2020 THIRD QUARTER EARNINGS CONFERENCE CALL
10.21.2020
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
THIRD QUARTER HIGHLIGHTS
Volume 1,522K Revenue $2,648MOperating Income $1,141MOperating Ratio 56.9%EPS $0.96Earnings Per Share | Operating Ratio |
$1.08
$0.96
56.8%56.9%
11% Decline | 10 bps Increase | ||||
2019 | 2020 | 2019 | 2020 |
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THIRD QUARTER REVENUE HIGHLIGHTS
Carload Traffic Challenged by Economic
Impacts of COVID-19
- Chemicals declined due to lower shipments of frac sand and other industrial chemicals, partially offset by increases in crude oil and plastics shipments.
- Agricultural & Food Products decreased due to lower shipments of grain and feed, partially offset by increases in ethanol shipments.
- Automotive declined due to lower vehicle production at CSX-served plants.
- Minerals decreased due to lower shipments of aggregates and other minerals.
- Forest Products declined due to lower shipments of printing paper, woodpulp and building products.
- Metals and Equipment declined due to reduced equipment shipments as well as lower sheet steel and pipe shipments.
- Fertilizers decreased due to lower shipments of phosphate and sulfur.
- Coal declined due to continued competition from natural gas, reduced electrical demand, lower industrial production, and lower global benchmark prices.
- Intermodal flat revenue on higher volume from tightening truck capacity, inventory replenishment, and growth in rail volumes from east coast ports.
Third Quarter Revenue
Down 11% Percent Year over Year
Chemicals | (4%) | |||||||||
Ag & Food Products | (5%) | |||||||||
Automotive | (9%) | |||||||||
Minerals | (2%) | |||||||||
Forest Products | (7%) | |||||||||
Metals and Equipment | (18%) | |||||||||
Fertilizers | (5%) | |||||||||
Coal | (36%) | |||||||||
Intermodal | 0% | |||||||||
Other | (12%) | |||||||||
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THIRD QUARTER SAFETY HIGHLIGHTS
FRA Personal Injury Frequency Index
1.15 | 1.12 | |||||||||||||
0.85 | 0.61 | 0.77 | ||||||||||||
3Q19 4Q19 1Q20 2Q20 3Q20
FRA Train Accident Rate
2.37 | 1.97 | 2.24 | 2.54 | 2.66 | ||||||||||
3Q19 | 4Q19 | 1Q20 | 2Q20 | 3Q20 |
Safety statistics are estimated and can continue to be updated as actuals settle
- Safety is a guiding principle at CSX
- Record Q3 low FRA personal injury frequency rate and number of injuries
- Record Q3 low number of FRA reportable train accidents
- Focused on frontline engagement and critical rules compliance to drive continued improvement
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COMMITTED TO SUSTAINABLE OPERATIONS
1.14 | Gallons of Fuel per kGTM | |||||
1.10 | 1.07 | |||||
1.05 | ||||||
1.01 | 1.01 | |||||
0.96 | 0.93 | |||||
2015 2016 2017 2018 2019 1Q20 2Q20 3Q20
GHG Emissions Intensity
12.0 | (Metric tons CO2e / million GTM) | ||||
11.5 | 11.5 | 11.2 | |||
10.8 | |||||
10.3 | |||||
2015 | 2016 | 2017 | 2018 | 2019 | 2020 YTD |
- CSX is expanding the inherent benefits of rail
- Commitment to industry-leading ESG and sustainability profile
- Further reducing emissions by converting additional trucks off the highway
ESG Recognition
CSX Named a Top 20 Most Sustainably Managed Company in the World by The Wall Street Journal
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THIRD QUARTER OPERATING HIGHLIGHTS
Train Velocity
Miles per Hour
Cars Processed per Hour Worked*
20.3 | 21.3 | 21.2 | 21.2 | 19.6 | ||||||||||||||||
3.273.28
3.90
3.463.61
3Q19 4Q19 1Q20 2Q20 3Q20
Terminal Car Dwell
Hours
8.9 | 8.4 | 8.3 | 8.9 | 9.7 | ||||||||||||||||
3Q19 | 4Q19 | 1Q20 | 2Q20 | 3Q20 |
3Q19 4Q19 1Q20 2Q20 3Q20
Distributed Power Trains | ||||||||||||||||||||
87 | Daily Average | 93 | ||||||||||||||||||
85 | 84 | |||||||||||||||||||
75 | ||||||||||||||||||||
3Q19 | 4Q19 | 1Q20 | 2Q20 | 3Q20 |
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.
*Cars Processed per Hour Worked adjusted from previous disclosures to measure unique cars instead of total handlings in order to more accurately reflect yard throughput.
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REALIZING STRONG OPERATING LEVERAGE
Change in Volume and Key Resources Since March 1, 2020 | % Change |
Rolling 7-Day Average | End of Quarter vs. March 1 |
Active | |||||||||
Volume | Active T&E | Active Locomotives | Train Starts | Volume | Active T&E | Locomotives Train Starts | |||
10% | 3% | ||||||||
5% | |||||||||
0% | |||||||||
(5%) | |||||||||
(10%) | |||||||||
(15%) | (6%) | ||||||||
(20%) | (8%) | ||||||||
(25%) | (11%) | ||||||||
(30%) | 9/30 | ||||||||
3/1 | 4/1 | 5/1 | 6/1 | 7/1 | 8/1 | 9/1 | |||
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THIRD QUARTER SERVICE HIGHLIGHTS
Carload Trip Plan Performance
80.7% | 80.5% |
82.5% |
75.7% | 73.0% |
3Q19 | 4Q19 | 1Q20 | 2Q20 | 3Q20 |
Intermodal Trip Plan Performance
94.2% | 95.5% | 96.2% | 94.0% |
87.4%
3Q19 | 4Q19 | 1Q20 | 2Q20 | 3Q20 |
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
THIRD QUARTER EARNINGS SUMMARY
Third Quarter Income Statement
Dollars in millions | 2020 | 2019 | Variance | ||||
Revenue | $ | 2,648 | $ | 2,978 | (11%) | ||
Expense | 574 | 638 | 10% | ||||
Labor and Fringe | |||||||
Materials, Supplies and Other | 378 | 407 | 7% | ||||
Depreciation | 348 | 338 | (3%) | ||||
Fuel | 119 | 223 | 47% | ||||
Equipment and Other Rents | 88 | 85 | (4%) | ||||
Total Expense | 1,507 | 1,691 | 11% | ||||
Operating Income | 1,141 | 1,287 | (11%) | ||||
Interest Expense | (187) | (186) | (1%) | ||||
Other Income - Net | 14 | 24 | (42%) | ||||
Income Tax Expense | (232) | (269) | 14% | ||||
Net Earnings | $ | 736 | $ | 856 | (14%) | ||
Earnings Per Share | $ | 0.96 | $ | 1.08 | (11%) | ||
Operating Ratio | 56.9% | 56.8% | (10 bps) | ||||
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YEAR-TO-DATE CASH AND FREE CASH FLOW
Capital Investments
Dollars in Millions
$1,191 $1,209
Q3 2019 | Q3 2020 |
YTD | YTD |
*See Appendix for Non-GAAP reconciliation
Free Cash Flow
Before Dividends*
Dollars in Millions
$2,783
$1,938
Q3 2019 | Q3 2020 |
YTD | YTD |
Cash and Short-Term Investments Balance
Dollars in Millions
$2,899
$1,954
Dec 31, 2019 | Sep 30, 2020 |
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CLOSING REMARKS
James M. Foote
President and Chief Executive Officer
LOOKING FORWARD
- Continue to monitor economic environment
- Focused on delivering best-in-class service while maximizing operating leverage
- Capital expenditure outlook remains at low end of initial $1.6-1.7 billion guidance
- Maintaining industry-leading free cash flow profile
- Incremental $5B share repurchase authorization
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APPENDIX
- Non-GAAPFree Cash Flow Reconciliation
NON-GAAP FREE CASH FLOW RECONCILIATION
Free Cash Flow
Nine Months Ended | ||
Dollars in millions | September 30, 2020 | September 30, 2019 |
Net Cash Provided by Operating Activities | $ 3,128 | $ 3,737 |
Property Additions | (1,209) | (1,191) |
Other Investing Activities | 19 | 237 |
Free Cash Flow Before Dividends (non-GAAP) | $ 1,938 | $ 2,783 |
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CSX Corporation published this content on 21 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 October 2020 20:09:03 UTC