Royal Bank of Canada Royal Bank of Canada Global Transportation - - PowerPoint PPT Presentation

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Royal Bank of Canada Global Transportation Conference September 2009 Royal Bank of Canada Global Transportation Conference September 2009

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Forward-Looking Disclosure Forward-Looking Disclosure

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

• 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” 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.investors.csx.com.

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CSX’s competitive position is strong among peers CSX’s competitive position is strong among peers

Serves all major markets in the eastern United States

— Accounts for over 65% of U.S. population and 75% of consumption

Links all major industry and natural resource centers

— Strong presence in coal, phosphates, and aggregates support key industries

Provides international access through all major ports

— Directly serves Atlantic and Gulf ports; access Pacific ports through alliances

Diverse business portfolio provides greater stability

— Balanced between life-essential products and discretionary products

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Economic recession impacting volume levels Economic recession impacting volume levels

% of CSX Volume 35% 11% 12% 14% 28% Chemicals Metals Forest Products Emerging Markets Automotive Intermodal Agricultural Products Phosphates & Fertilizers Food & Consumer Coal CSX Commodity Groups

Note: Third quarter data for 2009 is through week 34

Industrial Segment Housing Products Consumer Products Agriculture Segment Energy

Year-Over-Year Volume Change

(19%) (8%) (14%) (20%) (26%) (14%) (12%) (19%) (23%) (32%)

First Half Third Quarter-to-Date

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Productivity/rightsizing helping offset volume decline Productivity/rightsizing helping offset volume decline

First Half 2009 CSX Cost Structure

25% 29% 46%

First Half 2009 Year-Over-Year Change

(19%) (43%) (14%) (10%)

Volume ST Variable LT Variable Fixed

Short-term Variable Short-term Variable Fixed and Indirect Fixed and Indirect Long-term Variable

Cost structure improvement delivered in culture of safety leadership Cost structure improvement delivered in culture of safety leadership

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Economy expected to remain weak through 2009 Economy expected to remain weak through 2009

Year-Over-Year Change in CSX Volume

(25%) (20%) (15%) (10%) (5%) 0% 5%

Oct Dec Feb Apr Jun Aug

Q4-08 Q1-09 Q2-09 Q3-09

Year-Over-Year Change in GDP and IDP

(25%) (20%) (15%) (10%) (5%) 0% 5% Industrial Production GDP Source: Global Insight – August 2009 Forecast

Q4 2009 Q1 2010 Q4 2010 Q2 2010 Q3 2010 Q3 2009

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CSX is preparing for changes in the economy CSX is preparing for changes in the economy

• Operating strategy leverages

ONE Plan and technology

• Long-term fundamentals

continue to favor railroads

— Most efficient transportation — Most environmentally friendly — Most sustainable infrastructure

• Investments drive long-term

strategic/economic benefits

• Pricing momentum is in the

early stages of recovery

New York Boston New Orleans Florida Midwest Piedmont Atlantic Gulf Coast Northeast Population

GT 6M 3-6M 1-3M LT 1M Source: World Trade Service

Chicago

US Population Centers

Miami

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ONE Plan is the operational foundation ONE Plan is the operational foundation

• ONE Plan is the platform for

the scheduled train network

• Focus remains on optimizing

service and efficiency

• Advanced technology applied

to operations planning

• Network evaluation and
• ptimization is continuous

Merchandise Traffic Automotive Traffic

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Network investments build on strategic advantage Network investments build on strategic advantage

• Single-line reach into Florida,

New England and Illinois Basin

• National Gateway will link ports

to producers and consumers

• Leveraging public-private

partnerships for future growth

NW Ohio Transfer Yard

CSX Network Reach

Key Strategic Advantage

Single-line Advantage NWOH Connectivity SE Expressway

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Rail remains America’s long-term freight solution Rail remains America’s long-term freight solution

• Infrastructure needs have

gained national attention

• Recovery and Reinvestment

Act provides funding for rails

• Freight rails need to earn

adequate returns Investment Required Through 2035 in Billions

$148 $198 $5,000

Freight Rail Passenger Rail Highways

Source: 2007 AAR/Cambridge Study and 2007 DOT Surface Transportation Study

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CSX continues to create value for customers CSX continues to create value for customers

Service Reliability

51% 40% 81% 79%

On-time Departures On-time Arrivals

• ONE Plan and customer

focus driving strong service

• Supporting customers as they

reformulate their supply chains

• Driving solutions that reduce

carbon footprint and costs

• Relentless in selling the value
• f rail transportation

Network Performance

19.2 29.0 21.7 23.9

Velociy (mph) Dwell (hours) 2005 3QTD 2009

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Pricing remains in early stages of recovery Pricing remains in early stages of recovery

Source: Association of American Railroads

R R2

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During the first 23 years after the passage During the first 23 years after the passage

• f the Staggers Act, rail pricing declined by 60%
• f the Staggers Act, rail pricing declined by 60%

Pre-deregulation, rail pricing kept pace with inflation

Inflation-Adjusted Pricing Indexed: 1981 = $100

$51 $40 $100

1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007

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Strengthening position for long-term value creation Strengthening position for long-term value creation

Core earning power is resilient in current economy

— First half results represent second highest earnings in company history

Margins remain stable despite volume decline

— Positions CSX to emerge stronger when the economy returns to growth

Maintaining strong investment levels in the network

— Leverages current environment to strengthen network for recovery

Relentless pursuit of excellence Relentless pursuit of excellence

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Royal Bank of Canada Global Transportation Conference September 2009 Royal Bank of Canada Global Transportation Conference September 2009