EX-99.2 3 qfr_q12009.htm QUARTERLY FINANCIAL REPORT qfr_q12009.htm
Exhibit 99.2
                           
 
 
CSX Announces First Quarter Results
 

First Quarter Highlights:

·  
Safety and service levels remain strong
 
·  
Productivity and right-sizing actions delivering cost savings
 
·  
Earnings per share of 62 cents, operating income of $522 million
 

JACKSONVILLE, Fla., (Apr. 14, 2009) – CSX Corporation [NYSE: CSX] today announced first quarter earnings of $246 million, or 62 cents a share, versus $351 million, or 85 cents per share, last year.  Excluding 5 cents per share from an equity earnings adjustment in the first quarter of 2008, comparable earnings per share declined 23 percent.  (See table below for reconciliation of quarter items to reported numbers.)

“In this economic downturn, CSX is focusing sharply on the things that are more within our control – safety, customer service and productivity,” said Michael Ward, chairman, president and CEO. “We are taking tough actions to right-size our operations in this challenging environment.”

First quarter revenues of $2.2 billion were down 17 percent from the prior year, primarily due to a 17 percent decline in volume.  The volume declines were driven by significant weakness in industrial production, housing starts, and consumer spending, as well as in the agriculture and energy sectors.

In response to these conditions, CSX right-sized its train network and implemented a wide range of productivity initiatives.  As a result, operating expenses declined 17%, allowing the company to produce operating income of $522 million and an operating ratio of 76.8 percent for the quarter.

“Our nation will continue to rely heavily on rail transportation to move vital goods, relieve traffic congestion, protect the environment and support American businesses,” said Ward.  “We can meet those needs with discipline in our operations, strategic investments in our system and sound public policy.”
 
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

 
1
 



 
 
GAAP RECONCILIATION 1
 (Dollars in millions, except per share amounts)
 
 
First Quarter
 
 
2009
  
 
2008
  
 
% Change
 
 
Earnings Per Share
 
 
$ 0.62
  
 
 
$ 0.85
  
 
 
(27)%
 
Less Equity Earnings Adjustment
 
-
  
 
(0.05
 
)
  
 
Comparable Earnings Per Share
 
$ 0.62
  
 
$ 0.80
  
 
(23)%

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 Apr. 15, 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.

###

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.

 
2
 



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 INCOME STATEMENTS (Unaudited)
(Dollars in Millions, Except Per Share Amounts)
       
 
Quarters Ended
 
Mar. 27,
Mar. 28,
  
 
2009
2008
$ Change
Revenue
 $2,247
 $2,713
 $(466)
Expense
      
Labor and Fringe
 662
 745
 83
Materials, Supplies and Other
 477
505
 28
Fuel
 191
441
 250
Depreciation
 224
222
 (2)
Equipment and Other Rents
 113
111
 (2)
Inland Transportation
 58
63
 5
Total Expense
 1,725
 2,087
 362
       
Operating Income
 522
 626
 (104)
       
Interest Expense
 (141)
 (119)
 (22)
Other Income (Expense) - Net
 (9)
 55
 (64)
Earnings before Income Taxes
 372
 562
 (190)
       
Income Tax Expense
 (126)
 (211)
 85
Net Earnings
 $246
 $351
 $(105)
       
Per Common Share
      
Net Earnings Per Share, Assuming Dilution
 $0.62
 $0.85
 $(0.23)
       
Average Shares Outstanding,
      
Assuming Dilution (Thousands)
 394,101
 415,210
  
       
Cash Dividends Paid Per Common Share
 $0.22
 $0.15
  


 
4
 


CSX Corporation
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
 
(Unaudited)
  
 
Mar. 27,
Dec. 26,
 
2009
2008
ASSETS
     
Current Assets
    
Cash and Cash Equivalents
 $1,056
 $669
Short-term Investments
 73
 76
Accounts Receivable, net of allowance for doubtful
 958
 1,107
accounts of $64 and $70, respectively
    
Materials and Supplies
 250
 217
Deferred Income Taxes
 151
 203
Other Current Assets
 112
 119
Total Current Assets
 2,600
 2,391
     
Properties
 30,399
 30,208
Accumulated Depreciation
 (7,637)
 (7,520)
Properties - Net
 22,762
 22,688
     
Investment in Conrail
 617
 609
Affiliates and Other Companies
 399
 406
Other Long-term Assets
 189
 194
Total Assets
 $26,567
 $26,288
     
LIABILITIES AND SHAREHOLDERS' EQUITY
     
Current Liabilities
    
Accounts Payable
 $934
 $973
Labor and Fringe Benefits Payable
 369
 465
Casualty, Environmental and Other Reserves
 217
 236
Current Maturities of Long-term Debt
 314
 319
Income and Other Taxes Payable
 116
 125
Other Current Liabilities
 120
 286
Total Current Liabilities
 2,070
 2,404
     
Casualty, Environmental and Other Reserves
 636
 643
Long-term Debt
 7,995
 7,512
Deferred Income Taxes
 6,266
 6,235
Other Long-term Liabilities
 1,395
 1,426
 Total Liabilities
 18,362
 18,220
     
Common Stock, $1 Par Value
 392
 391
Retained Earnings
 8,534
 8,398
Accumulated Other Comprehensive Loss
 (742)
 (741)
Noncontrolling Minority Interest
 21
 20
Total Shareholders' Equity
 8,205
 8,068
Total Liabilities and Shareholders' Equity
 $26,567
 $26,288


 
5
 


CSX Corporation
CONSOLIDATED CASH FLOW STATEMENTS (Unaudited)
(Dollars in Millions)
     
 
Quarters Ended
 
Mar. 27,
Mar. 28,
 
2009
2008
OPERATING ACTIVITIES
    
Net Earnings
 $246
 $351
Adjustments to Reconcile Net Earnings to Net Cash Provided
    
by Operating Activities:
    
Depreciation
 224
 225
Deferred Income Taxes
 79
 89
Other Operating Activities
 (65)
 (24)
Changes in Operating Assets and Liabilities:
    
Accounts Receivable
 132
 3
Other Current Assets
 (76)
 (13)
Accounts Payable
 (36)
 10
Income and Other Taxes Payable
 31
 84
Other Current Liabilities
 (86)
 9
Net Cash Provided by Operating Activities
 449
 734
     
INVESTING ACTIVITIES
    
Property Additions
 (309)
 (446)
Purchases of Short-term Investments
 -
 (50)
Proceeds from Sales of Short-term Investments
 -
 295
Other Investing Activities
 37
 12
Net Cash Used in Investing Activities
 (272)
 (189)
     
FINANCING ACTIVITIES
    
Long-term Debt Issued
 500
 1,000
Long-term Debt Repaid
 (26)
 (44)
Dividends Paid
 (86)
 (61)
Stock Options Exercised
 2
 36
Shares Repurchased
 -
 (300)
Other Financing Activities
 (180)
 26
Net Cash Provided by Financing Activities
 210
 657
     
Net Increase in Cash and Cash Equivalents
 387
 1,202
     
CASH AND CASH EQUIVALENTS
    
Cash and Cash Equivalents at Beginning of Period
 669
 368
Cash and Cash Equivalents at End of Period
 $1,056
 $1,570


 
6
 

 
 CSX Corporation
OTHER INCOME (EXPENSE) (Unaudited)
 (Dollars in Millions)
       
 
Quarters Ended
 
Mar. 27,
Mar. 28,
  
 
2009
2008
$ Change
Interest Income (a)
 $4
 $8
 $(4)
Income from Real Estate Operations (b)
 1
 30
 (29)
Loss from Resort Operations (c)
 (14)
 (16)
 2
Miscellaneous (d)
 -
 33
 (33)
Total Other Income (Expense) - Net
 $(9)
 $55
 $(64)
 

 
(a)  
Interest income fluctuates based on interest rates and balances that earn interest based on CSX’s cash, cash equivalents and short-term investments.

(b)  
Income from real estate 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)  
The resort filed for Chapter 11 bankruptcy protection in March 2009.  See below for further details.

(d)  
Miscellaneous income includes a number of items which can be income or expense.  Examples of these items are equity earnings and/or losses, non-controlling minority interest expense, investment gains and losses and other non-operating activities.  In first quarter 2008, CSX recorded additional income of $30 million for an adjustment to correct equity earnings from a non-consolidated subsidiary.

Greenbrier Hotel Corporation Bankruptcy Filing

On March 19, 2009, Greenbrier Hotel Corporation (“GHC”), owner of The Greenbrier resort and subsidiary of CSX Corporation, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Eastern District of Virginia. CSX has agreed to extend up to $19 million in bankruptcy financing to GHC.

In conjunction with the bankruptcy, GHC also announced an agreement to sell the resort pursuant to an asset purchase agreement (“Agreement”) with Marriott Hotel Services, Inc. (“Marriott”).  The Agreement remains subject to the approval of the Bankruptcy Court and contemplates that CSX will provide $50 million to be used in the operations of the resort after completion of the sale.  These funds are expected to be paid over a two-year period following the closing of the transaction.  In turn, Marriott would pay GHC between $60 million and $130 million within approximately seven years, with the actual amount depending on the timing of the payment and The Greenbrier’s financial performance.

The sale to Marriott is expected to close later this year, but is contingent on various closing conditions, including the ability of The Greenbrier and its unions to negotiate labor contracts satisfactory to Marriott.  It is also subject to a Bankruptcy Court-supervised auction process in which other qualified purchasers will have an opportunity to bid on the resort.  Currently, the bid and auction process are scheduled in June 2009.

At this time, this transaction does not qualify for discontinued operations under SFAS 144 Accounting for the Impairment or Disposal of Long-lived Assets due to the nature of certain closing conditions under the Agreement.  Once these conditions have been satisfied, it is likely that the resort’s results of operations will be reclassified into discontinued operations.

 
7
 


 
RESULTS OF OPERATIONS (Unaudited)
(Dollars in Millions)
                   
Quarters Ended March 27, 2009 and March 28, 2008
                   
       
CSX
      
 
Rail (a)
Intermodal
Consolidated
      
 
2009
2008
2009
2008
2009
2008
$ Change
% Change
Revenue
 $1,977
 $2,365
 $270
 $348
 $2,247
 $2,713
 $(466)
 (17)
%
Expense
                  
Labor and Fringe
 644
 726
 18
 19
 662
 745
 83
 11
  
Materials, Supplies and Other
 432
 456
 45
 49
 477
 505
 28
 6
  
Fuel
 190
 439
 1
 2
 191
 441
 250
 57
  
Depreciation
 218
 217
 6
 5
 224
 222
 (2)
 (1)
  
Equipment and Other Rents
 88
 84
 25
 27
 113
 111
 (2)
 (2)
  
Inland Transportation
 (93)
 (122)
 151
 185
 58
 63
 5
 8
  
Total Expense
 1,479
 1,800
 246
 287
 1,725
 2,087
 362
 17
  
Operating Income
 $498
 $565
 $24
 $61
 $522
 $626
 $(104)
 (17)
%
                   
Operating Ratio
74.8%
76.1%
91.1%
82.5%
76.8%
76.9%
      

(a)  
  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 March 27, 2009 and March 28, 2008
                             
 
Volume
  
Revenue
  
Revenue Per Unit
 
2009
2008
% Change
  
2009
2008
% Change
  
2009
2008
% Change
Chemicals
 105
 129
 (19)
%
  
 $308
 $362
 (15)
 %
  
 $2,933
 $2,806
 5
%
Emerging Markets
 91
 115
 (21)
    
 134
 161
 (17)
    
 1,473
 1,400
 5
  
Forest Products
 65
 87
 (25)
    
 140
 192
 (27)
    
 2,154
 2,207
 (2)
  
Agricultural Products
 109
 109
 -
    
 249
 235
 6
    
 2,284
 2,156
 6
  
Metals
 48
 92
 (48)
    
 97
 197
 (51)
    
 2,021
 2,141
 (6)
  
Phosphates and Fertilizers
 60
 91
 (34)
    
 87
 130
 (33)
    
 1,450
 1,429
 1
  
Food and Consumer
 25
 27
 (7)
    
 60
 65
 (8)
    
 2,400
 2,407
 -
  
Total Merchandise
 503
 650
 (23)
    
 1,075
 1,342
 (20)
    
 2,137
 2,065
 3
  
                             
Coal
 415
 440
 (6)
    
 713
 720
 (1)
    
 1,718
 1,636
 5
  
Coke and Iron Ore
 16
 23
 (30)
    
 31
 42
 (26)
    
 1,938
 1,826
 6
  
Total Coal
 431
 463
 (7)
    
 744
 762
 (2)
    
 1,726
 1,646
 5
  
                             
Automotive
 45
 96
 (53)
    
 95
 202
 (53)
    
 2,111
 2,104
 -
  
                             
Other
 -
 -
 -
    
 63
 59
 7
    
 -
 -
 -
  
Total Rail
 979
 1,209
 (19)
    
 1,977
 2,365
 (16)
    
 2,019
 1,956
 3
  
                             
International
 186
 253
 (26)
    
 83
 123
 (33)
    
 446
 486
 (8)
  
Domestic
 254
 255
 -
    
 184
 218
 (16)
    
 724
 855
 (15)
  
Other
 -
 -
 -
    
 3
 7
 (57)
    
 -
 -
 -
  
Total Intermodal
 440
 508
 (13)
    
 270
 348
 (22)
    
 614
 685
 (10)
  
                             
Total
 1,419
 1,717
 (17)
%
  
 $2,247
 $2,713
 (17)
 %
  
 $1,584
 $1,580
 -
 %

Certain data within Merchandise categories have been reclassified to conform to the current year presentation.

 
9
 

CSX Corporation

REVENUE

CSX experienced significant year-over-year volume and revenue losses caused by the broad-based weakness in the economy.  The greatest impact from the economic conditions was in construction and consumer related markets. Despite the challenging environment, the Company’s ongoing yield management initiatives offset lower fuel recovery associated with the sharp decline in fuel prices.

Rail

Merchandise

Chemicals – Continued weakness in the housing, automotive and consumer goods markets has significantly reduced demand for chemical products related to those markets.

Emerging Markets – Aggregates (which include crushed stone, sand and gravel) volume declined due to continued softness in residential construction.

Forest Products – A weak housing market has driven the continued decline of lumber and building products.  Paper volume 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 corn were offset by declines in wheat, soybeans and exports. Strength in corn and ethanol shipments positively impacted 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.

Phosphates and Fertilizers – Phosphate production was down due to weak international and domestic demand.  Additionally, farmers are cutting back on levels of phosphate and potash application in reaction to lower commodity prices.

Food and Consumer – Weakness in residential construction caused reduced shipments of appliances and other consumer goods.

Coal

Volume declines were driven by a weaker export market and lower demand from electric utilities.  The demand for electrical generation from coal was down because of low natural gas prices and lower industrial production.

Automotive

Revenue and volume were down due to declining new car sales resulting from the weak economic environment and low consumer confidence.

Intermodal

International – Volume was down significantly on continued import declines and slowing exports due to the global economic recession. Revenue-per-unit was lower on decreased fuel recovery, partially offset by long-term contract price increases.

Domestic – Volume was flat as continued growth in new truckload conversion and short-haul services help offset the decline in other segments of the domestic market. Revenue-per-unit was lower on decreased fuel recovery and a competitive trucking pricing environment.


 
10
 

CSX Corporation

 
EXPENSE

Expenses decreased $362 million from last year’s quarter.  Significant variances are described below.

Labor and Fringe expense decreased $83 million.  This decrease was primarily driven by labor productivity initiatives, such as employee furloughs and reduced crew overtime, and lower incentive compensation.  These decreases were partially offset by inflation and other items.

Materials, Supplies and Other expense decreased $28 million.  This decrease was primarily due to lower volume, decreased cost of risks, lower bad debt expense related to improved collectibility of receivables and other items.  These decreases were partially offset by increased inflation.

Fuel expense decreased $250 million due to lower fuel prices and lower volume.

Equipment and Other Rents expense increased by $2 million.  Lower volume resulted in lower car hire expense, but was offset by lower car productivity and higher settlement estimates with other railroads.
____________________________________________________________________________________________________________________________________________




EMPLOYEE COUNTS (Estimated)
                   
       
2009
      
2008
  
 
Jan
Feb
Mar
Q1
Jan
Feb
Mar
Q1
Average
 
2009
2009
2009
Average
2008
2008
2008
Average
Change
Transportation
                  
  Rail
 30,347
 29,444
 29,037
 29,609
 31,388
 31,233
 31,323
 31,315
 (1,706)
  Intermodal
 964
 952
 943
 953
 985
 976
 964
 975
 (22)
  Technology and Corporate
 569
 572
 574
 572
 566
 568
 566
 567
 5
Total Transportation
 31,880
 30,968
 30,554
 31,134
 32,939
 32,777
 32,853
 32,856
 (1,722)
                   
Resort and Real Estate
 837
 565
 558
 653
 1,086
 892
 883
 954
 (301)
Total
 32,717
 31,533
 31,112
 31,787
 34,025
 33,669
 33,736
 33,810
 (2,023)







FUEL STATISTICS
 
Quarters Ended
 
Mar. 27,
Mar. 28,
  
 
2009
2008
Change
Estimated Locomotive Fuel Consumption (Millions of gallons)
 119.6
 143.6
 24.0
Price Per Gallon (Dollars)
 $1.39
 $2.82
 $1.43
Total Locomotive Fuel Expense (Dollars in millions)
 166
 405
 239
Total Non-Locomotive Fuel Expense (Dollars in millions)
 25
 36
 11
Total Fuel Expense (Dollars in millions)
 $191
 $441
 $250

11

           
RAIL OPERATING STATISTICS (Estimated)
           
 
Quarters Ended
  
 
Mar. 27,
Mar. 28,
Improvement
  
Coal (Millions of Tons)
2009
2008
(Decline) %
  
Domestic
          
Utility
37.0
36.7
1
%
  
Other
2.7
3.9
(31)
    
Total Domestic
39.7
40.6
(2)
    
Export
6.1
7.6
(20)
    
Total Coal
45.8
48.2
(5)
    
Coke and Iron Ore
1.2
1.9
(37)
    
Total Coal, Coke and Iron Ore
47.0
50.1
(6)
    
           
Revenue Ton-Miles (Billions)
          
Merchandise
27.8
33.9
(18)
    
Coal
20.5
22.1
(7)
    
Automotive
0.8
1.7
(53)
    
Intermodal
4.0
4.6
(13)
    
Total
53.1
62.3
(15)
    
           
Gross Ton-Miles (Billions)
          
Total Gross Ton-Miles
95.5
113.5
(16)
    
(Excludes locomotive gross ton-miles)
          
           
Safety and Service Measurements
          
FRA Personal Injuries Frequency Index
1.30
1.10
(18)
    
Number of FRA-reportable injuries per 200,000 man-hours
          
FRA Train Accident Rate
3.08
2.92
(5)
    
Number of FRA-reportable train accidents per million train miles
        
           
On-Time Train Originations
83%
79%
5
    
On-Time Destination Arrivals
79%
69%
14
    
           
Dwell Time (Hours)
24.1
22.7
(6)
    
Cars-On-Line
218,863
221,193
1
    
           
System Train Velocity (Miles per hour)
21.6
20.8
4
    
           
     
Increase
  
Resources
    
(Decrease) %
  
Route Miles
21,178
21,225
-
    
Locomotives (Owned and long-term leased)
4,129
4,049
2
    
Freight Cars (Owned and long-term leased)
90,027
93,351
(4)
%
  


 
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