Slide 1: Investor & Analyst Conference 2018
I N V E S T O R & A N A LY S T CONFERENCE 2018
Slide 2: Forward-Looking Disclosure
FORWARD-LOOKING DISCLOSURE This information and other statements by the company may 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, margins, volumes, rates, cost
Slide 3: Non-GAAP Measures Disclosure
NON-GAAP MEASURES DISCLOSURE CSX reports its financial results in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). CSX also uses certain non-GAAP measures that fall within the meaning of Securities and Exchange Commission Regulation G and Regulati
Slide 4: James M. Foote
I N V E S T O R & A N A LY S T C O N F E R E N C E 2 0 1 8 JAMES M. FOOTE President and Chief Executive Officer
Slide 5: 2018 Investor & Analyst Conference
2018 INVESTOR & ANALYST CONFERENCE 5
Slide 6: Making CSX the Best
MAKING CSX THE BEST RIGHT TEAM RIGHT PLAN PRODUCE THE BEST RESULTS 2018 INVESTOR & ANALYST CONFERENCE 6
Slide 7: Scheduled Railroading Delivers Better Service at Lower Cost
SCHEDULED RAILROADING DELIVERS BETTER SERVICE AT LOWER COST
Slide 8: Three-Year Plan
THREE-YEAR PLAN Leveraging Capturing Targeting 60% reduced cost growth Operating base opportunities Ratio 2018 INVESTOR & ANALYST CONFERENCE 8
Slide 9: Mark Wallace
I N V E S T O R & A N A LY S T C O N F E R E N C E 2 0 1 8 MARK WALLACE Executive Vice President and Chief Administrative Officer
Slide 10: New Business Model Requires Culture Change
NEW BUSINESS MODEL REQUIRES CULTURE CHANGE What We Found Progress We Are Making Dedicated Team of Railroaders Empowering Leaders Hesitant to Change Change as a Competency Regional Operating Cultures One CSX Broken Organizational Design Smaller Leadership Team Bureaucratic, Accelerated Decision-Makin
Slide 11: 2018 Investor & Analyst Conference
2018 INVESTOR & ANALYST CONFERENCE 11
Slide 12: Principles in Changing the Culture
PRINCIPLES IN CHANGING THE CULTURE • Identify new talent • Develop future leaders • Improve processes • Communicate success • Re-design org structure • Measure and reward results Our Focus on Culture Change Drove Significant Operational Improvement 2018 INVESTOR & ANALYST CONFERENCE 12
Slide 13: Right-Sizing the Organization
RIGHT-SIZING THE ORGANIZATION Workforce Forecast* Union Management Contractors • Every position has 31,800 to add value 27,200 ~25,000 • Reduced workforce ~21,000** 14% in 2017, including 3,300 employees • Absorbing annual attrition 2016 2017 2018E 2020E *End of Year figures, includes contractors &
Slide 14: Strengthened Our Pay for Performance Culture
STRENGTHENED OUR PAY FOR PERFORMANCE CULTURE Long-Term Incentive Awards Where We Were Where We Are Today • Measures for CEO and 25% Executive Vice 40% Presidents 50% 60% − Operating Ratio 25% − Free Cash Flow − Total Shareholder Performance Share Units Return Stock Options Restricted Share Units Exe
Slide 15: New Focus in Technology Enables Scheduled Railroading
NEW FOCUS IN TECHNOLOGY ENABLES SCHEDULED RAILROADING Technology Focus Enabler Efficiency Insourcing and Automation Reliability Investing in Core Infrastructure Information Executive Morning Report Service Trip Plans Safety Positive Train Control Focusing on Today with an Eye on the Future 2018 INVE
Slide 16: Monetizing Real Estate Opportunities
MONETIZING REAL ESTATE OPPORTUNITIES 2018-2020 Base Plan Real Estate Sales $300M Real Estate Pipeline Leases / Licenses / Ancillary Services $300M • Surplus real estate 2018-2020 Upside Potential • Vacated / consolidated yards • Ancillary income streams Real Estate Sales $300M Line Sales $500M 16 An
Slide 17: Welcome to the New CSX!
WELCOME TO THE NEW CSX! “Forget about the likes and dislikes. They are of no consequence. Just do what must be done. This may not be happiness, but it is greatness.” – George Bernard Shaw We Are Focused on Driving Long-Term Shareholder Value 17
Slide 18: Ed Harris
I N V E S T O R & A N A LY S T C O N F E R E N C E 2 0 1 8 ED HARRIS Executive Vice President Operations
Slide 19: Ed's Story
ED’S STORY 1968 2011 2018 1998 2014 2018 INVESTOR & ANALYST CONFERENCE 19
Slide 20: Jamie Boychuk
I N V E S T O R & A N A LY S T C O N F E R E N C E 2 0 1 8 JAMIE BOYCHUK Vice President Precision Scheduled Railroading Implementation
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Slide 22: Leveraging Experience to Drive Change
LEVERAGING EXPERIENCE TO DRIVE CHANGE Experience On The Road • 20+ years Scheduled Railroading • Spent first six months touring CSX facilities • Pace of change faster than CN • Significant opportunities ahead for CSX 2018 INVESTOR & ANALYST CONFERENCE 22
Slide 23: CSX Behaved as Separate Companies
CSX BEHAVED AS SEPARATE COMPANIES 2018 INVESTOR & ANALYST CONFERENCE 23
Slide 24: Lack of Integration Led to Inefficient Handling
LACK OF INTEGRATION LED TO INEFFICIENT HANDLING… 2018 INVESTOR & ANALYST CONFERENCE 24
Slide 25: Lack of Integration Led to Inefficient Handling
LACK OF INTEGRATION LED TO INEFFICIENT HANDLING… 2018 INVESTOR & ANALYST CONFERENCE 25
Slide 26: Balancing the Network
BALANCING THE NETWORK 2018 INVESTOR & ANALYST CONFERENCE 26
Slide 27: Introducing Trip Plans Is the Answer
INTRODUCING TRIP PLANS IS THE ANSWER Before After • Every car has a plan • Trip Plan drives visibility and accountability • Provides customers predictability and reliability • Trip plans deliver consistent service product and asset utilization 2018 INVESTOR & ANALYST CONFERENCE 27
Slide 28: ... And There's Still Low Hanging Fruit
… AND THERE’S STILL LOW HANGING FRUIT 2018 INVESTOR & ANALYST CONFERENCE 28
Slide 29: Tip of the Iceberg – Vast Opportunities Ahead
TIP OF THE ICEBERG – VAST OPPORTUNITIES AHEAD Significant Achievements To Date • Executive • Balancing train Morning Report schedules • Closing hump yards • Management team Countless Opportunities Ahead • Carload trip plans • Leveraging excess capital • GTM per HP optimization • Repetition and consi
Slide 30: Jermaine Swafford
I N V E S T O R & A N A LY S T C O N F E R E N C E 2 0 1 8 JERMAINE SWAFFORD Senior Vice President and Chief Transportation Officer
Slide 31: Streamlining Management to Drive Change
STREAMLINING MANAGEMENT TO DRIVE CHANGE 9 Divisions 4 Regions 12 Hump Yards 4 Hump Yards Albany Detroit Chicago Midwest North Great Baltimore Jersey Lakes South Jersey Louisville Florence Nashville Southwest Northeast Atlanta Jacksonville South 2018 INVESTOR & ANALYST CONFERENCE 31
Slide 32: Disruptive Change for Long-Term Improvement
DISRUPTIVE CHANGE FOR LONG-TERM IMPROVEMENT 20 CSX Weekly Train Velocity* (MPH) 19 • Unparalleled rebound 18 17 in measures driven by 16 +30% scheduled railroading 15 14 13 • Improving measures 12 drive virtuous cycle Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 of capacity and 14 CSX Weekly Car Dwell (H
Slide 33: Scheduled Railroading Presents Large Opportunities
SCHEDULED RAILROADING PRESENTS LARGE OPPORTUNITIES 2017 EXPENSES* Freight Cars ~130,000 Cars Online ~$750M ~3,900 Active T&E; Yard Employees ~$640M ~700 Support Employees Locomotives 2,865 Active ~$650M Fuel 427 million gallons per year ~$850M Consumption Line of Road ~4,600 Active T&E; ~$1B Employe
Slide 34: Faster Turn Times Reduce Active Cars Online
FASTER TURN TIMES REDUCE ACTIVE CARS ONLINE Freight Cars ~130,000 Cars Online ~$750M YTD Velocity YTD Dwell (MPH) (Hrs) 18 10 • Generate savings from car hire, Cars Online (000) maintenance and material − Additional benefit captured through capital avoidance 148 136 104 - • New demurrage policies to
Slide 35: Engaged, Productive Workforce Drives Value
ENGAGED, PRODUCTIVE WORKFORCE DRIVES VALUE ~3,900 Active T&E; Yard Employees ~$640M ~700 Support Employees Yard T&E Employee Efficiency Cars Per Manhour • Continuing to improve yard fluidity • Creating capacity in rail yards • Streamlining an engaged and fully 13 productive workforce 9 • Reducing to
Slide 36: Continue to Optimize Our Yard Footprint
CONTINUE TO OPTIMIZE OUR YARD FOOTPRINT 2018 INVESTOR & ANALYST CONFERENCE 36
Slide 37: Bob Frulla
I N V E S T O R & A N A LY S T C O N F E R E N C E 2 0 1 8 BOB FRULLA Senior Vice President Network Operations
Slide 38: Precision Railroading Requires Streamlining
PRECISION RAILROADING REQUIRES STREAMLINING Before After Service Locomotive Design Management Transportation Crew Network Operations Systems Management Customer Service Asset Operations Dispatching Planning Management Intermodal PTC Network Ops Passenger Fuel Services 2018 INVESTOR & ANALYST CONFERE
Slide 39: Dispatching Alignment and Coordination
DISPATCHING ALIGNMENT AND COORDINATION 2018 INVESTOR & ANALYST CONFERENCE 39
Slide 40: Scheduled Railroading Presents Large Opportunities
SCHEDULED RAILROADING PRESENTS LARGE OPPORTUNITIES 2017 EXPENSES* Freight Cars ~130,000 Cars Online ~$750M ~3,900 Active T&E; Yard Employees ~$640M ~700 Support Employees Locomotives 2,865 Active ~$650M Fuel 427 million gallons per year ~$850M Consumption Line of Road ~4,600 Active T&E; ~$1B Employe
Slide 41: Loco Fleet Productivity Continues to Improve
LOCO FLEET PRODUCTIVITY CONTINUES TO IMPROVE Locomotives 2,865 Active Locomotives ~$650M YTD Velocity YTD Average (MPH) Train Tonnage 18 7,283 Active Locomotives • Refine train plan, increase velocity, and right-size footprint 3,381 • Focus going forward: 3,781 − Matching horsepower to tonnage 3,000
Slide 42: Fuel Consumption Reduced as Operations Are Refined
FUEL CONSUMPTION REDUCED AS OPERATIONS ARE REFINED Fuel 427 Million Gallons Per Year ~$850M Consumption YTD Horsepower per Ton 1.27 Fuel Efficiency Gal / KGTM • Fewer locomotives means fuel efficiency • Notch-limiting where appropriate 1.10 1.06 0.94 - • New fuel-saving technologies 0.96 2016 2017 2
Slide 43: Engaged, Productive Workforce Drives Value
ENGAGED, PRODUCTIVE WORKFORCE DRIVES VALUE Line of Road ~4,600 Active T&E; ~$1B Employees ~900 Support Employees T&E Employee Efficiency GTM (000) / Active T&E Employee • Fewer train starts improves labor efficiencies 140 - • Faster, more consistent trips reduce 145 overtime and recrews 116 110 • St
Slide 44: Future Is Bright
FUTURE IS BRIGHT 2018 INVESTOR & ANALYST CONFERENCE 44
Slide 45: Amy Rice
I N V E S T O R & A N A LY S T C O N F E R E N C E 2 0 1 8 AMY RICE Vice President Strategic Planning
Slide 46: The $100M Challenge
THE $100M CHALLENGE CHALLENGE DELIVERED CHALLENGE DELIVERED C R O S S F U N C T I O N A L I D E N T I F I C AT I O N EXECUTION AND REALIGNMENT EXECUTION AND REALIGNMENT 2018 INVESTOR & ANALYST CONFERENCE 46
Slide 47: Designing the Network
DESIGNING THE NETWORK 37,000 Track Miles • Focus on our core network • Eliminate unnecessary track 150+ Yards infrastructure • Rationalize unproductive yards $1B+ Network Capital • Optimize intermodal terminals 1,000+ Intermodal • Determine best use of Lanes/Trains underutilized territory Combinatio
Slide 48: Network Rationalization Drives Asset Utilization
NETWORK RATIONALIZATION DRIVES ASSET UTILIZATION Case Study: 1,000 Miles Of Network Rationalization Revenue Reduction ($60M) Conceptual based on distance Cost Avoidance – Operating and Capital Track maintenance, territory operation, assets; overhead $110M+ reduction above and beyond Locomotives Redu
Slide 49: Question & Answer
QUESTION & ANSWER
Slide 50: Michael Rutherford
I N V E S T O R & A N A LY S T C O N F E R E N C E 2 0 1 8 MICHAEL RUTHERFORD Vice President Merchandise Sales & Marketing
Slide 51: Diverse Merchandise Business Poised for Growth
DIVERSE MERCHANDISE BUSINESS POISED FOR GROWTH 2017 Revenue by Market Forest Metals and Products Equipment 11% 9% Fertilizers • Merchandise represents 7% ~60% of revenue Minerals • Selling value of 7% Scheduled Railroading • Renewed emphasis on Agricultural Chemicals carload growth Products 31% 18%
Slide 52: The Timing Could Not Be Better
THE TIMING COULD NOT BE BETTER Key Market Forecasts Key Merchandise Forecasts U.S. Gross Domestic Product Housing Starts In Millions 2.9% 1.4 1.4 2.6% 1.1 1.2 1.2 1.3 2.3% 2.3% 1.9% 1.5% 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 Auto Production In Millions 17.8 18.2 17.5 17.7 U.S.
Slide 53: Delivering Better, More Competitive Service
DELIVERING BETTER, MORE COMPETITIVE SERVICE Reduced Transit Time Yields Customer Benefits 8.0 Transit Time (Seven-day Rolling Average) • Use more low-cost rail 7.0 • Fewer supply chain buffers • Lower inventory 6.0 • Better asset utilization 5.0 Q2 2017 Q3 2017 Q4 2017 Q1 2018 2018 INVESTOR & ANALYS
Slide 54: Improved Car Utilization Drives Customer Growth
IMPROVED CAR UTILIZATION DRIVES CUSTOMER GROWTH New Chemical Production Trucking Challenges Millions of Tons per Year Current 2020 16.1 71% 69% 56% 50% 7.3 42% 5.5 25% 2018 2019 2020 Congestion Hours of Service Driver Shortages Scheduled Railroading Benefits Customers with Private Car Fleets Source:
Slide 55: CSX Customers Getting Tangible Benefits
CSX CUSTOMERS GETTING TANGIBLE BENEFITS Total Car Days Spent At Metals Customer Loading Time Unloading Time • Smoother car flows lead to more resilient supply chain 10 • Reduced fleet by >10% • Freed up cars used to 2 capture new business Before - Unit Train Today - Carload 2018 INVESTOR & ANALYST C
Slide 56: Scheduled Railroading Works in the East
SCHEDULED RAILROADING WORKS IN THE EAST A Streamlined Solution Obsession with Humps • Excessive out-of-route miles • Increased dwell and transit time Direct Route Benefits • Miles cut by two-thirds • Transit time cut by half • Costs cut by half Won Highly Competitive Business at Improved Profitabili
Slide 57: Partnering with Customers to Drive Results
PARTNERING WITH CUSTOMERS TO DRIVE RESULTS Consumer Products • Better service supports better planning • Eliminated bunching at destination • Solid volume growth in 2017 Warehouse Network Average Customer Transit Days In 2017 7.8 7.8 8.4 7.7 7.3 7.2 7.1 6.7 6.9 6.1 Mar Apr May Jun Jul Aug Sep Oct No
Slide 58: Scheduled Railroading Supports Future Growth
SCHEDULED RAILROADING SUPPORTS FUTURE GROWTH New Projects & Customer Expansions • Appeals to a diverse group of customers • Supports long-term growth • Industrial Development supports site location and design 2018 INVESTOR & ANALYST CONFERENCE 58
Slide 59: Pivoting to Growth in Merchandise
PIVOTING TO GROWTH IN MERCHANDISE Merchandise Annual Revenue Change Revenue Trend • Driving future growth opportunities 8% 2% − More reliable service product − Better asset utilization (4%) (2%) (1%) − Increased addressable market 2014 2015 2016 2017 2018 • Still in the early phases Revenue Outlook
Slide 60: Upside Opportunity Throughout Merchandise
UPSIDE OPPORTUNITY THROUGHOUT MERCHANDISE US Modal Shipment Tonnage Improving Freight Economy Expanding Economy Rail 9% GDP/IDP Water Air/Other 5% Tax Reform 8% Infrastructure Bill Consumer Sentiment Pipeline 18% Rail Conversion Opportunity Tightening Truck Market Rising Truck Load Rates Truck 60% M
Slide 61: Dean Piacente
I N V E S T O R & A N A LY S T C O N F E R E N C E 2 0 1 8 DEAN PIACENTE Vice President Intermodal Sales & Marketing
Slide 62: Intermodal Market Positioned for Growth
INTERMODAL MARKET POSITIONED FOR GROWTH Domestic Private Asset Partners • Domestic driven by organic (Trucking companies International 60% that own assets) growth through highway 40% 37% conversions • International driven by new capacity and consumer spending • Scheduled Railroading drives: Rail Ass
Slide 63: Truckload Market Dynamics Benefit Intermodal
TRUCKLOAD MARKET DYNAMICS BENEFIT INTERMODAL Cass Truckload Linehaul Index (Measure of changes in per-mile rates) 140 135 Indexed, 2005 = 100 • Trucking demand and 130 125 linehaul rates surged at the 120 115 110 end of 2017 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2013 2014 2015 2016 2017 •
Slide 64: Altered Network Design Streamlines Service
ALTERED NETWORK DESIGN STREAMLINES SERVICE • Point-to-point trains move on high density lanes faster and NW Ohio with fewer delays Chicago • Eliminated undesirable lanes, creating capacity to “trade up” Charlotte Wilmington • NW Ohio is a strong local gate and serves as an effective Savannah “Chicag
Slide 65: Network Redesign Expands Our Market Opportunity
NETWORK REDESIGN EXPANDS OUR MARKET OPPORTUNITY • Utilize faster, daily merchandise train network • Expands market reach Louisville Charlotte • Increases asset utilization Wilmington Merchandise Train • Provides competitive service Intermodal Pt-Pt product Jacksonville Train New Orleans Winter Haven
Slide 66: Leverage Capacity for Growth
LEVERAGE CAPACITY FOR GROWTH Intermodal Train Length +13% • Longer, denser trains 8,000 result in improved 7,088 6,279 efficiencies 2017 Q1 2018 YTD 2018 GOAL • Balanced daily service Distribution Of Containers Arriving across nearly entire At CSX Terminals network • Demand-based pricing 18% 19% 18%
Slide 67: Network Enhancements for Profitable Growth
NETWORK ENHANCEMENTS FOR PROFITABLE GROWTH • Exited underutilized terminals Worcester Detroit Chicago Pittsburgh NY/NJ Philadelphia Kansas City Baltimore Cincinnati VA Ports Nashville Charlotte Wilmington Memphis Atlanta Charleston Savannah Jacksonville Tampa Winter Haven Active Terminal Exited Term
Slide 68: Network Enhancements for Profitable Growth
NETWORK ENHANCEMENTS FOR PROFITABLE GROWTH • Exited underutilized terminals Detroit Worcester • Adding over 600k units capacity Chicago Pittsburgh NY/NJ by expanding terminals for Kansas City Philadelphia Baltimore growth Cincinnati VA Ports Nashville Charlotte Wilmington Memphis Atlanta Charleston
Slide 69: Network Enhancements for Profitable Growth
NETWORK ENHANCEMENTS FOR PROFITABLE GROWTH • Exited underutilized terminals Detroit Worcester • Adding over 600k units capacity Chicago Pittsburgh NY/NJ by expanding terminals for Kansas City Philadelphia Baltimore growth Cincinnati VA Ports • Suez and Panama Canals both Nashville Charlotte driving
Slide 70: Strong Intermodal Growth Projected
STRONG INTERMODAL GROWTH PROJECTED Intermodal Annual Revenue Change Revenue Trend • Service and investments will drive growth and margin 5% 4% 5% expansion (2%) (2%) • Strong market fundamentals for 2014 2015 2016 2017 2018 both domestic and international Revenue Outlook • Truck issues favor rail −
Slide 71: Russ Epting
I N V E S T O R & A N A LY S T C O N F E R E N C E 2 0 1 8 RUSS EPTING Vice President Coal Sales & Marketing
Slide 72: Scheduled Railroading Drives Efficiency in Coal
SCHEDULED RAILROADING DRIVES EFFICIENCY IN COAL Coal Cycle Times (Days) 2016 2017 • Maximizes train size with origin and destination capabilities 9.8 9.5 9.6 8.6 10.1 9.8 8.8 8.1 • Improves key metrics in the coal Q1 Q2 Q3 Q4 network Coal Line-of-Road Velocity* (MPH) − Cycle times have improved ~17%
Slide 73: Well Positioned to Capture Export Opportunities
WELL POSITIONED TO CAPTURE EXPORT OPPORTUNITIES Total Tons In Millions 48 44 40 39 36 30 30 30 26 23 Baltimore 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Newport News • Network access to vast coal reserves • Excellent port connectivity New Orleans Mobile • Demand for export coal has reco
Slide 74: Less Downside Exposure on Domestic Utility Coal
LESS DOWNSIDE EXPOSURE ON DOMESTIC UTILITY COAL Total Domestic Tons (Millions) (65%) • Natural gas prices drove significant structural 174 change in domestic coal 61 • Fewer planned closures 2008 2017 through 2020 Eastern US Utility Demand* • Partnering with customer base to compete in current 400 e
Slide 75: Capitalizing on Opportunities in Coal
CAPITALIZING ON OPPORTUNITIES IN COAL • Dependent on global supply and demand EXPORT • Remains highly volatile DOMESTIC • Driven by weather, natural gas prices, and regulation UTILITY • Outlook is stabilizing, although not expected to reverse STEEL & • Flexes with US steel production INDUSTRIAL • Ex
Slide 76: Question & Answer
QUESTION & ANSWER
Slide 77: Frank Lonegro
I N V E S T O R & A N A LY S T C O N F E R E N C E 2 0 1 8 FRANK LONEGRO Executive Vice President and Chief Financial Officer
Slide 78: Transformation to Scheduled Railroading Is Well Underway
TRANSFORMATION TO SCHEDULED RAILROADING IS WELL UNDERWAY •Scheduled Railroading provides untapped growth opportunities, strong pricing gains Competitive •Step function changes in asset, resource and fuel utilization Advantage drive cost control •Fewer assets yields lower capital intensity over the f
Slide 79: CSX Targeting 60% Operating Ratio by 2020
CSX TARGETING 60% OPERATING RATIO BY 2020 Full Year Operating Ratio • Operating ratio improvement to outpace the industry − Peers will not stand still, but CSX intends to move faster • Target reflects annual revenue growth from 2018 - 2020 69.4% − Stronger growth anticipated 66.3% in 2019 - 2020 > 6
Slide 80: Scheduled Railroading Supports Top Line Gains
SCHEDULED RAILROADING SUPPORTS TOP LINE GAINS Revenue • Revenue up slightly in 2018 Dollars In Billions • Project ~4% annual revenue growth in 2019 - 2020 − Volume and pricing gains led by Merchandise and Intermodal − Mix presents a headwind • Key revenue assumptions: − Stable economic climate − No
Slide 81: Efficiency Gains Will Offset Cost Headwinds Through 2020
EFFICIENCY GAINS WILL OFFSET COST HEADWINDS THROUGH 2020 INFLATION AND FUEL OTHER COSTS EFFICIENCY • Expecting inflation to • Depreciation continues to • Workforce, asset and fuel moderate increase, but at a slower efficiency to offset • Forecast assumes pace inflation, volume, fuel Highway Diesel F
Slide 82: Total Capital Spending at $4.8B from 2018 - 2020
TOTAL CAPITAL SPENDING AT $4.8B FROM 2018 - 2020 Capital Expenditures • CSX will continue to prioritize investment for Core PTC safety and reliability $2.7B − Infrastructure investments remain steady through 2020 $2.0B − Evaluating return-based strategic projects to $1.6B facilitate growth • Focused
Slide 83: Substantial Free Cash Flow Growth Versus Prior Three Years
SUBSTANTIAL FREE CASH FLOW GROWTH VERSUS PRIOR THREE YEARS Three Year Cumulative • Cash generation improves dramatically Free Cash Flow going forward − Higher core earnings, reduced capex, lower taxes • Tax reform drives improved earnings and cash generation > $5B increase − Anticipate effective tax
Slide 84: Capital Structure Supports Shareholder Distributions
CAPITAL STRUCTURE SUPPORTS SHAREHOLDER DISTRIBUTIONS • Recent announcement of $5B share repurchase and 10% 2018 Sources & Uses Of Liquidity dividend increase illustrates confidence in new trajectory − Maintains financial flexibility with Debt appropriate increase in balance sheet Capacity AVAILABLE
Slide 85: Shareholder Return History Reflects Consistent Increases
SHAREHOLDER RETURN HISTORY REFLECTS CONSISTENT INCREASES Shareholder Returns ($M) Dividends Repurchases • 22 cent quarterly dividend represents 38% of 2017 EPS* • New $5B buyback represents 2,678 ~10% of market cap − Demonstrates strong confidence in 1,736 three-year targets 1,490 1,146 − Funded by
Slide 86: Question & Answer
QUESTION & ANSWER