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csx 2006_Merrill_Lynch_Presentation_FINAL-REF22975

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  • 1. Merrill Lynch Global Transportation Conference June 2006 1 1
  • 2. Forward Looking Disclosure This presentation 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,” 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. 2 2
  • 3. Our core strategies are gaining momentum Revenue Operational Performance Operational Impact Discipline Culture Discipline Pricing momentum Safety leadership Drive to win Customer focus Productivity discipline Personal accountability Profitable growth Service execution Core values Driving for reliability and growth 3 3
  • 4. Focus on revenue impact is driving rates Revenue Impact Revenue Per Unit Year-Over-Year Improvement 12% 11% 10% 9% 9% 8% 7% Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Note: The second quarter of 2005 excludes a $17 million coal rate case settlement 4 4
  • 5. Profitability focus is improving returns Revenue Impact Percentage of Rail Cars Above Reinvestment Hurdle Rates 2004 2006 24% 65% 35% 76% Above Hurdle Below Hurdle 5 5
  • 6. Economic environment remains strong Revenue Impact Transportation demand Transportation Index still near record levels Indexed: 2000=100 120 Full-year outlook: 110 — GDP 3.3% 100 — IDP 3.9% 90 80 ISM Index stands at 55% 70 Continued strength in 60 imports and exports 90 93 96 99 02 05 Source: Bureau of Transportation Statistics 6 6
  • 7. Leadership, discipline, execution Operational Discipline Specific, clear roles and responsibilities defined Compliance process developed Reliable Reliable Exception handling Performance Performance process defined Service Execution Service Execution Resources in place Productivity Discipline Productivity Discipline — Crews — Locomotives Safety Leadership Safety Leadership — Line capacity 7 7
  • 8. Operational discipline is driving safety Operational Discipline Personal Injury Train Accidents 3.0 6.0 2.6 5.2 2.2 4.4 1.8 3.6 1.4 2.8 1.0 2.0 01 02 03 04 05 06 01 02 03 04 05 06 8 8
  • 9. Discipline is driving on-time performance Operational Discipline On-time Originations On-time Arrivals 90 90 78 78 66 66 54 54 42 42 30 30 01 02 03 04 05 06 01 02 03 04 05 06 9 9
  • 10. Discipline is driving asset utilization Operational Discipline Dwell Time (hours) Cars on Line (000) 33 250 30 243 27 236 24 229 21 222 18 215 01 02 03 04 05 06 01 02 03 04 05 06 10 10
  • 11. Discipline is driving velocity and recrews Operational Discipline Train Velocity (mph) Recrews 26 90 24 74 22 58 20 42 18 26 16 10 01 02 03 04 05 06 01 02 03 04 05 06 11 11
  • 12. Discipline is driving the operating ratio Performance Culture Operating Ratio 89% 87% 86% 85% 83% 83% 81% 81% 79% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2004 2004 2004 2004 2005 2005 2005 2005 2006 Note: The first three quarters of 2004 exclude $71 million of management restructuring charges 12 12
  • 13. Consistent, continuous improvement Performance Culture Surface Transportation Operating Income in Millions $487 $422 $415 $361 $351 $315 $295 $250 $204 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2004 2004 2004 2004 2005 2005 2005 2005 2006 Note: The first three quarters of 2004 exclude $71 million of management restructuring charges 13 13
  • 14. Future growth leverages evolving trends Transportation demand is increasing Rail competitiveness is improving Highest growth trends are in the South 14 14
  • 15. Transportation demand – imports and IDP U.S. Consumption Imports and IDP 2000 Dollars in Trillions 2000 Dollars in Trillions IDP Imports $10 $3.0 $9 $2.5 $8 $2.0 $7 $1.5 $6 $1.0 $5 $0.5 2000 2003 2006 2009 2000 2003 2006 2009 Source: Global Insight 15 15
  • 16. Rail competitiveness – highway congestion Highway Miles versus Transport Forecast Miles Traveled Ton Miles in Trillions 7 250% 200% 6 150% 5 100% 4 50% 3 0% 2 1980 1985 1990 1995 2000 2000 2004 2008 2012 2016 2020 Miles Traveled Lane Miles Source: Department of Transportation Source: American Association of State Highway and Transportation Officials 16 16
  • 17. Rail competitiveness – truck cost structure Highway congestion Cost per Mile 24-28% Driver shortages New hours of service law 8-12% Increasing fuel costs Emission requirements Rising insurance costs Q1 2003 Q1 2006 Trucks Rail Source: Estimate based on CSX analysis 17 17
  • 18. Rail competitiveness – CSX set for growth CSX Intermodal Volume Growth 4% 4% $248 91% 89% 1% $152 82% (1%) (1%) $110 (2%) (3%) (4%) (5%) (8%) 2003 2004 2005 Q1 Q4 Q3 2QTD 2004 2004 2005 2006 Op Inc (millions) Op Ratio Note: Fourth quarter volume growth for 2004 and 2005 reflects comparable periods 18 18
  • 19. Southeast growth – industrial development Merchandise • Ethanol Facilities • Feed Mills • Aggregate Facilities Boston • Plastics Plants Chicago New York Philadelphia Coal Baltimore St Louis • New Projects Portsmouth Memphis Intermodal • Port Development Charleston 60% of • Logistics Centers projects Mobile Jacksonville Automotive New Orleans • Assembly Plant • Supplier Facility Miami Income Growth 5-5.5% LT 5% 5.6-6.0% GT 6% 19 19
  • 20. Targeting strong long-term financial results 5 Year CAGR Surface Transportation Operating Income 10% – 12% Earnings per Share 12% – 14% Core Free Cash Flow 10% – 12% Operating Ratio Mid-70%’s 20 20
  • 21. Looking forward . . . Core strategies are gaining solid momentum Revenue Operational Performance Impact Discipline Culture Transportation environment remains strong Capacity projects position CSX for the future Volume growth will build momentum further 21 21
  • 22. Merrill Lynch Global Transportation Conference June 2006 22 22