Progressing Forward FORWARD LOOKING DISCLOSURE This information and - - PowerPoint PPT Presentation
Progressing Forward FORWARD LOOKING DISCLOSURE This information and - - PowerPoint PPT Presentation
CSX CORPORATION BAIRDS 2017 GLOBAL INDUSTRIAL 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 Securities
FORWARD LOOKING DISCLOSURE
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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NON-GAAP MEASURES 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. Reconciliations of non-GAAP measures to corresponding GAAP measures are attached hereto in the Appendix of this presentation. 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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PRESENTATION OVERVIEW . . .
- CSX is a leading North American transportation company
─
Network serves two-thirds of U.S. population and over 60% of U.S. manufacturing
- Business diversified across broad spectrum of markets
─
Serve consumer products, industrial, agricultural, construction and energy sectors
- Corporation is undergoing significant transformation
─
New team with Precision Scheduled Railroading drives superior performance
- Expect strong financial results for 2017 and beyond
─
Targeting record financial results this year; strong trajectory going forward
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NETWORK SUPPORTS DIVERSE PORTFOLIO
- Network connects all five
eastern mega-regions
- Serves nearly two-thirds of
the nation’s population
- Access to over 60% of U.S.
industrial production
- Superior market reach into
Northeast and Florida
- Well positioned to serve
major East Coast & Gulf ports
New Orleans Memphis
Florida Piedmont Atlantic Gulf Coast Midwest
St Louis Chicago New York Boston Norfolk Jacksonville Miami
Northeast
Savannah Wilmington Tampa Mobile Baltimore Philadelphia Charleston Montreal
CSX-served Ports Population Density
GT 6M 3-6M 1-3M LT 1M
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BUSINESS DIVERSIFIED ACROSS MULTIPLE MARKETS
20% 11% 6% 12% 4% 7% 5% 13% 6% 5% 11%
LTM Revenue by Market: $11.2 Billion
Metals and Equipment Agriculture and Food Phosphates Forest Products Minerals Chemicals Automotive Export Coal Domestic Coal Domestic Intermodal International Intermodal
Consumer Products: 16% Industrial Sector: 37% Agricultural Sector: 16% Construction Sector: 12% Energy Sector: 19%
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50.0% 55.0% 60.0% 65.0% 70.0% 75.0% 80.0% 85.0% 90.0%
1980 1989 1998 2007 2016
Operating Ratio
Best-in-Class Old Paradigm New Paradigm 60% 65% 70% 75% 80%
2011 2012 2013 2014 2015 2016 CSX Operating Ratio
CONVENTIONAL RAILROAD WISDOM TRANSFORMED
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Precision Railroading has redefined conventional wisdom
CSX Historically Range Bound Redefining What is Possible
$2,800 $3,150 $3,500 $3,850 $4,200
2011 2012 2013 2014 2015 2016 CSX Operating Income
Dollars in Millions
PRECISION RAILROADING DRIVING TRANSFORMATION
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Improve Service Operate Safely Control Costs Drive Asset Utilization Develop People
Operational Focus
Terminal Fluidity Balanced Train Plan
Service Improvements
Rolling Stock Utilization People Efficiency Fuel Optimization Train Density
- Sustainable volume and revenue growth
- Improving operating ratio
- Strong FCF generation & less capital intensity
- Superior shareholder distributions and returns
Financial Focus Superior Financial Results
Improved Frequency Better Reliability Faster Transit Quicker Turnaround
Productivity Improvements
&
CHANGES PROFOUND, SWIFT AND PURPOSEFUL
9 5.0 6.0 7.0 8.0 9.0
Mar-1 Apr-1 May-1 Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1
Transit Time (Seven-day Rolling Average)
Transit Time and Transformation Timeline
Transit Time Train Plan Changes Hump Yard Conversions Train Consolidations Other Changes
Nashville Rock Unit Trains Implemented Full Balanced Plan Metals Unit Trains Atlanta, Toledo, Louisville, Hamlet Florida Intermodal Track Curfew Changes Willard Cumberland, Birmingham Restructured Local Plans; 7-day/week Intermodal Service Consolidated Field Operating Regions; Consolidated Dispatch Operations Reverse Avon Avon
- Underutilized terminals and
lanes under strategic review
- Leveraging merchandise trains
to improve network efficiency
- Utilizing Intermodal trains to
serve high density lanes
- Focus is to improve profitability
- f intermodal business
ALIGNING INTERMODAL WITH PRECISION RAILROADING
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Intermodal Terminals
Kansas City Detroit Chicago Jacksonville Atlanta Tampa NY/NJ Charlotte Nashville Baltimore Pittsburgh Philadelphia Cincinnati Savanah Charleston VA Ports Wilmington
DELIVERING RESULTS THROUGH IMPLEMENTATION
- Early gains from Precision
Railroading drive:
─
Operating ratio improvement of 360 bps year-over-year
─
Operating income growth of nearly 20% year-over-year
- Financials resilient through
recent service changes
- Significant opportunity ahead
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Anticipate a first quarter 2018 Investor Conference
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2,385 2,842
70.3% 66.7%
Q3 2016 Q3 2017
YTD Operating Results as of Third Quarter
Operating Income Operating Ratio Note: Results for 2017 excluding restructuring charges; see Non-GAAP reconciliation on slide 15
FINANCIAL OUTLOOK . . .
- Shareholders Distributions Continue to be Strong
― Dividend increase of 11% announced earlier this year ― Repurchased $1.5 billion, or 29 million shares ― New $1.5 billion share repurchase program recently authorized
- Reaffirm 2017 expectations (excludes restructuring charges)
― Operating ratio to be around high end of mid-60s, supported by record efficiency ― Earnings per share growth to be 20% – 25% off 2016 reported base of $1.81 ― Free Cash Flow before dividends to be around $1.5 billion ― Expectations presume coal markets and overall economy remain stable
- New team excited about the long term opportunity
12 Note: Please see Forward Looking Non-GAAP Measures Disclosure on Slide 3
CSX CORPORATION
BAIRD’S 2017 GLOBAL INDUSTRIAL CONFERENCE
Progressing Forward
APPENDICES
Non-GAAP Reconciliations
NON-GAAP INCOME STATEMENT RECONCILIATION
Year-to-Date Income Statement
Dollars in millions GAAP Adjustments Non-GAAP Revenue Expense Labor and Fringe Materials, Supplies and Other Fuel Depreciation Equipment and Other Rents Restructuring Charge $ 8,545 2,249 1,573 621 978 282 296 $ -
- (296)
$ 8,545 2,249 1,573 621 978 282
- Total Expense
Operating Income Interest Expense Other Income – Net Income Taxes 5,999 2,546 (406 19 (828 ) ) (296 296
- (103
) ) 5,703 2,842 (406 19 (931 ) ) Net Earnings Earnings Per Share Operating Ratio $ 1,331 $ 1.45 70.2% $ 193 $ 0.21 (350 bps) $ 1,524 $ 1.66 66.7% 15
Note: Non-GAAP excludes a $296 million restructuring charge and adjusts taxes for nondeductible executive compensation