Forward-Looking Statements This information and other statements by - - PDF document

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Forward-Looking Statements This information and other statements by - - PDF document

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


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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

  • perations, 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.

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Presentation overview . . .

 CSX is a Fortune 250 company with a record of success

— Leading North American transportation company with strong eastern network

 Company’s business portfolio is well diversified

— Positioned to drive long term shareholder value creation

 Coal markets will continue to transition in 2016

— Company taking steps to address variable and structural costs of coal network

 Still targeting mid-single digit EPS growth this year

— Meaningful margin expansion expected; targeting mid-60s longer-term

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$2.3 $3.7

2009 LTM Dollars in Billions 2009 LTM

$0.95 $2.02

2009 LTM

Performance strong coming out of 2009 recession

Operating Income Operating Ratio Earnings Per Share

8% CAGR 510 bps Improvement 13% CAGR

74.9% 69.8%

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. . . despite significant transition in coal business

2009 LTM

Volume Units in Thousands

Merchandise Intermodal Domestic Coal Export Coal

 Intermodal growth

— Driven by highway conversions and new customers and services

 Merchandise up slightly

— Industrial and housing economies have suppressed recovery

 Domestic coal decline

— Driven by natural gas substitution

 Export coal more variable

— Driven by commodity prices for metallurgical and thermal coal

5,793 6,869

40% 42% 41% 13% 33% 23%

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4% 4%

Network well positioned for eastern U.S. growth

 Connects all five eastern mega-regions  Serves nearly two-thirds of the nation’s population  Access to over 60% of U.S. industrial production  Superior market reach into Northeast and Florida  Network reach is foundation for business diversity

New Orleans Memphis

Florida Piedmont Atlantic Gulf Coast Midwest

St Louis Chicago New York Boston Norfolk Jacksonville Miami

Northeast

Savannah Wilmington Tampa Mobile Baltimore Philadelphia Charleston Montreal CSX-served Ports Population Density GT 6M 3-6M 1-3M LT 1M

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Business diversified across broad market base

9% 7% 4% 6% 4% 1% 5% 5% 2% 13% 4% 18% 23%

LTM Volume by Market: 6.9 Million Units

Chemicals Automotive Metals Agriculture Phosphates Food & Consumer Forest Products Minerals Waste & Equipment Export Coal Domestic coal Domestic Intermodal International Intermodal

Consumer Goods: 41%

Industrial Sector: 20%

Agricultural Sector: 11% Construction Sector: 12% Energy Sector: 17% 7

Industrial sector will be led by automotive in 2016

8.6 11.9 13.1 15.4 16.2 17.0 17.5 18.0

2009 2016

North American Light Vehicle Production in Millions

 NALVP expected to further increase 3% in 2016

— Will begin serving additional facilities next year

 Expect chemical market to be impacted by shale next year

— Crude prices and spreads pressure eastern rail opportunities

 Metals to continue to be impacted by dollar’s strength

— Headwinds expected to continue until foreign exchange normalizes

Industrial Sector

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Source: IHS Global Inc.

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Projection

Agriculture outlook challenged by multiple indicators

1975 2020

U.S. Corn Production Index: 1975=100

Acres Planted Yield per Acre

 Strong domestic harvest offset by challenging global market

— U.S. dollar and large Brazilian crop pressure export grain

 Ethanol markets face continued challenges

— Oversupply and import sourcing create market headwinds

 Corn prices drive demand for phosphates and fertilizers

— Farmers delaying fertilizer purchases until netback improves

Source: USDA and ProExporter 207 114 100 Agricultural Sector

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Expect steady housing market recovery to continue

 Housing starts drive about 5% of CSX business

— Lumber and building products — Aggregates and waste — Metals and plastics — Intermodal — Appliances

 Housing market growth concentrated in multi-family

— Multi-family starts require about 1/3 the material as single family starts

Source: IHS Global Inc. & U.S. Census Bureau Construction Sector 1,406 1,768 1,492 1,371 1,536 586 612 784 928 1,001 1,112 1,297

U.S. Housing Starts in Thousands

Decade/Annual Average Historical Average 60’s 00’s 2010 2016

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Hampton Roads St Louis Memphis Philadelphia Wilmington Chicago Baltimore Tampa Mobile New Orleans Jacksonville Savannah Charleston NY/NJ Boston

Midwest

Intermodal network leveraging long-term growth

1.9 2.2 2.3 2.5 2.6 2.7 2.8

2009 2010 2011 2012 2013 2014 LTM

Intermodal Volume in Millions

 Intermodal traffic operating in double-stack lanes accounts for 90% of volume today  With National Gateway completion in 2017, mid-90% of traffic will be double-stacked 11 11

Montreal Northwest Ohio Terminal Existing Terminals Served Terminals being Expanded New Terminal Development Double Stack Cleared Double Stack in Process

Florida Gulf Coast Northeast Piedmont Atlantic

Intermodal Montreal Note: Multiple terminals in a location are designated with a number

2 2 2 3 3 3 2 2

Norfolk St Louis Memphis Philadelphia Wilmington Chicago Baltimore Tampa Mobile New Orleans Jacksonville Savannah Charleston NY/NJ Boston

Gulf Coast Midwest

Montreal

Northeast Piedmont Atlantic

Montreal

NW Ohio hub enhances network connectivity

Intermodal

 Hub and spoke coupled with corridor lanes key differentiator

— 25% of growth since 2011 is a direct result of NW Ohio hub

 Approach combined with superior service drives growth

— Over 200 new NW Ohio lanes driving significant volume growth

 NW Ohio recently expanded 50% to drive further growth

— Supports new investments in Montreal and Florida markets

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CSX has successful H2R conversion platform . . .

75 100 125 150 175 200 225

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Indexed: January 2006 = 100

ATA Truck Tonnage CSX Average Weekly Domestic Intermodal Volume Source: CSX Corporation and ATA

Domestic Intermodal Volume versus ATA Truck Tonnage

Intermodal Up ~120% Up ~15%

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. . . and future opportunity aligns with CSX’s network

 Total eastern opportunity is about 9 million truck loads

— Reflects truckload moves greater than 550 miles

 Significant majority overlays CSX’s intermodal network

— H2R initiative designed to capture growth opportunity

 Capital investment will be required over time

— Investment is scalable as volume increases

Intermodal Traffic Density Originations Terminations Chicago St Louis Memphis New Orleans Mobile Tampa Jacksonville Savannah Charleston Wilmington Hampton Roads Baltimore Philadelphia NY/NJ Boston Montreal

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CSX earnings increased during coal transition

$1.70 $1.79 $1.83 $1.92 $2.02 $3.7 $3.2 $2.9 $2.8 $2.6

2011 2012 2013 2014 LTM

EPS Coal Revenue in Billions

 Over 30% decline in coal revenue since 2011

— Natural gas prices down nearly 50% since 2011

 Successfully grew earnings each year

— Results driven by H2R conversions, pricing for the value of our service, and focus on efficiency

Coal

Record EPS despite $1.1 billion decline in coal revenue

131 97 90 104 98 40 48 44 39 34

2011 2012 2013 2014 LTM

Domestic Export

Coal Tonnage in Millions

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CSX continuing to streamline cost structure

Appalachian Coal Fields  Recently announced closures in Erwin, TN and Corbin, KY

— Structural change due to lower coal demand going forward — Actions drive further benefits

 Focused on further actions

— Combining coal trains — Consolidating merchandise traffic — Utilizing alternate route capacity — Consolidating additional facilities

 Additional opportunities being evaluated across coal network

Eastern Kentucky West Virginia Evaluating additional

  • pportunities

Erwin ~300 Employees Impacted Corbin ~180 Employees Impacted Coal

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Outlook for 2015 and longer-term remains intact

 Expect fourth quarter EPS to be slightly down

— Coal actions completed; labor & property items are still pending

 Targeting mid-single digit full-year EPS growth

— Despite about $450 million in coal revenue losses

 Expect meaningful full-year margin expansion  Strong pricing, efficiency and profitable growth key drivers

— Leverage longer trains across all three major markets — Drive industrial development to leverage merchandise growth — H2R conversions, new terminals and expansions drive intermodal — Structural changes & rightsizing resources, especially in coal

2015 Guidance Mid-60s Longer-term

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Wrap-up . . .

 Sustained record of strong financial performance

— Expect coal declines since 2011 to total about $1.3 billion by year-end 2015

 Energy markets expected to be challenged in 2016

— Headwinds persist in 2016; evaluating further structural changes in coal network

 Service Excellence is foundation for value creation

— Pricing for the value of rail service, efficient operations, and long term growth

 Leveraging network reach and diverse business portfolio

— Expect meaningful margin expansion in 2015, mid-60s operating ratio longer-term

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