Welcome to the CSX Corporation third quarter 2008 earnings call. (Operator Instructions) For opening remarks and introductions I would like to turn the call over to Mr. David Baggs, Assistant Vice President, Investor Relations for CSX Corporation.

The presentation material that we’ll review this morning along with our quarterly financial report and our safety and service measurements are available on our website at www.CSX.com under the investor section. In addition, following the presentation a webcast and podcast replay will be available for your review. Here representing CSX this morning are Michael Ward, the Company’s Chairman, President and Chief Executive Officer, Tony Ingram, Chief Operating Officer, Clarence Gooden, Chief Sales and Marketing Officer, and Oscar Munoz, Chief Financial Officer. Before begin the formal part of our presentation this morning let me remind everyone that the presentation and other statements made by the company contain forward looking statements and actual performance could differ materially from the results anticipated by these statements. With that let me turn the presentation over to CSX Corporation’s Chairman, President, and Chief Executive Officer, Michael Ward.

In the third quarter CSX demonstrated its continued strength at a time of significant economic uncertainty. Like any American business today we continue to monitor our environment with vigilance. However, this morning we will provide you with the reasons why our business is resilient and can continue to succeed even through challenges in the economy. Let’s start with our most recent results, yesterday we reported record third quarter earnings per share from continuing operations of $0.94. That represents a 40% increase from same period last year. Our strong earnings were driven by record revenues and operating income as well as our ability to sustain high levels of performance on our railroad. Revenues grew 18% to nearly $3 billion for two primary reasons; first we were able to price our services to the value we’re creating for our customers and recover the high cost of fuel. Our customers rely on the service performance and efficiencies we offer particularly in today’s economic environment. Second, our diverse business portfolio affords us the ability to capitalize on growing segments even when other markets are experiencing weakness. In the quarter the majority of our markets produced revenue gains despite the ongoing softness in the housing and automotive sectors of the economy. The gains were led by shipments of export coal, grain, ethanol, and metals. These factors, the capability to produce strong yields and the diversity of our markets create the opportunity to provide sustained earnings growth despite challenges in the economy. In addition, our employees continue to deliver high levels of safety, service, and productivity. As a result, our operating ratio improved 250 basis points to a third quarter record of 75%. We continue on our path to the high 60’s operating ratio by 2010. The strong performance of our railroad in the third quarter not only reflects the excellent efforts of our employees but also the ability of our network to recover from major storm damage and disruptions along the gulf coast and in the Midwest. This morning we hope to give you some insight into the underlying strength and potential of our business which is derived from a business portfolio we’ve created and the performance we continue to deliver. With that let me turn the presentation over to Tony to discuss our operating results.

Our focus on leadership, discipline, and execution continues. That’s what drives results in our business and we will take us to the next level. Looking at the quarter, our safety measures show continuous improvement. In addition, we are delivering productivity to offset inflation and drive the operating ratio lower. Finally, operations were impacted by the weather in the quarter but the network remained fluid and stable and we expect service levels to improve. On slide seven you can see where the network was affected by severe weather in the quarter. The New Orleans line was out of service for over five weeks due to storm damage from Hurricanes Gustaf and Ike. During that time Interchange traffic with our Western partners was routed through other gateways, St. Louis, Memphis and Birmingham. These reroutes combined with heavy rains and flooding in the Midwest caused congestion in some carters and terminals and impaired key gateways. Overall the network was stable and with the New Orleans line back in service the system is recovering well. Now let’s look at the safety and service measurements in more detail. On slide eight you see our safety performance. Personal injuries were 1.12 for the quarter a 12% improvement from prior year. Train accidents also remained at low levels and showed continuous improvement. Our focus on safety is part of our culture and the team is producing strong improvements but we also know that we can and must get even better. Now looking at our service performance on the next two slides the results clearly show that the impact of the recent storms. Looking at slide nine Dwell and Velocity were stable. For the quarter Dwell time was about 24 hours and went up from prior year due to congestion in some of our terminals. It was a similar story on the line of road. Velocity was 20.1 miles per hour down from prior year levels. Looking at on time performance on slide 10, on time originations and arrivals declined from prior year but remain at the high levels we’ve seen since 2006. While not satisfied with these results the network is stable and proved to be resilient in spite of service disruptions. Looking forward our commitment to running a scheduled railroad has not changed. We will drive on time performance even higher. In summary, we’re operating at a high level in both safety and productivity. Safety performance is solid but we can do better. Leadership will continue to take us to the next level. Our productivity initiatives are delivering as expected. We continue to drive the operating ratio lower. We will continue also our positive momentum in service and deliver more reliable service to our customer. As always, we get the job done with leadership, discipline, and execution. Now I’ll turn the presentation over to Clarence to review the sales and marketing results.

In the third quarter our team again delivered strong revenue growth. With our diverse portfolio a strong service product managements focus on yield management our results show that revenue growth continues to be sustainable even in a more challenging economic environment. This morning I’ll highlight our results for the quarter and the primary driver of those results while offering insights on what we see as we look ahead to the fourth quarter and to 2009. Now let us look at the results. CSX achieved another great quarter of revenue growth despite continued softness in the housing and the automotive sectors of the economy. Revenues increased 18% to an all time record of nearly $3 billion. It is strong market based pricing and fuel recovery more than offset the impact of lower volumes. These yield improvements continue to reflect the value we are providing to our customers through consistent service. In short, the secular strength of our business has continued to generate revenue increases throughout the economic cycle as reflected in over six consecutive years of top line growth. Now let’s look at the revenue performance by market on the next slide. As Michael mentioned earlier, nine of our 10 markets experienced strong revenue growth for the quarter. The only market segment that produced lower revenues was the automotive sector due to the declines in demand and production. In agricultural products, coal, and metals we produced significant revenue growth on both stronger yields and volume growth. The remainder of the markets produced revenue growth as pricing gains and fuel recovery more than offset the weaker volumes. Now let’s look at pricing on the next slide. As we have reviewed with you in previous quarters the line on this chart highlights the year over year change in total revenue per unit which…

On slide 23 and as Michael mentioned earlier we recorded earnings per share of $0.94 up $0.27 from the prior year. Starting at the top of the slide and working our way down revenues increased 18% and nearly $3 billion reflecting our strong service product and our focus on yield management and fuel recovery. This revenue growth along with our continued focus on cost efficiency drove an all time quarterly record operating income of $733 million a 31% increase over last year. As we move below the line other income decreased $6 million and interest expense driven by the incremental debt issued over the last year increased $29 million. Next income taxes increased $55 million due to the improvement in this years earnings. Finally, the number of fully diluted shares outstanding is 37 million lower reflecting the ongoing impact of our share repurchase program. Now let’s review the key drivers of our operating income results on the next slide. In addition to our core earnings momentum two unique items impacted our results in the quarter. First, we experienced a $44 million impact from recent storms which included lost revenue as well as expenses related to asset write downs and reroute costs. However, nearly offsetting this impact was a $39 million benefit in the quarter as a result of the two month lag in our fuel recovery program. After adjusting for these two items the real story continues to be the strength of our core business which delivered earning growth of $180 million driven by a sustained focus on the fundamentals of our business. This momentum is also driving margin expansion which I’ll highlight on the next slide. Here the company’s operating ratio improved 250 basis points to a third quarter record of 75.2%. This improvement was driven by our continued…

To some investors the results you’ve heard today might seem inconsistent with the current economy. The fact is while no company is immune from the realities of the economy the relative value of our transportation service stands out in an environment we’re seeing now. Our customers are relentlessly focused on their supply chains and railroads like CSX offer the best ground transportation alternative. Our job is to deliver superior safety service and productivity while operating a transportation network that’s flexible enough to adjust to the economic conditions. Our one plan and our culture of accountability allow us to do those things well. Our performance is built on a company with a strong balance sheet and a resilient business portfolio. We are confident that CSX is well positioned to deliver high levels of customer and shareholder value. In fact, as you saw in our press release we have reaffirmed our long term financial guidance. Both now and well in to the future the transportation outlook favors rail. Not only because we offer the most efficient way to move products but also because rails take traffic off the highways, reduce fuel consumption and help the environment. CSX employees view this as an opportunity to produce kinds of positive results we discussed today by constantly inventing new and better ways to improve our business processes. At the end of the day CSX is positioned in an external environment that favors our services and with an internal culture that is geared for performance and durability. We believe that makes us a truly unique investment in today’s capital markets and it motivates us to deliver even more value to you our shareholders. With that we’d like to open up for questions.

(Operator Instructions) Your first question comes from John Barnes – BB&T Capital. John Barnes – BB&T Capital: Could you talk a little bit about coal volumes during the quarter it looked like export coal volumes maybe were a little weaker than expected, just elaborate on that and has there been any change in your outlook on export coal volumes?

On our export coal volumes going forward there’s no change on it. We expect the export market to remain fundamentally strong. There’s a world wide and adequate supply of metallurgic coals, the API 2 index and Rotterdam Thermal Coal although is down is still up significantly by historical standards. On your second question we were able to meet most of our requirements with little exception on export coal during the third quarter. We’ve maintained our supplies to our producers of equipment going forward we’ve got adequate crews, locomotives and cars committed to the service. The numbers really were what they were based what the demand was at the time. John Barnes – BB&T Capital: In looking at your full year guidance obviously if you took the $0.94 that you reported if you add it back in I think you said the impact from the hurricanes was $0.06 to $0.08 you’d be looking at something of the magnitude of $1.02 or something like that. As I go back and look in our model in prior years typically you have a little bit better fourth quarter than you did third quarter. I’m just trying to understand exactly what the big fear is. Are you worried about a more severe slow down in volumes in the fourth quarter? It doesn’t seem like pricing has really be impacted by that so I would imagine pricing comes off that much. Is there something in the or we should be prepared for in the fourth quarter that maybe we don’t have currently modeled?

A couple of events I think that have transpired over the last couple of weeks, probably the most significant and these are all top line issues. GM shut a few more plants than were expected and I think that’s going to continue to affect our automotive business clearly. As you’ve seen and as you’ll continue to see in addition the international intermodal business is a bit soft and we do have, although small, some lingering effects as the chemical plants really while our lines are up and running some of our customers are not yet quite up and running. The combination of those three items offset by fuel, offset by some productivity I think is what the component drivers for that range going down to the lower end of our range. John Barnes – BB&T Capital: With the change in economic climate in the last couple of weeks, couple of months, are you still comfortable with the guidance the longer term guidance that you gave a month ago or so?

Yes, from a 2010 perspective as we reaffirmed in our press release yes we are. With the environment we feel today we’re comfortable.

Your next question comes from Tom Wadewitz – JP Morgan. Tom Wadewitz – JP Morgan: I had some questions on the look at 2009. I know you’re reiterating the view on earnings CAGR and so forth for both 2009 and 2010 but I wanted to see if you could comment a little bit on what you think of the volume outlook for 2009 specifically and then also on pricing as you look into 2009 is it similar to 2008, is it moderately lower and what the view is on those two elements in 2009.

Calling 2009 obviously is a little difficult given some of the concerns that there in the economy. We have not been feeling the impacts to date in our current shipments. They’re continuing to be down a little bit as they have all year. I think as Clarence alluded to we expect to see some weakness in the industrial sector certainly in the first half of ’09 and continued weakness in automotive and housing. We also think that we’re going to see the continued strength in coal and phosphates and fertilizers and ethanol and AG. Overall we still see it may be down 2% to 3% versus this years volumes.

As Michael said, clearly there are some things we’re feeling or not feeling today as the case may be but what we have line of sight as we move forward into is things we control to a degree and that’s price and productivity. We have a great line of sight towards those items. While we still feel comfortable there are a lot of thing happening around the world and as you’d expect us to do with the ranges we provided for you in long term guidance we’ve done our own sensitivity analysis and because of the ranges we’ve given you we can from the year end volumes we can drop 2% to 3% in volume. Again, that’s not our plan whatsoever but we do have that range and still be within the guidance. We’re thoughtful and considerate about the future. We viewed everything, from what we feel today we’re comfortable with that long term guidance. Tom Wadewitz – JP Morgan: When you say you can drop 2% to 3% in still be within the guidance you’re saying in 2009 you could have volumes down 2% to 3% and 2009 results would still be in that 20% to 25% earnings growth guidance or what do you mean by that comment?

We’re starting to stretch that guidance. I think as we’ve proven before our guidance is not full and considerate and has sensitivity and what I can tell you is that it has a volume range that we can afford to move from but that is not our plan. We’ll keep you posted. Tom Wadewitz – JP Morgan: There’s not much volume sensitivity in terms of the guidance. One other question on pricing, what do you think pricing might look like in ’09 versus ’08 do you think it’s broadly similar trend or would you expect a meaningful deceleration and you’ve talked about line of sight can you give us a little bit more perspective on what gives you a good line of sight to ’09 pricing at this point?

I would answer your first question saying it will be broadly similar to what you’ve been seeing. I would answer your second question by saying what we mean by line of sight is we’ve got about a third of our contracts that we’ve already got negotiated and finalized going forward to next year we’re in the process of negotiating about another third so we’ve got some feel for that. The final third will be negotiated mostly in the first half of the year and we see no reason to deviate off the course that we’re on. We feel very strong, its strong pricing going forward here. I’d like to add too, in economic down turns the value proposition that rail offers is very strong and our service is strong and that’s helping us to continue to get the pricing that we’re getting.

Your next question comes from Ken Hoexter – Merrill Lynch. Ken Hoexter – Merrill Lynch: I want to follow up on the outlook questions for a quick second. When you look at your high 60’s target is this kind of a perfect environment. I’m just looking at the world that we just went through last quarter does it include the normal swing of hurricanes and floods that we see as working as an outdoor sport or is that kind of high 60’s target if everything goes right in the second year of that target?

Clearly as we model things going forward the concept of contingencies is always built into a normal planning cycle. Because we do operate in the kind of world that we do there is some level of expectation that those things will continue. Anything obviously majorly catastrophic of some nature is not always built in but I think as a general rule we have a lot of those things built in. We’re not expecting a perfect storm to hit with that guidance number. Ken Hoexter – Merrill Lynch: On the pricing side if I look at coal and AG pricing was up 30%. If I look at the rest of the group it was somewhere between 10% and let’s say 20%. On a yield basis was there something that is going on with the AG pricing are they just better at getting fuel surcharge recovery, are you taking pricing up in those particular commodity areas twice the rate you are in other areas just wondering why we would see such significant outliers when fuel is such a big part of this equation?

Two factors in AG the first was we got some general rate increases on a couple of fairly large contracts on the purely agricultural side of the business. The second factor that was driving it was a significant growth in our ethanol business which came at fairly high rates so the revenue in ethanol was up almost 124% in the third quarter. The case really driven by higher rates in fuel particularly in the export coal market. Ken Hoexter – Merrill Lynch: When you talk about contract renewals what percent of coal have you still not touched yet since let’s say ’04?

By the end of this year there will be about we’ll have in total legacy contracts including coal about 7% of our contracts left and as we discussed the last time most of those renewals then are in the out years beyond 2010 so it would be 2011, 2012 type timeframes for those. Ken Hoexter – Merrill Lynch: So nothing major coming up next year?

Most of the stuff we’ve got coming up next year we pretty much finished renegotiating already.

Your next question comes from William Greene – Morgan Stanley. William Greene – Morgan Stanley: The one area you’re looking to see weakness coming up here is automotive but I realize the way you guys report that is that that might just be sort of the finished vehicles and parts so if you look in total at the inbound and outbound for the total auto industry that goes through your network, what percent of revenue or volume would all auto and auto related be?

I don’t know because sand is involved in that, you’ve got plastics, you’ve got chemicals that get involved in that. You’ve got sheet steel. I will tell you that commodities like sheet steel right now in the marketplace are significantly down in the metals market and all of the industries that are associated with automotive are down. William Greene – Morgan Stanley: If we look at the same store sales number that you talked about the 6% that you got, when you look at what’s driving that can you estimate how much of that is being driven from let’s say economically sensitive traffic versus commodity like stuff rather like coal or grain?

I would tell you that we’ve had better pricing in the coal and the commodities than we’ve had in the consumer related goods, things such as appliances, things on that’s moving by truck conversions. We’re not getting as much of the price in there as we are in the other commodities. William Greene – Morgan Stanley: If you look at 2009 what percentage of the revenue is contractually locked in? How much pricing is already known for 2009?

As I said earlier we’ve got about a third of the contracts completed. We’re in negotiation with about a third and the other third will be in the first half of 2009. William Greene – Morgan Stanley: Two thirds you kind of most know is that a safe way to say it or you have to wait until you get to ’09 is that last third?

I would say we have good line of sight towards that.

Your next question comes from Edward Wolfe – Wolfe Research. Edward Wolfe – Wolfe Research: Oscar talked about a line of sight into things you can control to some degree, pricing and productivity. Clarence gave a bit about that pricing visibility, Tony could you talk a little bit about the visibility into the service metrics, the timing for when we’ll start to see positive dwell and speed and on time stuff again when should we start to see the inflection back positive?

We’ve got the railroad back in our line to New Orleans so we’re beginning to see those metrics improve now and you can also compare these metrics with the metrics last year. We didn’t have any hurricanes in the third quarter last year so you can see the impact that has done to our system. The other area that’s on your map you also see the outer effects of most of the issues we had with the flooding in Chicago, Evansville area up our main line to Chicago was remnants of the hurricanes that came in the gulf an sort of turned northeast as they went through. We had record rainfall in Chicago with seven inches here in less than 20 hours so we had some significant issues in that area. We think that we’re back on track now they’re beginning to come back as we move into the fourth quarter. Edward Wolfe – Wolfe Research: You think by the end of fourth quarter we’ll see a year over year improvement in these weekly metrics?

We should be back better than we were last year. Edward Wolfe – Wolfe Research: Can we talk a little bit about coal and Clarence you said that stocks were down? Can you give a sense of how much those stocks feel like they’re down in the visibility to how long those will be increasing? Maybe a little bit of your experience historically into recessions are the utilities less likely to stockpile as high as during historical average times?

In the south utilities are down on a year over year basis about six million tons. In the north I’ll give it to you in days. In the north we’re down from on a year over year basis about 13 heating or cooling days in the north. What that means in English is those piles are down and utilities will have to start looking at replenishing those. Our experience is in recent years utilities are not going to let those stockpiles decline to the levels that they had let them decline two or three years ago because its just simply not in their best interest to do it. To keep an even flow of coal in the supply lines going to them is in everyone’s best interest. We can’t handle surges, the producers can’t handle surges anymore and the utilities don’t need surges any more. Edward Wolfe – Wolfe Research: Is there any rough rule of thumb of how much coal it takes for every heating day to make up or anything like that?

I don’t know of one. Edward Wolfe – Wolfe Research: Given your sense I’m guessing you’ve known when we were 13 days before is this multiple quarters how do we think about the time to catch up on something like that?

In my view if the demand on the supply lines as it is now it would a couple good quarters to at best to make this supply up because of the way things are concentrated, production in the coal fields, spread out demand in both the export markets north and south utilities.

Wouldn’t you say, Clarence, given the export demand and the expected utility demand the production side may have some challenges meeting all of that demand which will make us go out multiple quarters.

Absolutely. Edward Wolfe – Wolfe Research: The export side of things obviously off a smaller base but growing 47% which is slowing a little bit. What’s a growth range you could foresee in ’09 for export coal roughly is it 10% to 20%, is it zero, I’m guessing it’s not 47%.

I don’t think from a volume standpoint export coal will grow in 2009. All the estimates that I’ve seen from the experts have it flat. It’s flat at an all time record. We’ll have revenue growth. Edward Wolfe – Wolfe Research: It will be on the pricing side?

Right Edward Wolfe – Wolfe Research: Can you talk about the visibility of that pricing? How comfortable are you with export coal pricing assuming you kept flat volumes for the next couple of years? Should export coal pricing, I’m guessing those are one year contracts?

Most of them are one year some of them are multiple years. To answer your question directly, I feel great. Edward Wolfe – Wolfe Research: Michael, some big picture kind of things, first of all, have you had any time to interact with the new Board and do you have any general sense of how things might be the same or different?

As you know we’ve invited all five new members on to the Board. We’ve had all five of them in for orientation sessions to review all of our longer term plans as well as to meet the management team. Those meeting have gone very well. I think basically the attitude of all of our Directors and our Management is we’re going to continue to work to keep creating the kind of values we have over the last four to five years. We have our first official Board meeting next week and we anticipate that we’ll be working closer together to create more value.

Your next question comes from Gary Chase – Barclay’s Capital. Gary Chase – Barclay’s Capital: You say about a third of your business rolls every year and I think you broke that into thirds the stuff that you’d completed and so on. The remaining two thirds can you give us a sense for the escalation that has been built into those contracts on a year on year basis and maybe contrast that with the kind of escalation you had say in 2008 so we can get a sense for how much contribution is coming from the things that are not being re-priced.

First let me not correct you but say I didn’t say that a third of our business comes due every year. Actually that number is about 50% of our business comes up for renewal every year. What we’ve got is a third that we’ve finished the contracts, a third we’re negotiating and a third in the first half of the year. Your second question was what? Gary Chase – Barclay’s Capital: On the 50% that is not going to be up for negotiation this year what is the escalation that has been built into those and how does it compare to the escalation you had on existing contracts say in 2008?

On a comparable basis of how it has escalated it will mostly by and large be identical to 2008. That basis is mostly RCAF less fuel surcharge because most of our business has been covered on the fuel side by our fuel surcharge program. Gary Chase – Barclay’s Capital: When you talk about in the press release when you talk about the intermodal yields you say that yields are flat exclusive of fuel and mix. I was just curious if there was additional color there have domestic yields been generally up on a core basis and offset by international or is that intended to mean both domestic and international were flat on a core basis?

The domestic yields have been up essentially due to the fuel surcharge and mix. The domestic volumes also were up which helped drive that yield a little higher. Then the international volume has been down have driven that side of the equation. Gary Chase – Barclay’s Capital: How come the core pricing isn’t a little bit better than flat in the domestic intermodal business?

Yesterday I sat down and counted and I had 15 different types of intermodal competition in both the west and the east that we’re facing. With the truck competition now being very strong it’s difficult to get the pricing that we need to get in there on a daily basis.

Your next question comes from Matthew Troy – Citigroup. Matthew Troy – Citigroup: I was wondering does the longer term operating ratio goal to drive it down to the high 60’s obviously in the current environment not expecting progress to be linear. I’m curious how do you predict the gains you’ve made to date in the overall trajectory into an environment when volumes are going to come under pressure as a result of the slowing economy. I was just wondering if you would talk about some specific things you’re doing operationally today right now since the blocking and tackling.

As you know if our long term guidance I outlined $400 million worth of productivity initiatives. We have good line of sight on those and a lot of those are looking at our processes to bring technology to improve our productivity. In addition, as we went through this year and I think Charlie has mentioned this before with the one plan if we see a given market down we have the ability to fine tune that to change some of the configurations and train starts. As we’ve talked about we have total service integration where we’re pushing that how do we define the most efficient way to move product for the customer that also meets their needs and gives us very high efficiency. We also have the ability as we go forward if there is some lessening of business to furlough our employees some of which we had done this year as we right sized the slightly down revenues. I think we’d use all those tools to continue helping us in our drive to those high 60’s. Matthew Troy – Citigroup: On the pricing story same store sales trend in the low 6% range your commentary has been exhaustive in terms of something broadly similar in 2009 and beyond. I’m just curious, I like a very long term view, and my understanding is the pricing gains is a function of service and the capacity within the total industry. If capacity should loosen a bit from an industry perspective given slowing volumes and a down economy and the number of legacy bulk traffic contracts subject to the larger pricing gains start to accentuate into the back half of next year what is the strategy to protect or maintain the rate improvement into 2009, 2010 and beyond if your customers are used to the improved service, there’s a little bit more capacity. Should we expect to see different categories take a leadership role in terms of where you see pricing is it broad based across the portfolio? Just tactically over a three year basis how do you think about maintaining that pricing momentum?

I would give you multiple answers on that. There will be different markets that will be able to have different pricing levels in it as we price to the market, number one. Number two, our pricing in the rail industry in general is no where near where it was in 1981 at the time of the stager that we just now two or three years ago reached a point of inflection where we started back up so there’s a lot of room to go there. Number three, at CSX we intend to maintain our pricing discipline. We’re not going to give up the discipline that we’ve established over the last four years on an economic whim. Matthew Troy – Citigroup: I understand it’s certainly a consistent message. If I think long term should we think about truck pricing as a theoretical umbrella or a 10% discount to that. How should we think about order magnitude what pricing as an industry can do over a five or 10 year basis? Is truck pricing a good umbrella?

I think it’s going to be positive over a five or 10 year basis. If you look at Class 8 truck sales they’re significantly down as some of the analysts report regularly. There’s capacity coming out of the truck industry. We’re pumping money into the economy like it’s going out of style here. This thing is going to turn and take off and when it does our pricing capability because of the overall capacity in the transportation industry, the demand that we have. As important the value proposition of rail versus truck will enable us to continue strong pricing.

Your next question comes from Chris Seraso – Credit Suisse. Chris Seraso – Credit Suisse: There’s been a lot of talk about pricing; can you give us a view on inflation maybe some color on specific line items as you look out over the next couple of years?

I think probably the biggest driver that we feel very year is in the labor situation. I’m not sure we’ve been public with any specific numbers around that but that’s usually if not our biggest cost line item. I think the contractual increases are in the 3% to 4% generally. That’s probably the bigger items. Anything that is industry specific or commodities like steel or any kind of fuel components have been going up at higher rates than most others. I think we’ve been experiencing things in the 5% to 8% over the last couple years. We’re working hard to moderate those costs by getting a lot of different suppliers from outside the country as well. I think the inflationary pressures will continue to be pretty strong ones we modeled in the next couple years. Chris Seraso – Credit Suisse: The margin ’09 inflation higher or lower than what you had in ’08?

I think it’s a tad higher because of the labor contractual costs that we’ve experienced.

Your next question comes from Jason Seidl – Dahlman Rose. Jason Seidl – Dahlman Rose: When you look at the coal demand on utility side have you seen any evidence of utilities switching over on the base load to more natural gas usage and does that worry you going out given where natural gas prices are currently?

On the margin some of the more marginal plants that had the lower heat rates have converted to natural gas. We think that number for some of the more efficient plants is somewhere in the $5.00 range on natural gas. Every time I’ve tried to predict which way oil prices or gas prices are going I’ve been wrong so I don’t want to go in that direction. We have seen it on the very marginal plants convert. Jason Seidl – Dahlman Rose: You mentioned a little bit about productivity maybe constraining your ability to grow coal. There’s been a lot of productivity cuts out east announced. How should we consider the near term outlook call it the next two quarters or so for eastern coal?

I think that you’ll actually see production in central Appalachia 2009 on the latest forecast that we have both from our producers as well as independent outside consultants actually will rise slightly in 2009 over what production levels were in 2008. You’ve seen production levels in 2008 and these numbers are through about I think it’s either August or September is up 2% over 2007. Although production is up you’re seeing issues with getting enough labor to mine in the coal fields and the mining equipment in the coal fields and there are permitting issues in the coal fields. Jason Seidl – Dahlman Rose: I wanted to make sure I heard you correctly, the asset write downs in the quarter due to the hurricane that was a total of $30 million?

Actually the actual asset write down was roughly $25 million the incremental $5 was the reroute costs Tony experienced and the other railroads helping us out on their lines. Jason Seidl – Dahlman Rose: Your full year guidance includes the asset write downs correct?

Yes, they were built into the third quarter results.

Your next question comes from David Feinberg – Goldman Sachs. David Feinberg – Goldman Sachs: Some more questions about ’09 but not about pricing and volume. A question was you talked about sensitivity into your long term forecast. I was curious how much of that sensitivity is dependent upon completing the $2 billion worth of share repurchase that you have under authorization?

It is not a big portion of that. It’s certainly included but it wouldn’t be a material effect. David Feinberg – Goldman Sachs: As a follow up to that, you talked about having access to the investment grade markets as being key and as I look historically at some points you funded part of your share repurchase through debt issuance. Can you talk about in terms of your conversations with the markets or the participants how your thoughts on share repurchase may have changed over the last few weeks given the credit tightness and the ability to continue to spend at the rate that you did here in the third quarter how that may or may not have changed?

As you’d expect we’re very mindful of having a prudent liquidity position and so we monitor all these conditions very closely. In the third quarter we did I think a good amount of the share repurchase programs. As you say the credit markets have tightened up and most importantly the credit spreads have increased. With a stable cash balance and only a little bit of debt sort of maturing over the last couple of years while we regularly evaluate how to deploy capital we feel the environment today we will continue that repurchase program as announced which is between now and the end of the year. As you know that does include both not only free cash flow generation but also tapping the debt markets and so we’ll continue to monitor closely. David Feinberg – Goldman Sachs: Touching on free cash flow in terms of your CapEx budget for next year you talked about volumes potentially being down 2% to 3%. How if at all does that impact what you plan on spending in CapEx in ’09 relative to ’08?

If you look at the CapEx spend we have out there we put out the three year guidance on it. About 80% of that is really maintenance to keep the railroads safe and fluid, its track, locomotives, its cars, those sorts of things. The other 20% is roughly split between growth and productivity initiatives. We think that there’s still for the long term revival. Of course we’ll continue to evaluate the market and regulatory conditions but we think they’re in the appropriate range to meet our current and future safety and reliability and still create significant value for the shareholders. I’d say if anything the biggest risk to sustain CapEx would not be so much the economy but if there were some sort of regulatory change like a re-regulation that might choke the expansion some because we would obviously reevaluate our investment criteria at that point. Having said that though, we do believe that the public officials will recognize that re-regulation would damage a vital part of our nation’s economy and we hope they would see the wisdom of supporting additional investment in rail through investment tax credits and public/private partnerships. We are seeing that out there in the legislative environment. That would be the thing that would more make us reexamine our investments. David Feinberg – Goldman Sachs: Because you brought it up, any development on the regulatory front this quarter in terms of your conversations with the folks in Washington if at all?

The biggest thing, we’re hopeful on, as you know we’ve petitioned as an industry to have replacement costs basis for the cost of capital calculation. The STB at this point is set to decide that on October 28th of this year. Although it could find some reason to extend the deadline further but as you know we in the industry have been a strong supporter of that. They have acknowledged, the STB has, that the replacement costs methodology may be superior to the present methodology. We think the petition we put in probably addresses some of the concerns they have. The other big development, which I’m sure you’re aware of, is the mandate on positive train control. As you know we’ve been as an industry been mandated to install PTC (Positive Train Control) on our network, all rail networks actually by 2015 on the routes with high concentrations of commuters or passengers and where there’s a high concentration of the toxin inhalant chemicals. We’ve obviously been evaluating these safety measures over a number of years. It’s still very much in flux exactly how where we will have to do it especially on the TIH’s we’ll look and see whether they’re some rerouting changes we may want to make in that particular commodity. We’re thinking that it will be at least $500 million and likely more to install that over that period between now and 2015. David Feinberg – Goldman Sachs: I assume that’s in the capital plan that we talked about earlier?

No, that’s a new development that was just mandated to us with the passage of that bill. That was not included in the capital outlook we had given in our long term guidance. David Feinberg – Goldman Sachs: It’s fallen a little out of favor and maybe I’m reading too far between the lines but your outlook on forest products the last two quarters it’s been in the unfavorable category it’s now moving to neutral. Can I imply that perhaps we’ve hit the bottom here in terms of the declines in forest product shipments or is there something unique about the fourth quarter?

We hope it’s hit the bottom. That’s the plan. David Feinberg – Goldman Sachs: Any indication as we head into ’09 about shipments or is it too early to say as it relates to that business? I know you did say that you had a negative outlook there.

We do. The forest products cover a multitude of products. It’s everything from lumber shipments and OSB boards etc. in the construction business to newsprint to brown paper to while finished paper. Products as you know the paper industry has had its issues; it’s still in a state of flux and consolidation. More to come.

Your next question comes from John Larkin – Stifel, Nicolaus. John Larkin – Stifel, Nicolaus: I think I’ve been paying attention closely but if you already answer this I apologize. Did you break out the differential between mix and fuel in the overall 21% unit revenue increase? I know 6% of it is pure price but the other 15% how is that broken down between fuel and mix?

Almost all of it is fuel and there’s about 1% or less that’s mix. John Larkin – Stifel, Nicolaus: I really applaud your confidence on pricing heading into what is somewhat of an uncharted territory here in 2009 economically with the credit crisis we’re currently experiencing. Does your confidence stem somewhat from the fact that in the east railroads have perhaps a higher percentage of captive shippers relative to non-captive shippers and realistically many of your shippers have limited options other than CSX?

Absolutely not. Most of our shippers have a lot of options; a lot of our utilities for example have water options as well as rail options. Some of our utilities particularly in central Appalachia have truck options, water options and rail options. In our phosphate business we have rail options and port of Tampa options to move up through the Mississippi River chain. A large preponderance of our business is very competitive. John Larkin – Stifel, Nicolaus: Would you care to put a rough percentage on what percentage of the business is competitive versus say captive?

No, thank you. John Larkin – Stifel, Nicolaus: I know there was a lot of talk about cost inflation and Tony mentioned briefly that he intends to try and offset some of that? Any rough quantitative guidance in terms of what the internal objectives are to offset those inflation costs through productivity, technology, application etc.

I think we’ve been very public on that we’ve said over the ’08, ’09 and ’10 period we would get $400 million of the productivity. John Larkin – Stifel, Nicolaus: That’s spread evenly over that period?

I don’t think we’ve been specific but generally yes you’d expect some fluctuations but generally that way. John Larkin – Stifel, Nicolaus: Your competitors talked a lot about some of their corridor improvement initiatives. You all have a fairly major initiative I think it’s called the National Gateway Project. Any updates in terms of soliciting or capturing state and local funding to help you with the development of that project?

We’re seeing a lot of support for this as you know it involves six states and the District of Columbia. We’ve had endorsements by the Governors in Ohio and in Pennsylvania and most of the State DOT’s we’ve talked to about this are very supportive of it as well. We think it’s got some good growing momentum now. Obviously there’s a challenge in that about half of the funding is going to come from state and federal funds and obviously people are a little bit pinched in their budgets at this point. I think there’s a growing recognition that these kind of public/private partnerships really will help with the highway congestion, environmental issues, etc. We think it’s got good momentum and we’re really targeting to try to get authorization within the reauthorization of the transportation bill in the next Congress. John Larkin – Stifel, Nicolaus: On the declining price of fuel, oil today is down to like $76.50 a barrel. There’s been a lot of discussion about how domestic intermodal which has been very strong for you is more energy efficient vis-à-vis truck. Are you worried that fuel prices may decline to the point where domestic intermodal growth may flatten out once again?

I don’t think so. As I mentioned here earlier this rail proposition shouldn’t be underestimated and you see more and more as you know truck lines that are developing entire intermodal product sections within their portfolio and I don’t see them changing. The fundamental that’s driven this change to intermodal for the trucking companies is still there with a high insurance costs, the high capital costs of acquiring the new tractors, the driver retention issues, the insurance costs, the congestion on the highways. I think intermodal still has very promising future.

This will conclude today’s teleconference.