Mobile
Nashville
Atlanta
Detroit
Jacksonville
Tampa
BuffaloSyracuse
Cleveland
ColumbusCincinnati
Evansville
Boston
Philadelphia
New York
New Orleans
St Louis Portsmouth
Indianapolis
Population in Major Metropolitan Areas
GT 10,000,000
5,000,000 – 10,000,000
2,500,000 – 5,000,000
1,500,000 – 2,500,000
1,000,000 – 1,500,000
2626
Looking forward . . .
Rail renaissance environment remains strong
Financial and operational momentum continues
In our 180th year, targeting record results again
Capitalizing on long-term growth trends
Delivering value for shareholders
2727
BB&T Transportation ConferenceFebruary 2007
BB&T Transportation ConferenceFebruary 2007