On March
17, 2008, CSX sent the following letter to its employees:
Dear CSX
Employees –
Today, I
would like to inform you of some exciting news about the company’s near- and
long-term outlook, as well as some additional actions we announced
today. The related two press releases can be
found on the Gateway under “News and Announcements.”
POSITIVE FINANCIAL
GUIDANCE
First,
thanks to the momentum that you have created in our safety, service and
financial performance, as well as the positive market environment for rail
transportation, we had the privilege of announcing financial guidance for the
first quarter and full-year 2008 that is well above current Wall Street
expectations. We’re off to a fast start to the year, and the market
for our services remains strong. In addition, we have raised our
long-term guidance on several important financial measures, including our belief
that we can achieve compound annual growth in operating income by 2010 that is
25 to 30 percent higher than we had previously informed Wall
Street.
ADDITIONAL SHARE REPURCHASES
AND DIVIDEND INCREASE
Also as a
result of our confidence in CSX, its marketplace, and your ability to sustain
our strong performance, we announced two specific actions to increase
shareholder value. First, the Board has authorized the repurchase of
an additional $2.4 billion in CSX shares. This action has the
potential effect of increasing the value of remaining shares held by
investors. In addition to the share repurchase, we are increasing our
dividend by 20 percent, the fourth time we have raised the dividend in the past
two and a half years.
It is
important for you to know that, in addition to creating value through this
increased share buyback and dividend increase, we remain committed to continuing
to make significant investments in our railroad and maintaining a credit rating
that enables us to do so. That’s what we mean when we tell our
investors that we believe in a balanced and sensible approach to the management
of their money.
LEGAL ACTION AGAINST TWO
HEDGE FUNDS
I also
want to share with you another important action authorized by the Board to
protect the interests of CSX and all of its stakeholders. CSX has
filed a lawsuit in federal court against TCI and 3G alleging that, among other
things, these activist hedge funds have provided CSX shareholders with
materially misleading information regarding the extent of their ownership
interests in CSX and the level of control they seek to exert over the
company. We believe that TCI and 3G have violated securities laws and
that CSX shareholders are entitled to complete and accurate information about
this group and their plans and intentions.
ADDITIONAL
PERSPECTIVE
Because
of the significant recent news coverage related to our differences with TCI, I
know that a good number of you have a strong interest in the
matter.
I would
like to share with you an opinion
editorial that appeared
in the Washington Times
on March 11. It describes some of my views on the implications
of activist investors in rail stocks, which I recently made known on Capitol
Hill. The “op-ed” is also found on the Gateway.
Regardless
of your views on hedge funds, one thing is clear: The future of our
great company rides on the continuation of the outstanding improvements that you
have made in our business. When we do that, we create value for all
shareholders while also meeting the needs of customers, communities and
employees. I know I’ve said this many times before, and I can assure
you that it is critical.
By almost
every measure of safety, service and financial performance, we are leading the
industry in improvement and are now forging absolute leadership positions in
many areas of operating the business. The Board and management team
are tremendously proud of the work you have been doing and will continue to
stand behind you in every way possible.
The
momentum we have built together is paying dividends, literally! I
encourage you to remain focused on these fundamentals, and confident that
together we can achieve even greater success.
Best
Regards,
Michael
Ward
Forward
Looking Statements
This
information and other statements by the company 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, cost-savings, expenses, or other financial items; statements of
management’s plans, strategies and objectives for future operation, and
management’s expectations as to future performance and operations and the time
by which objectives will be achieved; statements concerning proposed new
products and services; and statements regarding future economic, industry or
market conditions or performance. Forward-looking statements are typically
identified by words or phrases such as “believe,” “expect,” “anticipate,”
“project,” “estimate” 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 does update 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 these
forward-looking statements. Factors that may cause actual results to differ
materially from those contemplated by these 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
or business conditions, including those affecting the rail 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; and (v) the outcome of claims
and litigation involving or affecting the company.
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.
Important
Proxy Information
On
February 22, 2008, CSX Corporation ("CSX") filed with the SEC a revised
preliminary proxy statement in connection with its 2008 Annual Meeting.
CSX plans to file with the SEC and furnish to its shareholders a
definitive Proxy Statement in connection with its 2008 Annual Meeting, and
advises its security holders to read the definitive Proxy Statement when it
becomes available, because it will contain important information. Security
holders may obtain a free copy of the definitive Proxy Statement and other
documents (when available) that CSX files with the SEC at the SEC’s website at
www.sec.gov. The definitive Proxy Statement and these other documents may also
be obtained for free from CSX by directing a request to CSX Corporation, Attn:
Investor Relations, David Baggs, 500 Water Street C110, Jacksonville, FL
32202.
CSX, its
directors, director nominee and certain named executive officers and employees
may be deemed to be participants in the solicitation of CSX’s security holders
in connection with its 2008 Annual Meeting. Security holders may obtain
information regarding the names, affiliations and interests of such individuals
in CSX’s revised preliminary proxy statement filed on February 22, 2008 with the
SEC.
Rewards
for railroads
March 11,
2008
By
Michael J. Ward
America's
railroads are solving real problems for the nation - big problems like traffic
congestion on the highways and emissions from motor vehicles. Rail demand is
expected to skyrocket over the next several years.
Railroads
deliver around 70 percent of the automobiles produced in this country, ethanol
that fuels a growing number of those vehicles, one-third of the nation's grain,
raw materials to produce energy and military equipment that helps keep our
nation secure. Our tracks also support passenger services
nationwide.
It would
be a real shame if we let the rail system fall prey to the whims of
short-sighted investors. I'm the CEO of one of the nation's largest railroads,
and that's what we're fighting today.
A common
criticism of corporate managers is that they "live for the quarter." But that is
precisely what some activist investors are demanding of railroads, regardless of
the impact on safety, service and shareholder value. One hedge fund, for
example, actually demanded that CSX freeze investment in its rail system and
pile on large amounts of debt on the eve of the recent credit crisis. Keep in
mind, the CSX railroad delivers essential products to two thirds of the American
population.
By their
very nature, railroads require constant investment to ensure high levels of
safety and customer service. They invest well more than 15 percent of their
revenues back into track, facilities and equipment. By contrast, the average
American manufacturer incurs only about 3 percent in capital expenditures. In
2006 alone, the major U.S. railroads invested a record $8.5 billion in track and
equipment.
At the
same time, rail investors are being rewarded in a big way. CSX's stock price,
for example, tripled from 2004 to 2007, placing it in the top 10 percent of all
S&P 500 companies in share appreciation. This value is created by bringing
real solutions to real problems and exercising balanced judgment in the way we
invest our shareholders' money.
At a time
when America's highway infrastructure is overcrowded and failing in some areas,
railroads take freight off the highways and are four times more fuel efficient
than trucks. In fact, it takes several hundred trucks to pull the freight of one
train. What's more, it can easily cost $15 million to add a single lane to a
mile of highway, compared to $1 million to $3 million and relatively little time
to add a mile of rail. And taxpayers foot the entire bill for highways, while
railroads are supported almost exclusively by private investment.
Intensive
capital investment and strategic long-term planning are responsible for the
renaissance of the American rails. And with railroads playing an important role
in meeting new challenges, this is no time for railroad companies to succumb to
investor demands that will limit their ability to serve the nation.
Any
activist hedge fund that would order a railroad to freeze capital expenditures
is merely putting its narrow agenda ahead of the long-term interests of the
company, their fellow shareholders, and the customers who sustain the business.
Such investors seem to lack a complete understanding of why railroads are
vibrant again and providing more benefits than ever before.
Railroads
have a long, proud history and a network of tracks that extend from border to
border and sea to sea. We will not be detoured by ill-considered decisions and
distractions. The best of American railroads, like the vast majority of railroad
investors, are seeking value for the long haul.
Michael
J. Ward is chairman, president and CEO of CSX.
Important
Proxy Information
On
February 22, 2008, CSX Corporation ("CSX") filed with the SEC a revised
preliminary proxy statement in connection with its 2008 Annual Meeting.
CSX plans to file with the SEC and furnish to its shareholders a
definitive Proxy Statement in connection with its 2008 Annual Meeting, and
advises its security holders to read the definitive Proxy Statement when it
becomes available, because it will contain important information. Security
holders may obtain a free copy of the definitive Proxy Statement and other
documents (when available) that CSX files with the SEC at the SEC’s website at
www.sec.gov. The definitive Proxy Statement and these other documents may also
be obtained for free from CSX by directing a request to CSX Corporation, Attn:
Investor Relations, David Baggs, 500 Water Street C110, Jacksonville, FL
32202.
CSX, its
directors, director nominee and certain named executive officers and employees
may be deemed to be participants in the solicitation of CSX’s security holders
in connection with its 2008 Annual Meeting. Security holders may obtain
information regarding the names, affiliations and interests of such individuals
in CSX’s revised preliminary proxy statement filed on February 22, 2008 with the
SEC.