EX-99.2 BYLAWS 3 flash3q07.htm 3Q07 QUARTERLY FINANCIAL REPORT flash3q07.htm
Exhibit 99.2
 
 
 
 
 
 
 
 



CSX Reports Strong Third Quarter Earnings
 Surface Transportation Highlights:
·     Double-digit gains in operating income
·     Operating ratio improves on higher productivity and efficiency
·     Strong safety and customer service performance
 
Jacksonville, Florida (Oct. 16, 2007) – CSX Corporation [NYSE: CSX] today reported third quarter 2007 net earnings of $407 million, or 91 cents per share, including 24 cents per share from discontinued operations.  In the same quarter last year, the company reported earnings of $328 million, or 71 cents per share, including 17 cents per share from insurance gains and the resolution of certain tax matters.  On a comparable basis, excluding these items, earnings per share from continuing operations increased 24 percent on a year-over-year basis.  (See table below for reconciliation of quarter items to reported numbers.)
 
“Our core earning power continues to improve in a more challenging transportation environment,” said Michael Ward, chairman, president and CEO.  “The CSX team delivered exceptional levels of safety and service for our customers and excellent third quarter results that build on the superior value we have delivered for our shareholders over the last three years.”
 
Third quarter revenues were $2.5 billion, a 3 percent increase over the third quarter of 2006. This increase was driven by an 8 percent improvement in revenue per unit, more than offsetting the 4 percent decline in volume.
 
The company’s Surface Transportation businesses recorded third quarter operating income of $552 million versus $489 million in the same quarter last year.  Both quarters included insurance recoveries of $1 million and $15 million, respectively. On a comparable basis, excluding the insurance recoveries, operating income rose 16 percent on a year-over-year basis.
 
Continued improvements in safety, service and productivity combined to help improve the company’s operating ratio to 78 percent for the quarter. This represents a 240 basis point improvement on a comparable basis from the same period last year.
 
“With our financial results improving on a sustained basis, we are targeting nearly $5 billion of investment in our transportation network over the next three years,” said Ward.  “These investments will position us to meet the pressing transportation needs of our nation in a way that reduces highway congestion and supports the environment.  When we do this, we create long-term value for shareholders, and that value is enhanced in the near term when we return capital through dividends and repurchases.  This balanced approach to value creation is serving our shareholders very well.”
 
 
Table of Contents
The accompanying unaudited
CSX CORPORATION
CONTACTS:
 
financial information should be
500 Water Street
 
 
read in conjunction with the
15th Floor, C900
INVESTOR RELATIONS
Consolidated Financial Statements……........….p. 3
Company’s most recent
Jacksonville, FL
David Baggs
Annual Report on Form 10-K,
32202
(904) 359-4812
Quarterly Reports on Form
http://www.csx.com
MEDIA
 
10-Q, and any Current
 
Garrick Francis
 
Reports on Form 8-K
 
(904) 359-1708
 

1

 
 
 
 GAAP RECONCILIATION 1
 
 (Dollars in millions, except per share amounts)
 
 
 
Third Quarter
 
 
 
 
 
2007
 
 
 
2006
 
Improvement
 
 Surface Transportation Operating Income
 
       $        552
 
 
 
    $       489
 
 
 
 Less Gain on Insurance Recoveries
 
                  (1)
 
             (15)
 
 
 
 Comparable Surface Transportation Operating    Income
 
          $     551
 
 
 
       $    474
 
16%
 
 
 
  
 
 
 
 
 
 
 
EPS
 
      $     0.91
 
   $       0.71
 
 
 
 Less Discontinued Operations
 
             (0.24)
 
-
 
 
 
 Less Gain on Insurance Recoveries After Tax
 
                   - 
 
          (0.02)
 
 
 
 Less Income Tax Benefits
 
 -
 
          (0.15)
 
 
 
 
 
 
 
 
 
 
 
 
24%
 
 Comparable EPS from Continuing Operations
 
$   0.67
 
$    0.54
 
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 Web site at www.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 October 17, 2007 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.
 
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.
###
 
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 Securities and Exchange Commission 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 Surface Transportation operating income and earnings per share 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.

Forward-looking statements
 
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,” ”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.csx.com.
 
2

 
CSX Corporation
(Dollars in Millions, Except Per Share Amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters Ended
 
 
Nine Months Ended
 
 
 
 
 
Sept. 28,
Sept. 29
 
 
Sept. 28,
Sept. 29
 
 
 
 
 
2007
2006
$ Change
 
2007
2006
$ Change
Surface
Revenue
 $     2,501
 $          2,418
 $             83
 
 $           7,453
 $                   7,170
 $                   283
Transportation
Expense
 
 
 
 
 
 
 
 
 
Labor and Fringe
           746
                736
                (10)
 
               2,219
                       2,169
                       (50)
 
 
Materials, Supplies and Other
           503
497
                  (6)
 
               1,573
                       1,468
                      (105)
 
 
Fuel
           305
300
                  (5)
 
                 853
841
                        (12)
 
 
Depreciation
           220
213
                  (7)
 
                 662
640
                       (22)
 
 
Equipment and Other Rents
            116
135
                  19
 
                 346
391
                         45
 
 
Inland Transportation
             60
63
                    3
 
                  177
181
                            4
 
 
Gain on Insurance Recoveries (Note a)
              (1)
                  (15)
                (14)
 
                  (19)
                         (141)
                      (122)
 
 
 
Total Expense
         1,949
              1,929
               (20)
 
               5,811
                      5,549
                     (262)
 
Surface Transportation Operating Income
           552
                489
                 63
 
               1,642
                        1,621
                          21
 
 
 
 
 
 
 
 
 
 
 
 
Other Operating Income
               3
                      -
                    3
 
                     5
                             10
                          (5)
Consolidated
Consolidated Operating Income
           555
                489
                 66
 
               1,647
                        1,631
                          16
 
 
 
 
 
 
 
 
 
 
 
 
Other Income - Net
              17
                   25
                    (8)
 
                    17
                            33
                           (16)
 
Interest Expense
          (102)
                 (97)
                  (5)
 
               (302)
                       (293)
                          (9)
 
Earnings From Continuing Operations
 
 
 
 
 
 
 
 
 
 
Before Income Taxes
           470
                 417
                 53
 
               1,362
                        1,371
                          (9)
 
 
 
 
 
 
 
 
 
 
 
 
Income Tax Expense (Note b)
          (173)
                 (89)
               (84)
 
                (501)
                       (408)
                       (93)
 
Earnings from Continuing Operations
           297
                328
                (31)
 
                  861
                         963
                      (102)
 
 
 
 
 
 
 
 
 
 
 
 
Discontinued Operations (Note c)
            110
                      -
                   110
 
                  110
                               -
                           110
 
Net Earnings
 $        407
 $            328
 $                79
 
 $              971
 $                     963
 $                          8
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings Per
Net Earnings Per Share, Assuming Dilution:
 
 
 
 
 
 
 
Common Share
From Continuing Operations
 $   0.67
 $  0.71
 $ (0.04)
 
 $       1.89
 $       2.07
 $     (0.18)
 
 
Discontinued Operations
      0.24
        -
     0.24
 
          0.24
            -
         0.24
 
 
Net Earnings
 
 $   0.91
 $  0.71
 $  0.20
 
 $       2.13
 $       2.07
 $      0.06
 
 
 
 
 
 
 
 
 
 
 
 
Average Diluted Common Shares
 
 
 
 
 
 
 
 
 
    Outstanding (Thousands)
    445,548
         465,641
 
 
          455,882
                 466,737
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash Dividends Paid Per Common Share
 $       0.15
 $            0.10
 
 
 $             0.39
 $                    0.23
 


See accompanying Notes to Consolidated Financial Statements on page 6.

3



CONSOLIDATED BALANCE SHEET
(Dollars in Millions)
 
 
 
 
(Unaudited)
 
 
 
 
 
Sept. 28,
Dec. 29,
 
 
 
 
2007
2006
Assets
Cash and Cash Equivalents
 $                 660
 $                  461
 
Short-term Investments
                    576
                     439
 
Accounts Receivable - Net
                 1,173
                  1,174
 
Materials and Supplies
                    244
                     204
 
Deferred Income Taxes
                    229
                     251
 
Other Current Assets
                      98
                     143
 
 
 
Total Current Assets
                 2,980
                  2,672
 
 
 
 
 
 
 
Properties
              28,569
                27,715
 
Accumulated Depreciation
              (7,141)
                 (6,792)
 
 
 
Properties - Net
              21,428
                20,923
 
 
 
 
 
 
 
Investment in Conrail
                    624
                     607
 
Affiliates and Other Companies
                    355
                     336
 
Other Long-term Assets
                    218
                     591
 
 
 
Total Assets
 $           25,605
 $             25,129
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and
Accounts Payable
 $             1,002
 $                  974
Shareholders' Equity
Labor and Fringe Benefits Payable
                    480
                     495
 
Casualty, Environmental and Other Reserves
                    241
                     253
 
Current Maturities of Long-term Debt
                    230
                     592
 
Short-term Debt
                        5
                         8
 
Income and Other Taxes Payable
                    109
                     114
 
Other Current Liabilities
                    101
                       86
 
 
 
Total Current Liabilities
                 2,168
                  2,522
 
 
 
 
 
 
 
Casualty, Environmental and Other Reserves
                    666
                     668
 
Long-term Debt
                 6,678
                  5,362
 
Deferred Income Taxes
                 5,931
                  6,110
 
Other Long-term Liabilities
                 1,385
                  1,525
 
 
 
 Total Liabilities
              16,828
                16,187
 
 
 
 
 
 
 
Shareholders' Equity:
 
 
 
 
Common Stock, $1 Par Value
                    420
                     438
 
 
Other Capital
                    471
                  1,469
 
 
Retained Earnings
                 8,262
                  7,427
 
 
Accumulated Other Comprehensive Loss
                 (376)
                    (392)
 
 
 
Total Shareholders' Equity
                 8,777
                  8,942
 
 
 
 
 
 
 
 
 
Total Liabilities and Shareholders' Equity
 $           25,605
 $             25,129



See accompanying Notes to Consolidated Financial Statements on page 6.

4



CSX Corporation
CONSOLIDATED CASH FLOW STATEMENT (Unaudited)
 (Dollars in Millions)
 
 
 
 
 Nine Months Ended
 
 
 
 
 Sept. 28,
 Sept. 29,
 
 
 
 
2007
2006
Operating Activities
 Net Earnings
 $        971
 $          963
 
 Adjustments to Reconcile Net Earnings to Net Cash Provided:
 
 
 
 
 Depreciation
           666
             648
 
 
 Deferred Income Taxes
           154
               46
 
 
 Non-cash Discontinued Operations (Note c)
         (110)
                 -
 
 
 Gain on Insurance Recoveries (Note a)
           (19)
           (141)
 
 
 Insurance Proceeds
              10
             104
 
 
 Other Operating Activities
              15
             (63)
 
 
 Changes in Operating Assets and Liabilities:
 
 
 
 
 
 Accounts Receivable
           (17)
           (133)
 
 
 
 Other Current Assets
           (54)
               73
 
 
 
 Accounts Payable
              64
               51
 
 
 
 Income and Other Taxes Payable
        153
             (61)
 
 
 
 Other Current Liabilities
           (15)
           (120)
 
 
 Net Cash Provided by Operating Activities
        1,818
          1,367
 
 
 
 
 
 
Investing Activities
 Property Additions
      (1,195)
        (1,204)
 
 Insurance Proceeds
              12
             130
 
 Purchase of Short-term Investments
      (2,035)
        (1,023)
 
 Proceeds from Sales of Short-term Investments
        1,914
          1,072
 
 Other Investing Activities
             (9)
               (9)
 
 
 Net Cash Used In Investing Activities
      (1,313)
        (1,034)
 
 
 
 
 
 
Financing Activities
 Short-term Debt - Net
             (3)
               12
 
 Long-term Debt Issued
        2,000
             473
 
 Long-term Debt Repaid
         (712)
           (499)
 
 Dividends Paid
         (170)
           (101)
 
 Stock Options Exercised
           144
             237
 
 Shares Repurchased
      (1,609)
           (422)
 
 Other Financing Activities
            44
               46
 
 
 Net Cash Used In Financing Activities
         (306)
           (254)
 
 
 
 
 
 
Cash and Cash
 Net Increase  in Cash and Cash Equivalents
           199
               79
  Equivalents
 
 
 
 
 
 
 Cash and Cash Equivalents at Beginning of Period
           461
             309
 
 
 Cash and Cash Equivalents at End of Period
 $        660
 $          388



See accompanying Notes to Consolidated Financial Statements on page 6.

5



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:
CSX recognized a pre-tax gain of $1 million and $15 million for the third quarter of 2007 and 2006, respectively. These gains represent insurance recoveries from claims related to Hurricane Katrina property damage and lost profits. Additional gains are expected in future periods as more cash is collected.

(b)
Income Tax:
 
·
  In the third quarter of 2006, CSX recognized an income tax benefit of $69 million principally related to the resolution of the 1994 – 1996 federal income tax audits.
 
·
  For the nine months of 2006, CSX recognized $110 million of income tax benefits, principally related to the resolution of certain tax matters.

(c)
Discontinued Operations:
In the third quarter of 2007, the Internal Revenue Service completed its review of the Company’s pre-filing agreement, which is an early review of specific transactions.  The company recorded an income tax benefit of $110 million in the third quarter of 2007, primarily associated with the resolution of income tax matters related to former activities of the container shipping and marine service businesses.   This third quarter benefit is recorded as discontinued operations as the Company no longer is active in these businesses.  This benefit is associated with tax basis adjustments, foreign dividends and foreign tax credits from operations over a multi-year period. 

6



CSX Corporation
(Dollars in Millions)
 
 
 
 
 
 
 
 
 
 
 
Quarters Ended September 28, 2007 and September 29, 2006
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Surface
 
 
 
 
 
Rail
Intermodal
Transportation
 
 
 
 
 
2007
2006
2007
2006
2007
2006
$ Change
Revenue
 $  2,164
 $   2,054
 $     337
 $      364
 $  2,501
 $   2,418
 $       83
Expense
 
 
 
 
 
 
 
 
Labor and Fringe
        726
        716
          20
          20
        746
        736
        (10)
 
Materials, Supplies and Other
        455
        452
          48
          45
        503
        497
          (6)
 
Fuel
        305
        300
            -
            -
        305
        300
          (5)
 
Depreciation
        211
        205
            9
            8
        220
        213
          (7)
 
Equipment and Other Rents
          90
        101
          26
          34
        116
        135
          19
 
Inland Transportation
      (111)
       (119)
        171
        182
          60
          63
           3
 
Gain on Insurance Recoveries
          (1)
         (15)
            -
            -
          (1)
         (15)
        (14)
 
 
Total Expense
     1,675
      1,640
        274
        289
     1,949
      1,929
         (20)
Surface Transportation
 
 
 
 
 
 
 
 
Operating Income
 $     489
 $      414
 $       63
 $       75
 $     552
 $      489
 $       63
 
 
 
 
 
 
 
 
 
 
 
Surface Transportation
 
 
 
 
 
 
 
 
Operating Ratio
77.4%
79.8%
81.3%
79.4%
77.9%
79.8%
 
 
 
 
 
 
 
 
 
 
 
 
Other Operating Income
 
 
 
 
 $         3
 $          -
 
Consolidated Operating Income
 
 
 
 
 $     555
 $      489
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 28, 2007 and September 29, 2006
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Surface
 
 
 
 
 
Rail
Intermodal
Transportation
 
 
 
 
 
2007
2006
2007
2006
2007
2006
$ Change
Revenue
 $  6,455
 $   6,116
 $     998
 $   1,054
 $  7,453
 $   7,170
 $     283
Expense
 
 
 
 
 
 
 
 
Labor and Fringe
     2,159
      2,109
          60
          60
     2,219
      2,169
        (50)
 
Materials, Supplies and Other
     1,435
      1,325
        138
        143
     1,573
      1,468
      (105)
 
Fuel
        853
        841
            -
            -
        853
        841
        (12)
 
Depreciation
        634
        612
          28
          28
        662
        640
        (22)
 
Equipment and Other Rents
        264
        293
          82
          98
        346
        391
          45
 
Inland Transportation
      (330)
       (346)
        507
        527
        177
        181
           4
 
Gain on Insurance Recoveries
        (19)
       (139)
            -
          (2)
        (19)
       (141)
      (122)
 
 
Total Expense
     4,996
      4,695
        815
        854
     5,811
      5,549
      (262)
Surface Transportation
 
 
 
 
 
 
 
 
Operating Income
 $  1,459
 $   1,421
 $     183
 $      200
 $  1,642
 $   1,621
 $       21
 
 
 
 
 
 
 
 
 
 
 
Surface Transportation
 
 
 
 
 
 
 
 
Operating Ratio
77.4%
76.8%
81.7%
81.0%
78.0%
77.4%
 
 
 
 
 
 
 
 
 
 
 
 
Other Operating Income
 
 
 
 
 $         5
 $       10
 
Consolidated Operating Income
 
 
 
 
 $  1,647
 $   1,631
 


7



CSX Corporation
SURFACE TRANSPORTATION VOLUME AND REVENUE (Unaudited)
Volume (Thousands); Revenue (Dollars in Millions); Revenue Per Unit (Dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters Ended  September 28, 2007 and September 29, 2006
 
 
Volume
 
Revenue
 
Revenue Per Unit
 
 
2007
2006
% Change
 
2007
2006
% Change
 
2007
2006
 
% Change
 
Chemicals
          130
              133
        (2)
%
 
 $         336
 $             313
          7
 %
 $      2,585
 $         2,353
 
         10
%
 
Emerging Markets
          128
              133
        (4)
 
 
             157
                 150
          5
 
 
          1,227
               1,128
 
          9
 
 
Forest Products
            87
              100
       (13)
 
 
             182
                200
        (9)
 
 
          2,092
             2,000
 
          5
 
 
Agricultural Products
           101
              102
         (1)
 
 
             190
                 176
          8
 
 
           1,881
              1,725
 
          9
 
 
Metals
            89
                91
        (2)
 
 
              181
                 176
          3
 
 
          2,034
              1,934
 
          5
 
 
Phosphates and Fertilizers
            89
               93
        (4)
 
 
             100
                   82
        22
 
 
           1,124
                882
 
        27
 
 
Food and Consumer
            52
                61
       (15)
 
 
              112
                 123
        (9)
 
 
          2,154
              2,016
 
          7
 
Total Merchandise
          676
              713
        (5)
 
 
          1,258
              1,220
          3
 
 
           1,861
                1,711
 
          9
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Coal
          441
              451
        (2)
 
 
             619
                 571
          8
 
 
          1,404
              1,266
 
          11
 
 
Coke and Iron Ore
24
               24
           -
 
 
               30
                   31
        (3)
 
 
          1,250
              1,292
 
        (3)
 
Total Coal
          465
             475
        (2)
 
 
             649
                602
          8
 
 
          1,396
              1,267
 
         10
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Automotive
          102
              100
          2
 
 
             198
                 183
          8
 
 
           1,941
              1,830
 
          6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other
              -
                   -
           -
 
 
               59
                49
        20
 
 
                -
                    -
 
           -
 
Total Rail
       1,243
          1,288
        (3)
 
 
          2,164
             2,054
          5
 
 
           1,741
              1,595
 
          9
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
International
          280
             338
       (17)
 
 
             129
                 158
       (18)
 
 
             461
                467
 
         (1)
 
 
Domestic
          250
             226
          11
 
 
             202
                 198
          2
 
 
             808
                876
 
        (8)
 
 
Other
              -
                   -
           -
 
 
                 6
                     8
      (25)
 
 
                -
                    -
 
           -
 
Total Intermodal
          530
             564
        (6)
 
 
             337
                364
        (7)
 
 
             636
                645
 
         (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Surface Transportation
       1,773
          1,852
        (4)
%
 
 $       2,501
 $          2,418
          3
 %
 
 $        1,411
 $          1,306
 
          8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 28, 2007 and September 29, 2006
 
 
Volume
 
Revenue
 
Revenue Per Unit
 
 
2007
2006
% Change
 
2007
2006
% Change
 
2007
2006
% Change
 
 
Chemicals
          397
             402
         (1)
%
 
 $         980
 $             913
          7
 %
 
 $      2,469
 $          2,271
 
          9
%
 
Emerging Markets
          376
              401
        (6)
 
 
             458
                442
          4
 
 
           1,218
               1,102
 
          11
 
 
Forest Products
          271
             309
       (12)
 
 
             553
                585
        (5)
 
 
          2,041
              1,893
 
          8
 
 
Agricultural Products
          301
             294
          2
 
 
             560
                497
         13
 
 
          1,860
              1,690
 
         10
 
 
Metals
          276
             280
         (1)
 
 
             539
                 513
          5
 
 
          1,953
              1,832
 
          7
 
 
Phosphates and Fertilizers
          270
             275
        (2)
 
 
             310
                265
         17
 
 
           1,148
                964
 
         19
 
 
Food and Consumer
          163
              188
       (13)
 
 
             335
                 361
        (7)
 
 
          2,055
              1,920
 
          7
 
Total Merchandise
       2,054
          2,149
        (4)
 
 
          3,735
             3,576
          4
 
 
           1,818
              1,664
 
          9
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Coal
       1,324
          1,353
        (2)
 
 
          1,829
              1,685
          9
 
 
           1,381
              1,245
 
          11
 
 
Coke and Iron Ore
            69
               68
           1
 
 
               91
                   89
          2
 
 
           1,319
              1,309
 
           1
 
Total Coal
       1,393
           1,421
        (2)
 
 
          1,920
              1,774
          8
 
 
          1,378
              1,248
 
         10
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Automotive
          330
              351
        (6)
 
 
             624
                637
        (2)
 
 
           1,891
               1,815
 
          4
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other
              -
                   -
           -
 
 
             176
                 129
        36
 
 
                -
                    -
 
           -
 
Total Rail
       3,777
          3,921
        (4)
 
 
          6,455
               6,116
          6
 
 
          1,709
              1,560
 
         10
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
International
          872
             966
       (10)
 
 
             402
                438
        (8)
 
 
             461
                453
 
          2
 
 
Domestic
          706
              661
          7
 
 
             580
                582
 -
 
 
             822
                880
 
        (7)
 
 
Other
              -
                   -
           -
 
 
               16
                   34
      (53)
 
 
                -
                    -
 
           -
 
Total Intermodal
       1,578
          1,627
        (3)
 
 
             998
              1,054
        (5)
 
 
             632
                648
 
        (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Surface Transportation
       5,355
         5,548
        (3)
%
 
 $      7,453
 $          7,170
          4
 %
 
 $       1,392
 $          1,292
 
          8
 %
                                                                                                    
8



CSX Corporation

REVENUE

Third quarter 2007 Surface Transportation revenue represents over five years of quarter-over-quarter revenue gains.  Improved pricing due to the competitive advantage of rail-based transportation solutions and high levels of customer service continued to be the primary drivers of revenue gains offsetting weakness in housing construction and related markets.


Merchandise

Chemicals– Revenue and revenue per unit increases were driven by continued yield management improvements.  While overall volume was down, there were increases in biodiesel and chemicals used in plastics production.  These gains were more than offset by volume declines in chlorine, plastics and petroleum product shipments.

Emerging Markets – Revenue and revenue per unit improved through positive mix changes including an increase in high revenue per unit shipments in military traffic and higher demand in the domestic cement markets due to a reduction in imported cement.  Total volume declined primarily due to lower aggregate shipments, which include crushed stone, sand and gravel, as a result of continued weakness in residential construction.

Forest Products– Revenue was down even with continued yield management initiatives which led to gains in revenue per unit.  Volume declines were seen in lumber and panel shipments driven by the downturn in residential construction.  Volumes were also negatively affected by lower paper production due to electronic media substitution.

Agricultural Products– Pricing gains drove increases in revenue and revenue per unit.  Continued growth in ethanol and feed ingredients were more than offset by weak grain and export volumes driven by higher commodity prices and an increased Southeastern crop which lessened the need for long-haul rail transportation.

Metals– Volume was down as a result of steel production decreases for the quarter primarily due to weakness in the housing market.  This decline was partially offset by strength in steel exports and increased scrap metal shipments due to inventory replenishment.

Phosphates and Fertilizers– Lower global demand for domestically produced phosphates led to lower volume.  This decline was partially offset by higher fertilizer shipments due to increased demand for corn from ethanol products.  Revenue and revenue per unit increased due to pricing and changes in traffic mix.

Food and Consumer– Volume declines in the quarter were driven by decreased demand for building products and reduced shipments of transportation equipment.  Revenue per unit increases were driven by continued pricing gains due to improved service.

Coal
Positive revenue and revenue per unit were influenced by favorable pricing efforts. Volume declined slightly as increased exports were more than offset by utility inventories at target levels and a resulting decrease in domestic coal shipments.

Automotive
Revenue and revenue per unit improved as a result of continued focus on yield management. Volume gains were driven by an increase in year-over-year North American light vehicle production.

Other Rail Revenue
The primary driver of this positive change was the increase in revenue generated by the company’s affiliated businesses.
 

 
Intermodal
International– Volumes were lower primarily due to the termination of certain customer contracts, losses due to select steamship carriers withdrawing from certain markets and slower growth from Aisan markets. Also, volume was impacted by the closing of a terminal facility earlier this year.  Despite pricing gains, revenue per unit decreased due to unfavorable mix changes.

Domestic– Revenue and volumes increased due to a new shorter-haul train service.  The unfavorable mix impact on revenue per unit from this new traffic more than offset price gains in the remaining domestic business.


9


CSX Corporation

 
EXPENSE
 
Surface Transportation expenses increased $20 million from last year’s third quarter.  Significant variances are described below.

Labor and Fringe expenses increased $10 million primarily due to the effect of inflation. The increase was partially offset by a reduction in train crew headcount due to lower volume and productivity gains from improved operations.

Materials, Supplies and Other expenses increased $6 million primarily due to inflation. The increase was mostly offset by a decrease in costs associated with the reduction in train accidents and related costs reflecting continued improvement in safety performance.

Fuel expense increased $5 million due to higher fuel prices, mostly offset by increased fuel efficiency as well as lower volume.

Depreciation expense increased $7 million. A larger asset base related to higher capital spending was partially offset by lower depreciation rates resulting from an equipment life study completed earlier this year.

Equipment and Other Rents expense decreased $19 million due to lower volumes and better asset utilization driven by operational fluidity reflected in lower shipment cycle times and cars-on-line measurements.

Gain on Insurance Recoveries of $1 million represents insurance recoveries related to Hurricane Katrina property damage and lost profits.  The $14 million decrease from last year’s quarter is due to timing of cash receipts.

10



CSX Corporation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RAIL OPERATING STATISTICS(Estimated)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Third Quarter
 
Nine Months
 
 
 
 
 
 
 
 
Improvement
 
 
 
Improvement
 
 
 
 
 
2007
2006
(Decline) %
 
2007
2006
(Decline) %
Coal
Domestic:
 
 
 
 
 
 
 
 
 
 
(Millions of Tons)
 
Utility
 
      38.3
               40.0
         (4)
%
 
     115.2
               119.8
        (4)
%
 
 
Other
 
         5.1
                 5.3
         (4)
 
 
       15.1
                15.3
         (1)
 
 
 
 
Total Domestic
 
      43.4
               45.3
         (4)
 
 
    130.3
               135.1
        (4)
 
 
Export
 
 
        4.7
                  3.1
         52
 
 
      13.6
                  9.5
        43
 
 
 
 
Total
 
       48.1
               48.4
          (1)
 
 
    143.9
              144.6
           -
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue Ton-Miles
Merchandise
 
      33.5
               34.6
         (3)
 
 
    102.3
               105.1
        (3)
 
(Billions)
Automotive
 
         1.9
                  1.7
          12
 
 
       5.8
                  6.2
        (6)
 
 
Coal
 
       21.7
                21.3
           2
 
 
     64.9
               63.6
          2
 
 
Intermodal
 
        4.8
                 5.4
         (11)
 
 
      14.3
                15.7
        (9)
 
 
 
 
Total
 
       61.9
               63.0
         (2)
 
 
    187.3
              190.6
        (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Ton-Miles
Total Gross Ton-Miles
 
 
 
 
 
 
 
 
 
 
(Billions)
(Excludes locomotive gross ton-miles)
 
     113.3
              116.6
         (3)
 
 
   344.4
             354.7
         (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service Measurements
Personal Injury Frequency Index (Per 200,000 Man Hours)
 
       1.24
                1.50
          17
 
 
       1.20
                1.46
         18
 
 
FRA Train Accidents Frequency (Per Million Train Miles)
 
      2.79
               3.24
          14
 
 
     2.80
               3.48
        20
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
On-Time Originations
 
83.1%
76.5%
           9
 
 
79.0%
75.8%
           4
 
 
On-Time Arrivals
 
76.0%
63.4%
         20
 
 
69.8%
61.7%
         13
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average System Dwell Time (Hours)
 
       21.9
               24.4
          10
 
 
     22.8
               24.8
           8
 
 
Average Total Cars-On-Line
    220,604
       225,270
           2
 
     222,974
         224,310
            1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Velocity, All Trains (Miles Per Hour)
 
       21.4
                19.8
           8
 
 
     20.6
                19.8
           4
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Recrews (Per Day)
 
         45
                  55
          18
 
 
        58
                   58
            -
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Resources
Route Miles
 
   21,165
           21,207
 -
 
 
 
 
 
 
 
Locomotives (Owned and long-term leased)
 
    3,925
            3,843
           2
 
 
 
 
 
 
 
Freight Cars (Owned and long-term leased)
 
  96,866
         101,662
         (5)
%
 
 
 
 
 




SURFACE TRANSPORTATION FUEL STATISTICS
 
 
Third Quarter
 
Nine Months
 
 
2007
2006
 
2007
2006
Diesel No. 2:
 
 
 
 
 
 
Estimated Fuel Consumption (Millions of Gallons)
             135
                       144
 
             429
                      448
 
Price Per Gallon (a) (Dollars)
 $        2.25
 $                 2.09
 
 $         1.99
 $                  1.88
 
Impact of Year-to-Year Price Variance on Operating Expense (Dollars in Millions)
 $          (22)
 
 
 $          (47)
 
 
 
 
(a)
2006 amounts are net of fuel hedge benefits.
 

11


 

 
CSX Corporation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters Ended
 
 
Nine Months Ended
 
 
 
Sept. 28,
Sept. 29,
 
 
Sept. 28,
Sept. 29,
 
 
 
2007
2006
$ Change
 
2007
2006
$ Change
Interest Income
 $           13
 $     10
 $   3
 
 $      41
 $       29
 $  12
Income from Real Estate and Resort Operations (a)
                5
        13
    (8)
 
         (9)
           6
   (15)
Minority Interest Expense
              (8)
        (5)
    (3)
 
       (18)
        (16)
     (2)
Miscellaneous
                7
       7
      -
 
           3
          14
   (11)
 
Total
 $           17
 $     25
 $    (8)
 
 $      17
 $       33
 $  (16)
 

(a)  
Income from Real Estate and Resort Operations includes the results of operations of the company’s real estate sales, leasing, acquisition, and management and development activities as well as the results of operations from CSX Hotels, Inc., a resort doing business as The Greenbrier, located in White Sulphur Springs, West Virginia.

 
EMPLOYEE COUNTS (Estimated)
 
 
 
 
 
 
 
 
 
August
August
 
 
 
 
2007
2006
Change
Surface Transportation
 
 
 
 
  Rail
 
   32,635
     33,148
        (513)
 
  Intermodal
     1,004
       1,006
            (2)
 
  Technology and Corporate
        574
          574
              -
 
 
Total Surface Transportation
   34,213
     34,728
        (515)
 
 
 
 
 
 
Resort and Real Estate
     1,745
       1,712
           33
 
 
Total
   35,958
     36,440
        (482)


12