Here representing CSX Corporation this morning are Michael Ward, the company’s Chairman, President and Chief Executive Officer; Clarence Gooden, Chief Sales and Marketing Officer; David Brown, Chief Operating Officer; and Oscar Munoz our Chief Financial Officer.Before we begin the formal part of our program, let me remind everyone that the presentation and other statements made by the company contain forward-looking statements and actual performance could differ materially from the results anticipated by these statements. In addition, let me also remind everyone that at the end of the presentation we will conduct a question-and-answer session with the research analysts. With 27 analysts now covering CSX, I would ask, as a courtesy to everyone, please limit your inquiries to one primary and one follow up question. And with that, let me turn the presentation over to CSX Corporation’s Chairman, President, and Chief Executive Officer, Michael Ward. Michael? Michael Ward Well thank you David and good morning everyone. Last evening we reported second quarter earnings per share of $1.07, up 51% on a continuing basis from the same period last year. These results were driven largely by volume improvement in a recovering marketplace, the ability to value price our services and strong safety, service and productivity on our railroad. Looking at revenues broadly, they increased 22%. Volume was the biggest driver at 13%, while pricing and fuel cost recovery made up the rest. We took on higher levels of traffic profitably as our employees continued to find new ways to operate more efficiently. They continue to demonstrate our culture of accountability and results. The combination of higher revenues and strong productivity resulted in an all time record financial results including an operating income of $768 million, up 33% from the prior period and a 240 basis point improvement in our operating ratio to 71.2%.
We are on the right path in creating value for our customers to help them compete in today’s economy. As a result, we are also delivering strong financial results for our shareholders. We remain confident in our ability to grow, drive operating leverage and produce strong financial results going forward.With that I’ll turn it over to Clarence. Clarence Gooden Thank you Michael and good morning everyone. In the second quarter of 2010, an improving economy helped almost all the markets that we serve rebound from the lows experienced last year. As you can see in the chart on the left, the manufacturing sector expanded again in June as reflected in a reading of 56.2 from The Institute for Supply Management’s Manufacturing, Purchasing Managers Index. You will recall that a reading above 50 indicates growth. This is the eleventh consecutive month that the index has shown growth. Also, inventory replenishment continues to play a significant role in the recovery as inventories remain below target levels in several markets. And the chart to the right, the June ISM report on customer inventories which assesses responder’s views of the adequacies of their own inventories yielded an index score of 38 which indicates that responders believe their customer's inventories are too low. In addition to this report, the most recent May 2010 U.S. Census Bureau report of Manufacturer's Inventories to Shipments and Unfilled Orders stood at 1.25 which is near the low end of its historical range. At the same time, as the economy and our traffic levels have been improving, we remain committed to delivering a safe and reliable product and we remain focused on capturing the value of our services. Now let's look at the change in revenue for the second quarter on the next slide. CSX revenue increased 22% to nearly $2.7 billion due to volume growth or pricing gains and the impact of higher fuel cost reflected in our fuel surcharge program. As you can see on the chart, volume increases drove $290 million of year-over-year revenue growth. Also the combined effect of rate and mix accounted for $108 million of the increase reflecting yield gains across all markets, as we continue to sell the value of rail transportation.
Finally, as you look to the slide on the right side of the chart, the impact of higher fuel costs increased our fuel recovery $80 million in the quarter.Let me turn to the next slide and take a closer look at overall volume changes across the markets that we serve. Total volume of 1.6 million units was up 13% versus the second quarter of 2009. You'll notice on the chart that we have consolidated our reporting into three lines of business, Intermodal, Merchandise and Coal. We moved automotive reporting within merchandise due to the relative size of the automotive business when compared to our book of business and due to the similar market characteristics. Looking at the bars, you can see the largest growth was in Intermodal at 18%, with increases in domestic and international volume. Merchandise shipments also grew 14%. Each of these markets showed greater year-over-year growth than they did in the first quarter. The real volume story in the second quarter was the strengthening in the coal market. Coal volumes grew 7% in the second quarter, a significant contrast from the weakness reflected in the first quarter. This resulted in the first quarter of year-over-year growth since the fourth quarter of 2008. Read the rest of this transcript for free on seekingalpha.com