10-QPeriod: Q3 FY2013

CSX CORP Quarterly Report for Q3 Ended Sep 27, 2013

Filed October 16, 2013For Securities:CSX

Summary

CSX Corporation's third quarter 2013 report indicates a slight revenue increase of 4% to $3.0 billion, driven by volume growth in merchandise and intermodal segments, alongside positive pricing gains. However, expenses also rose by 5%, primarily due to higher incentive compensation and inflation, leading to flat operating income year-over-year. The company maintained a strong liquidity position with $719 million in cash, cash equivalents, and short-term investments, supported by an undrawn $1 billion revolving credit facility. Capital expenditures remain significant, with $2.3 billion planned for 2013, including substantial investment in Positive Train Control (PTC) technology. While operational efficiency showed improvements in areas like train velocity and on-time arrivals, the operating ratio slightly worsened, reflecting the challenge of managing rising expenses.

Financial Highlights

48 data points
Beta

Revenue

$2.98B

Net Income

$455.00M

15.2% Net Margin

EPS (Diluted)

$0.15

Total Assets

$30.94B

Cash & Equivalents

$591.00M

Free Cash Flow

$318.00M

Financial Statements
Beta
Revenue$2.98B
Operating Expenses$2.15B
Operating Income$840.00M
Interest Expense$136.00M
Net Income$455.00M
EPS (Basic)$0.15
EPS (Diluted)$0.15
Shares Outstanding (Basic)3.05B
Shares Outstanding (Diluted)3.05B

Key Highlights

  • 1Total revenue for the third quarter of 2013 was $3.0 billion, a 4% increase from the prior year, driven by a 3% volume increase and higher revenue per unit.
  • 2Total expenses rose by 5% to $2.1 billion, mainly due to increased incentive compensation and inflation, outpacing revenue growth.
  • 3Operating income remained flat at $854 million, while the operating ratio increased by 100 basis points to 71.5%, indicating slightly lower efficiency.
  • 4Net earnings for the third quarter were $463 million ($0.46 per diluted share), an increase from $455 million ($0.44 per diluted share) in the prior year.
  • 5The company reported strong operating cash flow of $2.5 billion for the first nine months of 2013, despite a $193 million decrease in cash and cash equivalents for the period.
  • 6Planned capital investments for 2013 are $2.3 billion, with a significant portion allocated to infrastructure and the ongoing implementation of Positive Train Control (PTC).
  • 7CSX maintained a robust liquidity position with $719 million in cash, cash equivalents, and short-term investments, and an undrawn $1 billion revolving credit facility.

Frequently Asked Questions

CSX reported a 4% increase in revenue, reaching $3.0 billion, primarily driven by a 3% rise in volume and higher revenue per unit. However, expenses also increased by 5% to $2.1 billion, largely due to higher incentive compensation and inflationary pressures. This divergence resulted in flat operating income year-over-year.

CSX demonstrated a strong liquidity position. As of September 27, 2013, the company held $719 million in cash, cash equivalents, and short-term investments. Additionally, CSX has a $1 billion unsecured revolving credit facility, which was undrawn at the time of the filing, providing significant financial flexibility.

CSX planned significant capital investments totaling $2.3 billion for 2013. A substantial portion of this investment is dedicated to sustaining core infrastructure, while other allocations include upgrades to locomotives, freight cars, growth-driving projects like intermodal terminal capacity, and the critical implementation of Positive Train Control (PTC), with an estimated multi-year cost of at least $1.7 billion for the PTC project.

CSX is involved in ongoing litigation, including a significant fuel surcharge antitrust class action lawsuit. While management believes its fuel surcharge practices were lawful and the case is without merit, an adverse decision could have a material impact. The company also faces other legal actions related to environmental matters and personal injury claims, for which reserves have been established, but management notes that an unexpected adverse resolution of one or more of these could materially affect financial results.