CSX : Presentation PDF 504 KB

2020 FOURTH QUARTER EARNINGS CONFERENCE CALL

01.21.2021

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); (iii) 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 HIGHLIGHTS

1,599K$2,825M

VolumeRevenue

$1,215M

Op. Income

Operating Income

Operating Ratio

Earnings Per Share

Operating Income increased 5% year over year

	$1,215M
$1,154M
	5%
Increase
Q4 19	Q4 20

60.0%
	57.0%
300 bps
Improvement
Q4 19	Q4 20

$0.99 $0.99

Flat

YoY*

Q4 19

Q4 20

Operating Ratio improved 300 bps to new Q4 record

EPS of $0.99, includes $0.05 of early debt retirement expense

* Q4 20 includes $0.05 of expense from early repurchase of notes maturing in 2023. Q4 19 includes $0.01 of expense from repurchase of notes maturing in 2020.

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FOURTH QUARTER REVENUE HIGHLIGHTS

Intermodal Volume and Revenue Growth

Offset by Declines in Coal

Chemicals increased due to higher shipments of plastics, waste and crude oil, partially offset by lower shipments of frac sand and natural gas liquids

Agricultural & Food Products increased due to higher shipments of export grains, food and consumer products, and ethanol

Automotive declined as a result of lower vehicle production at plants served by CSX

Minerals decreased due to lower shipments of aggregates, partially offset by higher shipments of other minerals

Forest Products declined due to lower shipments of printing paper, wood pulp and building products, partially offset by growth in pulpboard

Metals and Equipment increased due to higher scrap and steel shipments

Fertilizers revenue increased as growth in long-haul fertilizer shipments was partially offset by declines from fewer short-haul phosphate shipments

Coal decreased as domestic utility coal demand was negatively impacted by competition from natural gas prices and export coal declined due to reduced international shipments of thermal coal

Intermodal increased due to tightening truck capacity, inventory replenishments and growth in rail volumes from East Coast ports

Fourth Quarter Revenue

Down 2% Year Over Year

Chemicals		1%
Ag & Food Products		6%
Automotive	(8%)
Minerals	(5%)
Forest Products	(1%)
Metals & Equip
		3%
Fertilizers		5%
Coal	(18%)
Intermodal
			6%
Other	(6%)

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FOURTH QUARTER AND FULL YEAR SAFETY HIGHLIGHTS

FRA Personal Injury Frequency Index

Safety is a guiding principle at CSX

Quarterly

1.15

0.61	0.76	0.76

Q1 20 Q2 20 Q3 20 Q4 20

Annual

1.04 0.90 0.81

FY 18 FY19 FY 20

Record Q4 low number of injuries

Full year injuries and train accidents at record low levels

	FRA Train Accident Rate
	Quarterly		3.66	Annual
	2.62	2.78	3.43		2.76
2.24			2.35
Q1 20	Q2 20	Q3 20	Q4 20	FY 18	FY19	FY 20

New culture and engagement programs to further drive safety performance in 2021

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SUCCESSFULLY LEVERAGING NEW TECHNOLOGIES

Continued

Investment in Safety

& Inspection

Realizing

Efficiencies Across

the Railroad

Laying Foundation for Growth

Expanding investment in autonomous train and track inspection Piloting new drone-based yard and track inspection programs

Creating smarter, more autonomous intermodal yards Extending benefits of fuel saving technologies Modernizing field communications

Dynamic, real-time routing optimization Predictive analytics furthering safety and reliability Seamless customer experience

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COMMITTED TO SUSTAINABLE OPERATIONS

CSX is expanding the sustainability benefits of rail by focusing on fuel efficiency and customer service

Improved fuel efficiency by 16% compared to CSX's pre-PSR averages

Truck-to-rail conversions allow customers to reduce emissions without sacrificing reliability

Focused on maintaining ESG leadership position

CSX's fuel efficiency advantage vs. trucks

allowed our customers to avoid CO2

emissions equivalent to:

1.8M		14M
Homes' Electricity		Acres of Forest
Use per Year		Planted per Year

3.5M		2.2M
Tons of Waste		Passenger Vehicles
Recycled Annually		Driven per Year

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FOURTH QUARTER OPERATING HIGHLIGHTS

Train Velocity

Miles per Hour

21.3	21.2	21.2	19.6	18.9
Q4 19	Q1 20	Q2 20	Q3 20	Q4 20

Terminal Car Dwell

Average Hours per Car

8.4	8.3	8.9	9.7	10.2
Q4 19	Q1 20	Q2 20	Q3 20	Q4 20

Fuel Efficiency

Gallons per kGTM

0.99	1.01	0.96	0.93	0.94
Q4 19	Q1 20	Q2 20	Q3 20	Q4 20

Locomotive Efficiency

GTM's per Available HP

127	131	126	132	135
Q4 19	Q1 20	Q2 20	Q3 20	Q4 20

The methodology for calculating train velocity and dwell differs from that prescribed by the Surface Transportation Board (STB). The Company will continue to report train velocity and dwell to the STB using the prescribed methodology. See additional discussion on CSX.com.

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MAINTAINING STRONG OPERATING LEVERAGE

Volume and Resources vs. February

Indexed (February = 100)

115
Volume		Active T&E		Train Starts
110

105

100

95

90

85

80

75

70

Feb Apr Jun Aug Oct Dec

YoY Change in Volume and Resources

YoY % Change

10%

Volume Active T&E Train Starts

5%

0%

(5%)

(10%)

(15%)

(20%)

(25%)

Q1 20

Q2 20

Q3 20

Q4 20

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FOURTH QUARTER SERVICE HIGHLIGHTS

Carload Trip Plan Performance

100%

90%
83%	81%	80%

80%	73%	75%
70%
60%
50%

40%

Q4 19

Q1 20

Q2 20

Q3 20

Q4 20

Intermodal Trip Plan Performance

100%	95%	96%	94%
90%			87%
			84%
80%

70%

60%

50%

40%

Q4 19

Q1 20

Q2 20

Q3 20

Q4 20

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 both loaded and empty cars/containers on its network that are 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	2020	2019	Variance
Revenue	$	2,825	$	2,885	(2%)
Expense		588		658	11%
Labor and Fringe
Materials, Supplies and Other		445		426	(4%)
Depreciation		347		344	(1%)
Fuel		139		216	36%
Equipment and Other Rents		91		87	(5%)
Total Expense		1,610		1,731	7%
Operating Income		1,215		1,154	(5%)
Interest Expense		(189)		(189)	(0%)
Other (Expense)/Income - Net*		(32)		16	(300%)
Income Tax Expense		(234)		(210)	(11%)
Net Earnings	$	760	$	771	(1%)
Earnings Per Share*	$	0.99	$	0.99	(0%)
Operating Ratio	57.0%	60.0%	(300 bps)

• Q4 20 includes $48M of debt repurchase expense, or $0.05 per share after-tax, due to the repurchase of notes maturing in 2023. Q4 19 includes $10M of debt repurchase expense, or $0.01 per share after-tax, due to the repurchase notes maturing in 2020.

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FULL YEAR CASH AND FREE CASH FLOW

	Free Cash Flow	Cash and Short-Term
Capital Investments	Before Dividends*	Investments Balance
In Millions	In Millions	In Millions

$1,657	$1,626
FY 2019	FY 2020

$3,478
	$2,646
FY 2019	FY 2020

	$3,131
$1,954
Dec 31, 2019	Dec 31, 2020

* See Appendix for Non-GAAP reconciliation

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CLOSING REMARKS

James M. Foote

President and Chief Executive Officer

LOOKING FORWARD

Expect volumes to outpace GDP growth

• Merchandise volume growth exceeds Industrial Production
• Intermodal volumes grow faster than Merchandise
• Coal market improving from 2020 trough levels

Improving service levels while controlling costs

Targeting capital expenditures in the $1.7-1.8 billion range

Remain committed to returning capital to shareholders

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APPENDIX

Non-GAAP Free Cash Flow Reconciliation

NON-GAAP FREE CASH FLOW RECONCILIATION

Free Cash Flow

	Twelve Months Ended
Dollars in millions	Dec 31, 2020	Dec 31, 2019
Net Cash Provided by Operating Activities	$ 4,263	$ 4,850
Property Additions	(1,626)	(1,657)
Other Investing Activities	9	285
Free Cash Flow Before Dividends (non-GAAP)	$ 2,646	$ 3,478

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