10-QPeriod: Q2 FY2016

CSX CORP Quarterly Report for Q2 Ended Jun 24, 2016

Filed July 14, 2016For Securities:CSX

Summary

CSX Corporation's second quarter 2016 report shows a notable decrease in revenue and operating income compared to the prior year, largely driven by volume declines across key segments, particularly coal. While expenses were also reduced, the reduction in revenue outpaced cost savings, leading to lower profitability and a higher operating ratio. Despite the top-line pressure, the company demonstrated resilience by increasing efficiency savings and managing operational costs. Shareholder returns remain a focus, with ongoing share repurchases and dividend payments. The company also provided an updated outlook for its Positive Train Control (PTC) implementation, indicating significant progress and investment in safety technology. Overall, the quarter presented challenges due to macroeconomic factors affecting freight demand, but CSX is focused on operational improvements and managing its cost structure.

Financial Highlights

47 data points
Beta

Revenue

$2.70B

Net Income

$445.00M

16.5% Net Margin

EPS (Diluted)

$0.16

Total Assets

$34.55B

Cash & Equivalents

$566.00M

Free Cash Flow

$197.00M

Financial Statements
Beta
Revenue$2.70B
Operating Expenses$1.86B
Operating Income$840.00M
Interest Expense$141.00M
Net Income$445.00M
EPS (Basic)$0.16
EPS (Diluted)$0.16
Shares Outstanding (Basic)2.86B
Shares Outstanding (Diluted)2.86B

Key Highlights

  • 1Revenue decreased by 12% to $2.7 billion in Q2 2016 compared to Q2 2015, primarily due to volume declines and lower fuel surcharges.
  • 2Operating income fell 17% to $840 million, and the operating ratio increased to 68.9% from 66.8% year-over-year.
  • 3Earnings per diluted share decreased 16% to $0.47.
  • 4Significant volume declines were observed in the Coal segment (-34%) and Merchandise (-5%), impacting overall revenue.
  • 5Expenses were reduced by 9% to $1.9 billion, driven by efficiency savings and lower volume-related costs, particularly in labor and fuel.
  • 6The company continued its share repurchase program, buying back $266 million worth of shares in the second quarter.
  • 7Projected capital investments for 2016 were updated to $2.7 billion, including a significant allocation for Positive Train Control (PTC) implementation, with $1.6 billion already spent through June 2016.

Frequently Asked Questions

The revenue decline of 12% was primarily driven by a decrease in shipping volumes across several segments, particularly coal. Lower fuel surcharge revenue and a less favorable business mix also contributed to the reduction.

CSX implemented efficiency savings and reduced volume-related costs, leading to a 9% decrease in total expenses. Key areas of cost reduction included labor and fringe benefits, and fuel expenses.

CSX has made significant progress on its Positive Train Control (PTC) implementation, with $1.6 billion spent through June 2016. The total estimated multi-year cost for PTC implementation is approximately $2.2 billion. The company projects total capital investments of $2.7 billion for 2016, including substantial funding for PTC.

CSX continued its commitment to returning capital to shareholders. The company repurchased approximately $266 million of its stock during the second quarter of 2016, as part of a larger $2 billion program expected to conclude by April 2017. Dividends paid per common share remained consistent at $0.18 for the quarter.