10-QPeriod: Q1 FY2014

CSX CORP Quarterly Report for Q1 Ended Mar 28, 2014

Filed April 16, 2014For Securities:CSX

Summary

CSX Corporation reported its first-quarter 2014 financial results, showing a modest 2% increase in revenue to $3.01 billion, primarily driven by higher volumes and pricing across most markets. However, expenses rose significantly by 9% to $2.27 billion, largely attributed to the severe winter weather impacting network operations and higher prior-year real estate gains that were not repeated. This expense increase led to a 16% decline in operating income to $739 million and a worsening of the operating ratio to 75.5% from 70.3% in the prior year. Net earnings for the quarter were $398 million, or $0.40 per diluted share, a decrease from $462 million, or $0.45 per diluted share, in the first quarter of 2013. Despite these headwinds, CSX continued to return capital to shareholders, with cash dividends paid per common share increasing to $0.15 from $0.14, and also engaged in share repurchases totaling $127 million. The company has outlined significant capital investment plans for 2014, including substantial spending on Positive Train Control (PTC) implementation.

Financial Highlights

47 data points
Beta

Revenue

$3.01B

Net Income

$398.00M

13.2% Net Margin

EPS (Diluted)

$0.13

Total Assets

$31.68B

Cash & Equivalents

$475.00M

Free Cash Flow

$124.00M

Financial Statements
Beta
Revenue$3.01B
Operating Expenses$2.27B
Operating Income$739.00M
Interest Expense$140.00M
Net Income$398.00M
EPS (Basic)$0.13
EPS (Diluted)$0.13
Shares Outstanding (Basic)3.02B
Shares Outstanding (Diluted)3.02B

Key Highlights

  • 1Revenue increased by 2% to $3.01 billion, driven by volume growth and pricing gains, despite challenging weather conditions.
  • 2Expenses surged by 9% to $2.27 billion, primarily due to severe winter weather impacts and the absence of prior-year real estate gains.
  • 3Operating income decreased by 16% to $739 million, and the operating ratio deteriorated to 75.5% from 70.3%.
  • 4Net earnings declined to $398 million ($0.40 per diluted share) from $462 million ($0.45 per diluted share) in the prior year's quarter.
  • 5The company paid $151 million in dividends and repurchased $127 million of its stock, demonstrating a commitment to returning capital to shareholders.
  • 6Significant capital expenditures are planned for 2014, totaling $2.3 billion, with a substantial portion dedicated to Positive Train Control (PTC) implementation.
  • 7Service performance metrics such as on-time arrivals and train velocity were negatively impacted by severe winter weather but showed signs of recovery by the end of the quarter.

Frequently Asked Questions

The primary driver for the 9% increase in expenses was the severe winter weather experienced across the network, which led to operational disruptions and increased costs such as overtime. Additionally, the prior year benefited from significant real estate gains that were not repeated in the current quarter.

The severe winter weather significantly impacted operational performance. Key service metrics like on-time train originations and destination arrivals deteriorated substantially (31% and 40% respectively), train velocity decreased by 12%, and dwell time increased by 21%. While these metrics were negatively affected, the company noted a gradual recovery in service performance as the quarter concluded.

CSX plans to invest approximately $2.3 billion in capital expenditures for 2014, excluding certain reimbursable projects. A significant portion of this investment, around $300 million, is allocated to the implementation of Positive Train Control (PTC), with a total estimated multi-year cost for PTC of at least $1.7 billion. The remainder will focus on sustaining core infrastructure, locomotives, freight cars, and growth projects like intermodal terminal expansions.

CSX continued to return capital to shareholders through increased cash dividends, with the quarterly dividend rising to $0.15 per common share from $0.14 in the prior year. The company also repurchased $127 million of its common stock under its announced share repurchase program.