Forward-Looking Disclosure Forward-Looking Disclosure This - - PDF document

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Forward-Looking Disclosure Forward-Looking Disclosure

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, cost-savings, expenses, or other financial items; statements of management’s plans, strategies and

• bjectives 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,” “preliminary” and similar

• expressions. Forward-looking statements speak only as of the date they are made, and the company undertakes no
• bligation 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

• r 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 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; (v) the outcome of claims and litigation involving or affecting the company; and (vi) natural events such as severe weather conditions or pandemic health crises. 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.

Executive Summary Executive Summary

Michael Ward Chairman, President and Chief Executive Officer

4 4

Fourth quarter performance . . . Fourth quarter performance . . .

• Macro-economy recovering

— Year-over-year comparisons stabilized post-Thanksgiving

• Revenue declines 13%

— Lower volume and FSC more than offset core price increases

• Operating ratio at 74.9%

— Safety and service performance remains strong — Productivity efforts continue to support improving margins

Earnings Per Share From Continuing Operations

$0.86 $0.92 $0.77

2007 2008 2009

16% Decline 16% Decline

5 5

Operating Income (millions)

$1,981 $2,260 $2,768 $2,285

2006 2007 2008 2009

EPS - Continuing Operations

$2.24 $2.77 $3.66 $2.87

2006 2007 2008 2009

Full-year performance . . . Full-year performance . . .

Note: Data for 2006 excludes certain items for comparison purposes. See GAAP Reconciliation

79.3% 77.5% 75.4% 74.7%

2006 2007 2008 2009

. . . Strong core earning power Record operating ratio . . .

Sales and Marketing Review Sales and Marketing Review

Clarence Gooden Executive Vice President Sales and Marketing

7 7 7 7

Revenue declines 13% to $2.3 billion Revenue declines 13% to $2.3 billion

Revenue in Millions

$2,320 $2,674 $3 ($182) ($175)

Q4 2008 Fuel Price Volume Rate/Mix Q4 2009

RPU $1,549 Volume 1,498K Revenue $2,320M Note: See Fuel Surcharge Reconciliation

Core pricing intact, but offset by mix Core pricing intact, but offset by mix 8 8

Economic environment drives 7% volume decline Economic environment drives 7% volume decline

Year-Over-Year Volume Change

(7%) (23%) (13%) (53%) (21%) (22%) (14%) (41%) (18%) (17%) (10%) (28%) (23%) (5%) 5% 3%

Coal Merchandise Intermodal Automotive

First Quarter Second Quarter Third Quarter Fourth Quarter

RPU $1,549 Volume 1,498K Revenue $2,320M

Percent of Total Volume

30% Q1 24% Q4 36% Q1 36% Q4 31% Q1 35% Q4 3% Q1 5% Q4

Coal Merchandise Intermodal Automotive

9 9 9 9

Core pricing stable; RPU lower on fuel surcharge Core pricing stable; RPU lower on fuel surcharge

Note: “Same Store Sales” price increases exclude impacts from fuel surcharge and mix

Year-Over-Year Change

6.7% 6.8% 6.4% 6.2% 6.5% 6.5% 6.6% 6.3% 5.3% 10.5% 14.5% 18.3% 21.2% 14.0% 0.2% (5.4%) (7.1%) (8.7%)

Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009

Same Store Sales Price Increase Total Revenue per Unit

RPU $1,549 Volume 1,498K Revenue $2,320M

10 10 10 10 10 10 10 10

Coal revenue declines 24% Coal revenue declines 24%

Utility Export Other

Coal Categories

Fourth Quarter Year-Over-Year Change

(24%) (3%) (23%)

RPU Volume Revenue

• Fourth quarter summary

— Domestic shipments down on low demand and high stockpiles — Export shipments decline on lower global demand — Natural gas substitution remained high during the quarter

• Ongoing drivers

— Export market strengthening — Natural gas substitution easing — Domestic demand and inventory levels expected to be a headwind

74% 74% 15% 15% 11%

Fourth Quarter Volume RPU $1,756 Volume 365K Revenue $641M

11 11 11 11

Utility inventory levels a headwind well into 2010 Utility inventory levels a headwind well into 2010

Source: Coal consumption and inventory numbers from PIRA Energy Group

2001 2002 2003 2004 2005 2006 2007 2008 2009

Eastern Power Sector Tons in Millions

30 40 50 60 70 80 90 100

Coal Consumption Coal Inventory Typical Inventory Level

12 12 12 12 12 12 12 12

Merchandise revenue declines 10% Merchandise revenue declines 10%

Merchandise Categories

Agriculture Housing Industrial 40% 40% 31% 31% 29%

Fourth Quarter Year-Over-Year Change

(5%) (5%) (10%)

RPU Volume Revenue

Fourth Quarter Volume RPU $2,094 Volume 531K Revenue $1,112M

• Fourth quarter summary

— Housing starts and overall construction remain slow — Metals weakness continues on reduced steel production — Phosphates and Agricultural strength on multiple drivers

• Ongoing drivers

— Ongoing economic recovery driving moderate growth — All markets to see volume growth led by Phosphates and Metals

13 13 13 13 13 13 13 13

Automotive revenue declines 3% Automotive revenue declines 3%

Detroit–3 New Domestics

Automotive Categories

Fourth Quarter Year-Over-Year Change

(6%) 3% (3%)

RPU Volume Revenue

RPU $2,256 Volume 78K Revenue $176M

59% 59% 41% 41%

Fourth Quarter Volume

• Fourth quarter summary

— Volume strength due to inventory replenishment — Volume also improved slightly due to higher vehicle sales

• Ongoing drivers

— Inventories at normal levels — Double-digit increases in light vehicle production expected — Adapting to continuing industry production changes

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Intermodal revenue increases 2% Intermodal revenue increases 2%

Domestic International 60% 60% 40% 40%

Intermodal Categories

Fourth Quarter Year-Over-Year Change

(3%) 5% 2%

RPU Volume Revenue

RPU $649 Volume 524K Revenue $340M Fourth Quarter Volume

• Fourth quarter summary

— RPU lower due to fuel recovery and competitive truck prices — International weakness eased, producing sequential gains — Domestic up on truck conversions and new service offerings

• Ongoing drivers

— Better consumer demand and global trade drives international — Highly competitive truck market remains a challenge for domestic

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Sales and Marketing wrap-up . . . Sales and Marketing wrap-up . . .

Economic Forecast

2.1% 0.4% (2.5%) 2.6% 1.5% (2.2%) (9.8%) 3.6%

2007 2008 2009 2010 GDP IDP

• Macro-economic environment

is now recovering

— Forecasts reflect moderate growth

• Linehaul revenue growth

expected in first quarter

— Nine of ten markets are favorable; coal remains a headwind

• Maintaining reliable service

product for our customers

— Continue to sell the value of rail transportation — Core pricing expected to be above inflation long-term

Source: Global Insight

Operations Review Operations Review

David Brown Executive Vice President Chief Operating Officer

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Delivering under challenging business conditions Delivering under challenging business conditions

Culture of leadership, discipline and execution continues to produce strong results

— Leadership: Safety performance remained

strong in the fourth quarter

— Discipline: Cost control and productivity

are helping to improve operating margins

— Execution: Network operations

fluid and reliable for customers

Safety Safety Productivity Productivity Service Service Leadership Leadership Discipline Discipline Execution Execution Performance Excellence 18 18 18 18

Full Year

FRA Personal Injury Rate

1.36 1.28 1.19 0.99

Q4 2006 Q4 2007 Q4 2008 Q4 2009

FRA Train Accident Rate

3.73 2.93 2.78 2.65

Q4 2006 Q4 2007 Q4 2008 Q4 2009

FRA Personal Injury Rate

1.47 1.24 1.22 1.19

2006 2007 2008 2009

FRA Train Accident Rate

3.66 3.06 2.92 2.77

2006 2007 2008 2009

Fourth Quarter

Helping to lead one of the Nation’s safest industries Helping to lead one of the Nation’s safest industries

19 19 19 19 (60%) (50%) (40%) (30%) (20%) (10%) (0%) 10% 20%

1 6 11 16 21 26 31 36 41 46 51

Week Carloads Road Crew Starts

Train network stable as volume increases . . . Train network stable as volume increases . . .

Year-Over-Year Change in Volume and Crew Starts

Q2 2009 Q1 2009 Q3 2009 Q4 2009 Volume 17% Crew starts15% Volume 17% Crew starts15% Volume 21% Crew starts 20% Volume 21% Crew starts 20% Volume 15% Crew starts 19% Volume 15% Crew starts 19% Volume 7% Crew starts 16% Volume 7% Crew starts 16% Operating Operating Leverage Created Leverage Created

20 20 20 20

. . . with key resources stable at lower levels . . . with key resources stable at lower levels

Active T&E Employees

9,300 10,000 10,700 11,400 12,100 12,800 13,500

2009 2008

Down 17% Down 17% Down 14% Down 14% Down 15% Down 15% Down 10% Down 10%

Active Locomotives

2900 3100 3300 3500 3700 3900 4100

2009 2008

Down 9% Down 9% Down 18% Down 18% Down 17% Down 17% Down 16% Down 16%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

21 21 21 21

Network Performance

On-time Originations

76% 81% 85% 79%

Q4 2006 Q4 2007 Q4 2008 Q4 2009

On-time Arrivals

66% 73% 77% 79%

Q4 2006 Q4 2007 Q4 2008 Q4 2009

Train Velocity (mph)

20.0 21.2 21.2 22.0

Q4 2006 Q4 2007 Q4 2008 Q4 2009

Terminal Dwell (hours)

24.2 22.2 23.2 24.3

Q4 2006 Q4 2007 Q4 2008 Q4 2009

Service Reliability

Service levels strong on stable network operations Service levels strong on stable network operations

22 22 22 22

Productivity helping to improve full year earnings Productivity helping to improve full year earnings

Operating Ratio

79.3% 77.5% 75.4% 74.7%

2006 2007 2008 2009

• Adjusting the ONE Plan for

increased efficiency

• Managing resources levels

to business conditions

— Creating operating leverage

• Driving productivity to help
• ffset the impact of inflation

— Process improvement teams — Increased train productivity

Note: Data for 2006 excludes certain items for comparison purposes. See GAAP Reconciliation

23 23 23 23

CSX is well prepared as volume builds CSX is well prepared as volume builds

• Furloughed employees

— Generally available within a few weeks

• Newly-hired employees

— Training of new employees takes four to six months

• Stored rolling stock

— Locomotives and cars can be brought online within a week

Resources Available Resources Available T&E Employees furloughed

Percent of total

T&E Employees furloughed

Percent of total

1,882

18%

1,882

18%

Locomotives stored

Percent of total

Locomotives stored

Percent of total

564

14%

564

14%

Freight cars stored

Percent of total

Freight cars stored

Percent of total

23,602

30%

23,602

30%

Note: Data as of January 11, 2010 Note: Data as of January 11, 2010

As volume builds, resources will return less than 1-for-1 As volume builds, resources will return less than 1-for-1

24 24 24 24

Operations wrap-up . . . Operations wrap-up . . .

Leadership, Discipline and Execution Leadership, Discipline and Execution Maintaining strong safety performance

— Helping to lead one of America’s safest industries

Continuing to drive productivity and cost control

— Working aggressively to manage resources as volume returns

Providing a high level of customer service

— Network operations remain strong at lower resource levels

Financial Review Financial Review

Oscar Munoz Executive Vice President Chief Financial Officer

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Fourth quarter earnings summary . . . Fourth quarter earnings summary . . .

Fourth Quarter Results Dollars in millions, except EPS 2009 2008 Variance Revenue Expense $ 2,320 1,737 $ 2,674 1,982 (13% 12% ) Operating Income $ 583 $ 692 (16%) Interest Expense Other Income (net) Income Taxes (138 15 (155 ) ) (136 6 (201 ) ) Earnings from Continuing Operations $ 305 $ 361 (16%) Fully Diluted Shares in Millions EPS from Continuing Operations 396.9 $ 0.77 395.7 $ 0.92 (16%)

27 27 27 27

Cycling significant fuel surcharge benefit in 2008 Cycling significant fuel surcharge benefit in 2008

Weekly Highway Diesel Fuel Monthly Highway Diesel Fuel (two-month lag)

Positive Impact Negative Impact Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009

Fuel Surcharge Lag Impact

$38 $38 Million Million ($33) ($33) Million Million ($19) ($19) Million Million ($12) ($12) Million Million ($162) Million YOY Impact ($162) Million YOY Impact $150 $150 Million Million 28 28 28 28

Labor and Fringe expense declines 9% Labor and Fringe expense declines 9%

Employee Headcount

34,408 33,141 33,363 29,417

Q4 2006 Q4 2007 Q4 2008 Q4 2009

Fourth Quarter Labor Analysis in Millions

2008 Labor Expense $ 723 Labor Reduction Inflation Other 103 (18 (22 ) ) Subtotal 63 2009 Labor Expense $ 660 Variance

12% Decline 12% Decline

29 29 29 29

MS&O expense declines 19% MS&O expense declines 19%

Fourth Quarter MS&O Analysis in Millions

2008 MS&O Expense $ 547 Volume Net Reserve Adjustment Bad Debt Other 47 25 10 23 Subtotal 105 2009 MS&O Expense $ 442

MS&O Expense Dollars in Millions

$434 $436 $547 $442

Q4 2006 Q4 2007 Q4 2008 Q4 2009 Variance

30 30 30 30

Fuel expense declines 24% Fuel expense declines 24%

Gallons Per Thousand Gross Ton Miles

1.28 1.24 1.25 1.18

Q4 2006 Q4 2007 Q4 2008 Q4 2009

Fourth Quarter Fuel Analysis in Millions

2008 Fuel Expense $ 331 Volume Price Efficiency Non-Locomotive 31 20 17 13 Subtotal 81 2009 Fuel Expense $ 250 Variance

6% Improvement 6% Improvement

31 31 31 31

Other expenses collectively increase 1% Other expenses collectively increase 1%

Other Costs in Millions

$217 $220 $228 $227 $110 $96 $88 $61 $63 $57 $70 $120

Q4 2006 Q4 2007 Q4 2008 Q4 2009

• Inland Transportation up on
• ff-core volume increase
• Rents decrease on better

utilization and volume decline

• Life study adjustment offsets

increase in depreciable base

Inland Transportation Depreciation Rents $398 $393 $381 $385 32 32 32 32

Productivity and rightsizing driving costs lower Productivity and rightsizing driving costs lower

(7%) 1,603 1,498 Volume (12%) $ 1,982 $ 1,737 Total Operating Expenses (9%) 860 785

Depreciation Track Maintenance Pension and Property Taxes General and Administrative Technology and Other

Fixed and Indirect Costs (16%) 564 475

Terminal Operations Scheduled Network Crews Yard and Local Crews Locomotives and Freight Cars

Long-term Variable Costs (15%) $ 558 $ 477

Fuel Car Hire Unit Train Crews Third Party Services

Short-term Variable Costs % Change % Change 2008 2008 2009 2009

Fourth Quarter Cost Structure in Millions

Note: Normalizing for the fuel price impact, total operating expenses declined 11%

33 33 33 33

2009 Quarterly Cost Structure Year-Over-Year Change

(26%) (35%) (30%) (15%) (17%) (27%) (24%) (12%)

First Quarter Second Quarter Third Quarter Fourth Quarter

2009 Quarterly Cost Structure Year-Over-Year Change

(11%) (17%) (16%) (6%) (14%) (16%) (9%) (8%) (16%) (16%) (13%) (11%)

First Quarter Second Quarter Third Quarter Fourth Quarter

Sustained cost focus yields sequential improvement Sustained cost focus yields sequential improvement

Fuel Price-adjusted Variable Costs Fuel Price -adjusted Total Costs Fixed Costs Volume Variable Costs (unadjusted) Total Costs (unadjusted) 34 34 34 34 34 34 34 34

Full-year results strong in challenging environment Full-year results strong in challenging environment

Full Year Results Dollars in millions, except EPS 2009 2008 Variance Revenue Expense $ 9,041 6,756 $ 11,255 8,487 (20% 20% ) Operating Income $ 2,285 $ 2,768 (17%) Operating Ratio 74.7% 75.4% 70 bps Earnings from Continuing Operations $ 1,137 $ 1,495 (24%) Fully Diluted Shares in Millions EPS from Continuing Operations 395.7 $ 2.87 408.6 $ 3.66 (22%)

35 35 35 35

Cash flow remains positive with strong investment Cash flow remains positive with strong investment

Free Cash Flow Before Dividends in Millions

$506 $376 $1,221 $670

2006 2007 2008 2009

• 2009 free cash flow resilient

versus historic norms

• Strong liquidity supports

investment grade rating

• Commitment to balanced

capital deployment continues

Note: See GAAP Reconciliation; 2008 and 2009 data excludes seller-based financing of $54M and $160M, respectively

36 36 36 36 10% 10% 68%

Strong investment will continue in 2010 Strong investment will continue in 2010

• Nearly 70% targeted to

maintain strong infrastructure

• Strategic capital largely

driven by National Gateway

• Equipment capital maintains

capacity and gains efficiency

• Regulatory totals $200 million

with PTC at $170 million

— Total PTC expected to exceed $750 million through 2015

Infrastructure Regulatory Equipment Strategic 12%

2010 Capital Spending Plan $1.7 Billion

37 37 37 37

Looking ahead . . . Looking ahead . . .

Drivers of success in 2010 remain the same

— Yield management, safety, service, and productivity will produce positive results

Economic recovery will drive overall volume growth

— Although coal inventory levels will represent a headwind for much of 2010

Focused on offsetting margin pressure from mix impact

— Strong service product will continue to drive yield management efforts — Productivity will enhance operating leverage in non-coal markets

CSX emerging from recession a stronger company

— Operating leverage will drive continued financial strength as volume builds

Concluding Remarks Concluding Remarks

Michael Ward Chairman, President and Chief Executive Officer

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Relentless pursuit of excellence . . . Relentless pursuit of excellence . . .

Appendix Appendix

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GAAP Reconciliation Disclosure GAAP Reconciliation Disclosure

CSX reports its financial results in accordance with generally accepted accounting principles (“GAAP”). However, management believes that certain non-GAAP financial measures used to manage the company’s business that fall within the meaning of Regulation G (Disclosure of Non-GAAP Financial Measures) by the SEC may provide users of the financial information with additional meaningful comparisons to prior reported results. In press releases and presentation slides for stock analysts, CSX has provided financial information adjusted for certain items, which are non-GAAP financial measures. The company’s management evaluates its business and makes certain operating decisions (e.g., budgeting, forecasting, employee compensation, asset management and resource allocation) using these adjusted numbers. Likewise, this information facilitates comparisons to financial results that are directly associated with ongoing business

• perations as well as provides comparable historical information. Lastly, earnings forecasts prepared by stock

analysts and other third parties generally exclude the effects of items that are difficult to predict or measure in advance and are not directly related to CSX’s ongoing operations. A reconciliation between GAAP and the non-GAAP measure is provided. These non-GAAP measures should not be considered a substitute for GAAP measures.

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GAAP Reconciliation GAAP Reconciliation

$ 2.87 $ 3.66 $ 2.77 $ 2.24 Comparable EPS from Continuing Operations $ 2.87

• $ 3.66
• $ 2.77
• )

) ) $ 2.84 (0.22 (0.32 (0.06 EPS from Continuing Operations Gain on Insurance Recoveries Income Tax Benefits Gain on Conrail Property After-tax 74.7% 75.4% 77.5% 79.3% Comparable Operating Ratio 74.7%

• 75.4%
• 77.5%
• 77.5%

1.8% Operating Ratio Gain on Insurance Recoveries $ 2,285 $ 2,768 $ 2,260 $ 1,981 Comparable Operating Income $ 2,285

• $ 2,768
• $ 2,260
• )

$ 2,149 (168 Operating Income Gain on Insurance Recoveries 2009 2009 2008 2008 2007 2007 2006 2006 Dollars in millions Dollars in millions Full-year Results

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GAAP Reconciliation (continued) GAAP Reconciliation (continued)

$ 670 $ 1,221 $ 376 $ 506 Free Cash Flow ) $2,060 (1,447 54 3 ) $ 2,914 (1,740 36 11 ) ) $ 2,184 (1,773 (41 6 ) ) $ 2,058 (1,639 151 (64 Net Cash Provided by Operating Activities Property Additions Other Investing Activities Other Deposits and Conrail Free Cash Flow 2009 2009 2008 2008 2007 2007 2006 2006 Dollars in millions Dollars in millions Full-year Results

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Fuel Surcharge Reconciliation Fuel Surcharge Reconciliation

) ) $ (20 $ (182 Portion of year-over-year variance that is volume-related Portion of year-over-year variance that is fuel price-related ) $ (202 $ 332 $ 130 Total Rail and Intermodal Fuel Surcharge Recovery Variance Variance 2008 2008 2009 2009 Dollars in millions Dollars in millions Fourth Quarter Since total fuel surcharge revenue includes both rail and intermodal, it is different from the report filed with the Surface Transportation Board, which excludes CSX Intermodal fuel surcharge revenue.

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