H O W T O M O R R O W M O V E S

Fall 2017

HOW TOMORROW MOVES

Michael Rutherford Vice President – Sales & Marketing Industrial Products

PRECISION SCHEDULED RAILROADING AT CSX

Unlocking Potential through Transformative Change

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-SAVINGS, EXPENSES, TAXES, LIQUIDITY, CAPITAL EXPENDITURES, DIVIDENDS, SHARE REPURCHASES OR OTHER FINANCIAL ITEMS, STATEMENTS OF MANAGEMENT’S PLANS, STRATEGIES AND OBJECTIVES FOR FUTURE OPERATIONS, AND MANAGEMENT’S EXPECTATIONS AS TO FUTURE PERFORMANCE AND OPERATIONS AND THE TIME BY WHICH OBJECTIVES WILL BE ACHIEVED, STATEMENTS CONCERNING PROPOSED NEW SERVICES, AND STATEMENTS REGARDING FUTURE ECONOMIC, INDUSTRY OR MARKET CONDITIONS OR PERFORMANCE. FORWARD-LOOKING STATEMENTS ARE TYPICALLY IDENTIFIED BY WORDS OR PHRASES SUCH AS “WILL,” “SHOULD,” “BELIEVE,” “EXPECT,” “ANTICIPATE,” “PROJECT,” “ESTIMATE,” “PRELIMINARY” 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 UPDATES 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 ANY FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY ANY 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, POLITICAL OR BUSINESS CONDITIONS, INCLUDING THOSE AFFECTING THE TRANSPORTATION 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; (V) THE OUTCOME OF CLAIMS AND LITIGATION INVOLVING OR AFFECTING THE COMPANY; (VI) NATURAL EVENTS SUCH AS SEVERE WEATHER CONDITIONS OR PANDEMIC HEALTH CRISES; AND (VII) THE INHERENT UNCERTAINTY ASSOCIATED WITH PROJECTING ECONOMIC AND BUSINESS CONDITIONS. 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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FORWARD LOOKING DISCLOSURE

HOW TOMORROW MOVES

EVEN IF YOU’RE ON THE RIGHT TRACK, YOU’LL GET RUN OVER IF YOU JUST SIT THERE. - WILL ROGERS

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50%

55%

60%

65%

70%

75%

80%

85%

90%

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02

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03

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04

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05

20

06

20

07

20

08

20

09

20

10

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11

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14

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Operating Ratio Trends Class I Railroads

CSX

THE CASE FOR TRANSFORMATIVE CHANGE

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Operating Ratio is the preferred measure to evaluate railroads

― Reflects high ongoing capital expenditures and exposure to inflationary pressures

― Measures overall efficiency of both operations and capital deployment

Recent CSX performance has been range bound

― Significant gains under the One Plan ― Despite continuous improvement with

focus on train productivity, OR moved sideways in more recent years

Source: Public Reportings for Class I Railroads.

TRAFFIC MIX HAS SHIFTED RADICALLY

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8,806

10,701

5,571

2009 2016 H1 2017

CSX Revenue Dollars in Millions

Coal Merchandise Intermodal

17%

55%

14%

67%

31%

65%

15%

16%

19%

Coal expected to decline longer-term, despite recent gains

― Natural gas prices remain the key driver of domestic coal consumption

― Export coal volatility driven by supply and demand on global markets

― Industrial segment smaller but more stable

Network implications have been significant in recent years

― Rationalized some coal assets in the central portion of the network

― Growth shifting focus to assets supporting Merchandise and Intermodal on the triangle

Source: CSX Public Reportings.

FUTURE CHALLENGES REMAIN

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Near-term remains favorable for rail ― Positive macro-economic environment ― Maintains a strong value proposition with better

infrastructure than alternative modes ― ELD’s likely to hinder productivity and even

exacerbate the driver shortage

However uncertain, other initiatives will

likely promote trucking efficiencies ― Increased size and weight ― More stringent fuel consumption standards ― Platooning and autonomous vehicles

Railroads must focus on innovation ― Technological advances still important ― Must not neglect process innovation

to control asset and labor costs

Source: ASCE National Infrastructure Report Card 2017; WSJ “Truckers Are in No Hurry to Have Their Hours Tracked, 9/14/2017.

SUPERIOR SERVICE KEY TO SUSTAINABLE GROWTH

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ƒ (Productivity)

ƒ (Volume, Price)

Operating Expenses

Operating Revenue

HOW TOMORROW MOVES

IF I HAD ASKED PEOPLE WHAT THEY WANTED, THEY WOULD HAVE SAID FASTER HORSES. - HENRY FORD

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PSR: ‘RAILROADING IS JUST A BUNCH OF PROCESSES’

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Improve Service

Operate Safely

Control Costs

Drive Asset Utilization

Develop People

Operational Focus

Terminal Fluidity

Balanced Train Plan

Service Improvements

Rolling Stock Utilization

People Efficiency

Fuel Optimization

Train Density

Sustainable volume and revenue growth Improving operating ratio Strong free cash flow generation Superior shareholder distributions and returns

Financial Focus

Superior Financial Results

Improved Frequency

Better Reliability

Faster Transit

Quicker Turnaround

Productivity Improvements &

PSR STARTS WITH THE CUSTOMER

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‘Just run the plan’ and mean it ― Integrate MOW with the plan, versus running

a competing plan characterized by curfews ― All trains need to operate to a schedule

Unit trains are not always better ― Unit train transits compensated for issues with

the scheduled Merchandise network ― Excessive dwell to build and unload unit trains

elongates cycle times, requiring more assets

Focus on end-to-end transit times ― FMLM as part of overall service performance,

not as a separate goal unto itself ― There is no intrinsic value in hump yards

Do not confuse the ends with the means

‘DAISY CHAINS’ ARE FRAGILE BY DESIGN

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95%

95%

95%

95%

95%

Reliability degrades across handlings: 77%

OVER-RELIANCE ON HUMPS HINDERS PROGRESS

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Transitioning hump yards ― Started with twelve; seven have been

converted to flat switching operations ― Two to four hump yards likely long term

Yard efficiency improving ― Nearly two-thirds of all yard activity is now

done through flat switching ― Eliminating a handling can accelerate

transit by at least a day

Current footprint supports radically different train plan

― Strategic blocking allows for farther, faster transit while reducing handlings

― Eliminates out-of-route miles associated with “boomerang” service routings

― Reduced operating units from 9 to 5

CSX Hump Terminals Transitioning operations to flat-switching

Selkirk, NY

Cumberland, MD

Hamlet, NC

Waycross, GA

Atlanta, GA Birmingham, AL

Nashville, TN

Louisville, KY

Avon, IN Cincinnati, OH

Willard, OH Toledo, OH

Transitioned to flat-switching operations

Hump Terminals

HOW CAN YOU PARTNER WITH CSX GOING FORWARD?

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Help cycle equipment quickly to avoid idle dwell

― Do not allow cars to sit in the serving yard ― Quickly load and unload to turn the cars ― Release cars promptly in usable condition

Reduce time at customer to make local service more predictable

― Drop and hook is the ideal set up ― Eliminate excessive switching or placement ― Do not require mainline time to switch

Plan with the end in mind ― Pre-block cars to facilitate switching in transit ― Update transit times to mange pipeline

Change is a Team effort – Customers included

HOW TOMORROW MOVES

THE WORLD HATES CHANGE, YET IT IS THE ONLY THING THAT HAS BROUGHT PROGRESS. - CHARLES KETTERING

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AFTER A GREAT START, TRANSITION ISSUES IN Q3

16 Source: Merchandise Loaded Transit, settled 9/18/17. Waybill Release Date

MANY CUSTOMERS SEE THE IMPROVEMENT

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Customer Inquiries Daily Average Log Volume

Delayed cars most frequent concern ― Trend in problem logs mirrors timeframe

of network challenges and recovery ― Enhanced focus on long-dwell cars ensures

all cars benefit from fluidity gains ― Hurricane Irma driving latest uptick

Customer service and commercial presence at key field locations aids communication and problem-solving

Nearly 90% of problem logs have been addressed and closed to-date

― Managing pipeline of customer concerns to full resolution with more logs open thru placement

354 368

286

374

458

570 563 537

567

499

374

281 330

25 26 27 28 29 30 31 32 33 34 35 36 37Weeks

Delayed Cars Bad Order Switching Issues

VELOCITY AGAIN CLIMBING AS SERVICE RECOVERS

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Velocity

Former Line of road miles per hour

Current Total miles traveled per hour, including intermediate dwell of the train

Change Reason

Includes full trip of a train and ability to diagnose overall speed profile (in support of improvement in asset cycle)

Effect on Metric Reported velocity will be lower

Restated historical data in new methodology available on csx.com/servicemetrics

DWELL IMPROVING FOR MANY WEEKS NOW

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Dwell

Former Car time at terminal, excluding cars on the same train ID

Current All car time with a terminal work event, including through cars on same train ID (e.g. crew change)

Change Reason

Includes all dwell with ability to diagnose all events impacting car movement (in support of improvement in asset cycle)

Effect on Metric Reported dwell will be lower

Restated historical data in new methodology available on csx.com/servicemetrics

CARS ONLINE SHOWING SIMILAR IMPROVEMENT

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Cars Online

Former All cars on CSX, as determined by RailInc

Current

RailInc cars on CSX, excluding cars stored, under repair, sold, and private cars ex online inventory

Change Reason

More accurate measurement of active cars online, i.e. cars for which CSX is focused on real-time, efficient movement

Effect on Metric Reported cars online will be lower

Restated historical data in new methodology available on csx.com/servicemetrics

STILL ON TRACK FOR RECORD PRODUCTIVITY IN 2017

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93.5

103.8 100.9

Q1 '17 Q2 '17 Q3 '17

Locomotive Efficiency GTM’s per Horsepower

6,560 6,430

6,855

Q1 '17 Q2 '17 Q3 '17

Train Length Feet

Note: Third quarter 2017 efficiency measures are quarter-to-date through September 1st

8.8 8.1

7.6

Q1 '17 Q2 '17 Q3 '17

Fuel Consumption Average Weekly Gallons

in Millions

3,763

3,139

2,000

2,400

2,800

3,200

3,600

4,000

Q1AVG

Q2AVG

25 26 27 28 29 30 31 32 33 34 35 36 37Weeks

BALANCED TRAIN PLAN MEANS FEWER LOCOMOTIVES

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Q3 locomotive level stable; flex engines in response to incremental demand like coal

Active Locomotives

9,223

9,334

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

8,900

9,100

9,300

9,500

9,700

9,900

Q1AVG

Q2AVG

25 26 27 28 29 30 31 32 33 34 35 36 37Weeks

BETTER ASSET UTILIZATION MEANS FEWER CREWS

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T&E trend tracking normal seasonality; re-crew rates remain at historic lows and stable

Train & Engine Headcount and Re-crew Rate1

1 Re-crew rate is re-crew people starts as a percent of total measured people starts, and it represents incidences of replacing a crew on the same train ID (generally due to hours of service)

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CSX IS UNDERGOING TRANSFORMATIONAL CHANGE

Precision Scheduled Railroading rollout has been rapid ― Implementing core tenets on an accelerated basis

Now focused on executing and refining operating plan

― Aligning field leaders with Precision Railroading and new regional structure

Resources support current train plan

― As execution improves, service, volume and utilization are expected to improve

Long-term vision intact despite recent transition issues

― Transition issues in Q3 temporarily slowed progress for this year

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HOW TOMORROW MOVES

WHEN YOU ARE FINISHED CHANGING, YOU’RE FINISHED. - BENJAMIN FRANKLIN

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