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Transcript of csx BBT_White_background-REF22571
CSX Corporation
BB&T Transportation ConferenceFebruary 15, 2006
CSX Corporation
BB&T Transportation ConferenceFebruary 15, 2006
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Forward Looking Disclosure StatementThis 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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For 2006, our core strategies remain intact as the foundation for delivering value
Shareholder Value CreationShareholder Value Creation
Profitable GrowthProfitable Growth Margin ExpansionMargin Expansion
Core StrategiesCore Strategies
RevenueRevenueImpactImpact
OperationalOperationalDisciplineDiscipline
PerformancePerformanceCultureCulture
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Those strategies have improved the company’s earning power significantly
Note: Excludes 2003 provision for casualty claims, and 2003 andNote: Excludes 2003 provision for casualty claims, and 2003 and 2004 management restructuring charge2004 management restructuring charge
Surface Transportation Operating Income in BillionsRolling Twelve Months
$0.9 $1.0 $1.0$1.1
$1.2$1.3
$1.4$1.5
Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005
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The strong pricing environment andcontribution focus have improved yields
Revenue Per UnitYear-Over-Year Improvement
0.1%
2.4%
6.6%7.8%
8.6%9.7% 9.3%
11.1%
Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005
Note: Second quarter 2005 excludes a benefit from a rate case sNote: Second quarter 2005 excludes a benefit from a rate case settlementettlement
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Yields, productivity and an improvingculture have driven the operating ratio
Surface TransportationOperating Ratio
89.3%
85.2%87.1%
85.5%
83.3%
80.5%
83.0%81.3%
Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005
Note: The first three quarters of 2004 exclude management restrNote: The first three quarters of 2004 exclude management restructuring chargesucturing charges
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2006 – 2010 CAGR
Operating Income 10% – 12%
Earnings 12% – 14%
Free Cash Flow
Operating Ratio
Return on Invested Capital
10% – 12%
Mid 70’s
Meet or Exceed COC
Going forward, CSX expects steadydouble-digit growth through 2010
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Safety momentum remains strongFRA Train Accident
Rolling 12-Month AverageAccidents / MM Train Miles
4.79 4.724.43 4.32
3.993.78
Q42004
Q12005
Q22005
Q32005
Q42005
1QTD2006
FRA Personal Injury Rolling 12-Month Average
Injuries / 200,000 Man Hours
2.292.13 2.04
1.911.71 1.65
Q42004
Q12005
Q22005
Q32005
Q42005
1QTD2006
1.161.16Six WeekSix WeekAverageAverage
3.423.42Six WeekSix WeekAverageAverage
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ONE Plan is gaining traction; on-time performance is improving
On-Time OriginationsRolling 12-Month Average
49.0%48.2%
50.3% 50.3%51.1%
54.3%
Q42004
Q12005
Q22005
Q32005
Q42005
1QTD2006
On-Time ArrivalsRolling 12-Month Average
40.9%
38.4% 38.9% 39.6% 40.1%
43.0%
Q42004
Q12005
Q22005
Q32005
Q42005
1QTD2006
75%75%Six WeekSix WeekAverageAverage
62%62%Six WeekSix WeekAverageAverage
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ONE Plan is gaining traction; Dwell and cars-on-line are stable
Dwell Time (Hours)Rolling 12-Month Average
28.7 29.3 29.6 29.7 29.7 29.4
Q42004
Q12005
Q22005
Q32005
Q42005
1QTD2006
Cars-On-LineRolling 12-Month Average
232,172
233,271 233,118
233,876
234,165
234,132
Q42004
Q12005
Q22005
Q32005
Q42005
1QTD2006
27.127.1Six WeekSix WeekAverageAverage
225K225KSix WeekSix WeekAverageAverage
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ONE Plan is gaining traction;velocity to improve with Gulf restored
Velocity (mph)Rolling Twelve Months
20.319.9 19.8 19.7
19.2 19.3
Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 1QTD 2006
20.120.1Six WeekSix WeekAverageAverage
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Competitor yields are accelerating, implying continued opportunity
Year-Over-Year Growth in Revenue Per Unit
11%13%
16%
11%
0%
3%
6%
9%
12%
15%
18%
CSX NSC BNI UNP
3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 Q4 2005
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Volume growth will reflect continuedfocus on higher margin traffic
2006 Volume Growth and Contribution
Intermodal Coal Merchandise Auto
Volume Growth Long-term Contribution
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That focus drove a 63% increase inintermodal operating income in 2005
2003-2005 Intermodal ProfitabilityDollars in Millions
$152
$248
$110
88.7%
81.8%
91.2%
2003 2004 2005
Operating Income Operating Ratio
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Intermodal volume growth will be concentrated in key service lanes
• On-time performance provides foundation for growth
– Chicago-Florida 80%– Chicago-Northeast 90%– Northeast-Florida 90%
• Key service lanes have train capacity to handle growth
• Trucking capacity is expected to remain tight
MiamiMiami
New OrleansNew Orleans
New YorkNew YorkChicagoChicago
PortsmouthPortsmouth
BostonBoston
SavannahSavannahCharlestonCharleston
BaltimoreBaltimorePhiladelphiaPhiladelphia
St LouisSt Louis
MemphisMemphis
CharlotteCharlotte
MobileMobile
NashvilleNashville
AtlantaAtlanta
DetroitDetroit
JacksonvilleJacksonville
TampaTampa
BuffaloBuffaloSyracuseSyracuse
ClevelandCleveland
ColumbiaColumbiaCincinnatiCincinnati
EvansvilleEvansville
IntermodalIntermodal TerminalsTerminalsPriority Priority IntermodalIntermodal CorridorsCorridors
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Coal volume growth is expectedto remain strong
• Stockpiles remain low
• Utility demand remains strong
• Car utilization is improving
• New plants being served
• Western coal use to increase
CoalCoal--fired Utilitiesfired UtilitiesCoal ReservesCoal ReservesMiamiMiami
New OrleansNew Orleans
New YorkNew YorkChicagoChicago
PortsmouthPortsmouth
BostonBoston
SavannahSavannahCharlestonCharleston
PhiladelphiaPhiladelphia
St LouisSt Louis
MemphisMemphis
JacksonvilleJacksonville
TampaTampa
BuffaloBuffalo
ClevelandCleveland
BaltimoreBaltimore
SyracuseSyracuse
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The strong economy is expectedto drive Merchandise growth
• Manufacturing remains strong
• Plastics production increasing
• Customer service is improving
– Supports long-term growth– Drives increased utilization
Merchandise Revenue$4.2 Billion
8%17%
10%
12%12%14%14%
ChemicalsChemicals
Food & ConsumerFood & ConsumerAgricultureAgriculture
MetalsMetals
Phosphates & FertilizersPhosphates & FertilizersForest ProductsForest Products
Emerging MarketsEmerging Markets
13%13%26%26%
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Automotive volume growth willbe limited near-term
• Light vehicle production expected to be flat
• Traditional Big-3 expected to continue losing market share
• Production at the CSX-served Hyundai plant is increasing
• Long-term strategy continues to focus on “new domestics”
BigBig--3 Assembly Plants3 Assembly Plants““New DomesticsNew Domestics”” Assembly PlantsAssembly PlantsDistribution CentersDistribution CentersMiamiMiami
New OrleansNew Orleans
New YorkNew YorkChicagoChicago
PortsmouthPortsmouth
BostonBoston
SavannahSavannahCharlestonCharleston
PhiladelphiaPhiladelphia
St LouisSt Louis
MemphisMemphis
CharlotteCharlotteNashvilleNashville
AtlantaAtlanta
DetroitDetroit
JacksonvilleJacksonville
TampaTampa
BuffaloBuffaloSyracuseSyracuse
ClevelandCleveland
ColumbiaColumbia
EvansvilleEvansville
BaltimoreBaltimoreCincinnatiCincinnati
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Industrial development will further drive long-term growth
CoalCoalNew projectsNew projects
AutomotiveAutomotiveAssembly plantAssembly plantSupplier facilitySupplier facility
MerchandiseMerchandiseEthanol facilitiesEthanol facilitiesFeed millsFeed millsAggregates facilitiesAggregates facilitiesPlastics plantsPlastics plants
IntermodalIntermodalPort developmentsPort developmentsLogistics centersLogistics centers
MiamiMiami
New OrleansNew Orleans
New YorkNew YorkChicagoChicago
PortsmouthPortsmouth
BostonBoston
SavannahSavannahCharlestonCharleston
PhiladelphiaPhiladelphia
St LouisSt Louis
MemphisMemphisNashvilleNashville
AtlantaAtlanta
DetroitDetroit
JacksonvilleJacksonville
TampaTampa
BuffaloBuffaloSyracuseSyracuse
ClevelandCleveland
ColumbiaColumbia BaltimoreBaltimore
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To support growth, increased capitalexpands capacity along key corridors
Surface TransportationCapital Spending in Millions
$960$1,055
$1,420
2004 2005* 2006*
2006 Capital Spending
53%
18%14%
15%
InfrastructureInfrastructure New CapacityNew Capacity
LocomotiveLocomotive Cars & OtherCars & Other
Note: 2005 and 2006 excludes capital spending relating to KatriNote: 2005 and 2006 excludes capital spending relating to Katrinana
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The investment will leverage the richnortheast and growing southeast markets
Source: Bureau of Economic AnalysisSource: Bureau of Economic Analysis
New OrleansNew Orleans
ChicagoChicagoNew YorkNew York
19941994--2004 Income Growth2004 Income Growth
LT 5%LT 5%5.0% 5.0% –– 5.5%5.5%5.6% 5.6% –– 6.0%6.0%GT 6.0%GT 6.0%
JacksonvilleJacksonville
MiamiMiami
2004 Income2004 Income
LT $50BLT $50B$51B $51B –– $150B$150B$151 $151 –– $250B$250BGT $250BGT $250B
JacksonvilleJacksonville
New OrleansNew OrleansMiamiMiami
ChicagoChicagoNew YorkNew York
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Sixty projects are scheduled through 2007; first twenty are already underway
MiamiMiami
New OrleansNew Orleans
New YorkNew YorkChicagoChicago
AtlantaAtlanta
NashvilleNashville
Terre HauteTerre Haute
WaycrossWaycross
Albany toNew York
2 Locations
Albany toAlbany toNew YorkNew York
2 Locations2 Locations
WaycrossTo Atlanta
8 Locations
WaycrossWaycrossTo AtlantaTo Atlanta
8 Locations8 Locations
Terre HauteTo Nashville10 Locations
Terre HauteTerre HauteTo NashvilleTo Nashville10 Locations10 Locations
AlbanyAlbany
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Of the first twenty, eight are focusedbetween Atlanta and Waycross
JacksonvilleJacksonville
Capacity Expansion ProjectsCapacity Expansion ProjectsAtlanta, GA Atlanta, GA –– Waycross, GAWaycross, GA
Third Quarter 2006Third Quarter 2006
Fourth Quarter 2006Fourth Quarter 2006Woodbury, GAWoodbury, GAWoodbury, GA
Upton, GAUpton, GAUpton, GARock Spur, GARock Spur, GARock Spur, GA
Bartlett, GABartlett, GABartlett, GA
Lily, GALily, GALily, GA
Ambrose, GAAmbrose, GAAmbrose, GA
Haywood, GAHaywood, GAHaywood, GAWaycross, GAWaycross, GAWaycross, GA
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Another ten will be completed this year between Terre Haute and Nashville
Capacity Expansion ProjectsCapacity Expansion ProjectsTerre Haute, IN Terre Haute, IN –– Nashville, TNNashville, TN
Third Quarter 2006Third Quarter 2006
Fourth Quarter 2006Fourth Quarter 2006Rankin, KYRankin, KYRankin, KY
ChicagoChicago
Carlisle, INCarlisle, INCarlisle, IN Smith, INSmith, INSmith, IN
Hazelton, INHazelton, INHazelton, IN
Staughters, KYStaughtersStaughters, KY, KY
Casky, KYCaskyCasky, KY, KY
Trenton, KYTrenton, KYTrenton, KY Cedar Hill, TNCedar Hill, TNCedar Hill, TN
Goodlettsville, TNGoodlettsville, TNGoodlettsville, TN
Rankin, KYRankin, KYRankin, KY
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In addition, two projects will be completed between Albany and New York
Capacity Expansion ProjectsCapacity Expansion ProjectsAlbany, NY Albany, NY –– New York, NYNew York, NY
Third Quarter 2006Third Quarter 2006
Fourth Quarter 2006Fourth Quarter 2006AlbanyAlbany
Newark / New YorkNewark / New York
West Park, NYWest Park, NY
Fort Montgomery, NYFort Montgomery, NY
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Transportation demand is at recordlevels, with further growth expected
Transportation Services IndexIndexed: 2000=100
60
70
80
90
100
110
120
1990 1993 1996 1999 2002 2005
Transportation DemandIndexed: 2000=100
65
75
85
95
105
115
125
2000 2002 2004 2006 2008 2010
Sources: Bureau of Transportation Statistics and Association of State Highway and Transportation Officials
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More consumption is being sourced through imports, extending the supply chain
U.S. Consumption2000 Dollars in Trillions
$4
$5
$6
$7
$8
$9
$10
2000 2002 2004 2006 2008 2010
U.S. Production and ImportsIndexed: 2000=100
60
80
100
120
140
160
180
2000 2002 2004 2006 2008 2010
U.S. ImportsU.S. Industrial Production
Source: Global Insights
28
The competitive environmentsupports the Rail Renaissance
• The trucking industry is faced with several challenges
– Congested highways– Labor shortages– New hour of service laws– Rising fuel costs
• Rail-truck partnerships bridge those challenges, creating value for both
Intercity Freight RevenueDollars in Billions
$0$75
$150$225$300$375$450$525
'60 '70 '75 '80 '85 '90 '95 '00 '05Est
Rail TruckSource: Source: EnoEno TransportationTransportation
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Yet rail stocks continue to tradeat a discount to the S&P 500
Price-to-Earnings Ratios by Industry
15.9
17.0
17.4
17.9
18.7
19.4
23.1
Railroads
Telecom
Utilities
S&P 500
Transportation
Industrials
Healthcare
Note: Reflects closing January stock prices and LTM earnings peNote: Reflects closing January stock prices and LTM earnings per sharer share
30
CSX’s price-to-earnings ratio has room for improvement
Price-to-Earnings Ratios
14.4 15.2 15.316.7 16.9
18.4
CSX NSC CP CNI BNI UNP
Note: Reflects closing January stock prices and 2006 First CallNote: Reflects closing January stock prices and 2006 First Call earnings estimateearnings estimate
31
CSX’s commitment towards achieving its targets will drive that improvementEvolving Investment Thesis
• Operating ratio
• Economic cycle
• Cost of capital
• Long-term growth
•• Mid Mid –– 7070’’ssCommitmentCommitment
•• Grow through the cycleGrow through the cycleCommitmentCommitment
•• Meet or exceed COCMeet or exceed COCCommitmentCommitment
•• DoubleDouble--digit growthdigit growthCommitmentCommitment
20062006--2010 Targets2010 Targets
CSX Corporation
BB&T Transportation ConferenceFebruary 15, 2006
CSX Corporation
BB&T Transportation ConferenceFebruary 15, 2006