1 1
Dahlman Rose Dahlman Rose Global Transportation Conference Global - - PowerPoint PPT Presentation
Dahlman Rose Dahlman Rose Global Transportation Conference Global - - PowerPoint PPT Presentation
Dahlman Rose Dahlman Rose Global Transportation Conference Global Transportation Conference September 2009 September 2009 1 1 Forward-Looking Disclosure Forward-Looking Disclosure This information and other statements by the company
2 2
Forward-Looking Disclosure Forward-Looking Disclosure
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
- bjectives 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” 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.investors.csx.com.
3 3
CSX Network is vital to America's economy CSX Network is vital to America's economy
- Network serves every major
eastern metropolitan area
- Links key industry and natural
resource centers
- Provides international access
through all major ports
- Diverse business portfolio
provides greater stability
Chicago New York Florida Boston
- St. Louis
Memphis New Orleans
CSX Network
4 4
Economic recession impacting volume levels Economic recession impacting volume levels
% of CSX Volume 35% 11% 12% 14% 28% Chemicals Metals Forest Products Emerging Markets Automotive Intermodal Agricultural Products Phosphates & Fertilizers Food & Consumer Coal CSX Commodity Groups
Note: Third quarter data for 2009 is through week 34
Industrial Segment Housing Products Consumer Products Agriculture Segment Energy
Year-Over-Year Volume Change
(19%) (8%) (14%) (20%) (26%) (14%) (12%) (19%) (23%) (32%)
First Half Third Quarter-to-Date
5 5
Productivity/rightsizing helping offset volume decline Productivity/rightsizing helping offset volume decline
First Half 2009 CSX Cost Structure
25% 29% 46%
First Half 2009 Year-Over-Year Change
(19%) (43%) (14%) (10%)
Volume ST Variable LT Variable Fixed
Short-term Variable Short-term Variable Fixed and Indirect Fixed and Indirect Long-term Variable
Cost structure improvement delivered in culture of safety leadership Cost structure improvement delivered in culture of safety leadership
6 6
Economy expected to remain weak through 2009 Economy expected to remain weak through 2009
Year-Over-Year Change in CSX Volume
(25%) (20%) (15%) (10%) (5%) 0% 5%
Oct Dec Feb Apr Jun Aug
Q4-08 Q1-09 Q2-09 Q3-09
Year-Over-Year Change in GDP and IDP
(25%) (20%) (15%) (10%) (5%) 0% 5% Industrial Production GDP Source: Global Insight – August 2009 Forecast
Q4 2009 Q1 2010 Q4 2010 Q2 2010 Q3 2010 Q3 2009
7 7
CSX is preparing for changes in the economy CSX is preparing for changes in the economy
- Operating strategy leverages
ONE Plan and technology
- Long-term fundamentals
continue to favor railroads
— Most efficient transportation — Most environmentally friendly — Most sustainable infrastructure
- Investments drive long-term
strategic/economic benefits
- Pricing momentum is in the
early stages of recovery
New York Boston New Orleans Florida Midwest Piedmont Atlantic Gulf Coast Northeast Population
GT 6M 3-6M 1-3M LT 1M Source: World Trade Service
Chicago
US Population Centers
Miami
8 8
ONE Plan is the operational foundation ONE Plan is the operational foundation
- ONE Plan is the platform for
the scheduled train network
- Focus remains on optimizing
service and efficiency
- Advanced technology applied
to operations planning
- Network evaluation and
- ptimization is continuous
Merchandise Traffic Automotive Traffic
9 9
CSX network structure adjusts to demand changes CSX network structure adjusts to demand changes
- Downgrading Buffalo terminal
creates operating efficiencies
— Reduces operating expenses — Allows for better use of capital
- Strategically positions the
network for the long-term
— Accesses new supply chains — Provides incremental capacity
Buffalo Willard
Traffic Increase Traffic Decrease
10 10 10 10
Network investments build on strategic advantage Network investments build on strategic advantage
- Single-line reach into Florida,
New England and Illinois Basin
- National Gateway will link ports
to producers and consumers
- Leveraging public-private
partnerships for future growth
NW Ohio Transfer Yard
CSX Network Reach
Key Strategic Advantage
Single-line Advantage NWOH Connectivity SE Expressway
11 11 11 11
Rail remains America’s long-term freight solution Rail remains America’s long-term freight solution
- Infrastructure needs have
gained national attention
- Recovery and Reinvestment
Act provides funding for rails
- Freight rails need to earn
adequate returns Investment Required Through 2035 in Billions
$148 $198 $5,000
Freight Rail Passenger Rail Highways
Source: 2007 AAR/Cambridge Study and 2007 DOT Surface Transportation Study
12 12 12 12
Freight railroads deliver significant public benefits Freight railroads deliver significant public benefits
Safe and Secure Safe and Secure Safe and Secure Railroads are one of the safest and most secure modes of surface transportation Efficient Efficient Efficient One intermodal train can carry the load of 280 trucks, reducing highway congestion “Green” “ “Green Green” ” A locomotive can haul a ton of freight more than 436 miles on one gallon of fuel Sustainable Sustainable Sustainable Railroad capital investment relies principally
- n private funds
13 13 13 13
Competitive environment shifting in favor of rails Competitive environment shifting in favor of rails
Trucking Industry
- Highway congestion increasing
- Structural changes occurring
- Regulatory restrictions continue
- Overall capacity declining
Railroad Industry
- Service quality improving
- Supply chains are expanding
- Focus on “green” is increasing
- Balanced regulations are likely
14 14 14 14
CSX continues to create value for customers CSX continues to create value for customers
Service Reliability
51% 40% 81% 79%
On-time Departures On-time Arrivals
- ONE Plan and customer
focus driving strong service
- Supporting customers as they
reformulate their supply chains
- Driving solutions that reduce
carbon footprint and costs
- Relentless in selling the value
- f rail transportation
Network Performance
19.2 29.0 21.7 23.9
Velociy (mph) Dwell (hours) 2005 3QTD 2009
15 15 15 15
Pricing remains in early stages of recovery Pricing remains in early stages of recovery
Source: Association of American Railroads
R R2
2
During the first 23 years after the passage During the first 23 years after the passage
- f the Staggers Act, rail pricing declined by 60%
- f the Staggers Act, rail pricing declined by 60%
Pre-deregulation, rail pricing kept pace with inflation
Inflation-Adjusted Pricing Indexed: 1981 = $100
$51 $40 $100
1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007
16 16 16 16
Strengthening position for long-term value creation Strengthening position for long-term value creation
Core earning power is resilient in current economy
— First half results represent second highest earnings in company history
Margins remain stable despite volume decline
— Positions CSX to emerge stronger when the economy returns to growth
Maintaining strong investment levels in the network
— Leverages current environment to strengthen network for recovery
Relentless pursuit of excellence Relentless pursuit of excellence
17 17 17 17