EX-99.2 3 qfr-4q08.htm QUARTERLY FINANCIAL REPORT qfr-4q08.htm
Exhibit 99.2

 
 
 

 
 
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CSX Announces Fourth Quarter Results
 
Fourth Quarter Highlights:

·  
Revenues grow to $2.7 billion
 
·  
Operating income increases to $692 million
 
·  
Operating ratio improves to 74.1 percent
 

JACKSONVILLE, Fla., (Jan. 20, 2009) – CSX Corporation [NYSE: CSX] today announced fourth quarter earnings per share of 63 cents.  These results include a noncash impairment charge of 27 cents per share related to the write-down of its investment in The Greenbrier resort.  Excluding this charge and gains from insurance recoveries in the prior year quarter, comparable earnings per share increased to 90 cents, a 6 percent increase on a year-over-year basis. (See table below for reconciliation of quarter items to reported numbers.)

“CSX achieved solid financial results in the fourth quarter,” said Michael J. Ward, chairman, president and CEO. “The company finished 2008 in a strong financial position and began taking aggressive actions in the quarter as the intensifying global recession dramatically impacted our business.”

Revenues in the quarter increased four percent over last year, to $2.7 billion.  The gains were driven by higher yields and fuel recovery, which more than offset the impact of significantly lower volumes. Operating income, on a comparable basis, increased 16 percent to $692 million, resulting in an operating ratio of 74.1 percent. Lower fuel costs and the company’s productivity initiatives helped drive the increase in operating income as well as the improvement to a record fourth quarter operating ratio.

“Given the current economic environment, the company is accelerating its focus on driving productivity, changing its cost structure, creating efficiency and right sizing the resource base,” said Ward. “We will achieve this while keeping our intense focus on safety and customer service.”
 

Table of Contents
The accompanying unaudited
CSX CORPORATION
CONTACTS:
 
financial information should be
500 Water Street, C900
  
 
read in conjunction with the
Jacksonville, FL
INVESTOR RELATIONS
Company’s most recent
32202
David Baggs
Annual Report on Form 10-K,
http://www.csx.com
(904) 359-4812
Quarterly Reports on Form
  
MEDIA
 
10-Q, and any Current
  
Garrick Francis
 
Reports on Form 8-K.
  
(877) 835-5279

 
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GAAP RECONCILIATION 1
(Dollars in millions, except per share amounts)
 
 
Fourth Quarter
 
Full Year
 
 
2008
 
2007
 
%
 
2008
 
2007
 
%
 
EPS from Continuing Operations
Add Impairment Loss
Less Gain on Insurance Recoveries
Less Equity Earnings Adjustments
Less Income Tax Benefits
 
$ 0.63
0.27
-
-
-
 
$ 0.86
-
(0.01)
-
-
 
(27)%
 
 
$    3.34
0.27
-
(0.05)
(0.04)
 
$   2.74
-
(0.04)
-
-
 
22%
 
 
Comparable EPS from Continuing Operations
 
$ 0.90
 
$ 0.85
 
6%
 
$    3.52
 
$   2.70
 
30%
 
 
Operating Income
Less Gain on Insurance Recoveries
 
 
$ 692
-
 
 
$ 605
(8)
 
 
14%
 
 
$ 2,768
-
 
 
$ 2,260
(27)
 
 
22%
 
Comparable Operating Income
 
$ 692
 
$ 597
 
16%
 
$ 2,768
 
$ 2,233
 
24%

CSX Corporation, based in Jacksonville, Fla., is a leading transportation company providing rail, intermodal and rail-to-truck transload services. The company’s transportation network spans approximately 21,000 miles with service to 23 eastern states and the District of Columbia, and connects to more than 70 ocean, river and lake ports.

This earnings announcement, as well as a package of detailed financial information, is contained in the CSX Quarterly Financial Report available on the company's website at http://investors.csx.com in the Investors section and on Form 8-K with the Securities and Exchange Commission (“SEC”).

CSX executives will conduct a quarterly earnings conference call with the investment community on Jan. 21, 2009 at 8:30 a.m. ET. Investors, media and the public may listen to the conference call by dialing 888-327-6279 (888-EARN-CSX) and asking for the CSX earnings call. (Callers outside the U.S., dial 773-756-0199). Participants should dial in 10 minutes prior to the call. In conjunction with the call, a live webcast will be accessible and presentation materials will be posted on the company’s website at http://investors.csx.com. Following the earnings call, an internet replay of the presentation will be archived on the company website.

###


 
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GAAP Reconciliation1

CSX reports its financial results in accordance with generally accepted accounting principles (“GAAP”). However, management believes that certain non-GAAP financial measures used to manage the company’s business that fall within the meaning of Regulation G (Disclosure of Non-GAAP Financial Measures) by the SEC may provide users of the financial information with additional meaningful comparisons to prior reported results.

In press releases and presentation slides for stock analysts, CSX has provided financial information adjusted for certain items, which are non-GAAP financial measures. The company’s management evaluates its business and makes certain operating decisions (e.g., budgeting, forecasting, employee compensation, asset management and resource allocation) using these adjusted numbers.

Likewise, this information facilitates comparisons to financial results that are directly associated with ongoing business operations as well as provides comparable historical information. Lastly, earnings forecasts prepared by stock analysts and other third parties generally exclude the effects of items that are difficult to predict or measure in advance and are not directly related to CSX’s ongoing operations. A reconciliation between GAAP and the non-GAAP measure is provided above. These non-GAAP measures should not be considered a substitute for GAAP measures.

Forward-looking statements

This information 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,” “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 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.
 
 
3
 

 
 
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in Millions, Except Per Share Amounts)
                   
     
(Unaudited)
  
(Unaudited)
    
     
Quarters Ended
  
Years Ended
     
Dec. 26
Dec. 28,
    
Dec. 26
Dec. 28,
  
     
2008
2007
$ Change
  
2008
2007
$ Change
Revenue
 $2,674
 $2,577
 $97
  
 $11,255
 $10,030
 $1,225
Expense
              
 
Labor and Fringe
 723
 761
 38
  
 2,955
 2,986
 31
 
Materials, Supplies and Other
 547
444
 (103)
  
 2,133
 1,925
 (208)
 
Fuel
 331
382
 51
  
 1,817
 1,312
 (505)
 
Depreciation
 228
220
 (8)
  
 904
883
 (21)
 
Equipment and Other Rents
 96
110
 14
  
 425
451
 26
 
Inland Transportation
 57
63
 6
  
 253
240
 (13)
 
Gain on Insurance Recoveries
 -
(8)
 (8)
  
 -
(27)
 (27)
   
Total Expense
 1,982
 1,972
 (10)
  
 8,487
 7,770
 (717)
Operating Income
 692
 605
 87
  
 2,768
 2,260
 508
                   
Other Income (Expense) - Net (Note a)
 (172)
 80
 (252)
  
 (103)
 89
 (192)
Interest Expense
 (136)
 (115)
 (21)
  
 (519)
 (417)
 (102)
Earnings From Continuing Operations
              
 
Before Income Taxes
 384
 570
 (186)
  
 2,146
 1,932
 214
                   
Income Tax Expense (Note b)
 (137)
 (205)
 68
  
 (781)
 (706)
 (75)
Earnings From Continuing Operations
 247
 365
 (118)
  
 1,365
 1,226
 139
                   
Discontinued Operations (Note c)
 -
 -
 -
  
 -
 110
 (110)
Net Earnings
 $247
 $365
 $(118)
  
 $1,365
 $1,336
 $29
                   
                   
                   
                   
Per Share Data:
              
Net Earnings Per Common Share,
              
 
Assuming Dilution:
              
   
From Continuing Operations
 $0.63
 $0.86
 $(0.23)
  
 $3.34
 $2.74
 $0.60
   
Discontinued Operations
 -
 -
 -
  
 -
 0.25
 (0.25)
   
Net Earnings
 $0.63
 $0.86
 $(0.23)
  
 $3.34
 $2.99
 $0.35
                   
Average Diluted Common Shares
              
   
Outstanding (Thousands)
 395,665
 425,475
    
 408,602
 448,280
  
                   
Cash Dividends Paid Per
              
   
Common Share
 $0.22
 $0.15
    
 $0.77
 $0.54
  







See accompanying Notes to Consolidated Financial Statements on Page 7.

 
4
 
 
 
 
CSX Corporation
CONSOLIDATED BALANCE SHEET
(Dollars in Millions)
     
(Unaudited)
  
     
Dec. 26,
Dec. 28,
     
2008
2007
Assets
Cash and Cash Equivalents
 $669
 $368
 
Short-term Investments
 76
 346
 
Accounts Receivable - Net
 1,107
 1,174
 
Materials and Supplies
 217
 240
 
Deferred Income Taxes
 203
 254
 
Other Current Assets
 119
 109
   
Total Current Assets
 2,391
 2,491
         
 
Properties
 30,208
 28,999
 
Accumulated Depreciation
 (7,520)
 (7,219)
   
Properties - Net
 22,688
 21,780
         
 
Investment in Conrail
 609
 639
 
Affiliates and Other Companies
 406
 365
 
Other Long-term Assets
 194
 259
   
Total Assets
 $26,288
 $25,534
         
         
         
Liabilities and
Accounts Payable
 $973
 $976
Shareholders' Equity
Labor and Fringe Benefits Payable
 465
 461
 
Casualty, Environmental and Other Reserves
 236
 247
 
Current Maturities of Long-term Debt
 319
 783
 
Short-term Debt
 1
 4
 
Income and Other Taxes Payable
 125
 113
 
Other Current Liabilities
 285
 87
   
Total Current Liabilities
 2,404
 2,671
         
 
Casualty, Environmental and Other Reserves
 643
 624
 
Long-term Debt
 7,512
 6,470
 
Deferred Income Taxes
 6,235
 6,096
 
Other Long-term Liabilities
 1,446
 988
   
 Total Liabilities
 18,240
 16,849
         
 
Common Stock, $1 Par Value
 391
 408
 
Other Capital
 -
 37
 
Retained Earnings
 8,398
 8,565
 
Accumulated Other Comprehensive Loss
 (741)
 (325)
   
Total Shareholders' Equity
 8,048
 8,685
         
   
Total Liabilities and Shareholders' Equity
 $26,288
 $25,534





See accompanying Notes to Consolidated Financial Statements on Page 7.

 
5
 
 
 
 
CSX Corporation
CONSOLIDATED CASH FLOW STATEMENT
 (Dollars in Millions)
         
 (Unaudited)
  
         
 Years Ended
         
 Dec. 26,
 Dec. 28,
         
2008
2007
Operating Activities
 Net Earnings
 $1,365
 $1,336
   
 Adjustments to Reconcile Net Earnings to Net Cash Provided:
    
     
 Depreciation
 918
 890
     
 Deferred Income Taxes
 435
 272
     
 Non-cash Impairment Loss
 166
 -
     
 Non-cash Discontinued Operations
 -
 (110)
     
 Contributions to Qualified Pension Plans
 (102)
 (266)
     
 Other Operating Activities
 65
 (91)
     
 Changes in Operating Assets and Liabilities:
    
       
 Accounts Receivable
 74
 (50)
       
 Other Current Assets
 37
 (41)
       
 Accounts Payable
 (3)
 48
       
 Income and Other Taxes Payable
 (46)
 234
       
 Other Current Liabilities
 5
 (38)
     
 Net Cash Provided by Operating Activities
 2,914
 2,184
             
Investing Activities
 Property Additions
 (1,740)
 (1,773)
   
 Purchase of Short-term Investments
 (25)
 (2,338)
   
 Proceeds from Sales of Short-term Investments
 280
 2,459
   
 Other Investing Activities
 36
 (41)
     
 Net Cash Used In Investing Activities
 (1,449)
 (1,693)
             
Financing Activities
 Short-term Debt - Net
 (3)
 (6)
   
 Long-term Debt Issued
 1,351
 2,381
   
 Long-term Debt Repaid
 (642)
 (785)
   
 Dividends Paid
 (308)
 (231)
   
 Stock Options Exercised
 83
 153
   
 Shares Repurchased
 (1,570)
 (2,174)
   
 Other Financing Activities
 (75)
 78
     
 Net Cash Used in Financing Activities
 (1,164)
 (584)
             
Cash and Cash
 Net Increase in Cash and Cash Equivalents
 301
 (93)
 
Equivalents
          
   
 Cash and Cash Equivalents at Beginning of Period
 368
 461
     
 Cash and Cash Equivalents at End of Period
 $669
 $368











See accompanying Notes to Consolidated Financial Statements on Page 7.

 
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CSX Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


a)  
Other Income: In the fourth quarter of 2008, CSX wrote down its investment in The Greenbrier resort.  The impairment loss as well as the loss from resort operations was $179 million.  For additional details related to other income, see page 14.

b)  
Income Tax Expense: In 2008, CSX recognized a tax benefit of $18 million, or $0.04 per share, principally related to the settlement of federal income tax audits and certain other tax matters.

c)  
Discontinued Operations: In 2007, the Internal Revenue Service completed its review of the Company’s pre-filing agreement, which is an early review of specific transactions.  As a result of this agreement, the Company recorded an income tax benefit of $110 million in 2007, primarily associated with the resolution of income tax matters related to former activities of the container shipping and marine service businesses.   This benefit is recorded as discontinued operations as the company no longer is active in these businesses.  This benefit is associated with tax basis adjustments, foreign dividends and foreign tax credits from operations over a multi-year period. 














 
7
 
 
 
 
OPERATING INCOME DETAIL (Unaudited)(a)
(Dollars in Millions)
                     
Quarters Ended December 26, 2008 and December 28, 2007
                     
             
CSX
  
       
Rail (b)
Intermodal
Consolidated
  
       
2008
2007
2008
2007
2008
2007
$ Change
Revenue
 $2,340
 $2,219
 $334
 $358
 $2,674
 $2,577
 $97
Expense
              
 
Labor and Fringe
 704
 740
 19
 21
 723
 761
 38
 
Materials, Supplies and Other
 494
 400
 53
 44
 547
 444
 (103)
 
Fuel
 329
 381
 2
 1
 331
 382
 51
 
Depreciation
 221
 214
 7
 6
 228
 220
 (8)
 
Equipment and Other Rents
 69
 82
 27
 28
 96
 110
 14
 
Inland Transportation
 (113)
 (118)
 170
 181
 57
 63
 6
 
Gain on Insurance Recoveries
 -
 (8)
 -
 -
 -
 (8)
 (8)
   
Total Expense
 1,704
 1,691
 278
 281
 1,982
 1,972
 (10)
Operating Income
 $636
 $528
 $56
 $77
 $692
 $605
 $87
                     
Operating Ratio
72.8%
76.2%
83.2%
78.5%
74.1%
76.5%
  
                     
                     
Years Ended December 26, 2008 and December 28, 2007
                     
             
CSX
  
       
Rail (b)
Intermodal
Consolidated
  
       
2008
2007
2008
2007
2008
2007
$ Change
Revenue
 $9,789
 $8,674
 $1,466
 $1,356
 $11,255
 $10,030
 $1,225
Expense
              
 
Labor and Fringe
 2,879
 2,905
 76
 81
 2,955
 2,986
 31
 
Materials, Supplies and Other
 1,933
 1,747
 200
 178
 2,133
 1,925
 (208)
 
Fuel
 1,810
 1,307
 7
 5
 1,817
 1,312
 (505)
 
Depreciation
 879
 849
 25
 34
 904
 883
 (21)
 
Equipment and Other Rents
 317
 341
 108
 110
 425
 451
 26
 
Inland Transportation
 (507)
 (448)
 760
 688
 253
 240
 (13)
 
Gain on Insurance Recoveries
 -
 (27)
 -
 -
 -
 (27)
 (27)
   
Total Expense
 7,311
 6,674
 1,176
 1,096
 8,487
 7,770
 (717)
Operating Income
 $2,478
 $2,000
 $290
 $260
 $2,768
 $2,260
 $508
                     
Operating Ratio
74.7%
76.9%
80.2%
80.8%
75.4%
77.5%
  


a)  
Beginning in 2008, certain items have been reclassified within the income statement.  Certain prior-year data have been reclassified to conform to the 2008 presentation.

·  
The Company reclassified all items within other operating income and certain items within other income into the Rail segment. As a result of this change, CSX consolidated operating income and Surface Transportation operating income are now the same; therefore, the Company will no longer report separate Surface Transportation results. The Rail segment was not materially impacted by these reclassifications.

·  
The Company reclassified all non-locomotive fuel related costs previously included in materials, supplies and other into fuel on the Company’s consolidated income statement so that it now includes all fuel used for operations and maintenance.  For fourth quarters 2008 and 2007, these amounts were $36 million and $25 million, respectively.

b)  
In addition to CSX Transportation, Inc., the Rail segment includes non-railroad subsidiaries such as Total Distribution Services, Inc., Transflo Terminal Services, Inc., CSX Technology, Inc. and other subsidiaries.

 
8
 
 
 
 
VOLUME AND REVENUE (Unaudited)
Volume (Thousands of Units); Revenue (Dollars in Millions); Revenue Per Unit (Dollars)
                             
Quarters Ended December 26, 2008 and December 28, 2007
                             
 
Volume
  
Revenue
  
Revenue Per Unit
 
2008
2007
% Change
  
2008
2007
% Change
  
2008
2007
% Change
Chemicals
 107
 125
 (14)
%
  
 $322
 $333
 (3)
 %
 $3,009
 $2,664
 13
%
Metals
 57
 79
 (28)
    
 129
 163
 (21)
    
 2,263
 2,063
 10
  
Total Industrial
 164
 204
 (20)
    
 451
 496
 (9)
    
 2,750
 2,431
 13
  
Emerging Markets
 99
 115
 (14)
    
 149
 147
 1
    
 1,505
 1,278
 18
  
Forest Products
 71
 81
 (12)
    
 164
 169
 (3)
    
 2,310
 2,086
 11
  
Food and Consumer
 48
 49
 (2)
    
 113
 106
 7
    
 2,354
 2,163
 9
  
Total Housing
 218
 245
 (11)
    
 426
 422
 1
    
 1,954
 1,722
 13
  
Agricultural Products
 109
 109
 -
    
 271
 226
 20
    
 2,486
 2,073
 20
  
Phosphates and Fertilizers
 66
 92
 (28)
    
 86
 111
 (23)
    
 1,303
 1,207
 8
  
Total Agriculture
 175
 201
 (13)
    
 357
 337
 6
    
 2,040
 1,677
 22
  
Total Merchandise
 557
 650
 (14)
    
 1,234
 1,255
 (2)
    
 2,215
 1,931
 15
  
                             
Coal
 449
 447
 -
    
 811
 654
 24
    
 1,806
 1,463
 23
  
Coke and Iron Ore
 22
 22
 -
    
 38
 29
 31
    
 1,727
 1,318
 31
  
Total Coal
 471
 469
 -
    
 849
 683
 24
    
 1,803
 1,456
 24
  
                             
Automotive
 76
 109
 (30)
    
 182
 215
 (15)
    
 2,395
 1,972
 21
  
                             
Other
 -
 -
 -
    
 75
 66
 14
    
 -
 -
 -
  
Total Rail
 1,104
 1,228
 (10)
    
 2,340
 2,219
 5
    
 2,120
 1,807
 17
  
                             
International
 227
 260
 (13)
    
 112
 123
 (9)
    
 493
 473
 4
  
Domestic
 272
 273
 -
    
 212
 227
 (7)
    
 779
 832
 (6)
  
Other
 -
 -
 -
    
 10
 8
 25
    
 -
 -
 -
  
Total Intermodal
 499
 533
 (6)
    
 334
 358
 (7)
    
 669
 672
 -
  
                             
Total
 1,603
 1,761
 (9)
%
  
 $2,674
 $2,577
 4
 %
  
 $1,668
 $1,463
 14
 %


 
9
 
 
 
 
CSX Corporation
VOLUME AND REVENUE (Unaudited)
Volume (Thousands of Units); Revenue (Dollars in Millions); Revenue Per Unit (Dollars)
                             
Years Ended December 26, 2008 and December 28, 2007
                             
 
Volume
  
Revenue
  
Revenue Per Unit
 
2008
2007
% Change
  
2008
2007
% Change
  
2008
2007
% Change
Chemicals
 488
 522
 (7)
%
  
 $1,437
 $1,313
 9
 %
 $2,945
 $2,515
 17
%
Metals
 337
 355
 (5)
    
 751
 702
 7
    
 2,228
 1,977
 13
  
Total Industrial
 825
 877
 (6)
    
 2,188
 2,015
 9
    
 2,652
 2,298
 15
  
Emerging Markets
 429
 491
 (13)
    
 628
 605
 4
    
 1,464
 1,232
 19
  
Forest Products
 316
 352
 (10)
    
 722
 722
 -
    
 2,285
 2,051
 11
  
Food and Consumer
 199
 212
 (6)
    
 456
 441
 3
    
 2,291
 2,080
 10
  
Total Housing
 944
 1,055
 (11)
    
 1,806
 1,768
 2
    
 1,913
 1,676
 14
  
Agricultural Products
 432
 410
 5
    
 1,011
 786
 29
    
 2,340
 1,917
 22
  
Phosphates and Fertilizers
 335
 362
 (7)
    
 460
 421
 9
    
 1,373
 1,163
 18
  
Total Agriculture
 767
 772
 (1)
    
 1,471
 1,207
 22
    
 1,918
 1,563
 23
  
Total Merchandise
 2,536
 2,704
 (6)
    
 5,465
 4,990
 10
    
 2,155
 1,845
 17
  
                             
Coal
 1,779
 1,771
 -
    
 3,110
 2,483
 25
    
 1,748
 1,402
 25
  
Coke and Iron Ore
 100
 91
 10
    
 175
 120
 46
    
 1,750
 1,319
 33
  
Total Coal
 1,879
 1,862
 1
    
 3,285
 2,603
 26
    
 1,748
 1,398
 25
  
                             
Automotive
 343
 439
 (22)
    
 784
 839
 (7)
    
 2,286
 1,911
 20
  
                             
Other
 -
 -
 -
    
 255
 242
 5
    
 -
 -
 -
  
Total Rail
 4,758
 5,005
 (5)
    
 9,789
 8,674
 13
    
 2,057
 1,733
 19
  
                             
International
 1,000
 1,132
 (12)
    
 509
 525
 (3)
    
 509
 464
 10
  
Domestic
 1,069
 979
 9
    
 929
 807
 15
    
 869
 824
 5
  
Other
 -
 -
 -
    
 28
 24
 17
    
 -
 -
 -
  
Total Intermodal
 2,069
 2,111
 (2)
    
 1,466
 1,356
 8
    
 709
 642
 10
  
                             
Total
 6,827
 7,116
 (4)
%
  
 $11,255
 $10,030
 12
 %
  
 $1,649
 $1,409
 17
 %


 
10
 

 
CSX Corporation

REVENUE

The Company was able to achieve continued revenue and pricing gains during the fourth quarter 2008 predominantly due to the overall cost advantages that rail-based solutions provide versus other modes of transportation. These pricing gains, and higher fuel recovery, more than offset the volume losses caused by the broad based weakness in the economy.

Merchandise

Chemicals – Improved yield and increased fuel recovery continue to drive revenue-per-unit gains.  Chemicals are used in the manufacturing of plastics which play an important role in components used in housing, automotive and consumer goods.  Continued weakness in each of these three markets has reduced chemicals demand.  The large decline in oil and natural gas prices, a key feedstock in the making of plastics, also weakened demand for the product, as buyers are expecting further reductions in raw materials costs.

Emerging Markets and Food and Consumer – Revenue and revenue-per-unit increases were primarily driven by favorable fuel recoveries. Volume declines in appliances and aggregates, which include crushed stone, sand and gravel, were due to continued softness in residential construction.

Forest Products – A weak housing market and tighter credit conditions have driven the continued decline of lumber and building products.  Paper volumes continued to be soft due to electronic media substitution and less packaging being used as a result of slower consumer spending.

Agricultural Products – Volume was flat as increased shipments of ethanol and feed ingredients were offset by declines in feed grains and exports.  Gains in yield and fuel surcharge recovery, plus longer hauls of ethanol to the south led to increases in revenue and revenue per unit.

Metals – Volume declines were driven by weak global and domestic steel demand in the automotive and construction industries.  This weak demand, combined with the credit crisis, caused steel producers to take capacity out of the market in an attempt to balance supply with demand.  Revenue-per-unit increases were driven primarily by pricing gains and increased fuel recovery.

Phosphates and Fertilizers – Phosphate production was down as plant curtailments resulted from weak international and domestic demand.  Retailers were reluctant to refill warehouses during the quarter due to falling crop and fertilizer prices.  Revenue per unit was up due to improved yield and fuel recoveries.

Coal

Sustained growth in yield and improved fuel recovery positively influenced revenue and revenue per unit.  Volume increases in the export and river markets offset weakness in electric utility shipments.

Automotive

Revenue and volume were down due to declining sales resulting from the weak economic environment, tight credit conditions and low consumer confidence.  Revenue per unit improved due to yield initiatives and higher fuel recoveries.

Intermodal Operating Revenue

International – Revenue-per-unit was higher on long-term contract price increases and increased fuel recovery.  Volumes were down on continued import softness and slowing exports.

Domestic – Revenue-per-unit was lower as increased fuel recovery was offset by mix impacts of incremental short-haul traffic and a competitive over-the-road pricing environment.  Volume growth slowed in the fourth quarter from earlier in the year as the weakening economy materially slowed consumer-driven demand.



 
11
 
 
 
CSX Corporation

 
EXPENSE

Expenses increased $10 million from last year’s quarter.  Significant variances are described below.

Labor and Fringe expense decreased $38 million. This decrease was primarily driven by lower long-term incentive compensation which was slightly offset by wage and labor inflation and other items.

Materials, Supplies and Other expense increased $103 million.  This increase was primarily due to the absence of prior year favorable casualty reserve changes, higher inflation and various other items.

Fuel expense decreased $51 million due to lower fuel prices and lower volumes, slightly offset by increased non-locomotive fuel and lower fuel efficiency.

Depreciation expense increased $8 million. A larger asset base related to higher capital spending was partially offset by lower depreciation rates resulting from a periodic review of asset useful lives.   

Equipment and Other Rents expense decreased $14 million driven by lower volumes as well as reduced lease expense, partially offset by lower equipment utilization due to a significant decline in automotive business.

Inland Transportation decreased $6 million driven by lower transcontinental volumes.





















 
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RAIL OPERATING STATISTICS (Estimated)
                           
         
Fourth Quarter
  
Years Ended
             
Improvement
      
Improvement
         
2008
2007
(Decline) %
  
2008
2007
(Decline) %
Coal
Domestic:
                    
(Millions of Tons)
  
Utility
  
 38.4
 37.9
 1
%
  
 148.8
 154.9
 (4)
%
   
Other
  
 4.1
 4.7
 (13)
    
 17.0
 18.6
 (9)
  
     
Total Domestic
  
 42.5
 42.6
 -
    
 165.8
 173.5
 (4)
  
 
Export
  
 7.0
 6.3
 11
    
 30.0
 19.9
 51
  
     
Total Coal
  
 49.5
 48.9
 1
    
 195.8
 193.4
 1
  
   
Coke and Iron Ore
  
 1.9
 1.9
 -
    
 8.3
 7.6
 9
  
     
Total  Coal, Coke and Iron Ore
  
 51.4
 50.8
 1
    
 204.1
 201.0
 2
  
                           
Revenue Ton-Miles
Merchandise
  
 29.6
 32.9
 (10)
    
 132.0
 135.3
 (2)
  
(Billions)
Automotive
  
 1.3
 1.9
 (32)
    
 5.9
 7.6
 (22)
  
 
Coal
  
 22.7
 21.3
 7
    
 89.6
 85.6
 5
  
 
Intermodal
  
 4.6
 4.8
 (4)
    
 18.9
 19.6
 (4)
  
     
Total
  
 58.2
 60.9
 (4)
    
 246.4
 248.1
 (1)
  
                           
Gross Ton-Miles
Total Gross Ton-Miles
  
 106.7
 112.6
 (5)
    
 449.8
 458.2
 (2)
  
(Billions)
(Excludes locomotive gross ton-miles)
                    
                           
Safety and Service
FRA Personal Injuries Frequency Index
  
 1.07
 1.28
 16
    
 1.14
 1.23
 7
  
Measurements
Number of FRA-reportable injuries per 200,000 man-hours
                  
 
FRA Train Accident Rate
  
 2.39
 2.89
 17
    
 2.68
 3.01
 11
  
 
Number of FRA-reportable train accidents per million train miles
                  
                           
 
On-Time Train Originations
  
85%
81%
 5
    
79%
79%
 -
  
 
On-Time Destination Arrivals
  
77%
73%
 5
    
70%
70%
 -
  
                           
 
Dwell Time (Hours)
  
 23.2
 22.2
 (5)
    
 23.3
 23.2
 -
  
 
Cars-On-Line
  
 222,195
 218,884
 (2)
    
 223,574
 221,943
 (1)
  
                           
 
System Train Velocity (Miles Per Hour)
  
 21.2
 21.2
 -
    
 20.5
 20.8
 (1)
%
                           
             
Increase
          
             
(Decrease) %
          
Resources
Route Miles
  
 21,204
 21,227
 -
            
 
Locomotives (Owned and long-term leased)
  
 4,143
 4,007
 3
            
 
Freight Cars (Owned and long-term leased)
  
 91,350
 94,364
 (3)
%
          




FUEL STATISTICS
   
Fourth Quarter
  
Years Ended
   
2008
2007
Change
  
2008
2007
Change
Estimated Locomotive Fuel Consumption (Millions of Gallons)
 133.0
 139.5
 6.5
  
 544.8
 568.6
 23.8
Price Per Gallon  (Dollars)
  
 $2.22
 $2.56
 $0.34
  
 $3.06
 $2.13
 $(0.93)
Total Locomotive Fuel Expense (Dollars in Million)
  
 295
 357
 62
  
 1,667
 1,211
 (456)
Total Non-Locomotive Fuel Expense (Dollars in Million)
  
 36
 25
 (11)
  
 150
 101
 (49)
Total Fuel Expense (Dollars in Million)
  
 $331
 $382
 $51
  
 $1,817
 $1,312
 $(505)


 
13
 
 
 
 
CSX Corporation
               
OTHER INCOME (EXPENSE) (Unaudited)
 (Dollars in Millions)
               
 
Quarters Ended
  
Years Ended
 
Dec. 26,
Dec. 28,
    
Dec. 26,
Dec. 28,
  
 
2008
2007
$ Change
  
2008
2007
$ Change
Interest Income (a)
 $6
 $14
 $(8)
  
 $37
 $55
 $(18)
Income from Real Estate Operations (b)
 3
 51
 (48)
  
 39
 58
 (19)
Loss from Resort Operations (c)
 (179)
 (1)
 (178)
  
 (204)
 (16)
 (188)
Miscellaneous (d)
 (2)
 16
 (18)
  
 25
 (8)
 33
 
 $(172)
 $80
 $(252)
  
 $(103)
 $89
 $(192)
 

 
 

 
(a)  
Interest income includes amounts earned from CSX’s cash, cash equivalents and investments.

(b)  
Income from real estate operations includes the results of operations of the Company’s non-operating real estate sales, leasing, acquisition and management and development activities.  Income may fluctuate as a function of timing of real estate sales.

(c)  
Loss from resort operations consists primarily of the $166 million pre-tax write-down of the Company’s investment in The Greenbrier resort located in White Sulphur Springs, West Virginia.  Additionally, results from resort operations were down in 2008 because of decreased group business resulting from the uncertainty of labor negotiations and an inability to sufficiently reduce contractual labor costs accordingly.

(d)  
Miscellaneous includes a number of items, which can be income or expense.  Examples of these items are equity earnings and/or losses, minority interest expense, investment gains and losses and other non-operating activities.

·  
The fourth quarter of 2007 included $21 million of lower minority interest expense that was the result of an increase in CSX’s economic interest at a consolidated subsidiary.

·  
For the year 2008, CSX recorded additional income of $30 million for an adjustment to correct equity earnings from a non-consolidated subsidiary.

·  
For the year 2007, CSX recorded expense of $10 million related to an early redemption premium and the write-off of debt issuance costs.







EMPLOYEE COUNTS (Estimated)
           
     
November
November
  
     
2008
2007
Change
Transportation Businesses
      
 
  Rail
 31,924
 31,900
 24
 
  Intermodal
 957
 1,006
 (49)
 
  Technology and Corporate
 571
 563
 8
   
Total Transportation Businesses
 33,452
 33,469
 (17)
           
Resort and Real Estate
 1,238
 1,595
 (357)
   
Total
 34,690
 35,064
 (374)




 
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