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Rail News: CSX Transportation

CSX registers record revenue and income, reduces operating ratio into the 70s in third quarter


During a quarterly earnings teleconference and Webcast held today in Jacksonville, Fla., CSX Corp. Chairman, President and Chief Executive Officer Michael Ward said his senior management team is hitting on all cylinders. Third-quarter financial results show CSX Transportation and CSX Intermodal are, too — as in record revenue and operating income, volume and earnings growth, cost control and an operating ratio in the 70s.

During the quarter, CSX’s surface transportation revenue reached a record $2.4 billion, up 14 percent compared with third-quarter 2005. Coal revenue increased 18 percent to $602 million, merchandise revenue rose 16 percent to $1.2 billion (the 18th-straight quarterly gain) and intermodal revenue went up 8 percent to $364 million.

Surface transportation revenue per unit totaled $1.3 billion, up 12 percent compared with third-quarter 2005 primarily because of improved pricing and fuel surcharges, said CSX Executive Vice President of Sales and Marketing Clarence Gooden.

“Of the 12 percent growth, 40 percent came from pricing, 35 percent came from surcharges and 25 percent came from a favorable mix,” he said.

CSX also set a quarterly operating income record at $489 million, up nearly 30 percent compared with the same 2005 period. Excluding Hurricane Katrina-related insurance recoveries, operating income increased 31 percent to $474 million. CSX now has increased operating income in 10-straight quarters.

Quarterly net earnings totaled $328 million or 71 cents per share (including a 17-cent per share benefit from insurance recoveries and income tax resolutions), a 100 percent increase compared with third-quarter 2005 earnings. Excluding the insurance and tax gains, earnings rose 50 percent to 54 cents per share.

CSX’s quarterly surface transportation operating ratio and volume increased, as well. The ratio improved 3.2 points to 79.8 and volume rose 2 percent to 1.9 million units compared with similar third-quarter 2005 data.

“Our volume growth is highlighted by a 7 percent increase in coal traffic and nearly 4 percent increase in intermodal,” said Ward. “Overall, our results continue to reflect a record-setting pace.”

The only financial segment out of step in the quarter was total expenses, which increased about 10 percent to $1.9 billion compared with third-quarter 2005. Fuel expenses rose 60 percent to $300 million and labor costs went up 2 percent to $736 million. But overall, the company exercised cost control, said CSX EVP and Chief Financial Officer Oscar Munoz.

“Excluding fuel costs, our expenses went up 4 percent,” he said.

During 2006’s first nine months, CSX’s total expenses increased only 5 percent to $5.5 billion compared with similar 2005 data. Surface transportation revenue rose 12 percent to $7.2 billion, operating income increased 4 percent to $1.6 billion, volume was flat at 5.5 million units and CSX’s surface transportation operating ratio improved 4.9 points to 77.4.

Looking ahead, CSX execs expect transportation demand to remain strong with volume increasing between 2 percent and 3 percent in 2007 and 2008.

“With improved service on our extensive network, CSX is well positioned for the future,” said Ward.

Jeff Stagl

Contact Progressive Railroading editorial staff.

More News from 10/18/2006