csx 2006_Merrill_Lynch_Presentation_FINAL-REF22975

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<ul><li> 1. Merrill Lynch Global Transportation Conference June 2006 11 </li></ul> <p> 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 managements plans, strategies and objectives for future operation, and managements 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 Companys 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 Companys SEC reports, accessible on the SECs website at www.sec.gov and the Companys website at www.csx.com.22 3. Our core strategies are gaining momentumRevenueOperationalPerformance Operational Impact DisciplineCultureDiscipline Pricing momentum Safety leadership Drive to win Customer focus Productivity discipline Personal accountability Profitable growthService execution Core valuesDriving for reliability and growth 3 3 4. Focus on revenue impact is driving ratesRevenueImpact Revenue Per UnitYear-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 settlement44 5. Profitability focus is improving returnsRevenueImpactPercentage of Rail Cars Above Reinvestment Hurdle Rates 2004 200624%65% 35%76%Above Hurdle Below Hurdle 55 6. Economic environment remains strongRevenue Impact Transportation demand Transportation Index still near record levelsIndexed: 2000=100120 Full-year outlook: 110 GDP 3.3%100 IDP3.9%9080 ISM Index stands at 55%70 Continued strength in60 imports and exports90 93 96 99 02 05 Source: Bureau of Transportation Statistics66 7. Leadership, discipline, execution OperationalDisciplineSpecific, clear roles andresponsibilities defined Compliance processdevelopedReliableReliableException handlingPerformancePerformanceprocess definedService ExecutionService ExecutionResources in placeProductivity DisciplineProductivity Discipline Crews LocomotivesSafety Leadership Safety Leadership Line capacity 7 7 8. Operational discipline is driving safetyOperationalDiscipline Personal Injury Train Accidents 3.0 6.02.6 5.22.2 4.4 1.8 3.61.4 2.81.0 2.001 02 03 04 05 06 01 02 03 04 05 06 8 8 9. Discipline is driving on-time performanceOperational Discipline On-time OriginationsOn-time Arrivals 909078786666 54544242303001 02 03 04 05 0601 02 03 04 05 0699 10. Discipline is driving asset utilizationOperational Discipline Dwell Time (hours)Cars on Line (000) 33 25030 24327 236 24 22921 22218 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 269024742258 20421826161001 02 03 04 05 0601 02 03 04 05 06 11 11 12. Discipline is driving the operating ratio Performance Culture Operating Ratio89% 87%86%85% 83%83% 81% 81%79%Q1 Q2 Q3Q4 Q1 Q2 Q3Q4 Q1 2004 2004 20042004 2005 2005 20052005 2006 Note: The first three quarters of 2004 exclude $71 million of management restructuring charges1212 13. Consistent, continuous improvementPerformance CultureSurface Transportation Operating Income in Millions $487 $422 $415 $361$351 $315$295 $250 $204Q1 Q2 Q3Q4 Q1 Q2 Q3Q4 Q1 2004 2004 20042004 2005 2005 20052005 2006 Note: The first three quarters of 2004 exclude $71 million of management restructuring charges1313 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 IDPU.S. Consumption Imports and IDP2000 Dollars in Trillions2000 Dollars in Trillions IDPImports$10$3.0 $9 $2.5 $8 $2.0 $7 $1.5 $6 $1.0 $5 $0.520002003 20062009 20002003 20062009 Source: Global Insight1515 16. Rail competitiveness highway congestion Highway Miles versusTransport Forecast Miles TraveledTon Miles in Trillions 7 250%200%6150%5100%4 50%30%2 1980 1985 1990 1995 2000 2000 2004 2008 2012 2016 2020Miles TraveledLane Miles Source: Department of TransportationSource: American Association of State Highway and Transportation Officials16 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 TrucksRail Source: Estimate based on CSX analysis1717 18. Rail competitiveness CSX set for growth CSX Intermodal Volume Growth 4% 4%$24891% 89% 1% $15282% (1%)(1%)$110(2%) (3%)(4%)(5%) (8%)200320042005Q1 Q4 Q32QTD 2004 2004 2005 2006Op Inc (millions) Op Ratio Note: Fourth quarter volume growth for 2004 and 2005 reflects comparable periods 18 18 19. Southeast growth industrial developmentMerchandise Ethanol Facilities Feed Mills Aggregate FacilitiesBoston Plastics PlantsChicagoNew York PhiladelphiaCoalBaltimore St Louis New ProjectsPortsmouthMemphisIntermodal Port DevelopmentCharleston 60% of Logistics Centers projects Mobile Jacksonville Automotive New Orleans Assembly Plant Supplier FacilityMiamiIncome Growth5-5.5% LT 5% 5.6-6.0% GT 6%19 19 20. Targeting strong long-term financial results5 Year CAGRSurface TransportationOperating Income10% 12% Earnings per Share12% 14% Core Free Cash Flow 10% 12% Operating RatioMid-70%s2020 21. Looking forward . . . Core strategies are gaining solid momentum RevenueOperational PerformanceImpact Discipline Culture Transportation environment remains strong Capacity projects position CSX for the future Volume growth will build momentum further2121 22. Merrill Lynch Global Transportation Conference June 2006 2222 </p>