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Rail News: CSX Transportation

CSX in '07: Record revenue, best operating ratio in a decade


Leading off this morning's conference call on fourth-quarter and full-year earnings, CSX Corp. Chairman, President and Chief Executive Officer Michael Ward referred to the Class I's financial results as "another great quarter and another great year." It's hard to argue with an operating income record in the fourth quarter, all-time-high annual revenue in '07 and the railroad's best full-year operating ratio in a decade.

Senior officers holding court at the conference — during which the topic of CSX's proxy tussle with Children's Investment Fund Management L.L.P. was deemed off limits — said quarterly surface transportation operating income rose more than 20 percent year over year to a record $609 million.

Earnings increased 5 percent to $365 million and surface transportation revenue jumped 7.5 percent to $2.6 billion. Merchandise revenue rose 7 percent year over year to $1.25 billion even though volume decreased 4 percent to 650,000 units because of stronger yields in all markets, said Chief Commercial Officer Clarence Gooden. Coal revenue jumped 13 percent to a record $683 million, automotive revenue inched up 2 percent to $215 million and intermodal revenue was flat despite a 3 percent volume drop. The intermodal segment posted a record profit of $77 million in the quarter, said Gooden.

In addition, CSX's surface transportation operating ratio improved 2.5 points to 76.4 compared with fourth-quarter 2006's ratio. The drivers: yield management and productivity improvements, said Executive Vice President and Chief Financial Officer Oscar Munoz.

"We will continue to drive our operating ratio to the low- to mid-70s by 2010," said Ward.

The Class I made progress on that goal, according to full-year results. CSX's surface transportation ratio improved 0.2 points to 77.6 — the railroad's best ratio in the past 10 years. Since 2004, CSX has improved its ratio by 900 basis points as well as driven up shareholder value by 120 percent, said Ward.

"We don't just want to participate in the railroad renaissance, we want to lead it," he said.

Also for the full year, CSX's surface transportation revenue increased 5 percent to $10 billion — the first time the Class I's revenue has reached that mark. Surface transportation operating income totaled $2.25 billion, up 6 percent compared with 2006's total.

Total annual operating expenses rose 4.5 percent to $7.8 billion primarily because fuel costs increased 9 percent to $1.2 billion. In the fourth quarter, fuel expenses jumped up 32 percent to $357 million as the average price per gallon rose by 75 cents, said Munoz. Total quarterly operating expenses increased 4 percent to $2 billion compared with fourth-quarter 2006's total.

Jeff Stagl

Contact Progressive Railroading editorial staff.

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