CSX CORPORATION COWEN & COMPANY GLOBAL TRANSPORTATION CONFERENCE - - PowerPoint PPT Presentation
CSX CORPORATION COWEN & COMPANY GLOBAL TRANSPORTATION CONFERENCE - - PowerPoint PPT Presentation
CSX CORPORATION COWEN & COMPANY GLOBAL TRANSPORTATION CONFERENCE Progressing Forward Forward Looking Disclosure This information and other statements by the company may contain forward-looking statements within the meaning of the Private
This information and other statements by the company may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to, among other items: projections and estimates of earnings, revenues, margins, volumes, rates, cost-savings, expenses, taxes, liquidity, capital expenditures, dividends, share repurchases or other financial items, statements of management’s plans, strategies and objectives for future operations, and management’s expectations as to future performance and operations and the time by which objectives will be achieved, statements concerning proposed new services, and statements regarding future economic, industry or market conditions or performance. Forward-looking statements are typically identified by words or phrases such as “will,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate,” “preliminary” and similar expressions. Forward-looking statements speak only as of the date they are made, and the company undertakes no obligation to update or revise any forward-looking statement. If the company updates any forward-looking statement, no inference should be drawn that the company will make additional updates with respect to that statement or any
- ther forward-looking statements.
Forward-looking statements are subject to a number of risks and uncertainties, and actual performance or results could differ materially from that anticipated by any forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by any forward-looking statements include, among others; (i) the company’s success in implementing its financial and operational initiatives; (ii) changes in domestic or international economic, political or business conditions, including those affecting the transportation industry (such as the impact of industry competition, conditions, performance and consolidation); (iii) legislative or regulatory changes; (iv) the inherent business risks associated with safety and security; (v) the outcome of claims and litigation involving or affecting the company; (vi) natural events such as severe weather conditions or pandemic health crises; and (vii) the inherent uncertainty associated with projecting economic and business conditions. Other important assumptions and factors that could cause actual results to differ materially from those in the forward-looking statements are specified in the company’s SEC reports, accessible on the SEC’s website at www.sec.gov and the company’s website at www.csx.com.
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Forward Looking Disclosure
CSX reports its financial results in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). CSX also uses certain non-GAAP measures that fall within the meaning of Securities and Exchange Commission Regulation G and Regulation S-K Item 10(e), which may provide users of the financial information with additional meaningful comparison to prior reported results. Non-GAAP measures do not have standardized definitions and are not defined by U.S. GAAP. Therefore, CSX’s non-GAAP measures are unlikely to be comparable to similar measures presented by other companies. The presentation of these non-GAAP measures should not be considered in isolation from, as a substitute for, or as superior to the financial information presented in accordance with GAAP. Forward Looking Non-GAAP Measures CSX presents non-GAAP or adjusted operating ratio and adjusted net earnings per share, assuming dilution on a forward-looking basis. The most directly comparable forward-looking GAAP measure is operating ratio and net earnings per share, assuming
- dilution. CSX is unable to provide a quantitative reconciliation of these forward-looking non-GAAP measures to the most directly
comparable forward-looking GAAP measure, because CSX cannot reliably forecast the timing and amount of future restructuring charges and other charges related to the change of leadership and strategy which are difficult to predict and estimate. Please note that the unavailable reconciling items could significantly impact CSX’s future financial GAAP results.
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Non-GAAP Measures Disclosure
$2,800 $3,150 $3,500 $3,850 $4,200 2011 2012 2013 2014 2015 2016
CSX Operating Income
Dollars in Millions
CSX’s recent performance has been range bound
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55% 65% 75% 85% 2011 2012 2013 2014 2015 2016
CSX Operating Ratio
- CSX’s financial performance has
been relatively flat since 2011
― Offset ~$2B Coal revenue decline, but made little progress relative to the industry
- Service performance has had
peaks and valleys
― 2012-13 were strong years, but 2014 had significant challenges ― 2015-16 improvements muted by heavy focus on train productivity given coal decline
Goal is consistent, high service levels, accompanied by a radically improved financial trajectory
- Precision Scheduled Railroading rollout has been rapid
― Implementing core tenets on an accelerated basis
- Now focused on executing and refining operating plan
― Aligning field leaders with Precision Railroading and new regional structure
- Resources support current train plan
― As execution improves, service, volume and utilization are expected to improve
- Long-term vision intact; full-year 2017 guidance refined
― Transition issues in Q3 impact operating ratio and EPS expectations
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CSX is undergoing transformational change
- Transitioning hump yards
― Started with twelve; seven have been converted to flat switching operations ― Two to four hump yards likely long term
- Current footprint supports
radically different train plan
― Strategic blocking allows for farther, faster transit while reducing handlings
- Yard efficiency improving
― Nearly two-thirds of all yard activity is now done through flat switching ― Designed to reduce transit times in new framework by at least a day
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Precision Scheduled Railroading yard update
CSX Hump Terminals
Transitioning operations to flat-switching
Selkirk, NY Cumberland, MD Hamlet, NC Waycross, GA Atlanta, GA Birmingham, AL Nashville, TN Louisville, KY Avon, IN Cincinnati, OH Willard, OH Toledo, OH
Transitioned to flat-switching operations Hump Terminals
- Balanced operating plan normalizes flow of assets
― Train size down during Q2; significant locomotive and car reductions
- Converting unit trains into merchandise batch network
― Improves asset utilization and is helping drive train length increases in Q3
- Reduced operating units from nine to five
―
Facilitates efficient traffic flows, emphasizes customer service at local level
- Major revision to train plan went into effect early July
― ~1,300 train plan changes since March; pace has moderated last several weeks
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Significant operating plan changes now in effect
Service measures took step back; have stabilized
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Significant Derailments
Note: Metrics reported using new CSX definitions; details available at www.csx.com/servicemetrics 15.5 13.6
WK 26 WK 35
Train Velocity (mph)
11.9 11.5
WK 26 WK 35
Terminal Dwell (hours)
139.7 145.7
WK 26 WK 35
Cars Online
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Resources support new train plan
Average Daily Trains Holding for Power
2014 – 2017 YTD by Week
Train Crew Delay Hours
2014 – 2017 YTD by Week
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
2017 2016 2014
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
2017 2016 2014
New operating plan has eliminated over 300 crew starts per week
― Active T&E count down about 300, with further opportunity going forward
Locomotive availability also high, driven by consolidated train plan
― About 850 locomotives are in storage, sold or retired
- Network is now aligned with
Precision Railroading plan
― Hump conversions and new operating unit structure flow from revised train plan
- Developing decision-making
ability of front line supervisors
― Began “Hunter camps” and recruited ~15 experienced Precision Railroading leaders
- Revised train plan is gaining
traction in the field
― Transitioning from major re-design phase to execution and refinement
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Now focused on operating plan execution
CSX Network
New regions represented by colored lines
Cincinnati, OH Willard, OH Selkirk, NY Waycross, GA Avon, IN
(1%) 5% 4% 9% 1% 3% 3% 2% 7% (3%) (3%) 2% 7% 2% 1% 11% (4%) (7%) 0% 6% 1%
Domestic Intermodal International Intermodal Industrial Sector Construction Sector Agricultural Sector Coal Total
Year-Over-Year Volume Growth
First Quarter Second Quarter Third Quarter to Date 11
Third quarter volume up modestly during transition
Note: Third quarter to date volume reflects shipments CSX fiscal weeks 27-35, starting July 1st and ending September 1st
27.3 26.0 25.5 24.6 Q4 2016 Q1 2017 Q2 2017 Q3 2017
Union Management
- Year-to-date total workforce
reduction is now 3,700
― Includes reduction of over 1,000 contractors / consultants
- Employee reduction now
2,700 versus year-end 2016
― Includes management restructuring and rightsizing to new train plan
- Precision Railroading model
also enables union reductions
― Non-management headcount down 7% so far this year
CSX Employees in Thousands
Ahead of pace on workforce reductions
Note: Third quarter headcount reflects end of August, other bars reflect end of quarter figures. Beginning in Q3 and in each subsequent quarter, employee headcount includes employees on leave. Prior period employee count has been updated to reflect this methodology change.
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93.5 103.8 100.9 Q1 '17 Q2 '17 Q3 '17
Locomotive Efficiency
GTM’s per Horsepower
Remain on track for record productivity in 2017
6,560 6,430 6,855 Q1 '17 Q2 '17 Q3 '17
Train Length
Feet
Note: Third quarter 2017 efficiency measures are quarter-to-date through September 1st
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8.8 8.1 7.6 Q1 '17 Q2 '17 Q3 '17
Fuel Consumption
Average Weekly Gallons in Millions
- 2017 guidance1 impacted by transitional issues in Q3
― Operating ratio now around high end of mid-60s; still with record efficiency gains ― EPS growth of 20% – 25% off the 2016 reported EPS of $1.81 ― Free Cash Flow before dividends still expected to be around $1.5 billion ― Expectations still presume coal markets and overall economy remain stable
- $1.5 billion of share repurchases authorized
― Over $1.3 billion repurchased-to-date; expect program completion by end of Q3
- Multi-year strategy and guidance to be conveyed
― Timing confirmed for October 29th – 30th CSX Investor Conference
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1 All 2017 guidance is on an adjusted basis, excluding restructuring charges. Please see Non-GAAP Measures Disclosure on Slide 3.