CSX » Topics » 2007 E XPECTATIONS

This excerpt taken from the CSX 10-K filed Feb 15, 2007.

2007 EXPECTATIONS

The Company bases its performance expectations on external forecasts for economic indicators such as gross domestic product, industrial production and overall import levels. The indicators that influence CSX’s businesses are expected to be favorable in 2007, but at lower growth rates than the last two years. Considering these and other factors, the Company believes that its business environment remains strong and will support consistent, continuous financial improvements for the next several years.

While changes in the macro economy can impact CSX’s financial results, the Company’s revenues are derived from fairly diversified sources, and this provides stability as specific economic sectors fluctuate.

The nation’s increasing need to transport a substantially greater number of imported products across North America, combined with the significant cost and environmental advantages of rail versus truck transportation, should support continued pricing strength in the Company’s Surface Transportation businesses. In addition, recent and continued improvements in the Company’s operations and infrastructure are expected to result in volume growth and higher margins over time.

Considering the Company’s solid overall business environment, along with momentum in its underlying business performance, CSX expects that its financial performance in 2007 will be consistent with its long-term financial targets, which include compounded annual growth rates (“CAGR”) as shown below:

 

Long-term Financial Targets

  

2006-2010

CAGR

•      Revenue Growth

   4% - 6%

•      Surface Transportation Operating Income Growth

   10% - 12%

•      Earnings Per Share Growth

   12% - 14%

•      Free Cash Flow Growth

   10% - 12%

To reinforce its long-term vision, the Company’s capital budget is expected to be $1.4 billion in 2007. Approximately 76% is being allocated to maintaining existing rail infrastructure and expanding capacity in key corridors. The remaining 24% is being invested in locomotives and freight cars, along with certain technology improvements. The Company anticipates using cash from operations to fund these projects. Additionally, CSX anticipates free cash flow of approximately $500 million in 2007. See page 23 for how free cash flow is calculated.

 

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Table of Contents

CSX CORPORATION

PART II

 

In January 2007, the Surface Transportation Board (“STB”) announced its new policy on railroad fuel surcharges that will govern shipments regulated by the STB, commonly referred to as tariff movements. The STB determined that in the future, fuel surcharges should be based on movement-specific factors, such as distance and/or weight, rather than as a percentage of revenue. Most of CSXT’s shipments are not regulated by the STB ruling; however the Company is analyzing the application of a movement-specific fuel surcharge to both its regulated and non-regulated shipments. At this time, CSX does not believe this will result in a significant change to future revenue, but is still evaluating the overall impact.

On February 14, 2007, CSX announced a $2.0 billion share repurchase program and an increased quarterly dividend on the Company’s common stock of 20% to $0.12 per share. The Company intends to complete the repurchase program by the end of 2008. This new authority also terminated the unused portion under the previously announced $500 million program.

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