CSX : Presentation 509.8 KB

2019 FOURTH 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);

1. 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

FOURTH QUARTER AND FULL YEAR HIGHLIGHTS

	Q4 2019:Volume 1,539K Revenue $2,885M Operating Income $1,154M		FY 2019:Volume 6,220K Revenue $11,937M Operating Income $4,965M
			Fourth Quarter 2019						Full Year 2019
		Earnings Per Share	Operating Ratio			Earnings Per Share	Operating Ratio
								$4.17
	$1.01	$0.99	60.3%		60.0%		$3.84			60.3%

58.4%

(2%) Decline

30 bps Improvement

9% Growth

190 bps Improvement

Q4	Q4	Q4	Q4	2018	2019	2018	2019
2018	2019	2018	2019

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FOURTH QUARTER REVENUE HIGHLIGHTS

Revenue Declines Led by Export Coal

• Chemicalsdeclined due to lower natural gas liquids, fly ash and sand shipments
• Agricultural & Food Productsgrowth driven by gains in ethanol, sweeteners and oils
• Automotivedeclined due to lower North American vehicle production
• Mineralsincreased on highway and paving project activity growth
• Forest Productsdecreased as a result of lower pulpboard shipments
• Fertilizersdeclined as growth in short-haul phosphate shipments was offset by reduced long-haul fertilizer shipments
• Metals and Equipmentdeclined due to lower metals demand, primarily in steel, construction and scrap markets
• Coaldecreased due to declines in export coal markets from lower global benchmark prices, as well as domestic volume declines
• Domestic and InternationalIntermodaldecreased, primarily due to the impact of lane rationalizations

Fourth Quarter Revenue

Down 8% Percent Year over Year

Chemicals	(4%)
Ag & Food Products
								2%
Automotive
	(10%)
Minerals
	6%
Forest Products	(1%)
Fertilizers	(2%)
Metals & Equipment
		(6%)
Coal
	(22%)
Intermodal
		(9%)
Other
(22%)

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FOURTH QUARTER SAFETY HIGHLIGHTS

FRA Personal Injury Frequency Index

		0.98									0.85	1.10	1.03	0.88
		0.76	0.83

4Q18

1Q19

2Q19

3Q19

4Q19

FY18

FY19

FRA Train Accident Rate

		3.13																	3.64
		2.74	2.08	1.97	1.69					2.13

4Q18

1Q19

2Q19

3Q19

4Q19

FY18

FY19

Safety statistics are estimated and can continue to be updated as actuals settle

• Safety is a guiding principle at CSX
• Full year personal injury rate declined 15%
• Full year train accident rate reduced by 41%, and Q4 results represent new company record
• Opportunities remain to further improve safety
• Maintaining rigorous safety training and continuing education program in 2020

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FOURTH QUARTER OPERATING HIGHLIGHTS

Train Velocity

(miles per hour)

		20.5	20.0	20.3	21.3
		19.0

4Q18 1Q19 2Q19 3Q19 4Q19

Terminal Car Dwell

(hours)

9.2	8.6	8.7	8.9	8.4

4Q18

1Q19

2Q19

3Q19

4Q19

							Car Miles per Day
			133	134				138
		130				131

4Q18

1Q19

2Q19

3Q19

4Q19

Gallons of Fuel per kGTM

1.08

1.05

0.990.980.99

4Q18

1Q19

2Q19

3Q19

4Q19

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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FOURTH QUARTER SERVICE HIGHLIGHTS

Carload Trip Plan Performance*

Carload

82.6%

73.9% 74.4%75.7%

67.3%

4Q18

1Q19

2Q19

3Q19

4Q19

Intermodal Trip Plan Performance*

Intermodal

94.2% 95.5%

89.8%

78.3%

73.4%

4Q18

1Q19

2Q19

3Q19

4Q19

*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

FOURTH QUARTER EARNINGS SUMMARY

Fourth Quarter Income Statement

	Dollars in millions	2019		2018		Variance
	Revenue	$	2,885	$	3,143	(8%)
	Expense
	Labor and Fringe		658		678	3%
	Materials, Supplies and Other		436		542	20%
	Depreciation		344		345	-
	Fuel		216		253	15%
	Equipment and Other Rents		101		93	(9%)
	Equity Earnings of Affiliates		(24)		(17)	41%
	Total Expense		1,731		1,894	9%
	Operating Income		1,154		1,249	(8%)
	Interest Expense		(189)		(171)	(11%)
	Other Income - Net		16		20	(20%)
	Income Tax Expense		(210)		(255)	18%
	Net Earnings	$	771	$	843	(9%)
	Earnings Per Share	$	0.99	$	1.01	(2%)
	Operating Ratio	60.0%	60.3%	30 bps

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2019 FULL YEAR FINANCIAL MEASURES

Capital Investments

Dollars in Millions

$1,745

$1,657

20182019

Adjusted Free Cash Flow

Before Dividends

Dollars in Millions

$3,478

$3,199

9% Growth

20182019

Shareholder

Distributions

Dollars in Millions

Dividends

Buybacks

$5,422

$4,136

$4,671

$3,373

$751$763

20182019

Adjusted free cash flow excludes the after-tax cash payment impacts of restructuring charges; see Appendix for Non-GAAP reconciliation

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CLOSING REMARKS

James M. Foote

President and Chief Executive Officer

2020 FULL YEAR OUTLOOK

• Project revenue to be flat to down 2% versus 2019
• Full year Operating Ratio target of 59%
• Capital Expenditures to remain between $1.6 billion and $1.7 billion
• Continue to return capital to shareholders
• Committed to strong investment grade rating

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APPENDIX

Non-GAAP Adjusted Free Cash Flow Reconciliation

NON-GAAP ADJUSTED FREE CASH FLOW RECONCILIATION

Adjusted Free Cash Flow

	Years Ended
Dollars in millions	December 31, 2019	December 31, 2018
Net Cash Provided by Operating Activities	$ 4,850	$ 4,641
Property Additions	(1,657)	(1,745)
Other Investing Activities	285	292
Free Cash Flow (before payment of dividends)	3,478	3,188
Add back: Cash Payments for Restructuring Charge (after-tax)	-	11
Adjusted Free Cash Flow Before Dividends (non-GAAP)	$ 3,478	$ 3,199

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