Governor Olli Rehn: Dialling back monetary restraint
csx 3Q 08
1. Third Quarter 2008
Earnings Conference Call
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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
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,” “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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2. Executive Summary
Michael Ward
Chairman, President and
Chief Executive Officer
Third quarter overview . . .
Delivered record revenues,
Third Quarter EPS from
operating income and EPS
Continuing Operations
40% Revenues grow 18% on
$0.94
Increase
diverse business portfolio
$0.67 Performance in safety and
service remains strong
Operating margin improves
250 bps to record levels
2007 2008
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3. Operations Review
Tony Ingram
Executive Vice President
Chief Operating Officer
Leadership, discipline and execution
Strong improvement in safety
performance continues
Productivity initiatives are
Performance
delivering results Excellence
Service Execution
Service Execution
Network is stable and service
improvement will resume Productivity Discipline
Productivity Discipline
Safety Leadership
Safety Leadership
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4. Network responded well following storm impacts
BNI, UNP, KCS
Area Impacted
Train operations on New
Reroutes
Orleans line restored
Chicago
Interchange reroutes with
western roads were effective
Indianapolis
St Louis
Midwest operations back to
Louisville
normal following flooding
Memphis
Birmingham
NSC Haulage
Service is stable and is
Rights
expected to improve
Area Impacted
New Orleans
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Helping lead one of the Nation’s safest industries
FRA Personal Injury Rate FRA Train Accident Rate
4.49
1.97
1.56
3.27
3.06
1.27 2.75
1.12
Q3 2005 Q3 2006 Q3 2007 Q3 2008 Q3 2005 Q3 2006 Q3 2007 Q3 2008
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6. Operations wrap-up . . .
Building on strong safety foundation
— Driving continuous improvement
Focused on delivering greater productivity gains
— Contributing to further margin expansion
Network operations and service levels are stable
— Continuing positive service momentum
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Sales and Marketing Review
Clarence Gooden
Executive Vice President
Sales and Marketing
7. Revenues increase 18% to nearly $3 billion
Record quarterly revenues
Third Quarter
Revenue in Millions
Yield management continues
to offset softer volumes
$460 $2,961
Consistent service producing
strong revenue growth
$2,501
Secular strength drives over
six years of revenue growth
2007 Growth 2008
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Revenue growth is strong across most markets
Third Quarter
Year-Over-Year Revenue Growth
36%
Agricultural Products
31%
Coal
19%
Metals
18%
Intermodal
16%
Phosphates & Fertilizers
Chemicals 13%
Emerging Markets 9%
Forest Products 8%
Food & Consumer 6%
Automotive (2%)
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8. Price and fuel cost recovery drive RPU growth
Year-Over-Year Change
21.2%
18.3%
14.4%
10.5%
8.1% 8.0%
6.9%
7.1% 6.8%
6.7%
6.5% 6.5% 6.4% 6.2%
Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008
Price Increase on 'Same Store Sales' Total Revenue per Unit
Note: ‘Same Store Sales’ price increases exclude impacts from fuel and mix
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Merchandise revenue increases 16%
Higher yields continue to
Third Quarter
offset softer volumes
Year-Over-Year Change
Housing-related markets
RPU 20%
remain challenged
Volume (3%)
Revenue 16%
Strongest growth in
Agriculture and Metals
2007 Change 2008
RPU $ 1,861 $ 370 $ 2,231
Chemicals revenue growth
overcomes storm impact
Volume 676 (23) 653
(thousands)
Revenue $ 1,258 $ 199 $ 1,457
(millions)
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10. Intermodal revenue increases 18%
Intermodal revenues increase
Third Quarter
to record levels
Year-Over-Year Change
Fuel recovery and favorable
RPU 18%
mix drives yield growth
Volume 0%
Revenue 18%
Domestic strength overcomes
International weakness
2007 Change 2008
RPU $ 636 $ 114 $ 750
Focus on bottom line results
continues to drive success
Volume 530 2 532
(thousands)
Revenue $ 337 $ 62 $ 399
(millions)
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Fourth quarter revenue outlook is positive
Fourth Quarter Outlook Agricultural Products
Percent of Revenue Chemicals
69% Coal, Coke & Iron Ore
Favorable
Emerging Markets
Food & Consumer
Metals
Intermodal
Neutral Forest Products
24%
7%
Phosphate & Fertilizer
Favorable Neutral Unfavorable
Automotive
Unfavorable
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11. Sales and Marketing wrap-up . . .
Housing and automotive markets remain challenged
Broader economy also expected to slow near-term
Diverse portfolio remains resilient in slower economy
Expect price to more than offset volume weakness
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Financial Results
Oscar Munoz
Executive Vice President
Chief Financial Officer
12. Double-digit growth in operating income and EPS
Third Quarter Results
Dollars in millions, except EPS 2008 2007 Variance
Revenue $ 2,961 $ 2,501 $ 460
Expense 2,228 1,943 (285)
Operating Income $ 733 $ 558 $ 175
Other Income (net) 8 14 (6)
Interest Expense (131) (102) (29)
Income Taxes (228) (173) (55)
Earnings from Continuing Operations $ 382 $ 297 $ 85
Fully Diluted Shares in Millions 408.5 445.5 37.0
EPS from Continuing Operations $ 0.94 $ 0.67 $ 0.27
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Core earning power improves $180 million
Operating Income in Millions
$180 $733
$558 ($44) $39
Q3 2007 Storm Fuel Lag Earnings Q3 2008
Impacts Impact Momentum
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13. Operating ratio improves 250 bps
Performance drives operating
Comparable
ratio to third quarter record
Operating Ratio
Price/productivity continue to
83.2%
drive margin expansion
80.2%
77.7%
75.2%
Margin expansion totals
800 bps since 2005
Q3 2005 Q3 2006 Q3 2007 Q3 2008
Note: Comparable results exclude gains from insurance recoveries
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Expenses up 15% overall; up 7% excluding fuel
Third Quarter Operating Expenses
and Year-Over-Year Percentage Change
Labor and Fringe $ 754 1%
Material, Supplies, and Other 21%
568
Fuel 54%
508
Equipment Rent (7%)
106
Depreciation 3%
227
Inland Transportation 8%
65
Total Expenses $ 2,228 15%
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14. Fuel expense increases 54%
Gallons Per Thousand Third Quarter
Gross Ton Miles Fuel Analysis in Millions
1.24
1.23
1.20
2007 Fuel Expense $ 330
1.16
Increase in Fuel Price 173
Change in Volume and Mix (1)
Fuel Efficiency (8)
Non-locomotive Fuel (net) 14
Subtotal 178
2008 Fuel Expense $ 508
Q3 2005 Q3 2006 Q3 2007 Q3 2008
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Labor and Fringe expense increases 1%
Employee Headcount Third Quarter
Labor Analysis in Millions
34,728
34,213
2007 Labor Expense $ 748
33,991
33,405
Wage and Benefit Inflation 22
Labor Productivity and Other (16)
Subtotal 6
2008 Labor Expense $ 754
Q3 2005 Q3 2006 Q3 2007 Q3 2008
Note: Headcount reflects the company’s transportation businesses only
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15. MS&O expense increases 21%
MS&O Expense Third Quarter
Dollars in Millions MS&O Analysis in Millions
$568
$471 2007 MS&O Expense $ 471
Storm Impact 30
Proxy-related Costs 16
Cost of Risk 11
Inflation and Other 40
Subtotal 97
2008 MS&O Expense $ 568
Q3 2007 Q3 2008
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Rent expense decreases 7%
Payable Days Per Load Third Quarter
Rents Analysis in Millions
Total Carloads Excluding Multi-levels
17.8
2007 Rent Expense $ 114
16.015.7
15.5 15.4
14.3
13.9
13.0
Volume (11)
Net Leases and Other (5)
Equipment Utilization 8
Subtotal (8)
2008 Rent Expense $ 106
Q3 2005 Q3 2006 Q3 2007 Q3 2008
Note: Reflects equipment utilization in the carload network on freight cars where CSX incurs rent
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16. Other expenses increase 4%
Higher capital base increases
Other Expenses
Depreciation expense
Dollars in Millions
Depreciation Inland Transportation
Transcontinental volumes
$227
$220
drive Inland Transportation
$65
$60
Q3 2007 Q3 2008
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Total share repurchases approaching $4 billion
Shares repurchased total
Cumulative Shares
nearly 90 million since 2006
Repurchased in Millions
$3,926
Repurchased $836 million of
stock in the third quarter
$836
$2,639
Board Authority of $2.0 billion
remains on existing program
$3,090
$465
2006 2007 Q3 2008
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17. Strong liquidity; minimal debt maturity through 2010
Only about $400 million of
Debt Maturities in Millions
debt matures through 2010
— $18 million through year-end
— $301 million in 2009
— $93 million in 2010
$301
Cash balance remains stable
Free Cash Flow generation
$93
expected to remain strong
$18
Remainder 2009 2010
of 2008
Note: Debt maturities during the remainder of 2008 include debt maturing from October 16th through year-end
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Financial targets for full-year 2008 . . .
Targeting EPS at low end of
the $3.65 – $3.75 range
Guidance driven by:
— Sustained price momentum
— Moderating fuel costs
— Continued productivity gains
— Diverse portfolio of business
Free Cash Flow of
approximately $1 billion
— Capital spending at $1.75 billion
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18. Concluding Remarks
Michael Ward
Chairman, President and
Chief Executive Officer
Relentless pursuit of excellence . . .
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