2020 SECOND QUARTER EARNINGS CONFERENCE CALL
James M. Foote
President and Chief Executive Officer
FORWARD LOOKING DISCLOSURE
This information and other statements by the company may 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, margins, volumes, rates, cost-savings, expenses, taxes, liquidity, capital expenditures, dividends, share repurchases or other financial items, statements of management's plans, strategies and objectives for future operations, and management's expectations as to future performance and operations and the time by which objectives will be achieved, statements concerning proposed new services, and statements regarding future economic, industry or market conditions or performance. Forward-looking statements are typically identified by words or phrases such as "will," "should," "believe," "expect," "anticipate," "project," "estimate," "preliminary" 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 updates 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 any forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by any 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, political or business conditions, including those affecting the transportation industry (such as the impact of industry competition, conditions, performance and consolidation);
- legislative or regulatory changes; (iv) the inherent business risks associated with safety and security; (v) the outcome of claims and litigation involving or affecting the company; (vi) natural events such as severe weather conditions or pandemic health crises; and (vii) the inherent uncertainty associated with projecting economic and business conditions.
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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NON-GAAP MEASURES DISCLOSURE
CSX reports its financial results in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). CSX also uses certain non-GAAP measures that fall within the meaning of Securities and Exchange Commission Regulation G and Regulation S-K Item 10(e), which may provide users of the financial information with additional meaningful comparison to prior reported results.
Non-GAAP measures do not have standardized definitions and are not defined by U.S. GAAP. Therefore, CSX's non-GAAP measures are unlikely to be comparable to similar measures presented by other companies. The presentation of these non-GAAP measures should not be considered in isolation from, as a substitute for, or as superior to the financial information presented in accordance with GAAP. Reconciliations of non-GAAP measures to corresponding GAAP measures are attached hereto in the Appendix of this presentation.
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EXECUTIVE SUMMARY
James M. Foote
President and Chief Executive Officer
SECOND QUARTER HIGHLIGHTS
Volume 1,257K | Revenue $2,255M | Operating Income $828M |
Earnings Per Share
$1.08
$0.65
40% Decline
20192020
Operating Ratio 63.3% | EPS $0.65 |
Operating Ratio
63.3%
57.4%
590 bps Increase
20192020
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SECOND QUARTER REVENUE HIGHLIGHTS
All Markets Negatively Impacted by
Economic Effects of COVID-19
- Chemicals decreased due to lower shipments of industrial chemicals, energy, and waste
- Agricultural & Food Products declined due to lower shipments of food and consumer products, grain and feed, and ethanol
- Minerals decreased on lower cement, lime and limestone volumes, other minerals
- Forest Products declined due to lower shipments of building products and printing paper, partially offset by growth in pulpboard
- Fertilizers declined due to lower long-haul fertilizer volumes, partially offset by growth in short-haul phosphate shipments
- Metals and Equipment declined due to reduced metals volumes driven by reduced automotive and industrial production
- Automotive declined due to lower North American vehicle production primarily associated with plant closures resulting from COVID-19
- Coal decreased as domestic utility coal demand was negatively impacted by low natural gas prices and reduced electrical demand, and export coal was impacted by lower global benchmark prices
- Intermodal decreased as both domestic and international shipments were negatively impacted by the global economic impacts from COVID-19
Second Quarter Revenue
Down 26% Percent Year over Year
Chemicals | (10%) |
Ag & Food Products | (13%) |
Minerals | (9%) |
Forest Products | (11%) |
Fertilizers | (8%) |
Metals and Equipment | (24%) |
Automotive | (72%) |
Coal | (48%) |
Intermodal | (18%) |
Other | (19%) |
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SECOND QUARTER SAFETY HIGHLIGHTS
FRA Personal Injury Frequency Index
1.13 | 1.16 | |||||||||||||||||||
0.83 | 0.85 | |||||||||||||||||||
0.59 | ||||||||||||||||||||
2Q19 | 3Q19 | 4Q19 | 1Q20 | 2Q20 |
FRA Train Accident Rate
2.13 | 2.37 | 2.32 | 2.07 | 2.33 | ||||||||||||||||
2Q19 | 3Q19 | 4Q19 | 1Q20 | 2Q20 |
Safety statistics are estimated and can continue to be updated as actuals settle
- Safety is a guiding principle at CSX
- Frequency rates increased on lower volumes; lowest total number of train accidents in a quarter
- Remain focused on continued improvement
- Undertaking company-wide safety engagement initiative in Q3
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SECOND QUARTER OPERATING HIGHLIGHTS
Train Velocity | Cars Processed per Hour Worked | |||||||||||||||||||||||||||||||||||||||||
(miles per hour) | ||||||||||||||||||||||||||||||||||||||||||
20.0 | 20.3 | 21.3 | 21.2 | 21.2 | 11.6 | |||||||||||||||||||||||||||||||||||||
10.8 | 11.1 | |||||||||||||||||||||||||||||||||||||||||
10.5 | 10.5 | |||||||||||||||||||||||||||||||||||||||||
2Q19 3Q19 4Q19 1Q20 2Q20
Terminal Car Dwell
(hours)
8.7 | 8.9 | 8.4 | 8.3 | 8.9 | ||||||||||||||||
2Q19 | 3Q19 | 4Q19 | 1Q20 | 2Q20 |
Gallons of Fuel per kGTM
1.01
0.99 | 0.98 | 0.99 |
0.96
2Q19 | 3Q19 | 4Q19 | 1Q20 | 2Q20 | 2Q19 | 3Q19 | 4Q19 | 1Q20 | 2Q20 |
The methodology for calculating train velocity and dwell differs from that prescribed by the Surface Transportation Board. The Company will continue to report train velocity and dwell to the Surface Transportation Board using the prescribed methodology. See additional discussion on the Company's website.
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ADJUSTED RESOURCES IN RESPONSE TO LOWER VOLUMES
Change in Volume and Key Resources Since March 1, 2020
Rolling 7-Day Averages
5% | Volume | Active Locos | Total Starts | Road Starts | |||||||||||||||||
0% | |||||||||||||||||||||
(5%) | |||||||||||||||||||||
(10%) | |||||||||||||||||||||
(15%) | |||||||||||||||||||||
(20%) | |||||||||||||||||||||
(25%) | |||||||||||||||||||||
(30%) | |||||||||||||||||||||
(35%) | |||||||||||||||||||||
3/1 | 3/8 | 3/15 | 3/22 | 3/29 | 4/5 | 4/12 | 4/19 | 4/26 | 5/3 | 5/10 | 5/17 | 5/24 | 5/31 | 6/7 | 6/14 | 6/21 | 6/28 | 7/5 | 7/12 | 7/19 | |
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SECOND QUARTER SERVICE HIGHLIGHTS
Carload Trip Plan Performance* | Intermodal Trip Plan Performance* | ||||||
Carload | Intermodal | 96.2% | |||||
94.2% | 95.5% | 94.0% | |||||
89.8% | ||
82.5% | 80.7% | |
80.5% | ||
74.4% | 75.7% | |
2Q19 | 3Q19 | 4Q19 | 1Q20 | 2Q20 | 2Q19 | 3Q19 | 4Q19 | 1Q20 | 2Q20 |
*Trip Plan Performance measures success in meeting end-to-end customer commitments based on a specific time of arrival. CSX measures Trip Plan Performance for every car and container, loaded and empty, on its network that is destined for a customer.
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FINANCIAL REVIEW
Kevin S. Boone
EVP and Chief Financial Officer
SECOND QUARTER EARNINGS SUMMARY
Second Quarter Income Statement
Dollars in millions | 2020 | 2019 | Variance | ||||
Revenue | $ | 2,255 | $ | 3,061 | (26%) | ||
Expense | |||||||
Labor and Fringe | 507 | 648 | 22% | ||||
Materials, Supplies and Other | 407 | 445 | 9% | ||||
Depreciation | 344 | 337 | (2%) | ||||
Fuel | 91 | 234 | 61% | ||||
Equipment and Other Rents | 78 | 92 | 15% | ||||
Total Expense | 1,427 | 1,756 | 19% | ||||
Operating Income | 828 | 1,305 | (37%) | ||||
Interest Expense | (191) | (184) | (4%) | ||||
Other Income - Net | 15 | 25 | (40%) | ||||
Income Tax Expense | (153) | (276) | 45% | ||||
Net Earnings | $ | 499 | $ | 870 | (43%) | ||
Earnings Per Share | $ | 0.65 | $ | 1.08 | (40%) | ||
Operating Ratio | 63.3% | 57.4% | (590 bps) | ||||
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SECOND QUARTER YEAR TO DATE FINANCIAL MEASURES
Capital Investments
Dollars in Millions
$769$801
Q2 2019 | Q2 2020 |
YTD | YTD |
*See Appendix for Non-GAAP reconciliation
Free Cash Flow
Before Dividends*
Dollars in Millions
$1,628
$1,386
Q2 2019 | Q2 2020 |
YTD | YTD |
Cash and Short-Term Investments Balance
Dollars in Millions
$2,594
$1,731
Jun 30, 2019 | Jun 30, 2020 |
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CLOSING REMARKS
James M. Foote
President and Chief Executive Officer
LOOKING FORWARD
- Continue to monitor pace of recovery from May trough
- Adjust resources as needed to optimize network to prevailing economic environment
- Deliver high quality service product to customers
- Leverage structural cost savings created in the second quarter
- Expect capital expenditures at low end of initial $1.6-1.7 billion guidance
- Continue to invest in core network infrastructure
- Driving capital spend efficiencies and prioritizing high-return projects
- Industry-leadingfree cash flow profile and maintain strong liquidity position
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APPENDIX
- Non-GAAPFree Cash Flow Reconciliation
NON-GAAP FREE CASH FLOW RECONCILIATION
Free Cash Flow
Six Months Ended | ||
Dollars in millions | June 30, 2020 | June 30, 2019 |
Net Cash Provided by Operating Activities | $ 2,184 | $ 2,267 |
Property Additions | (801) | (769) |
Other Investing Activities | 3 | 130 |
Free Cash Flow Before Dividends (non-GAAP) | $ 1,386 | $ 1,628 |
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I N V E S T O R S . C S X . C O M
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CSX Corporation published this content on 22 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 July 2020 22:00:07 UTC