Add
CSX to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| CSX > SEC Filings for CSX > Form 10-Q on 15-Jul-2009 | All Recent SEC Filings |
15-Jul-2009
Quarterly Report
The Company provides customers with access to an interconnected transportation network that links ports, production facilities and distribution centers to markets in the Northeast, Midwest and southern states. The Company serves major markets in the eastern United States and has direct access to all significant Atlantic and Gulf Coast ports, as well as the Mississippi River, the Great Lakes and the St. Lawrence Seaway. The Company also has access to Pacific ports through commercial arrangements with western railroads.
The Company transports a broad portfolio of products, such as coal, forest products, ethanol, automobiles, chemicals and consumer electronics. Those goods are transported across the country in a way that, compared to alternative modes of transportation, reduces the impact on the environment, takes traffic off an already congested highway system and reduces fuel consumption and transportation costs.
The global recession that intensified in late 2008 has continued to impact CSX's business in 2009, and rail volume will be lower for the year. Beginning in late 2008, the Company began taking aggressive actions to manage costs and right-size resources to match demand conditions. With a mix of pricing, productivity, prudent investment in train network and rail efficiency, the Company believes it is positioned to take advantage of an eventual economic recovery.
· Revenue decreased $722 million or 25% to $2.2 billion due to declines in volume and lower fuel surcharge revenue.
· Expenses decreased $587 million or 27% to $1.6 billion.
· Operating income decreased $135 million or 19% to $582 million.
· CSX realized a $25 million after-tax gain from the sale of The Greenbrier resort.
CSX operating results reflect the impact of the ongoing recessionary environment. Second quarter revenues of $2.2 billion were down 25% from the prior year, primarily due to a 21% decline in volume and lower fuel surcharge recovery associated with the sharp decline in fuel prices. Volume continued to decline across the board, although the rate of decline in the coal market accelerated in the second quarter (from the first quarter) due to lower demand for export coal and high utility inventory levels. However, the other major lines of business have stabilized since the first quarter. Despite a challenging environment, the Company was able to achieve pricing gains predominantly due to the overall cost advantages that rail based solutions provide to customers versus other modes of transportation.
Despite the challenging economy, CSX was able to reduce expenses to $587 million down 27% from the prior year. The expense reductions were a combined result of extensive productivity initiatives, cost-cutting efforts and a favorable casualty reserve adjustment.
For additional information, refer to Rail and Intermodal Results of Operations discussed on pages 35 through 36.
In addition to the financial highlights described above, the Company measures and reports safety and service performance. CSX strives for continuous improvement in these measures through training, initiatives and investment. For example, the Company's safety and train accident prevention programs rely on broad employee involvement. The programs utilize operating rules training, compliance measurement, root cause analysis and communication to create a safer environment for employees and the public. Continued capital investment in Company assets, including track, bridges, signals, equipment and detection technology, also supports safety performance.
In second quarter 2009, the Company continued its focus on safety and operating performance. Results in both Federal Railroad Administration ("FRA") personal injuries and train accidents improved as a result of leadership and high levels of employee commitment to the Company's safety programs. The FRA personal injury index improved 6% to 1.22 in the quarter. Reported FRA train accident frequency declined to 2.22, a 16% improvement compared to the same quarter of 2008. As mentioned above, continued favorable historical trends on the personal injury index directly contributed to the favorable casualty reserve adjustment.
Key service metrics improved significantly in the quarter. On-time train originations and arrivals were 83% and 81%, respectively, during the quarter. Average dwell rose slightly to 24.1 hours and average cars-on-line declined to 218,313 primarily due to lower demand levels. Average train velocity improved to 21.7 miles per hour, as the network remained fluid. The Company aims to maintain key operating measures and service reliability at high levels, while reducing resource utilization in response to current business conditions.
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RAIL OPERATING STATISTICS (Estimated)
Second Quarters
Improvement
2009 2008 (Decline) %
Safety and Service Measurements
FRA Personal Injuries Frequency Index 1.22 1.30 6 %
FRA Train Accident Rate 2.22 2.63 16
On-Time Train Originations 83% 75% 11
On-Time Destination Arrivals 81% 65% 25
Dwell 24.1 23.3 (3)
Cars-On-Line 218,313 224,460 3
System Train Velocity 21.7 20.0 9 %
Increase/
Resources (Decrease)
Route Miles 21,190 21,224 - %
Locomotives (owned and long-term leased) 4,108 4,098 -
Freight Cars (owned and long-term leased) 86,300 92,083 (6) %
|
FRA Personal Injuries Frequency Index - Number of FRA-reportable injuries per 200,000 man-hours
FRA Train Accident Rate - Number of FRA-reportable train accidents per million train-miles
On-Time Train Originations - Percent of scheduled road trains that depart the origin yard on-time or ahead of schedule
On-Time Destination Arrivals - Percent of scheduled road trains that arrive at the destination yard on-time to two hours late (30 minutes for intermodal trains)
Dwell - Amount of time in hours between car arrival at and departure from the yard. It does not include cars moving through the yard on the same train.
Cars-On-Line - A count of all cars on the network (does not include locomotives, cabooses, trailers, containers or maintenance equipment)
System Train Velocity - Average train speed between terminals in miles per hour
(does not include locals, yard jobs, work trains or passenger trains)
FINANCIAL RESULTS OF OPERATIONS
Results of Operations (Unaudited)
(Dollars in Millions)
Second Quarters
CSX
Rail (a) Intermodal Consolidated
2009 2008 2009 2008 2009 2008 $ Change %Change
Revenue $1,894 $2,522 $291 $385 $2,185 $2,907 $(722) (25) %
Expense
Labor and Fringe 638 714 16 19 654 733 79 11
Materials, Supplies
and Other 324 462 44 51 368 513 145 28
Fuel 184 536 1 1 185 537 352 66
Depreciation 222 220 7 7 229 227 (2) (1)
Equipment and Other
Rents 74 86 24 26 98 112 14 13
Inland
Transportation (94) (137) 163 205 69 68 (1) (1)
Total Expense 1,348 1,881 255 309 1,603 2,190 587 27
Operating Income $546 $641 $36 $76 $582 $717 $(135) (19) %
Operating Ratio 71.2% 74.6% 87.6% 80.3% 73.4% 75.3%
|
(a) In addition to CSXT, the Rail segment includes non-railroad subsidiaries such as Total Distribution Services, Inc., Transflo Terminal Services, Inc., CSX Technology, Inc. and other subsidiaries.
Volume and Revenue (Unaudited)
Volume (Thousands of units); Revenue (Dollars in millions); Revenue Per Unit
Second Quarters
Volume Revenue Revenue Per Unit
2009 2008 % Change 2009 2008 % Change 2009 2008 % Change
Chemicals 105 131 (20) % $308 $381 (19) % $2,933 $2,908 1 %
Emerging Markets 106 133 (20) 147 191 (23) 1,387 1,436 (3)
Forest Products 64 90 (29) 133 205 (35) 2,078 2,278 (9)
Agricultural
Products 106 108 (2) 233 246 (5) 2,198 2,278 (4)
Metals 45 96 (53) 87 211 (59) 1,933 2,198 (12)
Phosphates and
Fertilizers 74 90 (18) 94 128 (27) 1,270 1,422 (11)
Food and Consumer 25 28 (11) 59 70 (16) 2,360 2,500 (6)
Total Merchandise 525 676 (22) 1,061 1,432 (26) 2,021 2,118 (5)
Coal 361 450 (20) 639 777 (18) 1,770 1,727 2
Coke and Iron Ore 14 27 (48) 23 47 (51) 1,643 1,741 (6)
Total Coal 375 477 (21) 662 824 (20) 1,765 1,727 2
Automotive 54 92 (41) 113 205 (45) 2,093 2,228 (6)
Other - - - 58 61 (5) - - -
Total Rail 954 1,245 (23) 1,894 2,522 (25) 1,985 2,026 (2)
International 183 262 (30) 81 137 (41) 443 523 (15)
Domestic 274 268 2 204 242 (16) 745 903 (17)
Other - - - 6 6 - - - -
Total Intermodal 457 530 (14) 291 385 (24) 637 726 (12)
Total 1,411 1,775 (21) % $2,185 $2,907 (25) % $1,549 $1,638 (5) %
|
Certain data within Merchandise categories have been reclassified to conform to the current year presentation.
Second Quarter Results of Operations
CSX experienced significant year-over-year volume and revenue declines caused by the broad-based weakness in the economy. The greatest impacts were felt in coal, automotive, construction and consumer-related markets. Lower fuel recovery associated with the sharp decline in fuel prices more than offset the Company's ongoing yield management initiatives.
Rail Revenue
Merchandise
Chemicals - Continued weakness in the housing, automotive and consumer goods markets has significantly reduced demand for chemical products related to those markets.
Emerging Markets - Aggregates (which include crushed stone, sand and gravel) volume declined due to continued softness in residential construction.
Forest Products - A weak housing market has driven the continued decline in lumber and building products. Paper volume continued to be soft due to electronic media substitution and less packaging being used as a result of lower consumer spending.
Agricultural Products - Volume was down slightly as the continuing growth in ethanol was more than offset by lower consumption of poultry and fewer east coast grain exports due to a stronger global supply.
Metals - Volume declines were driven by weak global and domestic steel demand in the automotive and construction industries. This weak demand caused steel producers to continue idling capacity in an attempt to balance supply with demand.
Phosphates and Fertilizers - Phosphate production was down due to weak international and domestic demand. Additionally, farmers are continuing to cut back on levels of phosphate and potash application in reaction to lower commodity prices.
Food and Consumer -Weakness in residential construction caused reduced shipments of appliances and other consumer goods. Yet, basic needs markets such as food products were less severely impacted by the current economic conditions.
Coal
Volume declines were driven by a weaker export market and lower demand from electric utilities. The export market decline is a result of both lower steel production in Europe reducing the need for metallurgical coal (coal used to produce steel), and cheaper alternative global sources for European utilities. The demand for domestic electrical generation from coal was down because of low natural gas prices and lower industrial production.
Automotive
Revenue and volume were down as lower consumer demands, inventory corrections, and bankruptcy filings within the auto industry reduced new car production.
Rail Expense
Expenses decreased $533 million from last year's quarter. Significant variances are described below.
Labor and Fringe expense decreased $76 million. This decrease was primarily driven by labor productivity initiatives, such as employee furloughs and reduced crew overtime, and lower incentive compensation. These decreases were partially offset by inflation.
Materials, Supplies and Other expense decreased $138 million due to several items including a year over year change in casualty reserves of $70 million. Casualty reserves are reviewed by management and outside experts twice a year. As safety trends have continued to improve, benefits were taken in both years' second quarters - $85 million in 2009 and $15 million in the prior year quarter. These benefits were a result of the continuing downward trend in the number and the severity of injuries. Additionally, there were volume-related expense decreases, prior year proxy-related items (not repeated in the current year) and other items.
Fuel expense decreased $352 million due to lower fuel prices and lower volume.
Intermodal Revenue
International - Volume continues to be down significantly on weak imports and exports due to the global economic recession. Revenue-per-unit was lower on significantly decreased fuel recovery, partially offset by long-term contract price increases.
Domestic - Volume was up slightly as truckload conversion and expanded service offerings helped offset the decline in other segments of the domestic market. Revenue-per-unit was lower on decreased fuel recovery and a competitive truck pricing environment.
Intermodal Expense
Intermodal operating expense decreased in the second quarter of 2009, primarily driven by lower volumes and a decline in fuel price.
Consolidated Results of Operations
Other Income
Other income decreased $7 million to $10 million due to lower average cash and investment balances as well as a lower average rate of return. This decrease was partially offset by higher real estate sales during second quarter 2009.
Interest Expense
Interest expense increased $6 million to $139 million due to higher average debt balances in second quarter 2009.
Income Tax Expense
Income tax expense decreased $41 million to $168 million due to lower earnings in second quarter 2009. This decrease was partially offset by an $18 million income tax benefit during the 2008 second quarter principally related to the resolution of various income tax matters that was not repeated during 2009.
Net Earnings
Net earnings decreased $77 million to $308 million and earnings per diluted share decreased $.15 to $.78 in second quarter 2009 as a result of lower earnings partially offset by a $25 million after-tax gain related to the sale of The Greenbrier resort in second quarter 2009.
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations(Unaudited)
(Dollars in Millions)
Six Months
Operating
Rail(a) Intermodal Income
2009 2008 2009 2008 2009 2008 $ Change
Revenue $3,871 $4,887 $561 $733 $4,432 $5,620 $(1,188)
Expense:
Labor and Fringe 1,282 1,440 34 38 1,316 1,478 162
Materials, Supplies and Other 756 918 89 100 845 1,018 173
Fuel 374 975 2 3 376 978 602
Depreciation 440 437 13 12 453 449 (4)
Equipment and Other Rents 162 170 49 53 211 223 12
Inland Transportation (187) (259) 314 390 127 131 4
Total Expense 2,827 3,681 501 596 3,328 4,277 949
Operating Income $1,044 $1,206 $60 $137 $1,104 $1,343 $(239)
Operating Ratio 73.0% 75.3% 89.3% 81.3% 75.1% 76.1%
|
(a) In addition to CSXT, the Rail segment includes non-railroad subsidiaries such as Total Distribution Services, Inc., Transflo Terminal Services, Inc., CSX Technology, Inc. and other subsidiaries.
Volume and Revenue (Unaudited)
Volume (Thousands of units); Revenue (Dollars in millions); Revenue Per Unit
Six Months
Volume Revenue Revenue Per Unit
2009 2008 % Change 2009 2008 % Change 2009 2008 % Change
Chemicals 210 260 (19) % $616 $743 (17) % $2,933 $2,858 3 %
Emerging Markets 197 248 (21) 281 352 (20) 1,426 1,419 -
Forest Products 129 177 (27) 273 397 (31) 2,116 2,243 (6)
Agricultural
Products 215 217 (1) 482 481 - 2,242 2,217 1
Metals 93 188 (51) 184 408 (55) 1,978 2,170 (9)
Phosphates and
Fertilizers 134 181 (26) 181 258 (30) 1,351 1,425 (5)
Food and Consumer 50 55 (9) 119 135 (12) 2,380 2,455 (3)
Total Merchandise 1,028 1,326 (22) 2,136 2,774 (23) 2,078 2,092 (1)
Coal 776 890 (13) 1,352 1,497 (10) 1,742 1,682 4
Coke and Iron Ore 30 50 (40) 54 89 (39) 1,800 1,780 1
Total Coal 806 940 (14) 1,406 1,586 (11) 1,744 1,687 3
Automotive 99 188 (47) 208 407 (49) 2,101 2,165 (3)
Other - - - 121 120 1 - - -
Total Rail 1,933 2,454 (21) 3,871 4,887 (21) 2,003 1,991 1
International 369 515 (28) 164 260 (37) 444 505 (12)
Domestic 528 523 1 388 460 (16) 735 880 (16)
Other - - - 9 13 (31) - - -
Total Intermodal 897 1,038 (14) 561 733 (23) 625 706 (11)
Total 2,830 3,492 (19) % $4,432 $5,620 (21) % $1,566 $1,609 (3) %
|
Certain data within Merchandise categories have been reclassified to conform to the current year presentation.
Six Month Results of Operations
Consolidated Results of Operations
Operating Revenue
Operating revenue decreased $1.2 billion to $4.4 billion in 2009 as a result of significant volume declines and lower fuel recovery associated with the sharp decline in fuel prices since 2008.
Operating Income
Operating income decreased $239 million to $1.1 billion as a result of lower operating revenue partially offset by lower fuel expense and the Company's continued efforts to control costs.
Other Income
Other income decreased $76 million to $13 million in 2009 due to lower income from real estate sales and a $30 million benefit to correct equity earnings from a non-consolidated subsidiary in the prior year. A lower average rate of return on cash and investment balances also contributed to this decrease.
Interest Expense
Interest expense increased $28 million to $280 million primarily due to higher average debt balances in 2009.
Income Tax Expense
Income tax expense decreased $128 million to $298 million primarily due to lower earnings in 2009.
Net Earnings
Net earnings decreased $182 million to $554 million and earnings per diluted share decreased $.38 to $1.40 in 2009 primarily as a result of lower earnings partially offset by a $25 million after-tax gain related to the sale of The Greenbrier resort in 2009.
Material Changes in Consolidated Balance Sheets and Significant Cash Flows
The following are material changes in the consolidated balance sheets and sources of liquidity and capital, which provide an update to the discussion included in CSX's most recent Annual Report on Form 10-K.
Total long-term debt increased $421 million driven by a $500 million debt issuance during first quarter 2009. Additionally, property additions increased $199 million due to planned capital spending. These increases were partially offset by a $222 million decrease in accounts receivable due to volume declines this year.
Cash provided by operating activities decreased $362 million due in part to lower pre-tax earnings. Also, contributing to this decrease were higher incentive compensation payouts this year compared to last year. Additionally, cash from investing activities decreased due to a reduction in the purchases and sales of short-term investments partially offset by lower property additions. Furthermore, cash provided by financing activities decreased $269 million as the Company paid higher dividends and paid for seller financed assets that were delivered in the prior year.
For 2009, the Company plans to spend $1.6 billion of capital expenditures. The Company is continually evaluating market and regulatory conditions that could affect its ability to generate sufficient returns on capital investments. The Company may revise this estimate as a result of changes in business conditions, tax legislation or the enactment of new laws or regulations.
Liquidity and Working Capital
As of the end of the second quarter, the Company had $1.2 billion of cash, cash equivalents and short-term investments. CSX also has available a $1.25 billion credit facility with a diverse syndicate of banks that was not drawn on. With the current cash balances, CSX intends to pre-fund future contributions up to $250 million, or $160 million after-tax, to its pension plans in 2009.
Working capital can also be considered a measure of a company's ability to meet its short-term needs. CSX had a working capital surplus of $675 million at June 2009 and a working capital deficit of $13 million at December 2008. The favorable change is primarily due to increased cash balances as a result of new debt issued during the first quarter.
The Company's working capital balance varies due to factors such as the timing of scheduled debt payments and changes in cash and cash equivalent balances as discussed above. As a result, the working capital balance could return to a deficit in future periods. A working capital deficit is not unusual for CSX or other companies in the industry and does not indicate a lack of liquidity. The Company continues to maintain adequate current assets to satisfy current . . .
|
|