CSX Corp. Announces Third Quarter 2020 Financial Results,
Authorizes Additional $5 Billion Share Buyback
JACKSONVILLE, Fla. – October 21, 2020 – CSX Corp. (NASDAQ: CSX) today announced third quarter 2020 net earnings of $736 million, or $0.96 per share, versus $856 million, or $1.08 per share in the same period last year. Despite lower economic activity resulting from the COVID-19 pandemic, CSX’s operating ratio of 56.9 percent remained in line with the prior year’s record results.
“I am incredibly proud of how CSX’s exceptional team of railroaders continues to deliver against the challenges this year has presented,” said James M. Foote, president and chief executive officer. “Their hard work allowed CSX to efficiently absorb the record rebound in volume while maintaining high levels of customer service.”
Revenue for the third quarter decreased 11 percent from the prior year to $2.65 billion, as intermodal volume growth was more than offset by declines in coal and merchandise volumes as well as lower fuel surcharge revenue. Expenses decreased 11 percent year over year to $1.51 billion, driven by continued efficiency gains and volume-related reductions. Operating income declined 11 percent for the quarter to $1.14 billion compared to $1.29 billion in the same period last year.
CSX also announced the Board authorized a new share repurchase program, providing $5 billion of incremental authority to the approximately $1.1 billion remaining under the existing share repurchase program. This new program affirms CSX’s commitment to continued return of capital to shareholders.
CSX executives will conduct a conference call with the investment community this afternoon, October 21, at 4:30 p.m. Eastern Time. Investors, media and the public may listen to the conference call by dialing 1-866-324-3683. For callers outside the U.S., dial 1-509-844-0959. Participants should dial in 10 minutes prior to the call and enter in 6621759 as the passcode.
In conjunction with the call, a live webcast will be accessible and presentation materials will be posted on the company's website at http://investors.csx.com. Following the earnings call, a webcast replay of the presentation will be archived on the company website.
This earnings announcement, as well as additional detailed financial information, is contained in the CSX Quarterly Financial Report available through the company’s website at http://investors.csx.com and on Form 8-K with the Securities and Exchange Commission.
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| Table of Contents | The accompanying unaudited | CSX CORPORATION | CONTACTS: |
| financial information should be | 500 Water Street, C900 | INVESTOR RELATIONS |
| read in conjunction with the | Jacksonville, FL 32202 | Bill Slater |
| Company’s most recent | www.csx.com | (904) 359-1334 |
| Annual Report on Form 10-K, | | MEDIA |
| Quarterly Reports on Form 10-Q, and | | Bryan Tucker |
| any Current Reports on Form 8-K. | | (855) 955-6397 |
About CSX and its Disclosures
CSX, based in Jacksonville, Florida, is a premier transportation company. It provides rail, intermodal and rail-to-truck transload services and solutions to customers across a broad array of markets, including energy, industrial, construction, agricultural, and consumer products. For nearly 200 years, CSX has played a critical role in the nation's economic expansion and industrial development. Its network connects every major metropolitan area in the eastern United States, where nearly two-thirds of the nation's population resides. It also links more than 230 short-line railroads and more than 70 ocean, river and lake ports with major population centers and farming towns alike.
This announcement, as well as additional financial information, is available on the company's website at http://investors.csx.com. CSX also uses social media channels to communicate information about the company. Although social media channels are not intended to be the primary method of disclosure for material information, it is possible that certain information CSX posts on social media could be deemed to be material. Therefore, we encourage investors, the media, and others interested in the company to review the information we post on Twitter (http://twitter.com/CSX) and on Facebook (http://www.facebook.com/OfficialCSX). The social media channels used by CSX may be updated from time to time. More information about CSX Corporation and its subsidiaries is available at www.csx.com.
Non-GAAP Disclosure
CSX reports its financial results in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). CSX also uses certain non-GAAP measures that fall within the meaning of Securities and Exchange Commission Regulation G and Regulation S-K Item 10(e), which may provide users of the financial information with additional meaningful comparison to prior reported results. Non-GAAP measures do not have standardized definitions and are not defined by U.S. GAAP. Therefore, CSX’s non-GAAP measures are unlikely to be comparable to similar measures presented by other companies. The presentation of these non-GAAP measures should not be considered in isolation from, as a substitute for, or as superior to the financial information presented in accordance with GAAP.
Forward-looking Statements
This information and other statements by the company may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to, among other items: projections and estimates of earnings, revenues, margins, volumes, rates, cost-savings, expenses, taxes, liquidity, capital expenditures, dividends, share repurchases or other financial items, statements of management's plans, strategies and objectives for future operations, and management's expectations as to future performance and operations and the time by which objectives will be achieved, statements concerning proposed new services, and statements regarding future economic, industry or market conditions or performance. Forward-looking statements are typically identified by words or phrases such as “will,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate,” “preliminary” and similar expressions. Forward-looking statements speak only as of the date they are made, and the company undertakes no obligation to update or revise any forward-looking statement. If the company updates any forward-looking statement, no inference should be drawn that the company will make additional updates with respect to that statement or any other forward-looking statements.
Forward-looking statements are subject to a number of risks and uncertainties, and actual performance or results could differ materially from that anticipated by any forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by any forward- looking statements include, among others; (i) the company's success in implementing its financial and operational initiatives; (ii) changes in domestic or international economic, political or business conditions, including those affecting the transportation industry (such as the impact of industry competition, conditions, performance and consolidation); (iii) legislative or regulatory changes; (iv) the inherent business risks associated with safety and security; (v) the outcome of claims and litigation involving or affecting the company; (vi) natural events such as severe weather conditions or pandemic health crises; and (vii) the inherent uncertainty associated with projecting economic and business conditions.
Other important assumptions and factors that could cause actual results to differ materially from those in the forward-looking statements are specified in the company's SEC reports, accessible on the SEC's website at www.sec.gov and the company's website at www.csx.com.
CONSOLIDATED INCOME STATEMENTS (Unaudited)
(Dollars in millions, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarters Ended | | | | | Nine Months Ended | | | |
| Sep. 30, 2020 | Sep. 30, 2019 | $ Change | % Change | | Sep. 30, 2020 | Sep. 30, 2019 | $ Change | % Change |
| | | | | | | | | |
| Revenue | $ | 2,648 | | $ | 2,978 | | $ | (330) | | (11) | % | | $ | 7,758 | | $ | 9,052 | | $ | (1,294) | | (14) | % |
| Expense | | | | | | | | | |
| Labor and Fringe | 574 | | 638 | | 64 | | 10 | | | 1,687 | | 1,958 | | 271 | | 14 | |
| Materials, Supplies and Other | 378 | | 407 | | 29 | | 7 | | | 1,239 | | 1,323 | | 84 | | 6 | |
| Depreciation | 348 | | 338 | | (10) | | (3) | | | 1,036 | | 1,005 | | (31) | | (3) | |
| Fuel | 119 | | 223 | | 104 | | 47 | | | 402 | | 690 | | 288 | | 42 | |
| Equipment and Other Rents | 88 | | 85 | | (3) | | (4) | | | 247 | | 265 | | 18 | | 7 | |
| Total Expense | 1,507 | | 1,691 | | 184 | | 11 | | | 4,611 | | 5,241 | | 630 | | 12 | |
| | | | | | | | | |
| Operating Income | 1,141 | | 1,287 | | (146) | | (11) | | | 3,147 | | 3,811 | | (664) | | (17) | |
| | | | | | | | | |
| Interest Expense | (187) | | (186) | | (1) | | (1) | | | (565) | | (548) | | (17) | | (3) | |
| Other Income - Net | 14 | | 24 | | (10) | | (42) | | | 51 | | 72 | | (21) | | (29) | |
| Earnings Before Income Taxes | 968 | | 1,125 | | (157) | | (14) | | | 2,633 | | 3,335 | | (702) | | (21) | |
| | | | | | | | | |
| Income Tax Expense | (232) | | (269) | | 37 | | 14 | | | (628) | | (775) | | 147 | | 19 | |
| Net Earnings | $ | 736 | | $ | 856 | | $ | (120) | | (14) | % | | $ | 2,005 | | $ | 2,560 | | $ | (555) | | (22) | % |
| | | | | | | | | |
| Operating Ratio | 56.9 | % | 56.8 | % | | | | 59.4 | % | 57.9 | % | | |
| | | | | | | | | |
| Per Common Share | | | | | | | | | |
| Net Earnings Per Share, Assuming Dilution | $ | 0.96 | | $ | 1.08 | | $ | (0.12) | | (11) | % | | $ | 2.61 | | $ | 3.18 | | $ | (0.57) | | (18) | % |
| | | | | | | | | |
Average Shares Outstanding, Assuming Dilution (Millions) | 767 | | 792 | | | | | 769 | | 805 | | | |
| | | | | | | | | |
| | | | | | | | | |
Certain prior year data has been reclassified to conform to the current presentation.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
| | | | | | | | |
| (Unaudited) | |
| Sep. 30, 2020 | Dec. 31, 2019 |
| ASSETS | | |
| | |
| Cash and Cash Equivalents | $ | 2,898 | | $ | 958 | |
| Short-Term Investments | 1 | | 996 | |
| Other Current Assets | 1,329 | | 1,324 | |
| Properties - Net | 32,381 | | 32,168 | |
| Investment in Affiliates and Other Companies | 1,949 | | 1,879 | |
| Other Long-Term Assets | 885 | | 932 | |
| Total Assets | $ | 39,443 | | $ | 38,257 | |
| | |
| | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | |
| | |
| Current Maturities of Long-Term Debt | $ | 371 | | $ | 245 | |
| Other Current Liabilities | 1,923 | | 1,906 | |
| Long-Term Debt | 16,121 | | 15,993 | |
| Deferred Income Taxes - Net | 7,087 | | 6,961 | |
| Other Long-Term Liabilities | 1,214 | | 1,289 | |
| Total Liabilities | 26,716 | | 26,394 | |
| | |
| Total Shareholders' Equity | 12,727 | | 11,863 | |
| Total Liabilities and Shareholders' Equity | $ | 39,443 | | $ | 38,257 | |
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (Unaudited)
(Dollars in millions)
| | | | | | | | |
| Nine Months Ended | |
| Sep. 30, 2020 | Sep. 30, 2019 |
| OPERATING ACTIVITIES | | |
| Net Earnings | $ | 2,005 | | $ | 2,560 | |
| Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities: | | |
| Depreciation | 1,036 | | 1,005 | |
| Deferred Income Tax Expense | 117 | | 186 | |
| Gains on Property Dispositions | (33) | | (129) | |
| | |
| | |
| Other Operating Activities - Net | 3 | | 115 | |
| Net Cash Provided by Operating Activities | 3,128 | | 3,737 | |
| | |
| INVESTING ACTIVITIES | | |
| Property Additions | (1,209) | | (1,191) | |
| Proceeds from Property Dispositions | 51 | | 218 | |
| Purchases of Short-Term Investments | (426) | | (2,255) | |
| Proceeds from Sales of Short-Term Investments | 1,423 | | 1,480 | |
| Other Investing Activities | (32) | | 19 | |
| Net Cash Used in Investing Activities | (193) | | (1,729) | |
| | |
| FINANCING ACTIVITIES | | |
| Long-term Debt Issued | 500 | | 2,000 | |
| Long-term Debt Repaid | (245) | | (18) | |
| Dividends Paid | (599) | | (577) | |
Shares Repurchased (a) | (664) | | (2,767) | |
| | |
| Other Financing Activities | 13 | | 17 | |
| Net Cash Used in Financing Activities | (995) | | (1,345) | |
| | |
| Net Increase in Cash and Cash Equivalents | 1,940 | | 663 | |
| | |
| CASH AND CASH EQUIVALENTS | | |
| Cash and Cash Equivalents at Beginning of Period | 958 | | 858 | |
| Cash and Cash Equivalents at End of Period | $ | 2,898 | | $ | 1,521 | |
| | |
Certain prior year data has been reclassified to conform to the current presentation.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
a)Shares Repurchased: During third quarters and nine months ended 2020 and 2019, the Company engaged in the following repurchase activities:
| | | | | | | | | | | | | | | | | |
| Quarters Ended | | | Nine Months Ended | |
| Sep. 30, 2020 | Sep. 30, 2019 | | Sep. 30, 2020 | Sep. 30, 2019 |
Shares Repurchased (Millions) | 1 | | 16 | | | 10 | | 39 | |
Cost of Shares (Dollars in millions) | $ | 48 | | $ | 1,111 | | | $ | 664 | | $ | 2,767 | |
| Average Cost per Share Repurchased | $ | 67.99 | | $ | 68.94 | | | $ | 65.12 | | $ | 71.11 | |
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VOLUME AND REVENUE (Unaudited) | | | | | | | | | | | | |
| Volume (Thousands of units); Revenue (Dollars in millions); Revenue Per Unit (Dollars) | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Quarters Ended September 30, 2020 and September 30, 2019 | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Volume | | | | Revenue | | | | Revenue Per Unit | | | |
| 2020 | 2019 | % Change | | 2020 | 2019 | % Change | | 2020 | 2019 | % Change | |
Chemicals(a) | 165 | | 166 | | (1) | % | | $ | 566 | | 590 | | (4) | % | | $ | 3,430 | | $ | 3,554 | | (3) | % | |
| Agricultural and Food Products | 115 | | 119 | | (3) | | | 335 | | 354 | | (5) | | | 2,913 | | 2,975 | | (2) | | |
| Automotive | 102 | | 110 | | (7) | | | 271 | | 297 | | (9) | | | 2,657 | | 2,700 | | (2) | | |
Minerals(a) | 86 | | 90 | | (4) | | | 144 | | 147 | | (2) | | | 1,674 | | 1,633 | | 3 | | |
Forest Products(a) | 67 | | 73 | | (8) | | | 206 | | 222 | | (7) | | | 3,075 | | 3,041 | | 1 | | |
Metals and Equipment(a) | 58 | | 65 | | (11) | | | 159 | | 195 | | (18) | | | 2,741 | | 3,000 | | (9) | | |
| Fertilizers | 57 | | 60 | | (5) | | | 96 | | 101 | | (5) | | | 1,684 | | 1,683 | | — | | |
| Total Merchandise | 650 | | 683 | | (5) | | | 1,777 | | 1,906 | | (7) | | | 2,734 | | 2,791 | | (2) | | |
| Coal | 155 | | 213 | | (27) | | | 330 | | 516 | | (36) | | | 2,129 | | 2,423 | | (12) | | |
| Intermodal | 717 | | 673 | | 7 | | | 445 | | 447 | | — | | | 621 | | 664 | | (6) | | |
| Other | — | | — | | — | | | 96 | | 109 | | (12) | | | — | | — | | — | | |
| Total | 1,522 | | 1,569 | | (3) | % | | $ | 2,648 | | $ | 2,978 | | (11) | % | | $ | 1,740 | | $ | 1,898 | | (8) | % | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Nine Months Ended September 30, 2020 and September 30, 2019 | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Volume | | | | Revenue | | | | Revenue Per Unit | | | |
| 2020 | 2019 | % Change | | 2020 | 2019 | % Change | | 2020 | 2019 | % Change | |
Chemicals(a) | 495 | | 506 | | (2) | % | | $ | 1,723 | | 1,770 | | (3) | % | | $ | 3,481 | | $ | 3,498 | | — | % | |
| Agricultural and Food Products | 338 | | 351 | | (4) | | | 1,011 | | 1,056 | | (4) | | | 2,991 | | 3,009 | | (1) | | |
| Automotive | 241 | | 346 | | (30) | | | 645 | | 937 | | (31) | | | 2,676 | | 2,708 | | (1) | | |
Minerals(a) | 243 | | 250 | | (3) | | | 405 | | 419 | | (3) | | | 1,667 | | 1,676 | | (1) | | |
Forest Products(a) | 202 | | 214 | | (6) | | | 617 | | 652 | | (5) | | | 3,054 | | 3,047 | | — | | |
Metals and Equipment(a) | 173 | | 192 | | (10) | | | 500 | | 572 | | (13) | | | 2,890 | | 2,979 | | (3) | | |
| Fertilizers | 175 | | 183 | | (4) | | | 311 | | 323 | | (4) | | | 1,777 | | 1,765 | | 1 | | |
| Total Merchandise | 1,867 | | 2,042 | | (9) | | | 5,212 | | 5,729 | | (9) | | | 2,792 | | 2,806 | | — | | |
| Coal | 463 | | 651 | | (29) | | | 1,022 | | 1,611 | | (37) | | | 2,207 | | 2,475 | | (11) | | |
| Intermodal | 1,963 | | 1,988 | | (1) | | | 1,226 | | 1,311 | | (6) | | | 625 | | 659 | | (5) | | |
| Other | — | | — | | — | | | 298 | | 401 | | (26) | | | — | | — | | — | | |
| Total | 4,293 | | 4,681 | | (8) | % | | $ | 7,758 | | $ | 9,052 | | (14) | % | | $ | 1,807 | | $ | 1,934 | | (7) | % | |
(a) In first quarter 2020, changes were made in the categorization of certain lines of business, impacting Chemicals, Minerals, Forest Products, and Metals and Equipment. The impacts were not material and prior periods have been reclassified to conform to the current presentation.
VOLUME AND REVENUE
The COVID-19 pandemic continued to impact volumes during the quarter. Total revenue decreased 11% in third quarter 2020 when compared to third quarter 2019 due to volume declines in merchandise and coal, decreases in fuel recovery and declines in coal pricing resulting from lower global benchmark prices. These decreases were partially offset by pricing gains in merchandise and intermodal as well as intermodal volume growth.
Fuel Surcharge
Fuel surcharge revenue is included in the individual markets. Fuel lag is the estimated difference between highway diesel prices in the quarter and the prices used for fuel surcharge, which are generally on a two month lag.
| | | | | | | | | | | | | | | | | |
| Quarters Ended | | | Nine Months Ended | |
| (Dollars in millions) | Sep. 30, 2020 | Sep. 30, 2019 | | Sep. 30, 2020 | Sep. 30, 2019 |
| Fuel Surcharge Revenue | $ | 70 | | $ | 154 | | | $ | 293 | | $ | 464 | |
| Fuel Lag (Expense) Benefit | $ | (1) | | $ | 8 | | | $ | 34 | | $ | 15 | |
Merchandise Volume
Chemicals - Declined due to lower shipments of frac sand and other industrial chemicals, partially offset by increases in crude oil and plastics shipments.
Agricultural and Food Products - Declined due to lower shipments of grain and feed, partially offset by increases in ethanol shipments.
Automotive - Declined as a result of lower vehicle production at plants served by CSX.
Minerals - Decreased due to lower shipments of aggregates and other minerals.
Forest Products - Declined due to lower shipments of printing paper, wood pulp and building products.
Metals and Equipment - Declined as a result of reduced equipment shipments as well as reduced sheet steel and pipe shipments.
Fertilizers - Decreased due to lower shipments of phosphate and sulfur.
Coal Volume
The decline in domestic coal was driven by lower shipments of utility coal as a result of continued competition from natural gas and reduced electrical demand, as well as lower steel and industrial shipments due to lower industrial production. Export coal declined due to reduced international shipments of thermal and metallurgical coal as a result of lower global benchmark prices.
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| Quarters Ended | | | | Nine Months Ended | | |
| (Millions of tons) | Sep. 30, 2020 | Sep. 30, 2019 | Change | | Sep. 30, 2020 | Sep. 30, 2019 | Change |
| Coal Tonnage | | | | | | | |
| Domestic | 10.3 | | 15.3 | | (33) | % | | 29.6 | | 43.3 | | (32) | % |
| Export | 7.2 | | 8.8 | | (18) | | | 22.3 | | 29.9 | | (25) | |
| Total Coal | 17.5 | | 24.1 | | (27) | % | | 51.9 | | 73.2 | | (29) | % |
Intermodal Volume
Increases in both domestic and international shipments resulted from tightening truck capacity, inventory replenishments and growth in rail volumes from east coast ports.
Other Revenue
Other revenue decreased $13 million versus prior year primarily due to lower affiliate revenue and declines in demurrage.
EXPENSE
Expenses of $1.5 billion decreased $184 million, or 11%, in third quarter 2020 when compared to third quarter 2019 primarily driven by efficiency and volume savings as well as lower fuel prices, partially offset by lower gains from real estate sales.
Labor and Fringe expense decreased $64 million due to the following:
•Efficiency and volume savings of $71 million primarily resulted from reduced crew starts and lower headcount.
•Other costs increased $7 million primarily due to inflation.
Materials, Supplies and Other expense decreased $29 million due to the following:
•Efficiency and volume savings of $58 million primarily resulted from lower operating support costs, lower terminal costs and reduced equipment maintenance expenses.
•Other costs decreased $33 million primarily due to a $22 million non-railroad asset impairment in the prior year related to an intermodal terminal sale agreement and other non-significant items.
•Partially offsetting these decreases, gains from real estate sales of $3 million in 2020 were lower than gains of $65 million in 2019.
Depreciation expense increased $10 million primarily due to the results of a 2019 equipment depreciation study.
Fuel expense decreased $104 million driven by a 36% price decrease, lower volumes and record fuel efficiency in the current year as well as a $15 million net expense in prior year related to state fuel tax matters.
Equipment and Other Rents expense increased $3 million primarily resulting from higher intermodal volumes and inflation.
Employee Counts (Estimated)
| | | | | | | | | | | | | | | | | | | | | | | |
| Quarters Ended | | | | Nine Months Ended | | |
| Sep. 30, 2020 | Sep. 30, 2019 | Change | | Sep. 30, 2020 | Sep. 30, 2019 | Change |
| Average | 19,313 | 21,331 | (2,018) | | 19,760(a) | 21,777 | (2,017) |
| Ending | 19,300 | 21,158 | (1,858) | | 19,300 | 21,158 | (1,858) |
(a) During second quarter 2020, there were on average 307 employees on temporary emergency reserve boards who are included in the average employee count for nine months ended September 30, 2020 in the above table. Employees on these boards received 7 days of guarantee pay in each 28-day cycle and were eligible, if qualified, for Railroad Retirement Board unemployment benefits for the other 21 days during which they were considered furloughed. Excluding these employees, average headcount for the nine months ended September 30, 2020 would be 19,658. There were no employees on temporary emergency reserve boards during third quarter 2020.
Fuel Expense
| | | | | | | | | | | | | | | | | |
| Quarters Ended | | | Nine Months Ended | |
| (Dollars and gallons in millions, except price per gallon) | Sep. 30, 2020 | Sep. 30, 2019 | | Sep. 30, 2020 | Sep. 30, 2019 |
Estimated Locomotive Fuel Consumption (Gallons) | 84.3 | | 94.7 | | | 254.9 | | 298.1 | |
Price per Gallon (Dollars) | $ | 1.32 | | $ | 2.05 | | | $ | 1.44 | | $ | 2.09 | |
| Total Locomotive Fuel Expense | $ | 111 | | $ | 194 | | | $ | 367 | | $ | 623 | |
| Non-locomotive Fuel Expense | 8 | | 29 | | | 35 | | 67 | |
| Total Fuel Expense | $ | 119 | | $ | 223 | | | $ | 402 | | $ | 690 | |
| | | | | |
Fuel Efficiency (Gallons of locomotive fuel per 1,000 GTMs) | 0.93 | | 0.98 | | | 0.97 | | 1.01 | |
OPERATING STATISTICS (Estimated)
In third quarter 2020, train velocity decreased by 3% and car dwell increased 9% relative to the prior year period. The Company remains focused on executing the operating plan to deliver improved reliability, faster transit times and increased asset utilization while continuing to control costs.
From a safety perspective, CSX saw a third quarter record low number of FRA reportable injuries as well as a third quarter record low number of FRA reportable train accidents. The personal injury frequency index of 0.77 improved 9% versus the prior year, representing a new third quarter record low level. The FRA train accident rate of 2.66 increased 12% compared to the third quarter of 2019. Despite a reduction in the number of incident versus third quarter 2019, the reduction of accidents did not offset the reduction in train miles. The Company is committed to safety improvement and remains focused on reducing risk and enhancing the overall safety of its employees, customers and communities in which the Company operates.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Quarters Ended | | | | Nine Months Ended | | |
| | Sep. 30, 2020 | Sep. 30, 2019 | Improvement / (Deterioration) | | Sep. 30, 2020 | Sep. 30, 2019 | Improvement / (Deterioration) |
| Operations Performance | | | | | | | | |
| | | | | | | | |
Train Velocity (Miles per hour) (a) | | 19.6 | | 20.3 | | (3) | % | | 20.7 | | 20.2 | | 2 | % |
Dwell (Hours) (a) | | 9.7 | | 8.9 | | (9) | % | | 9.0 | | 8.7 | | (3) | % |
Cars Online (a) | | 115,823 | | 118,787 | | 2 | % | | 108,437 | | 119,564 | | 9 | % |
| | | | | | | | |
Revenue Ton-Miles (Billions) | | | | | | | | |
| Merchandise | | 31.0 | | 32.1 | | (3) | % | | 91.9 | | 96.7 | | (5) | % |
| Coal | | 7.1 | | 10.3 | | (31) | % | | 21.7 | | 31.7 | | (32) | % |
| Intermodal | | 7.4 | | 6.7 | | 10 | % | | 20.3 | | 20.0 | | 2 | % |
| Total Revenue Ton-Miles | | 45.5 | | 49.1 | | (7) | % | | 133.9 | | 148.4 | | (10) | % |
| | | | | | | | |
Total Gross Ton-Miles (Billions) | | 90.3 | | 97.1 | | (7) | % | | 262.6 | | 293.7 | | (11) | % |
| | | | | | | | |
| On-Time Originations | | 85 | % | 93 | % | (9) | % | | 88 | % | 88 | % | — | % |
| On-Time Arrivals | | 71 | % | 79 | % | (10) | % | | 80 | % | 77 | % | 4 | % |
| | | | | | | | |
| Safety | | | | | | | | |
| FRA Personal Injury Frequency Index | | 0.77 | | 0.85 | | 9 | % | | 0.82 | | 0.82 | | — | % |
| FRA Train Accident Rate | | 2.66 | | 2.37 | | (12) | % | | 2.47 | | 2.43 | | (2) | % |
Certain operating statistics are estimated and can continue to be updated as actuals settle.
(a) The methodology for calculating train velocity, dwell and cars online differs from that prescribed by the Surface Transportation Board. The Company will continue to report these metrics to the Surface Transportation Board using the prescribed methodology. See additional discussion on the Company's website.
Key Performance Measures Definitions
Train Velocity - Average train speed between origin and destination in miles per hour (does not include locals, yard jobs, work trains or passenger trains). Train velocity measures the profiled schedule of trains (from departure to arrival and all interim time), and train profiles are periodically updated to align with a changing operation.
Dwell - Average amount of time in hours between car arrival to and departure from the yard.
Cars Online - Average number of active freight rail cars on lines operated by CSX, excluding rail cars that are being repaired, in storage, those that have been sold, or private cars dwelling at a customer location more than one day.
Revenue Ton-Miles (RTM's) - The movement of one revenue-producing ton of freight over a distance of one mile.
Gross Ton-Miles (GTM's) - The movement of one ton of train weight over one mile. GTM's are calculated by multiplying total train weight by distance the train moved. Total train weight is comprised of the weight of the freight cars and their contents.
On-Time Originations - Percent of scheduled road trains that depart the origin yard on-time or ahead of schedule.
On-Time Arrivals - Percent of scheduled road trains that arrive at the destination yard on-time to within two hours of scheduled arrival.
FRA Personal Injury Frequency Index - Number of FRA-reportable injuries per 200,000 man-hours.
FRA Train Accident Rate - Number of FRA-reportable train accidents per million train-miles.
NON-GAAP MEASURES (Unaudited)
The Company reports its financial results in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The Company also uses certain non-GAAP measures that fall within the meaning of Securities and Exchange Commission Regulation G and Regulation S-K Item 10(e), which may provide users of the financial information with additional meaningful comparison to prior reported results. Non-GAAP measures do not have standardized definitions and are not defined by U.S. GAAP. Therefore, the Company’s non-GAAP measures are unlikely to be comparable to similar measures presented by other companies. The presentation of these non-GAAP measures should not be considered in isolation from, as a substitute for, or as superior to the financial information presented in accordance with GAAP. Reconciliations of non-GAAP measures to corresponding GAAP measures are below.
Free Cash Flow
Management believes that free cash flow is supplemental information useful to investors as it is important in evaluating the Company’s financial performance. More specifically, free cash flow measures cash generated by the business after reinvestment. This measure represents cash available for both equity and bond investors to be used for dividends, share repurchases or principal reduction on outstanding debt. Free cash flow is calculated by using net cash from operations and adjusting for property additions and certain other investing activities, which includes proceeds from property dispositions. Free cash flow should be considered in addition to, rather than a substitute for, cash provided by operating activities. The following table reconciles cash provided by operating activities (GAAP measure) to free cash flow, before dividends (non-GAAP measure).
| | | | | | | | |
| Nine Months Ended | |
| (Dollars in millions) | Sep. 30, 2020 | Sep. 30, 2019 |
| Net Cash Provided by Operating Activities | $ | 3,128 | | $ | 3,737 | |
| Property Additions | (1,209) | | (1,191) | |
| Other Investing Activities | 19 | | 237 | |
| Free Cash Flow (before payment of dividends) | $ | 1,938 | | $ | 2,783 | |
