Slide 1: CSX: The Case for Change
CSX: The Case for Change The Children’s Investment Fund Management (UK) LLP (“TCI”) & 3G Capital Partners, Ltd. (“3G”) April 2008 The Children’s Investment Fund Management (UK) LLP, 7 Clifford Street, London, W1S 2WE, UK 3G Capital Partners, Ltd. c/o 3G Capital Inc., 800 Third Avenue, 31st Floor, Ne
Slide 2: Disclaimer
Disclaimer THIS PRESENTATION IS FOR GENERAL INFORMATIONAL PURPOSES ONLY. IT DOES NOT HAVE REGARD TO THE SPECIFIC INVESTMENT OBJECTIVE, FINANCIAL SITUATION, SUITABILITY, OR THE PARTICULAR NEED OF ANY SPECIFIC PERSON WHO MAY RECEIVE THIS PRESENTATION, AND SHOULD NOT BE TAKEN AS ADVICE ON THE MERITS OF
Slide 3: Quote from Paul Tellier, former CEO of Canadian National
3 “There will always be skeptics. We hear their voices whenever we try to do something that has never been done before in railroading” Paul Tellier, former CEO of Canadian National, 2000 Source: 2000 Canadian National Annual Report
Slide 4: Table of Contents
4 Table of Contents I. EXECUTIVE SUMMARY AND BACKGROUND 21 Entrenchment/Enrichment actions by Board and Management 20 Brief Bios of Current Directors 19 Brief Bios of Our Nominees 18 Our Nominees vs. Current Board II. CORPORATE GOVERNANCE 16 Overview of 3G Capital 15 How TCI Formed its View 14 Overv
Slide 5: Table of Contents (continued)
5 Table of Contents (continued) 29 Harassment and Intimidation of Workers III. SPECIFIC CORPORATE GOVERNANCE CONCERNS 31 Quotes Indicating Others Share our Concerns 30 Alleged Abusive Use of The Greenbrier 28 Filing Baseless Lawsuit to Manipulate Shareholder Vote 27 Disingenuous Attempt at Special M
Slide 6: Table of Contents (continued)
6 Table of Contents (continued) IV. THE TRUTH ABOUT CSX PERFORMANCE 45 A Typical Rail Shipment Diagrammed 44 Management Guidance indicates no Productivity Improvement 43 The Value of Productivity 42 The Productivity Opportunity Quantified 41 Our view of the Potential V. THE PRODUCTIVITY OPPORTUNITY
Slide 7: Table of Contents (continued)
7 Table of Contents (continued) 53 Further Opportunities – Locomotives V. THE PRODUCTIVITY OPPORTUNITY (continued) 56 Further Opportunities – Safety 55 Further Opportunities – Labor Productivity 54 Further Opportunities – Fuel 52 Back testing the Analysis to Actual Canadian National Results 51 Analy
Slide 8: Table of Contents (continued)
8 Table of Contents (continued) 68 The Value of Leverage 64 Historical Management Volume Guidance vs. Actual Results VI. THE PRICING DISCOUNT 70 CSX Revenue Composition 69 Recession Analysis 67 Capital Structure Considerations 66 Network Performance 65 Analysis of Deferred Maintenance Capex Risk 63
Slide 9: Table of Contents (continued)
9 Table of Contents (continued) 79 Back-up Data for Slide 38 IX. APPENDIX 78 Back-up Data for Slide 37 77 Back-up Data for Slide 35 76 Nominee Bio: Gary Wilson 75 Nominee Bio: Tim O’Toole 74 Nominee Bio: Gil Lamphere 73 Nominee Bio: Alex Behring 72 Nominee Bio: Chris Hohn Page #
Slide 10: Executive Summary
10 Executive Summary Electing our minority slate of nominees is in the best long-term interests of CSX shareholders Over 50 years of railroad experience know the business in order to ask the right questions Strong, proven business leaders willing to challenge management Own over $2bn of CSX shares ‘
Slide 11: The Choice
11 The Choice Chris Hohn Managing Partner of TCI Alex Behring Managing Director of 3G & former CEO of ALL railroad (~10 years of railroad experience) Gil Lamphere Former director Canadian National and Illinois Central (~20 years of railroad experience) Tim O’Toole MD of London Underground & former C
Slide 12: Our Vision For CSX
12 Our Vision For CSX “Our goal is a strong CSX that can provide the returns shareholders deserve, the service shippers demand, a safety record communities can count on, and a working environment employees can be proud of” (1) ‘Best In Class’ Corporate Governance Global best practice in management a
Slide 13: Key Questions We Are Asking
13 Key Questions We Are Asking Is this Board capable of holding management accountable? Is this Board working for shareholders or for management? Corporate Governance Productivity Opportunity Why does CSX lag peers on nearly every operational metric? Why does CSX have barely half the profitability o
Slide 14: The Children's Investment Fund Management UK LLP (TCI)
14 The Children’s Investment Fund Management UK LLP (“TCI”) London based investment firm with $15bn+ AUM Owner oriented approach to investing long-term, fundamental, value-focused conviction based on deep fundamental research Multi-year locked up capital Have fought for shareholders to have a voice
Slide 15: How TCI Formed Its View
15 How TCI Formed Its View Met top management of all major NA railroads(1) Retained advisors to assist understanding Five industry consultants (pricing, ops, capex) Two DC law firms (legislation/regulation) DC lobbying firm (legislation/regulation) Numerous discussions with key stakeholders Dozens o
Slide 16: 3G Capital Partners, Ltd
16 3G Capital Partners, Ltd New York based investment firm Focus on global equities and special situations Leverage deep industry knowledge and operating experience to identify attractive long-duration investments Managing Director Alex Behring served as CEO of Latin America’s largest railroad, Amer
Slide 17: Corporate Governance
17 Corporate Governance Management are operators, Boards are trustees, Shareholders are owners
Slide 18: Is the Board capable of holding management accountable?
18 Corporate Governance Is the Board capable of holding management accountable? No railroad operating experience (excluding CEO) Philanthropist Doctor Business School Professor Jacksonville Contractor Chairman is CEO and President Average director tenure of ~10 years 5 directors have served longer t
Slide 19: Our Nominees
19 Corporate Governance Our Nominees Chris Hohn Founder/Managing Partner of TCI Long track record of successful fundamental investing Vocal advocate for strong corporate governance globally TCI owns over 4% of CSX’s shares MBA (high distinction), Harvard Gil Lamphere Long track record as successful
Slide 20: Existing Board
20 Corporate Governance Existing Board Donna Alvarado Founder & President of Aguila International Former Deputy Assistant Secretary of Defense Director: Correction Corp of America, Ohio Board of Regents Age 59; 1 year on CSX Board John Breaux Partner, Breaux-Lott Leadership Group Former US Senator (
Slide 21: Is the Board working for shareholders or for management?
21 Corporate Governance Is the Board working for shareholders or for management and themselves? Allegedly approved “spring loaded” grants, in violation of Insider Trading Policy Allegedly allowed abusive use of The Greenbrier(1) Changed compensation basis to Operating Ratio (easily manipulated)(2) C
Slide 22: Shareholder pressure has been required to force positive change
22 Corporate Governance Concern: shareholder pressure has been required to force positive change Pre-Shareholder Pressure Now SHARE BUYBACKS $500 million over 1 year(1) $3 billion over 2 years (6x) (but now buying stock 30% more expensive and paying 2x spread over LIBOR as would have in Q1 07) SHARE
Slide 23: Highest industry compensation for lagging performance
23 Corporate Governance Concern: highest industry compensation for lagging industry performance 2007 CSX NSC BNI UNP CN TOTAL EXECUTIVE COMPENSATION (top 5 executives) $38m $32m $20m $23m $19m AVERAGE NONEXEC DIRECTOR COMPENSATION $343k $266k $258k $175k $306k TOTAL “GOLDEN PARACHUTE” PAYMENTS $95m
Slide 24: Board and management lack conviction in CSX value
24 Corporate Governance Concern: Board and management don’t seem to have conviction in CSX value $0m $0m TOTAL OPEN MARKET PURCHASES $(1.1)m $(38.9)m TOTAL SALES Last Two Years Activity In CSX stock Senior Management Team Board TOTAL GRANTS $28.9m $5.3m CHANGE IN NET EXPOSURE TO CSX $(10.0)m $4.2m S
Slide 25: Board not interested in allowing shareholders a voice
25 Corporate Governance Concern: Board not interested in allowing shareholders a voice without ties TCI/3G Concessions Conceded on number of board seats Offered to work with CSX Board to find mutually agreeable directors Suggested leaving contentious issue of separating Chairman/CEO roles to a share
Slide 26: Spring-loading and violations of Insider Trading Policy
26 Corporate Governance Concern: “spring-loading” and violations of Insider Trading Policy Major Allegations against Board and Michael Ward Setting “spring-loaded” grants for CSX executives Set grants while in possession of material non-public information, in violation of Insider Trading Policy and
Slide 27: Disingenuous attempt at special meeting bylaw
27 Corporate Governance Concern: disingenuous attempt at special meeting bylaw Shareholders vote for ability to call special meetings (passed 2:1), May 07 “At first glance, the bylaw would appear to be positive for shareholders. A closer reading, however, casts doubt on the bylaw’s impact.” (ISS, Fe
Slide 28: Filing baseless lawsuit to manipulate shareholder vote
28 Corporate Governance Concern: filing baseless lawsuit to manipulate shareholder vote The Truth CSX’s Major Allegations TCI/3G have an agreement with swap counterparties to vote stock (if any) hedging swaps TCI/3G formed a group much earlier than disclosed TCI/3G are seeking control of CSX There i
Slide 29: Harassment and intimidation of workers
29 Corporate Governance Concern: harassment and intimidation of workers In March 2008 the Federal Railroad Administration published “CSX Transportation Harassment and Intimidation Investigation”: The investigation followed an August 2006 joint letter from the two largest rail unions (UTU and BLET) c
Slide 30: Alleged abusive use of The Greenbrier
30 Corporate Governance Concern: alleged abusive use of the The Greenbrier The former Greenbrier President has alleged widespread abuse of the resort by executives and Board members, who treat it as their own private country club. Allegations include: Unaccounted for use, “comped” use, and unpaid ta
Slide 31: Our concerns are shared
31 Corporate Governance Our concerns are shared Source: Large four US railroads refers to the four largest Class I US railroads: Norfolk Southern, CSX, Burlington Northern Santa Fe, Union Pacific. An example of Warren Buffet’s investment philosophy: 'As time goes on, I get more and more convinced th
Slide 32: The Truth About Performance
32 The Truth About Performance “If what you did yesterday seems big, you haven’t done anything today” Lou Holtz Source: http://www.louholtzhalloffame.com/ Holtz is the only coach i n NCAA history to lead six different programs to bowl games and the only coach to guide four different programs to fina
Slide 33: CSX is a laggard on key operational metrics
33 The Truth About Performance The Simple Truth – CSX is a laggard on key operational metrics Velocity Dwell Time Accident Rate Labor/Sales Cost Inflation Cost / Unit Inflation CN CN NSC CN NSC CN BNSF NSC CN BNSF CN UP UP CSX CSX NSC UP NSC NSC BNSF BNSF UP CSX CSX CSX UP UP CSX BNSF BNSF Differenc
Slide 34: Customer surveys confirm poor performance
34 Morgan Stanley Research Q. Delivery When Expected? NSC NSC CN UP CSX CSX UP CN BN BN Apr 08 Sep 07 Credit Suisse Research % Of Shippers Rating Service “Fair” or “Poor” 8% NSC 54% CSX 37% CN 36% UP 18% BN Source: Morgan Stanley Research April 18, 2008. Credit Suisse Research April 14,2008. Morgan
Slide 35: Sources of EBIT growth 2003-2007
$0m $500m $1 ,000m $1 ,500m $2 ,000m $2 ,500m 2003 EBIT Reported 2003 EBIT Adjusted Inflationary Pricing/Costs Real Pricing Volume Productivity 2007 EBIT Adjusted 2007 EBIT Reported 35 Source: Group analysis of 2003 and 2007 Quarterly Financial Reports. Inflationary Pricing/Costs assumes annual grow
Slide 36: Industry stock performance confirms rising tide
36 Source: Bloomberg Total Return Analysis, 31st December 2003 through 31st December 2007. Michael Ward was appointed CEO of CSX in January 2003, current management team all together from earl y 2004 The Truth About Performance Industry stock prices performance confirms ‘rising tide lifting all boat
Slide 37: Productivity seems to have stalled
-3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 2001 2002 2003 2004 2005 2006 2007 -6. 0% -4. 0% -2. 0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Productivity Yield Growth 37 The Truth About Performance Productivity, which is under management’s control, seems to have stalled Productivity has been declining at
Slide 38: Recent performance flattered by non-recurrings
38 The Truth About Performance Recent performance flattered by non-recurrings, it’s not as good as it looks Q1 2008 Non-Fuel Cost Growth -0 .4% 1.8% 0.9% 3.2% Total Costs Costs Per Unit Reported Financials Adjusted Financials Q1 2008 performance flattered by $38m of “oneoff” serious derailment expen
Slide 39: Gap to Canadian National is widening
1.20 1.30 1.40 1.50 1.60 1.70 1.80 2002 2003 2004 2005 2006 2007 Cents (USD) / GTM CSX Cost CN Cost (Constant FX) 39 The Truth About Performance And the gap to industry leader, Canadian National, is actually widening In 2002 CSX’s costs/GTM were 11% higher than CN. In 2007 the gap widened to 26% Sou
Slide 40: The Productivity Opportunity
40 The Productivity Opportunity “Perhaps the most ingrained barrier is human nature, the tendency to stick with the familiar and the comfortable, to keep doing things the way we’ve always done them” Hunter Harrison, CEO of Canadian National (on the barriers to change) Source: How We Work and Why by
Slide 41: Productivity can offset cost inflation and accommodate free growth
41 The Productivity Opportunity Productivity can offset cost inflation and accommodate free growth We believe that over the next decade CSX can achieve, as a result of productivity improvement: Zero cost inflation 1% volume growth per year (without growth capex) Implications $2.2bn run-rate EBIT imp
Slide 42: Summary of potential benefits
The Productivity Opportunity Summary of potential benefits Issue Benefit ($mm) Potential Actionable Opportunities Emulating CN’s Revolution. Becoming a Scheduled Precision Railroad 1,800 Dramatically improve yard operations, consolidate freight, and optimize scheduling Increase velocity 3mph (12%),
Slide 43: Realizing even part of the opportunity is valuable
43 The Productivity Opportunity Realizing even part of the opportunity is hugely valuable % of Productivity Benefits Achieved 2007 25% 50% 75% 100% Op. Income $2,224m 2,774 3,324 3,874 4,424 Increase 25% 49% 74% 99% EPS $2.70 $3.50 $4.30 $5.11 $5.91 Increase 30% 59% 89% 119% Source: Group analysis a
Slide 44: Management guidance implies no improvement in productivity
44 The Productivity Opportunity Management guidance implies no improvement in productivity Management’s 2010 margin target (“low 70s”) can be achieved by pricing alone Implies management has no plan to improve productivity Implies no volume growth Implies 0% return on the $2 billion of growth capex
Slide 45: Focus on dwell in a typical shipment
Ma inline Train 45 The Productivity Opportunity Focus on dwell, as cars move only 10% of the time in a typical shipment Loading Process at Shipper Wait at Local Yard to build train Switched at System Yard Switched at Regional Yard Switched at Regional Yard Wait at Destination Yard to split Unloading
Slide 46: Why is Canadian National a good model?
46 The Productivity Opportunity Why is Canadian National a good model? Canadian National (“CN”) is the best-in-class railroad Most profitable and most productive railroad in America (margins 60% higher than CSX) CN went from “worst” to “first” in industry profitability. It can be done, despite skept
Slide 47: Arguments against using CN as the model are one-sided
47 The Productivity Opportunity The arguments against using CN as the model are often one-sided CN has a simple “T” network, CSX is complex CSX’s complex network is really a few simple networks as well CN benefits from nationalized healthcare Payroll taxes, FELA and healthcare differences are worth
Slide 48: Michael Ward vs. Hunter Harrison
“People who really understand the industry would not draw direct comparisons between an American railroad and a Canadian Railroad” “They do not run through many urban centers” “It’s a very streamlined railroad, it’s sort of a “T” if you will” “Very different health and welfare system” “A lot of thei
Slide 49: What is the Canadian National model?
49 The Productivity Opportunity What is the Canadian National model? (1) Canadian National Fact Sheet. Other source: discussions with CN management Optimize railroad better service better value for customer customers help optimize Precision Scheduled Railroading Every railcar has a trip plan “Every
Slide 50: CSX metrics worse than CN pre-revolution
50 The Productivity Opportunity CSX’s metrics are generally worse than CN’s were pre-revolution 96 23 >3 60 21 95 33 66 CSX Today 25% 22% >50% 37% 14% 40% 67% 212% CN Advantage vs. CSX CN 1998 CN Improvement CN Today Carloads (000s) / Hump and Major Flat Yard (1) NA 206 Gross Ton Miles (bn) / Horse
Slide 51: Capacity CSX could create by emulating CN
51 The Productivity Opportunity How much capacity could CSX theoretically create by emulating CN’s revolution? Source: Group analysis. Velocity, Dwell, Handlings, Hours / Load/Unload, and Cars / Train as per previous footnote. Average Haul per Analysis of Class I Railroads 2006, AAR. ( 1) Improve to
Slide 52: Analysis ties closely with what happened at CN
52 The Productivity Opportunity Although only indicative, our analysis ties closely with what happened at CN Source: Group Analysis. CN Average haul per discussion with company management. Velocity, dwell, and handling per previous footnote. Capital expenditures per CN Annual Reports and maintenance
Slide 53: Further opportunities – Locomotives
The Productivity Opportunity Further opportunities – Locomotives NS CSX % Diff Locomotive Opex / HP 24 33 +37% Locomotive Opex ($k) / Locomotive 82 116 +41% Locomotive Opex ($k) / GTM (Bn) 737 827 +12% Locomotive Opex ($mm) 309 424 +37% Age of Fleet (Yrs) 18 19 HP / Locomotive 3,367 3,475 Source: 20
Slide 54: Further opportunities – Fuel
1.24 1.13 1.05 1.10 1.15 1.20 1.25 CSX CN The Productivity Opportunity Further opportunities – Fuel Opportunity to consume 9% less fuel Source: 2007 Q4 Reports for CSX and CN. Savings based on CSX Q407 average price of fuel Why does CSX consume more fuel per GTM than CN, despite CSX having a younger
Slide 55: Further opportunities – Labor Productivity
The Productivity Opportunity Further opportunities – Labor Productivity Source: Independent consultant, 2006 R1 Reports for CSX and NSC, AAR and STB reports CSX NSC % of Hours Paid but Not Worked 23% 12% Transportation Wage $1,046m Savings @ 12% $150m 23% of the hours CSX pays for do not actually ge
Slide 56: Further opportunities – Safety
FRA Personal Injuries Frequency Index 1.10 1.14 1.18 1.22 NS CSX Accidents per million train miles Caused by Human Factor 0.90 0.95 1.00 1.05 1.10 NS CSX Accidents per million train miles 2.0 2.2 2.4 2.6 2.8 3.0 NS CSX The Productivity Opportunity Further opportunities – Safety (unquantifiable) Acci
Slide 57: Pricing Discount
57 Pricing Discount A picture is worth a thousand words. . .
Slide 58: Is there a smarter way to price?
58 Pricing Discount Is there a smarter way to price? US railroad pricing models haven’t really changed since deregulation What can we learn from other models? Airline yield management – uses price to ‘balance’ demand across times of day, days of week and weeks of year. It is our understanding that C
Slide 59: Why does CSX price at a deep discount to Norfolk Southern?
2 3 4 5 6 7 8 Coal Intermodal All Other Total Norfolk Southern CSX 59 Pricing Discount Why does CSX price at a deep discount to Norfolk Southern? Source: Group analysis of CSX and Norfolk Southern Q4 Financial Reports Comparison of Revenue per Revenue-Ton-Mile for Key Commodities (cents) NS versus C
Slide 60: Capital Allocation And Structure
60 Capital Allocation And Structure "Over time, the skill with which a company's managers allocate capital has an enormous impact on the enterprise's value." Warren Buffet Source: Berkshire Hathaway Letter To Shareholders, 1994
Slide 61: How can we be comfortable management will be disciplined?
61 600 1,000 1,400 1,800 2001 2002 2003 2004 2005 2006 2007 2008F 2009 F 2010F $m Capital Allocation And Structure How can we be comfortable management will be disciplined? Until early 2006, CSX management were compensated on Free Cash Flow But now, long term compensation is based largely on the ope
Slide 62: Contrasting statements of rail CEOs on capex
62 Capital Allocation And Structure How can we be comfortable management will be disciplined? “As a private company, BNSF will only invest in added capacity to the extent we believe we can earn an adequate return on those investments.” Matt Rose, CEO of Burlington Northern “The owners of the Union P
Slide 63: Is the capital expenditure budget economically justifiable?
63 Capital Allocation And Structure Is the capital expenditure budget economically justifiable? Volumes Declining, and yet Capex Increasing Source: Group analysis of CSX 10K Reports and Q4 Financial Reports (1) See next slide for backup. (2) CSX’s announced capex plan contains $1.6bn of expansion ca
Slide 64: Management has consistently over-estimated volume growth
Capital Allocation And Structure CSX management has consistently over-estimated volume growth 64 Management’s consistent over-estimation of growth is concerning Source: CSX Investor Day Presentation, 11 August 2005, Q4 2005 Earnings Call (January 24, 2006), Q3 2006 Earnings Call (October 18, 2006),
Slide 65: Is there significant deferred maintenance liability?
(10) (8) (6) (4) (2) 0 2 4 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 -400 -300 -200 -100 0 100 200 Tie Cumulative Surplus/Deficit (MM) Rail Cumulative Surplus/Deficit (Miles) Capital Allocation And Structure Is there significant def
Slide 66: Network performance doesn't indicate deferred maintenance
Capital Allocation And Structure Network performance doesn’t indicate deferred maintenance either 66 0.0 1.0 2.0 3.0 4.0 5.0 6.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 CSX % NS% UP% BNSF% % of Tracks w/ Slow Orders Slow Orders (1997 – 2006) Network Caused Accident Rate (2007) Network Acci
Slide 67: Factors to consider in capital structure
67 Capital Allocation And Structure Factors to consider in capital structure Infrastructure asset Pricing stability Diverse revenue base Non-core real estate Low-cost provider Cost opportunities Fixed cost base Capital intensive Strength of Business Serviceable Leverage Volatility of Cash flows Down
Slide 68: Appropriate capital structure for CSX
68 Capital Allocation And Structure What is the appropriate capital structure for CSX? CSX Today 2x Net Debt / EBITDA Each Incremental 1x Net Debt / EBITDA Net Debt ($bn) $6.5bn $3bn (EBITDA – Maint capex) / Interest 4.6x - Potential decline in EBITDA possible(1) 49% 7% less New Capital Raised For I
Slide 69: Even in a severe downturn EBITDA is resilient
2007A Downside % Revenue / Unit 1,409 1,452 3% Units 7,116 6,760 -5% Revenue 10,030 9,814 -2% Operating Costs 5,708 5,850 2% Depreciation 883 909 3% Diesel 1,210 1,150 -5% Total Costs 7,801 7,909 1% EBIT 2,229 1,906 -15% Margin 22% 19% EBITDA 3,112 2,815 -10% Margin 31% 29% % of Total Costs Fixed 77
Slide 70: Diversity of revenue base limits volume downside
70 Intermodal = 14% Structural growth from trade/share gain Can be cyclical in short term Capital Allocation And Structure Diversity of revenue base limits volume downside 25% 14% Coal = 26% Utility coal used for heating/lighting/AC Stable over time Short term weather/inventory influence Agriculture
Slide 71: Appendix
Appendix
Slide 72: Our Nominees: Christopher Hohn
72 Our Nominees Christopher Hohn (41) Before founding TCI in 2003, Mr. Hohn spent seven years at Perry Capital and was the portfolio manager leading its European investment strategy from 1997 to 2003. Mr. Hohn has previously served on the Board of RIT Capital Partners plc, which is publicly listed o
Slide 73: Our Nominees: Alexandre Behring
73 Our Nominees Alexandre Behring (41) Mr. Behring is the Managing Director of 3G, a private investment firm. Previously, he spent 10 years at GP Investments, Latin America's largest private-equity firm, including eight years as a Partner and Member of the firm's Investment Committee. He served for
Slide 74: Our Nominees: Gilbert Lamphere
74 Our Nominees Gilbert Lamphere (55) Mr. Lamphere is the Managing Director of Lamphere Capital Management, a private investment firm. Previously, he was a Director of Canadian National Railway, Chairman of Illinois Central Railroad prior to its sale to Canadian National in 1998, and a Director of F
Slide 75: Our Nominees: Timothy O'Toole
75 Our Nominees Timothy O’Toole (52) Mr. O’Toole has over 25 years of railroad industry experience. He is currently the Managing Director of the London Underground, where he is responsible for operating and rebuilding the Tube, the world’s oldest metropolitan railway. Previously, he served as Presid
Slide 76: Our Nominees: Gary Wilson
76 Our Nominees Gary Wilson (68) Mr. Wilson was a principal investor and Co-Chairman of the Board of Northwest Airlines from 1991 to 1997 and Chairman from 1997 to 2007. From 1985 to1990, he was Chief Financial Officer and a director of The Walt Disney Company and served on its Board until 2006. Pri
Slide 77: Back-Up Data For Slide 35
77 Back-Up Data For Slide 35 CSX 2007 Reported Operating Income 2,251 - Gains on Insurance Recoveries (28) + Serious Derailments in Q1 38 - 80% of $56m Personal Injury Reserve in Q4 (45) - 80% of $30m Personal Injury Reserve in Q2 (24) - 1/7 of previously taken Personal Casualty Claim (33) CSX 2007
Slide 78: Back-Up Data For Slide 37
78 Back-Up Data For Slide 37 CSX 2007 Reported Total Expenses 7,779 + Gains on Insurance Recoveries 28 - Serious Derailments in Q1 (38) + 80% of $56m Personal Injury Reserve in Q4 45 + 80% of $30m Personal Injury Reserve in Q2 24 + 1/7 of previously taken Personal Casualty Claim 33 CSX 2007 Adjusted
Slide 79: Back-Up Data For Slide 38
79 Back-Up Data For Slide 38 Q1 2007 Q1 2008 Q4 2006 Q4 2007 CSX Reported Non-Fuel Operating Expenses 1,653 1,646 1,620 1,611 + Insurance Recoveries 18 2 27 8 - Serious Derailments -38 + 80% of change in Personal Injury Reserves 45 CSX Adjusted Non-Fuel Operating Expenses 1,633 1,648 1,647 1,664 Vol