CSX CORP Quarterly Report for Q3 Ended Sep 26, 2008

Summary

CSX Corporation reported solid financial results for the third quarter and the first nine months of 2008, demonstrating resilience in a challenging economic environment. Operating revenue saw a significant increase of 18% in Q3 and 15% year-to-date, driven by strong pricing power and effective fuel surcharge recovery, which more than offset a slight decline in overall shipment volumes. Despite increased operating expenses, particularly due to rising fuel costs (up 178% in Q3), the company achieved a 31% increase in operating income for the quarter, reaching $733 million, and a substantial 25% increase year-to-date to $2.08 billion. Net earnings for the third quarter decreased by $25 million to $382 million, primarily due to a large one-time gain from discontinued operations in the prior year. However, excluding this impact, net earnings from continuing operations showed growth. Diluted earnings per share saw a modest increase to $0.94 for the quarter. The company maintained a strong cash position, with cash and cash equivalents increasing significantly, and reported a stable credit rating, underscoring its financial stability despite broader market concerns. CSX continues to focus on operational efficiency and strategic investments, including substantial share repurchases, to enhance shareholder value.

Key Highlights

• 1Operating revenue increased by 18% to $2.96 billion in Q3 2008 and by 15% to $8.58 billion for the nine months ended September 26, 2008, driven by strong pricing and fuel recovery.
• 2Operating income grew significantly by 31% to $733 million in Q3 2008 and by 25% to $2.08 billion for the nine months, demonstrating effective cost management despite higher fuel expenses.
• 3Net earnings for Q3 2008 were $382 million, a decrease from $407 million in Q3 2007, largely due to a favorable one-time tax gain in the prior year related to discontinued operations.
• 4Diluted earnings per share for Q3 2008 increased slightly to $0.94 from $0.91 in the prior year, reflecting a reduction in outstanding shares due to repurchases.
• 5Cash and cash equivalents increased substantially to $895 million at the end of Q3 2008, up from $368 million at the end of 2007, driven by strong operating cash flows.
• 6The company reported a reduction in its share count due to a robust share repurchase program, with $836 million repurchased in Q3 2008 and over $1.3 billion year-to-date.
• 7Despite an 18% increase in fuel costs in Q3 2008, the company managed to offset much of the impact through pricing power and improved operational efficiencies.

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