EX-99.2 3 dex992.htm CSX FLASH QUARTERLY FINANCIAL REPORT CSX Flash Quarterly Financial Report
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EXHIBIT 99.2

LOGO

 


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LOGO

CSX Announces Strong Fourth-Quarter and Full-Year Results

Surface Transportation Highlights:

 

 

Record fourth quarter revenues and operating income

 

 

Strong pricing environment and improved customer service

 

 

Full-year operating ratio below 80%

Jacksonville, Florida (Jan. 22, 2007) – CSX Corporation [NYSE: CSX] today reported fourth quarter 2006 earnings of $347 million, or 75 cents per share. Earnings in the quarter included an 18 cent per-share benefit from: Hurricane Katrina insurance recoveries, a gain on Conrail property included in other income, and the resolution of certain tax matters. Excluding these items, earnings were 57 cents per share, up 10 percent from the same quarter of 2005. (See table below for reconciliation of quarter and full year items to reported numbers.)

“Strong pricing and reliable customer service delivered record fourth quarter financial results in our Surface Transportation businesses,” said Michael Ward, chairman and CEO of CSX Corporation. “In 2006, we achieved a full-year operating ratio below 80% for the first time in nearly a decade and made break-out improvements in our railroad operations.”

The Company’s Surface Transportation businesses posted record fourth quarter revenues of $2.4 billion, an 8 percent increase from the fourth quarter of 2005. The increase was driven by strength in pricing, a growing agricultural market, export demand for coal and continued growth in imports that offset softness in the housing and automotive sectors. Yields increased over 8 percent, with improvements across nearly all markets.

These factors, combined with better operations, resulted in record fourth quarter Surface Transportation operating income of $505 million, including $27 million from insurance recoveries. Excluding the insurance recoveries, operating income was $478 million, a 15 percent increase from the fourth quarter of 2005.

For the full-year, CSX reported earnings per share from continuing operations of $2.82, including the insurance recoveries, the gain on Conrail property and income tax benefits. On a comparable basis, full-year earnings per share were $2.22, a 31% improvement over prior year’s comparable results.

Surface Transportation full-year operating income was $2.1 billion on revenues of $9.6 billion. Excluding gains from insurance recoveries, operating income was $1.96 billion, a 26 percent improvement over prior year.

“These results helped to drive significant value for our shareholders with the company’s stock price increasing 36% for 2006. In addition, we delivered further value in the year by increasing dividends 54% and by repurchasing $465 million of our stock,” said Ward. “In 2007, we expect demand to be strong and our operations to be stronger, and we remain confident in our previous guidance of double-digit growth in operating income, earnings and free cash flow.”

 

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The accompanying

unaudited financial

information should be read in    

conjunction with the

company’s most recent

Annual Report on Form

10-K, Quarterly Reports on

Form 10-Q, and any Current

Reports on Form 8-K.

  

CSX CORPORATION  

  

CONTACT:

 

Consolidated Financial Statements ...p.3  

Surface Transportation Information....p.7  

Other Information..............................p.12  

    

500 Water Street

15th Floor, C900

Jacksonville, FL

32202

http://www.csx.com

  

 

INVESTOR RELATIONS

David Baggs

(904) 359-4812

 

MEDIA

Garrick Francis

(904) 359-1708

 

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LOGO

GAAP RECONCILIATION

(Dollars in millions, except per share amounts)

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 Securities and Exchange Commission may provide users of the financial information with additional meaningful comparisons to prior reported results.

 

    Fourth Quarter         Full Year  
    2006     2005         2006     2005  

Surface Transportation Operating Income

  $    505     $    415       $  2,126     $  1,549  

Less Gain on Insurance Recoveries

  (27 )   -       (168 )   -  
             

Comparable Surface Transportation Operating Income

  $    478     $    415       $  1,958     $  1,549  

Earnings Per Share (from continuing operations)

  $   0.75     $   0.52       $    2.82     $    1.59  

Less Gain on Insurance Recoveries After Tax

  (0.04 )   -       (0.22 )   -  

Less Gain on Conrail Property After Tax

  (0.06 )   -       (0.06 )   -  

Less Income Tax Benefits

  (0.08 )   -       (0.32 )   (0.16 )

Plus Debt Repurchase Expense After Tax

  -     -       -     0.27  
             

Comparable Earnings Per Share (from continuing operations)

  $   0.57     $   0.52       $    2.22     $    1.70  
             

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 Flash report available on the company’s Web site at www.csx.com 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. 23, 2007 at 11 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.

A webcast of the live conference call will be available at www.csx.com in the Investors section. Following the earnings call, an internet replay of the presentation will be available. In addition, the replay will be available for download to a portable audio player or computer as an MP3 - or podcast - file. Both the replay and MP3 file can be found at www.csx.com in the Investors section and will be archived on the site for at least 30 days following the call for those unable to listen in real time.

###

This press release 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,” 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.

 

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CSX Corporation

CONSOLIDATED STATEMENT OF EARNINGS

(Dollars in Millions, Except Per Share Amounts)

 

         (Unaudited)           (Unaudited)              
         Quarters Ended           Years Ended        
                      
         Dec. 29,
2006
    Dec. 30,
2005
    $ Change     Dec. 29,
2006
    Dec. 30,
2005
    $ Change  
                  

Surface

  

Revenue

  $ 2,396     $ 2,219     $ 177     $ 9,566     $ 8,618     $ 948  

Transportation

  

Expense

           
  

Labor and Fringe

    753       731       22       2,922       2,856       66  
  

Materials, Supplies and Other

    480       416       64       1,889       1,784       105  
  

Depreciation

    216       208       8       856       818       38  
  

Fuel

    271       240       31       1,112       783       329  
  

Equipment and Other Rents

    121       132       (11)       512       533       (21 )
  

Inland Transportation

    61       60       1       242       230       12  
  

Conrail Rents, Fees and Services

    16       17       (1 )     75       65       10  
  

Gain on Insurance Recoveries (Note a)

    (27 )     -       (27 )     (168 )     -       (168 )
                  
  

Total Expense

    1,891       1,804       87       7,440       7,069       371  
                  
  

Surface Transportation
Operating Income

    505       415       90       2,126       1,549       577  
  

Other Operating Income (Expense)

    2       (3 )     5       12       1       11  
                  

Consolidated

  

Consolidated Operating Income

    507       412       95       2,138       1,550       588  
  

Other Income - Net

    62       62       -       95       101       (6 )
  

Debt Repurchase Expense (Note b)

    -       -       -       -       (192 )     192  
  

Interest Expense

    (99 )     (99 )     -       (392 )     (423 )     31  
                  
  

Earnings From Continuing Operations Before Income Taxes

    470       375       95       1,841       1,036       805  
  

Income Tax Expense (Note c)

    (123 )     (138 )     15       (531 )     (316 )     (215 )
                  
  

Earnings From Continuing Operations

    347       237       110       1,310       720       590  
  

Discontinued Operations -
Net of Tax (Note d)

    -       -       -       -       425       (425 )
                  
  

Net Earnings

  $ 347     $ 237     $ 110     $ 1,310     $ 1,145     $ 165  
                  

Earnings Per

Common Share

  

Earnings Per Share, Assuming
Dilution:

           
  

From Continuing Operations

  $ 0.75     $ 0.52     $ 0.23     $ 2.82     $ 1.59     $ 1.23  
  

Discontinued Operations

    -       -       -       -       0.93       (0.93 )
                  
  

Net Earnings

  $ 0.75     $ 0.52     $ 0.23     $ 2.82     $ 2.52     $ 0.30  
                  
  

Average Diluted Common Shares
Outstanding
(Thousands)

    463,524       459,943         465,934       456,047    
  

Cash Dividends Paid Per
Common Share

  $ 0.10     $ 0.07       $ 0.33     $ 0.22    

All share and per share data has been retroactively restated to reflect the stock split.

See accompanying Notes to Consolidated Financial Statements on page 6.

 

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CSX Corporation

CONSOLIDATED BALANCE SHEET

(Dollars in Millions)

 

         (Unaudited)
Dec. 29,
2006
    Dec. 30,
2005
 
          

Assets

 

Cash and Cash Equivalents

   $ 461     $ 309  
 

Short-term Investments

     439       293  
 

Accounts Receivable - Net

     1,174       1,202  
 

Materials and Supplies

     204       199  
 

Deferred Income Taxes

     251       225  
 

Other Current Assets

     143       144  
          
 

Total Current Assets

     2,672       2,372  
 

Properties

     27,715       26,538  
 

Accumulated Depreciation

     (6,792 )     (6,375 )
          
 

Properties - Net

     20,923       20,163  
 

Investment in Conrail

     607       603  
 

Affiliates and Other Companies

     336       304  
 

Other Long-term Assets

     591       790  
          
 

Total Assets

   $ 25,129     $ 24,232  
          

Liabilities and

 

Accounts Payable

   $ 974     $ 954  

Shareholders’ Equity

 

Labor and Fringe Benefits Payable

     495       565  
 

Casualty, Environmental and Other Reserves

     253       311  
 

Current Maturities of Long-term Debt

     592       936  
 

Short-term Debt

     8       1  
 

Income and Other Taxes Payable

     114       102  
 

Other Current Liabilities

     86       110  
          
 

Total Current Liabilities

     2,522       2,979  
 

Casualty, Environmental and Other Reserves

     668       653  
 

Long-term Debt

     5,362       5,093  
 

Deferred Income Taxes

     6,110       6,082  
 

Other Long-term Liabilities

     1,526       1,471  
          
 

Total Liabilities

     16,188       16,278  
          
 

Shareholders’ Equity:

    
 

Common Stock $1 Par Value

     438       436  
 

Other Capital

     1,468       1,533  
 

Retained Earnings

     7,428       6,262  
 

Accumulated Other Comprehensive Loss

     (393 )     (277 )
          
 

Total Shareholders’ Equity

     8,941       7,954  
          
      
          
 

Total Liabilities and Shareholders’ Equity

   $ 25,129     $ 24,232  
          

Common Stock and Other Capital have been retroactively restated to reflect the stock split.

See accompanying Notes to Consolidated Financial Statements on page 6.

 

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CSX Corporation

CONSOLIDATED CASH FLOW STATEMENT

(Dollars in Millions)

 

          Years Ended  
           
         

(Unaudited)

Dec. 29,

2006

   

Dec. 30,

2005

 
           

Operating Activities

  

Net Earnings

   $ 1,310     $ 1,145  
  

Adjustments to Reconcile Net Earnings to Net Cash Provided:

    
  

Depreciation

     867       833  
  

Deferred Income Taxes

     42       (46 )
  

Gain on Sale of International Terminals - Net of Tax

     -       (428 )
  

Gain on Insurance Recoveries

     (168 )     -  
  

Insurance Proceeds

     121       29  
  

Gain on Conrail (After Tax)

     (26 )     -  
  

Other Operating Activities

     5       (141 )
  

Changes in Operating Assets and Liabilities:

    
  

Accounts Receivable

     (33 )     (44 )
  

Other Current Assets

     96       (29 )
  

Accounts Payable

     51       54  
  

Income and Other Taxes Payable

     (103 )     (402 )
  

Other Current Liabilities

     (104 )     139  
           
  

Net Cash Provided by Operating Activities

     2,058       1,110  
           

Investing Activities

  

Property Additions

     (1,639 )     (1,136 )
  

Insurance Proceeds

     147       41  
  

Net Proceeds from Sale of International Terminals

     -       1,108  
  

Purchase of Minority Interest in International

    
  

    Terminals Subsidiary

     -       (110 )
  

Purchase of Short-term Investments

     (1,412 )     (2,601 )
  

Proceeds from Sales of Short-term Investments

     1,290       2,634  
  

Other Investing Activities

     4       28  
           
  

Net Cash (Used in) Provided by Investing Activities

     (1,610 )     (36 )
           

Financing Activities

  

Short-term Debt - Net

     7       (99 )
  

Long-term Debt Issued

     471       105  
  

Long-term Debt Repaid

     (546 )     (1,283 )
  

Dividends Paid

     (145 )     (93 )
  

Stock Options Exercised

     319       98  
  

Shares Repurchased

     (465 )     -  
  

Other Financing Activities

     63       (15 )
           
  

Net Cash Used in Financing Activities

     (296 )     (1,287 )
           

Cash and Cash
Equivalents

  

Net Increase (Decrease) in Cash and Cash Equivalents

     152       (213 )
  

Cash and Cash Equivalents at Beginning of Period

     309       522  
           
  

Cash and Cash Equivalents at End of Period

   $ 461     $ 309  
           

See accompanying Notes to Consolidated Financial Statements on page 6.

 

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CSX Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Prior periods have been reclassified to conform to the current year presentation.

 

(a)

Gain on Insurance Recoveries:

In the fourth quarter of 2006, CSX recognized a gain of $27 million before tax, or $17 million after tax, on insurance recoveries from claims related to Hurricane Katrina. For the year 2006 the gain was $168 million before tax or $104 million after tax. The gain represents insurance recoveries related to property damage and lost profits. Additional gains are expected in future periods as more cash is collected.

 

(b)

Debt Repurchase Expense:

In the second quarter of 2005, CSX repurchased $1.0 billion of outstanding debt. CSX recognized $192 million of before-tax costs, or $123 million of after-tax costs, to repurchase the debt, which primarily reflected the increase in current market value above original issue value.

 

(c)

Income Tax:

 

 

 

In the fourth quarter of 2006, CSX recognized an income tax benefit of $41 million principally related to the resolution of 1997 – 1998 federal income tax audits.

 

 

 

For the year 2006, CSX recognized $151 million of income tax benefits, principally related to the resolution of federal income tax audits and other tax matters.

 

 

 

In the second quarter of 2005, Ohio enacted legislation to gradually eliminate its corporate franchise tax. This legislative change resulted in an income tax benefit of $71 million associated with eliminating deferred income tax liabilities.

 

(d)

Discontinued Operations:

In the first quarter of 2005, CSX sold its International Terminals business for net cash proceeds of $998 million. As a result, CSX recognized earnings from discontinued operations of $425 million after tax, which included $428 million of after tax gain on sale and a $3 million after tax first quarter 2005 loss on operations of the International Terminals business.

 

(e)

Stock Split:

In 2006, CSX’s Board of Directors approved and distributed a two-for-one split of the Company’s common stock. All share and per share data have been retroactively restated to reflect the stock split.

 

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CSX Corporation

SURFACE TRANSPORTATION DETAIL (Unaudited)

(Dollars in Millions)

Quarters Ended December 29, 2006 and December 30, 2005

 

     Rail     Intermodal     Surface
Transportation
       
     2006     2005     2006     2005     2006     2005     $ Change  

Revenue

  $ 2,038     $ 1,853     $ 358     $ 366     $ 2,396     $ 2,219     $ 177  

Expense

                        

Labor and Fringe

    731       711       22       20       753       731       22  

Materials, Supplies and Other

    431       364       49       52       480       416       64  

Depreciation

    206       198       10       10       216       208       8  

Fuel

    271       240       -       -       271       240       31  

Equipment and Other Rents

    89       96       32       36       121       132       (11 )

Inland Transportation

    (116 )     (115 )     177       175       61       60       1  

Conrail Rents, Fees and Services

    16       17       -       -       16       17       (1 )

Gain on Insurance Recoveries

    (27 )     -       -       -       (27 )     -       (27 )
         

Total Expense

    1,601       1,511       290       293       1,891       1,804       87  
         

Surface Transportation
Operating Income

 

  $ 437     $ 342     $ 68     $ 73     $ 505     $ 415     $ 90  
         

Surface Transportation
Operating Ratio

    78.6 %     81.5 %     81.0 %     80.1 %     78.9 %     81.3 %    

Other Operating Income

          $ 2     $ (3 )    
                     

Consolidated Operating Income

          $ 507     $ 412      
                     

Years Ended December 29, 2006 and December 30, 2005

 

      Rail     Intermodal     Surface
Transportation
       
      2006     2005     2006     2005     2006     2005     $ Change  

Revenue

   $ 8,154     $ 7,256     $ 1,412     $ 1,362     $ 9,566     $ 8,618     $ 948  

Expense

                         

Labor and Fringe

     2,840       2,777       82       79       2,922       2,856       66  

Materials, Supplies and Other

     1,697       1,584       192       200       1,889       1,784       105  

Depreciation

     818       779       38       39       856       818       38  

Fuel

     1,112       783       -       -       1,112       783       329  

Equipment and Other Rents

     382       400       130       133       512       533       (21 )

Inland Transportation

     (462 )     (433 )     704       663       242       230       12  

Conrail Rents, Fees and Services

     75       65       -       -       75       65       10  

Gain on Insurance Recoveries

     (166 )     -       (2 )     -       (168 )     -       (168 )
          

Total Expense

     6,296       5,955       1,144       1,114       7,440       7,069       371  
          

Surface Transportation
Operating Income

   $ 1,858     $ 1,301     $ 268     $ 248     $ 2,126     $ 1,549     $ 577  
          

Surface Transportation
Operating Ratio

     77.2 %     82.1 %     81.0 %     81.8 %     77.8 %     82.0 %    

Other Operating Income

           $ 12     $ 1      
                      

Consolidated Operating Income

           $ 2,138     $ 1,550      
                      

 

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CSX Corporation

SURFACE TRANSPORTATION VOLUME AND REVENUE (Unaudited)

Volume (Thousands); Revenue (Dollars in Millions); Revenue Per Unit (Dollars)

Quarters Ended December 29, 2006, and December 30, 2005

 

     Volume         Revenue          Revenue Per Unit  
                           
     2006    2005    % Change         2006    2005    % Change          2006    2005    % Change  
                           

Chemicals

   126    127    (1)%       $ 297    $ 274    8%        $ 2,357    $ 2,157    9%  

Emerging Markets

   123    122    1             138      124    11             1,122      1,016    10     

Forest Products

   95    106    (10)            188      183    3             1,979      1,726    15     

Agricultural Products

   103    90    14             184      147    25             1,786      1,633    9     

Metals

   84    88    (5)            160      150    7             1,905      1,705    12     

Phosphates and Fertilizers

   87    99    (12)            89      87    2             1,023      879    16     

Food and Consumer

   57    61    (7)            116      115    1             2,035      1,885    8     
                           

Total Merchandise

   675    693    (3)            1,172      1,080    9             1,736      1,558    11     

Coal

   445    429    4             574      500    15             1,290      1,166    11     

Coke and Iron Ore

   26    21    24             30      21    43             1,154      1,000    15     
                           

Total Coal

   471    450    5             604      521    16             1,282      1,158    11     

Automotive

   112    125    (10)            210      225    (7)            1,875      1,800    4     

Other

   -    -    -             52      27    93             -      -    -     
                           

Total Rail

   1,258    1,268    (1)            2,038      1,853    10             1,620      1,461    11     
                           

International

   315    310    2             142      138    3             451      445    1     

Domestic

   237    240    (1)            204      217    (6)            861      904    (5)    

Other

   -    -    -             12      11    9            -      -    -     
                           

Total Intermodal

   552    550    -             358      366    (2)            649      665    (2)    
                           

Total Surface Transportation

   1,810    1,818    - %        $ 2,396    $ 2,219    8%        $ 1,324    $ 1,221    8%  
                           

Years Ended December 29, 2006, and December 30, 2005

 

     Volume          Revenue          Revenue Per Unit  
                            
     2006    2005    % Change          2006    2005    % Change          2006    2005    % Change  
                            

Chemicals

   528    533    (1)%        $ 1,210    $ 1,089    11%        $ 2,292    $ 2,043    12%  

Emerging Markets

   524    505    4              580      513    13             1,107      1,016    9     

Forest Products

   404    439    (8)             773      717    8             1,913      1,633    17     

Agricultural Products

   397    357    11              681      550    24             1,715      1,541    11     

Metals

   364    361    1              673      570    18             1,849      1,579    17     

Phosphates and Fertilizers

   362    444    (18)             354      351    1             978      791    24     

Food and Consumer

   245    249    (2)             477      438    9             1,947      1,759    11     
                            

Total Merchandise

   2,824    2,888    (2)             4,748      4,228    12             1,681      1,464    15     

Coal

   1,798    1,726    4              2,259      1,992    13             1,256      1,154    9     

Coke and Iron Ore

   94    83    13              119      88    35             1,266      1,060    19     
                            

Total Coal

   1,892    1,809    5              2,378      2,080    14             1,257      1,150    9     

Automotive

   463    488    (5)             847      844    -             1,829      1,730    6     

Other

   -    -    -              181      104    74             -      -    -     

Total Rail

   5,179    5,185    -              8,154      7,256    12             1,574      1,399    13     
                            

International

   1,281    1,274    1              580      545    6             453      428    6     
                            

Domestic

   898    891    1              786      766    3             875      860    2     

Other

   -    -    -              46      51    (10)            -      -    -     
                            

Total Intermodal

   2,179    2,165    1              1,412      1,362    4             648      629    3     
                            

Total Surface Transportation

   7,358    7,350    - %         $ 9,566    $ 8,618    11%        $ 1,300    $ 1,173    11%  
                            

 

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CSX Corporation

REVENUE

Rail Operating Revenue

Fourth quarter 2006 Surface Transportation revenue represents the 19th consecutive quarter of year-over-year revenue gains. Continued traffic re-pricing was the primary driver of revenue-per-unit gains.

Merchandise

Chemicals – A strong pricing environment continued to be the primary driver of gains in revenue and revenue per unit. Weakness in plastics volumes offset strengths in petroleum products such as propane.

Emerging Markets – Increased revenue was supported by growth in shipments of rock and minerals. Highway construction remained steady in many coastal markets that are still rebuilding from last year’s hurricanes. Revenue per unit improved due to strong pricing actions.

Forest Products – Emphasis on more profitable shipments continued to produce strong revenue and revenue-per-unit growth across all forest product markets. Building products and printing paper shipments slowed due to decreased demand.

Agricultural Products – High demand in feed grain, soybean, ethanol, and export shipments supported revenue per unit increases across all agricultural product markets.

Metals – Revenue and revenue per unit increased due to continued pricing gains. However, volumes declined as a result of lower demand in the automotive sector. The resulting high inventory levels have driven mills to reduce output in an attempt to re-balance supply with demand.

Phosphates and Fertilizers – The increase in offshore phosphate production and the closure of domestic phosphate plants in the fourth quarter of 2005 and the first quarter of 2006 reduced U.S. production. This volume loss was offset by price gains in other fertilizer markets.

Food and Consumer – Revenue per unit increased due to volume growth in alcoholic beverages and strong pricing actions, which were offset by market softness in building products and perishables as well as volume declines in the appliance market.

Coal

Revenue and volume improved due to increased shipments to utilities in the Southeastern United States and increased export volumes. Revenue per unit increased due to the continued favorable pricing environment. Utility inventories are believed to be at target levels.

Automotive

As a result of reduced automobile production in North America, automotive volume has continued to decrease primarily driven by a decline of truck and sport utility vehicle demand. However, these volume declines were partially offset by revenue per unit gains driven by pricing activity.

Intermodal

International – Volume increased due to continued growth of imported consumer goods from Asia. Revenue per unit improvement was driven by the favorable pricing environment, offset by lower fuel surcharge revenue.

Domestic – Volume decreased as a result of weaker demand in the wholesale market and a modal shift in the parcel business. Increases in shorter haul truckload business and repositioning of empty containers only partially offset these volume losses. This change in the mix of traffic along with a lower fuel surcharge rate, had a negative impact on revenue per unit.

 

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CSX Corporation

EXPENSE

Surface Transportation expenses increased $87 million from last year’s fourth quarter. Significant variances are described below.

Labor and Fringe expenses increased $22 million primarily due to wage and benefit inflation. Also included were higher incentive compensation costs and higher staffing which was partially offset by productivity gains.

Materials, Supplies and Other expenses increased $64 million. The primary drivers are net favorable casualty reserve and other adjustments recognized in the prior year as well as current year inflation.

Depreciation expense increased $8 million due to a larger asset base related to higher capital spending.

Fuel expense increased $31 million driven by a reduction in hedge benefits from the expiration of the fuel hedge program, offset by lower fuel prices.

Equipment and Other Rent expenses decreased $11 million driven by lower volumes in some markets, as well as improvement in operational fluidity, which drove improvements in asset utilization.

Gain on Insurance Recoveries of $27 million represented cash received for lost profits and higher replacement value of property compared to the value of the property that was damaged, after consideration of the company’s insurance deductible.

 

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CSX Corporation

RAIL OPERATING STATISTICS (Estimated)

 

          Fourth Quarter     Year  
               
          2006     2005     % Change     2006     2005     % Change  
               

Coal

  

Domestic:

            

(Millions of Tons)

  

    Utility

   38.6     38.1     1 %   158.4     149.8     6 %
  

    Other

   5.5     5.2     6     20.8     21.3     (2 )
               
  

        Total Domestic

   44.1     43.3     2     179.2     171.1     5  
  

Export

   3.8     2.4     58     13.3     12.4     7  
               
  

        Total

   47.9     45.7     5     192.5     183.5     5  
               

Revenue Ton-Miles

  

Merchandise

   34.0     34.1     -     139.2     136.8     2  

(Billions)

  

Automotive

   2.1     2.3     (9 )   8.2     8.6     (5 )
  

Coal

   21.1     20.1     5     84.8     81.2     4  
  

Intermodal

   5.2     5.5     (5 )   20.9     20.8     -  
               
  

        Total

   62.4     62.0     1     253.1     247.4     2  
               

Gross Ton-Miles

  

Total Gross Ton-Miles

            

(Billions)

  

(Excludes locomotive

gross ton-miles)

   117.6     116.3     1     472.3     463.7     2  

Service Measurements

  

Personal Injury

Frequency Index (Per

200,000 Man Hours)

   1.32     1.46     10     1.39     1.77     21  
  

FRA Train Accidents

Frequency (Per Million

Train Miles)

   3.48     4.14     16     3.35     4.41     24  
  

On-Time Originations

   76.4 %   55.9 %   37     76.0 %   51.1 %   49  
  

On-Time Arrivals

   65.9 %   43.5 %   51     62.7 %   40.1 %   56  
  

Average System Dwell

Time (Hours) (a)

   24.7     29.6     17     25.6     29.7     14  
  

Average Total Cars-

On-Line

   225,780     230,172     2     224,680     233,118     4  
  

Average Velocity, All

Trains (Miles Per Hour)

   19.8     18.8     5     19.8     19.2     3  
  

Average Recrews (Per

Day)

   60     78     23     59     68     13 %

Resources

  

Route Miles

   21,114     21,357     (1 )      
  

Locomotives (Owned

and long-term leased)

   3,851     3,788     2        
  

Freight Cars (Owned and

long-term leased)

   101,602     103,544     (2 )%      

(a) In October 2005, the Association of American Railroads adopted a new dwell calculation in an effort to standardize reporting across U.S. railroads. Beginning in 2007 and going forward, CSXT will adopt this new method. If CSXT had used this new method in the fourth quarter and year 2006, average system dwell time would have been 24.3 and 25.1 hours for those periods, respectively.

SURFACE TRANSPORTATION FUEL STATISTICS

 

     Fourth Quarter         Year
     2006     2005         2006    2005
            

Diesel No. 2:

             

Estimated Fuel Consumption (Millions of Gallons)

   149.6     149.7       597.7    595.5

Price Per Gallon—Net of Fuel Hedge Benefits (Dollars)

   $  1.8115     $1.6032       $  1.8605    $  1.3149

Impact of Year-to-Year Price Variance on Operating Expense

(Dollars in Millions)

   $        (31 )         $     (326)   
            

 

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CSX Corporation

OTHER INCOME (EXPENSE) (Unaudited)

 

     Quarters Ended           Years Ended        
                    
    

Dec. 29,

2006

   

Dec. 30,

2005

    $Change    

Dec. 29,

2006

   

Dec. 30,

2005

    $Change  
                

Interest Income

   $ 12     $ 8     $ 4     $ 41     $ 38     $ 3  

Income from Real Estate and Resort Operations (a)

     18       59       (41 )     24       85       (61 )

Gain on Conrail Property (After Tax) (b)

     26       -       26       26       -       26  

Minority Interest Expense

     (5 )     (5 )     -       (21 )     (19 )     (2 )

Miscellaneous (c)

     11       -       11       25       (3 )     28  
                

Total

   $ 62     $ 62     $ -     $ 95     $ 101     $ (6 )
                

 

(a)

Income from Real Estate and Resort Operations includes the results of operations from CSX Hotels, Inc., a resort doing business as The Greenbrier, located in White Sulphur Springs, West Virginia, as well as the results of the company’s real estate sales, leasing, acquisition, and management and development activities. The change in income from these activities decreased primarily due to prior year real estate sales.

 

(b)

This item represents a non-cash gain on additional Conrail property received.

 

(c)

Miscellaneous income increased for the fourth quarter of 2006 primarily due to improved performance and other items from several other CSX owned or partially owned companies.

 

 

 

EMPLOYEE COUNTS (Estimated)

 

     November
2006
   November
2005
   Change  
      

Surface Transportation

        

Rail

   33,042    32,537    505  

Intermodal

   1,047    1,054    (7 )

Technology and Corporate

   579    562    17  
      

Total Surface Transportation

   34,668    34,153    515  
      

Other

   1,582    1,473    109  
      

Total

   36,250    35,626    624  
      

 

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