2010 results reflect strong year-over-year volume and revenue growth as a result of the improving economy. Revenue increased 18 percent from the prior year, to nearly $10.6 billion, with gains across all of the company’s markets and particular growth in automotive and metals. Overall gains were driven by a 10 percent increase involume, continued pricing above rail inflation and higher fuel recovery associated with the increase in fuel prices. The company achieved pricing gains primarily due to improved service and the overall cost advantages that rail-based solutions provide to customers versus other modes of transportation.

As volume increased, expenses increased by $794 million, or only 12 percent, from the prior year. This increase was driven primarily by higher labor-related costs, including inflation and incentive compensation, an increase in volume-related costs and higher fuel expense due to a rise in fuel prices. Although expenses increased year over year, CSX was able to achieve a record operating ratio of 71.1 percent due to the company’s continued focus on cost control and productivity initiatives. Fiscal year 2010 results include an extra week of activity as compared to fiscal year 2009. This activity did not have a material effect on the company’s full-year results of operations.

Effective in 2010, CSX changed the accounting policy for rail-grinding costs from a capitalization method to a direct expense method. This represents a change from an acceptable method under GAAP to a preferable method and is consistent with recent changes in industry practice. The publication of the change in accounting principle is presented retrospectively to all periods presented. The effect of this change is not material to the financial condition, results of operations or liquidity for any of the periods presented.