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BB&T Transportation Conference February 2007 BB&T Transportation Conference February 2007

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Page 1: csx  2007_BB&T_Conference-REF23583

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BB&T Transportation ConferenceFebruary 2007

BB&T Transportation ConferenceFebruary 2007

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Forward Looking DisclosureThis 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.

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CSX registered another breakout year in 2006

Generated record financial results

Produced step-function service improvements

Delivered significant value for shareholders

Driving towards 2010 targets

Positioned for long-term profitable growth

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CSX produced record financial results in 2006

Dollars in millions, except EPS

Surface Transportation

RevenueExpense

$ 9,5667,608

Operating Income

Operating Ratio

$ 1,958

79.5%

Consolidated EPS $ 2.22

Note: Excludes insurance recoveries and income tax benefits

Year-Over-YearImprovement

11%

26%

31%

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Earnings improving; momentum to mid-70’s

$902M$1,064M

$1,549M

$1,958M

Surface Transportation Operating Income

2003 2004 2005 2006

Surface Transportation Operating Ratio

87.9%

84.6%

82.0%

79.5%

2003 2004 2005 2006

Notes: Excludes provision for casualty claims, management restructuring and insurance recoveries

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Over $1 billion deployed for investors in 2006

Growing Cash Generation& Improving ROIC

DebtHoldersDebt

HoldersEquityHoldersEquityHoldersCompanyCompany

Maintain target debt levels

Competitivedividend yield

Share buyback program

Focused, strategic investmentfor growth

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Recent actions reinforce shareholder focus

Initiated $2.0 BillionShare Repurchase

Represents over 10% of outstanding shares

Consistent with capital structure objectives

Targeting year-end 2008 completion

Increased Annual Dividend 20%

$0.20$0.26

$0.40

$0.48

Q32005

Q42005

Q32006

Q12007

20%Increase

20%Increase

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Double-digit growth targeted through 2010

2006–2010CAGR

Surface TransportOperating Income

10%–12%

Earnings Per Share 12%–14%

Free Cash Flow 10%–12%

Execute and

MonitorProgress

Execute and

MonitorProgress

Set goalsSet goals

Create plans

Create plans

Consistent Consistent continuous continuous

improvementimprovement

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Surface Transportation above target growth

Note: 2006 excludes benefits from insurance recoveries

Operating Income in MillionsFive-year Target: 10%-12% CAGR

$1,549

2005 2006 2007 2008 2009 2010

$2.5–$2.7Billion

$2.5–$2.7Billion

$1,958

26%Increase

26%Increase

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Earnings per share above target growth

Note: 2005 and 2006 excludes debt repurchase expenses, insurance recoveries and income tax benefits

Earnings Per ShareFive-year Target: 12%-14% CAGR

$1.70

$2.22

2005 2006 2007 2008 2009 2010

$3.00–$3.30$3.00–$3.30

31%Increase

31%Increase

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Rail earnings growth among leading sectors

Long-term Earnings Growth Expectations

5.6%

7.7%

10.9%

12.8%

12.9%

14.9%

15.3%

15.4%

18.2%

Telecom

Utilities

Financials

S&P 500

Industrials

Health Care

IT

Railroads

Energy

Source: Standard & Poor’s as of February 13, 2007

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However, rail PE’s continue to lag S&P 500

NTM Price-to-Earnings Ratio

11.2

13.9

16.5

16.6

17.1

17.7

18.3

21.6

22.5

Energy

Railroads

Utilities

Industrials

Financials

Telecom

S&P 500

IT

Health Care

Source: Standard & Poor’s as of February 13, 2007

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Rail Renaissance environment remains strong

Tight Transportation Tight Transportation CapacityCapacity

2006

StrongStrongEconomyEconomy

PricingPricingStrengthStrength

2007

Tight Transportation Tight Transportation CapacityCapacity

ModeratingEconomy

PricingPricingStrengthStrength

ExtendingExtendingSupply ChainsSupply Chains

ExtendingExtendingSupply ChainsSupply Chains

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Moderating economy continues to grow

GDP and Industrial ProductionYear-Over-Year Change

1.6%2.5%

3.9%3.2% 3.3%

2.7%0.8%

4.1%3.2%

4.1%

2.2%

(3.6%)

0.0%(0.3%)

2001 2002 2003 2004 2005 2006 2007

Gross Domestic Product Industrial Production

Source: Global Insight

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Demand remains high and increasing further

Transport ForecastTon-Miles in Trillions

3

4

5

6

7

2004 2006 2008 2010 2012 2014 2016 2018 2020

Source: AASHTO

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Highways are constrained and getting worse

Today 2020

CSX Territory

Source: USDOT FHWA Freight Analysis Framework

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Rail Renaissance is driving improving yields

Year-Over-Year Change

6.6%6.7%6.8%6.2%6.3%5.6%6.0%4.8%

8.6%9.6% 9.0%

11.0% 11.7%12.6%

11.8%

8.4%

Q12005

Q22005

Q32005

Q42005

Q12006

Q22006

Q32006

Q42006

Price Increase on 'Same Store Sales' Total Revenue per Unit

Note: Price increases on a ‘Same Store Sales’ basis exclude fuel surcharge and mix impacts

R2 = P + V

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Imports showing strong long-term growth . . .

United States Imports2000 Dollars in Trillions

$1.5 $1.4 $1.5 $1.6$1.7

$1.8 $1.9 $2.0 $2.1$2.2

$2.3

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: Global Insight

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. . . with volume focused at the major ports

4.5

15.8

NY/NJ

1.85.6

Virginia

1.9

6.6

Charleston

1.7

9.4

Savannah1.4

6.2

Houston

TEU in Millions

2020

2004

Source: Containerization International and TranSystems.

CSX Intermodal NetworkCSX Intermodal Network

13.1

LA/LB

59.4

3.67.0

Seattle/Tacoma

2.0 3.4

Oakland

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Increasing port volumes will drive rail volumes

Today 2020

CSX Territory

Source: TranSystems and USDOT Federal Railroad Administration Office of Policy

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New CSX/BNSF service leverages that trend

BNSF BNSF–MemphisCSX Charlotte

BNSF–MemphisCSX Florida

BNSF Atlanta

February 26th start-up

Enhanced PSW-SE service

Seamless connectivity

February 26th start-up

Enhanced PSW-SE service

Seamless connectivity

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Broader industrial development is growing

LT 5% 5-5.5%5.6-6.0% GT 6%

Income Growth Miami

New York

Portsmouth

Philadelphia

Merchandise• Ethanol Facilities• Feed Mills• Aggregate Facilities• Plastics Plants

Coal• New Projects

Intermodal• Port Development• Logistics Centers

Automotive• Assembly Plant• Supplier Facility

New Orleans

Chicago

St Louis

Memphis

MobileJacksonville

Charleston

Baltimore

Boston

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Access to new fertilizer receiving warehouses

Unit-train service

New Warehouses

— McLeansboro, IL

— Templeton, IA

— Mitchell, SD

— W Millbank SD

— Hutchinson, KS

— Yuma, CO

— Loomis, NE

— Oakland, NE

— Tamora, NE

— Ross, ND

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CSX creating industry-leading ethanol network

CSX Ethanol Terminals

Albany, NY

Sewaren, NJ

Linden, NJ (new)

Providence, RI (new)

Philadelphia, PA (2 new)

Baltimore, MD, (2 new)

Albany

Baltimore

Philadelphia

RI

NJ

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CSX well positioned in Rail Renaissance

Serves every major market in the east

Direct access to all Atlantic and Gulf ports

Access to Pacific ports with BNI/UNP alliances

Miami

Chicago

Savannah

Charleston

Baltimore

Memphis

Charlotte

Mobile

Nashville

Atlanta

Detroit

Jacksonville

Tampa

BuffaloSyracuse

Cleveland

ColumbusCincinnati

Evansville

Boston

Philadelphia

New York

New Orleans

St Louis Portsmouth

Indianapolis

Population in Major Metropolitan Areas

GT 10,000,000

5,000,000 – 10,000,000

2,500,000 – 5,000,000

1,500,000 – 2,500,000

1,000,000 – 1,500,000

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Looking forward . . .

Rail renaissance environment remains strong

Financial and operational momentum continues

In our 180th year, targeting record results again

Capitalizing on long-term growth trends

Delivering value for shareholders

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BB&T Transportation ConferenceFebruary 2007

BB&T Transportation ConferenceFebruary 2007