10-QPeriod: Q2 FY2008

CSX CORP Quarterly Report for Q2 Ended Jun 27, 2008

Filed July 16, 2008For Securities:CSX

Summary

CSX Corporation reported strong financial results for the second quarter and the first six months of 2008, driven by record revenues and operating income. Revenue growth was primarily attributed to pricing gains and higher fuel recovery mechanisms, which offset a slight decline in overall shipment volumes. This volume decrease was concentrated in sectors like housing construction and automotive production, while commodities like coal and agricultural products showed growth. Despite increased operating expenses, notably due to a significant rise in fuel costs, the company managed to improve its operating income and profitability. CSX also demonstrated a commitment to returning capital to shareholders through increased dividends and a substantial share repurchase program. The company's financial position remains solid, supported by ample liquidity and an investment-grade credit rating, although future outlook carries some sensitivity to economic conditions and fuel price volatility.

Financial Highlights

26 data points
Beta

Revenue

$2.91B

Net Income

$385.00M

13.2% Net Margin

EPS (Diluted)

$0.10

Cash & Equivalents

$1.40B

Free Cash Flow

$143.00M

Financial Statements
Beta
Revenue$2.91B
Operating Expenses$2.19B
Operating Income$717.00M
Interest Expense-$133.00M
Net Income$385.00M
EPS (Basic)$0.11
EPS (Diluted)$0.10
Shares Outstanding (Basic)3.66M
Shares Outstanding (Diluted)3.74M

Key Highlights

  • 1Record operating revenue of $2.91 billion in Q2 2008, a 15% increase year-over-year, driven by pricing and fuel recovery.
  • 2Operating income reached an all-time quarterly record of $717 million, up 17% from Q2 2007, reflecting effective cost management despite rising fuel expenses.
  • 3Net earnings increased to $385 million ($0.93/share diluted) in Q2 2008, up from $324 million ($0.71/share diluted) in Q2 2007.
  • 4Total operating expenses rose by 14%, largely due to a 70% increase in fuel costs, though other expenses saw only a 3% increase.
  • 5The company announced a 22% increase in its quarterly cash dividend to $0.22 per share.
  • 6CSX's share repurchase program continued, with $151 million spent on repurchasing shares in Q2 2008, as part of a $3 billion authorization.

Frequently Asked Questions

The primary driver for the increase in operating expenses was a substantial rise in fuel costs, which were up 70% in the second quarter of 2008 compared to the prior year. This surge in fuel prices significantly impacted overall operational spending, despite a 3% increase in other operating expenses.

CSX achieved revenue growth through a combination of pricing gains and increased fuel recovery mechanisms. These strategies, which allow the company to pass on higher costs to customers, more than offset a 3% decrease in overall shipment volumes. The volume decline was primarily seen in sectors like housing construction and automotive production.

CSX reported strong performance for the quarter and the first half of the year, driven by record revenues and profits. The company is committed to a balanced capital allocation strategy, which includes strategic investments, a significant share repurchase program, and an increased dividend. Management is focused on capitalizing on favorable industry trends while navigating economic uncertainties and fuel price volatility.

CSX is involved in ongoing litigation, including a notable antitrust lawsuit concerning fuel surcharge practices, for which the company believes it has strong defenses. While CSX accrues for environmental liabilities and believes its reserves are adequate, it notes that unforeseen adverse resolutions in litigation or environmental matters could materially affect its financial performance. The company is unable to assess the precise financial impact of the fuel surcharge litigation at this time.