-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pwt5omYXFOJn5BMJ0acWJl/eskOekNot8A9S4QpoqAoGZFgVMIV+2DY8a8SJaX85 Mjw0QWuNkAnsz/A6j5Z/2A== 0000902664-07-003586.txt : 20071219 0000902664-07-003586.hdr.sgml : 20071219 20071219103021 ACCESSION NUMBER: 0000902664-07-003586 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20071219 DATE AS OF CHANGE: 20071219 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CSX CORP CENTRAL INDEX KEY: 0000277948 STANDARD INDUSTRIAL CLASSIFICATION: RAILROADS, LINE-HAUL OPERATING [4011] IRS NUMBER: 621051971 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-39759 FILM NUMBER: 071315196 BUSINESS ADDRESS: STREET 1: 500 WATER STREET STREET 2: 15TH FLOOR CITY: JACKSONVILLE STATE: FL ZIP: 32202 BUSINESS PHONE: 9043593200 MAIL ADDRESS: STREET 1: 500 WATER STREET STREET 2: 15TH FLOOR CITY: JACKSONVILLE STATE: FL ZIP: 32202 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Childrens Investment Fund Management (UK) LLP CENTRAL INDEX KEY: 0001362598 IRS NUMBER: 000000000 STATE OF INCORPORATION: X0 FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 7 CLIFFORD STREET CITY: LONDON STATE: X0 ZIP: W1S 2WE BUSINESS PHONE: 44 207 440 2388 MAIL ADDRESS: STREET 1: 7 CLIFFORD STREET CITY: LONDON STATE: X0 ZIP: W1S 2WE SC 13D 1 sc13d.txt CSX CORP. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------- SCHEDULE 13D (Rule 13d-102) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) Under the Securities Exchange Act of 1934 (Amendment No. ________)* CSX Corporation - ------------------------------------------------------------------------------- (Name of Issuer) Common Stock - ------------------------------------------------------------------------------- (Title of Class of Securities) 126408103 - ------------------------------------------------------------------------------- (CUSIP Number) Mr. Christopher Hohn Mr. Alexandre Behring The Children's Investment 3G Capital Partners Ltd. Fund Management (UK) LLP c/o 3G Capital Inc. 7 Clifford Street 800 Third Avenue London W1S 2WE 31st Floor United Kingdom New York, New York 10022 +44 20 7440 2330 (212) 893-6727 With a copy to: Marc Weingarten, Esq. Stephen Fraidin, Esq. David Rosewater, Esq. Andrew E. Nagel, Esq. Schulte Roth & Zabel LLP Kirkland & Ellis LLP 919 Third Avenue 153 East 53rd Street New York, New York 10022 New York, New York 10022 (212) 756-2000 (212) 446-4800 ----------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) (Continued on following pages) December 12, 2007 ------------------------------------------------------------------------------ (Date of Event which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. [ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. - -------------------------- * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). (Page 1 OF 20 PAGES) - ------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 2 OF 20 PAGES - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) The Children's Investment Fund Management (UK) LLP - ----------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - ----------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - ----------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION England - ----------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- - ----------------------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 17,796,998 OWNED BY ------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 17,796,998 - ----------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4.2% - ----------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [X] - ----------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.2% - ----------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - ----------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 3 OF 20 PAGES - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) The Children's Investment Fund Management (Cayman) Ltd. - ----------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - ----------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - ----------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Cayman Islands - ----------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- - ----------------------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 17,796,998 OWNED BY ------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 17,796,998 - ----------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4.2% - ----------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [X] - ----------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.2% - ----------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - ----------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 4 OF 20 PAGES - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) The Children's Investment Master Fund - ----------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - ----------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - ----------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Cayman Islands - ----------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- - ----------------------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 17,796,998 OWNED BY ------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 17,796,998 - ----------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4.2% - ----------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [X] - ----------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.2% - ----------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - ----------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 5 OF 20 PAGES - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Christopher Hohn - ----------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - ----------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - ----------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United Kingdom - ----------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- - ----------------------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 17,796,998 OWNED BY ------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 17,796,998 - ----------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4.2% - ----------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [X] - ----------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.2% - ----------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - ----------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 6 OF 20 PAGES - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) 3G Capital Partners Ltd. - ----------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - ----------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - ----------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Cayman Islands - ----------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- - ----------------------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 17,232,854 OWNED BY ------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 17,232,854 - ----------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4.1% - ----------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [X] - ----------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.1% - ----------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - ----------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 7 OF 20 PAGES - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) 3G Capital Partners, L.P. - ----------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - ----------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - ----------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Cayman Islands - ----------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- - ----------------------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 17,232,854 OWNED BY ------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 17,232,854 - ----------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4.1% - ----------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [X] - ----------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.1% - ----------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - ----------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 8 OF 20 PAGES - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) 3G Fund L.P. - ----------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - ----------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - ----------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Cayman Islands - ----------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- - ----------------------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 17,232,854 OWNED BY ------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 17,232,854 - ----------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4.1% - ----------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [X] - ----------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.1% - ----------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - ----------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 9 OF 20 PAGES - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Alexandre Behring - ----------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - ----------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - ----------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Brazil - ----------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- - ----------------------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 17,232,854 OWNED BY ------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 17,232,854 - ----------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4.1% - ----------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [X] - ----------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.1% - ----------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - ----------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 10 OF 20 PAGES - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Gilbert H. Lamphere - ----------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - ----------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------------------------------------------------------------------- 4 SOURCE OF FUNDS* PF - ----------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - ----------------------------------------------------------------------------- 7 SOLE VOTING POWER 22,600 - ----------------------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY -0- OWNED BY ------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH 22,600 ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER -0- - ----------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 22,600 - ----------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ----------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.0% - ----------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - ----------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 11 OF 20 PAGES - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Timothy T. O'Toole - ----------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - ----------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------------------------------------------------------------------- 4 SOURCE OF FUNDS* PF - ----------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - ----------------------------------------------------------------------------- 7 SOLE VOTING POWER 2,500 - ----------------------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY -0- OWNED BY ------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH 2,500 ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER -0- - ----------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,500 - ----------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ----------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.0% - ----------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - ----------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 12 OF 20 PAGES - ------------------------------------------------------------------------------- ITEM 1. SECURITY AND ISSUER This Schedule 13D relates to the shares of Common Stock, par value $1.00 per share (the "Shares"), of CSX Corporation (the "Issuer"). The principal executive office of the Issuer is located at 500 Water Street, 15th Floor, Jacksonville, FL 32202. ITEM 2. IDENTITY AND BACKGROUND (a) This statement is being filed by: (i) The Children's Investment Fund Management (UK) LLP, an English limited liability partnership ("TCIF UK"), with respect to the Shares owned by the TCI Fund (as defined below) (the "TCI Shares"); (ii) The Children's Investment Fund Management (Cayman) Ltd., a Cayman Islands exempted company ("TCIF"), with respect to the TCI Shares; (iii) The Children's Investment Master Fund, a Cayman Islands exempted company (the "TCI Fund"), with respect to the Shares directly owned by it; (iv) Christopher Hohn, with respect to the TCI Shares (collectively with TCIF UK, TCIF and the TCI Fund, the "TCI Reporting Persons"); (v) 3G Capital Partners Ltd., a Cayman Islands exempted company ("3G Capital Ltd."), with respect to the Shares owned by the 3G Fund (as defined below) (the "3G Shares"); (vi) 3G Capital Partners, L.P., a Cayman Islands limited partnership ("3G Capital L.P."), with respect to the 3G Shares; (vii) 3G Fund L.P., a Cayman Islands limited partnership (the "3G Fund"), with respect to the Shares directly owned by it; (viii) Alexandre Behring, with respect to the 3G Shares (collectively, with 3G Capital Ltd., 3G Capital L.P. and the 3G Fund, the "3G Reporting Persons"); (ix) Gilbert H. Lamphere, with respect to the 22,600 Shares directly owned by him; (x) Timothy T. O'Toole, with respect to the 2,500 Shares directly owned by him; and (xi) Gary L. Wilson (together with Messrs. Lamphere and O'Toole, the "Additional Nominees," and collectively with Alexandre Behring and Christopher Hohn, the "Nominees"). (b) The address of the principal business and principal office for each of the TCI Reporting Persons, the 3G Reporting Persons and the Additional Nominees (collectively, the "Reporting Persons") is: (i) TCIF UK: 7 Clifford Street, London, W1S 2WE, United Kingdom; (ii) TCIF: PO Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, British West Indies; (iii) The TCI Fund: PO Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, British West Indies; (iv) Mr. Hohn: 7 Clifford Street, London, W1S 2WE, United Kingdom; - -------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 13 OF 20 PAGES - -------------------------------------------------------------------------------- (v) 3G Capital Ltd.: 36A Dr Roy's Drive, P.O. Box 2510 George Town, Grand Cayman, Cayman Islands, British West Indies; (vi) 3G Capital L.P.: 36A Dr Roy's Drive, P.O. Box 2510 George Town, Grand Cayman, Cayman Islands, British West Indies; (vii) The 3G Fund: 36A Dr Roy's Drive, P.O. Box 2510 George Town, Grand Cayman, Cayman Islands, British West Indies; (viii) Mr. Behring: 800 Third Avenue, 31st Floor, New York, New York 10022; (ix) Mr. Lamphere: 645 Fifth Avenue, 18th Floor, New York, New York 10022; (x) Mr. O'Toole: 55 Broadway, London, SW1H OBD, United Kingdom; and (xi) Mr. Wilson: 300 Delfern Drive, Los Angeles, California 90077. (c) The principal business of both TCIF and TCIF UK is investing for funds and accounts under its management. The TCI Fund falls under the management of both TCIF and TCIF UK. The principal business of the TCI Fund is to invest in securities. Christopher Hohn is the Managing Partner of TCIF UK and the 100% owner of TCIF. The principal business of 3G Capital Ltd. is serving as the general partner of 3G Capital L.P. The principal business of 3G Capital L.P. is serving as the general partner of the 3G Fund. The principal business of the 3G Fund is to invest in securities. The name, citizenship, present principal occupation or employment and business address of each director and executive officer of 3G Capital Ltd. are set forth in Appendix B attached hereto. Alexandre Behring is the Managing Director of 3G Capital Ltd. Gilbert H. Lamphere is the Managing Director of Lamphere Capital Management. Timothy T. O'Toole is the Managing Director of London Underground Ltd. Gary L. Wilson is a private investor. (d) None of the Reporting Persons, during the last five years, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) None of the Reporting Persons, during the last five years, has been party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) (i) Christopher Hohn is a citizen of the United Kingdom, (ii) Alexandre Behring is a citizen of Brazil, (iii) Gilbert H. Lamphere is a citizen of the United States, (iv) Timothy T. O'Toole is a citizen of the United States and (v) Gary L. Wilson is a citizen of the United States. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION The source of funds used to acquire the TCI Shares reported herein was the general working capital of the TCI Fund. The source of funds used to acquire the 3G Shares reported herein was the general working capital of the 3G Fund. The source of funds used to acquire the Shares reported herein held by Gilbert H. Lamphere and Timothy T. O'Toole were their respective personal funds. - -------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 14 OF 20 PAGES - -------------------------------------------------------------------------------- A total of (1) $762,251,613, including commissions, was paid to acquire the TCI Shares; (2) $707,588,338, including commissions, was paid to acquire the 3G Shares; (3) $1,004,063, including commissions, was paid to acquire Gilbert Lamphere's Shares and (4) $105,705, including commissions, was paid to acquire Timothy O'Toole's Shares, all as reported herein. ITEM 4. PURPOSE OF TRANSACTION The TCI Reporting Persons and the 3G Reporting Persons originally acquired Shares for investment in the ordinary course of business because they believed that the Shares, when purchased, were undervalued and represented an attractive investment opportunity. Messrs. Lamphere and O'Toole acquired their Shares in connection with becoming nominees to the board of directors of the Issuer (the "Board"). After multiple unsuccessful attempts to engage the management or the Board in a constructive dialogue regarding the operations of the Issuer, on October 16, 2007, the TCI Reporting Persons delivered a letter to the Board setting forth numerous failings in the Issuer's operations, corporate governance and management, and asking the Board to take the following actions: separate the Chairman and CEO roles; refresh the Board with new independent directors; allow shareholders to call special shareholder meetings; align management compensation with shareholder interests; justify the capital spending plan to shareholders; and provide to shareholders a plan to improve operations. On October 22, 2007, the TCI Reporting Persons sent a second letter to the Board criticizing the Board for allowing representatives of the Issuer to describe the Issuer as a "public service company" in communications to policymakers in Washington, DC and also criticizing a statement made by the Issuer's CEO that no industry of which he was aware analyzes returns on investment capital on a replacement cost basis. A copy of the October 16 and the October 22 letters are attached hereto as Exhibits 2 and 3, respectively, and incorporated by reference herein. The Reporting Persons currently intend to conduct a proxy solicitation seeking to elect the Nominees to the Board at the Issuer's 2008 Annual Meeting. On December 12, 2007, the TCI Reporting Persons delivered a letter to the Issuer informing the Issuer of their intention to propose nominees for election to the Board at the Issuer's 2008 Annual Meeting and requesting certain documents from the Issuer required under the Issuer's bylaws to be completed by nominees to the Board in order to comply with a formal notification process for Board nominations set forth in the Issuer's bylaws. Except as set forth herein or as would occur upon completion of any of the actions discussed herein, the Reporting Persons have no present plan or proposal that would relate to or result in any of the matters set forth in subparagraphs (a)-(j) of Item 4 of Schedule 13D. The Reporting Persons intend to review their investments in the Issuer on a continuing basis and may engage in discussions with management, the Board, other stockholders of the Issuer and other relevant parties concerning the business, operations, governance, management, strategy and future plans of the Issuer. Depending on various factors including, without limitation, the Issuer's financial position and strategic direction, the outcome of the discussions referenced above, actions taken by the Board, price levels of the Shares, other investment opportunities available to the Reporting Persons, conditions in the securities market and general economic and industry conditions, the Reporting Persons may in the future take such actions with respect to their investments in the Issuer as they deem appropriate including, without limitation, purchasing additional Shares or selling some or all of the Shares held by the Reporting Persons, engaging in short selling of or any hedging or similar transactions with respect to the Shares and/or otherwise changing their intention with respect to any and all matters referred to in Item 4 of Schedule 13D. - ------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 15 OF 20 PAGES - ------------------------------------------------------------------------------- ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) As of the close of business on December 18, 2007, the TCI Reporting Persons beneficially owned an aggregate of 17,796,998 Shares, constituting approximately 4.2% of the Shares outstanding, the 3G Reporting Persons beneficially owned an aggregate of 17,232,854 Shares, constituting approximately 4.1% of the Shares outstanding, Gilbert H. Lamphere beneficially owned an aggregate of 22,600 Shares, constituting less than 0.1% of the Shares outstanding, Timothy T. O'Toole beneficially owned an aggregate of 2,500 Shares, constituting less than 0.1% of the Shares outstanding (which such Shares are held in an Individual Retirement Account in his name, the custodian for which is Citigroup Global Markets Inc.) and Gary L. Wilson beneficially owned no Shares. On December 12, 2007, TCIF UK and 3G Capital Ltd. entered into an agreement to coordinate certain of their efforts with regard (i) the purchase and sale of Shares and/or options, swaps or other derivative securities or instruments that constitute or may by their terms create beneficial ownership of common stock of the Issuer (collectively, the "Securities") held by TCIF UK, 3G Capital Ltd. and any investment funds, managed accounts and other investment vehicles managed or advised by either of them, including the other TCI Reporting Persons and the other 3G Reporting Persons, and (ii) the proposal of certain actions and/or transactions to the Issuer (the "Letter Agreement"). The terms of the Letter Agreement are described in Item 6 of this Schedule 13D. By virtue of the Letter Agreement, the TCI Reporting Persons and the 3G Reporting Persons may be deemed to have formed a "group," within the meaning of Section 13(d)(3) of the Securities Act of 1934. Furthermore, the Additional Nominees may be deemed a part of the aforementioned "group" by virtue of the contemplated proxy solicitation, their agreement to be nominees and their ownership of Shares (as applicable). Collectively, the group may be deemed to have voting control over a combined 8.3% of the Shares. However, each of the TCI Reporting Persons expressly disclaims beneficial ownership of the Shares beneficially owned by the 3G Reporting Persons and the Additional Nominees (as applicable), each of the 3G Reporting Persons expressly disclaims beneficial ownership of the Shares beneficially owned by the TCI Reporting Persons and the applicable Additional Nominees (as applicable), and each of the applicable Additional Nominees expressly disclaims beneficial ownership of the Shares beneficially owned by the TCI Reporting Persons, the 3G Reporting Persons and the other Additional Nominees. The TCI Reporting Persons are responsible for the completeness and accuracy of the information concerning the TCI Reporting Persons contained herein, but are not responsible for the completeness or accuracy of the information concerning the 3G Reporting Persons or any of the Additional Nominees contained herein, except to the extent that the TCI Reporting Persons know or have reason to believe that such information is inaccurate. The 3G Reporting Persons are responsible for the completeness and accuracy of the information concerning the 3G Reporting Persons contained herein, but are not responsible for the completeness or accuracy of the information concerning the TCI Reporting Persons or any of the Additional Nominees contained herein, except to the extent that the 3G Reporting Persons know or have reason to believe that such information is inaccurate. Each Additional Nominee is responsible for the completeness and accuracy of the information concerning such Additional Nominee contained herein, but is not responsible for the completeness or accuracy of the information concerning the TCI Reporting Persons, the 3G Reporting Persons, or any of the other Additional Nominees contained herein, except to the extent that such Additional Nominee knows or has reason to believe that such information is inaccurate. - -------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 16 OF 20 PAGES - -------------------------------------------------------------------------------- The aggregate percentage of Shares beneficially owned by the TCI Reporting Persons, the 3G Reporting Persons and the applicable Additional Nominees is based upon 420,425,477 Shares outstanding, which is the total number of Shares outstanding as of September 28, 2007 as reported in the Issuer's Quarterly Report on Form 10-Q for the period ended September 28, 2007. (b) The TCI Reporting Persons share power to vote and direct the disposition of all of the TCI Shares. Thus, as of December 18, 2007, the TCI Reporting Persons may be deemed to beneficially own 17,796,998 Shares, or 4.2% of the outstanding Shares. The 3G Reporting Persons share power to vote and direct the disposition of all of the 3G Shares. Thus, as of December 18, 2007, the 3G Reporting Persons may be deemed to beneficially own 17,232,854 Shares, or 4.1% of the outstanding Shares. Alexandre Behring, by virtue of his relationships to 3G Capital Ltd., 3G Capital L.P. and 3G Fund (discussed in Item 2), may be deemed to have shared voting power and shared dispositive power with regard to, and therefore may be deemed to beneficially own (as that term is defined in Rule 13d-3 under the Act), the 3G Shares. Alexandre Behring disclaims beneficial ownership of the 3G Shares for all other purposes. Gilbert Lamphere has sole power to vote and direct the disposition of 22,600 Shares and Timothy O'Toole has sole power to vote and direct the disposition of 2,500 Shares. (c) During the past sixty days, the TCI Reporting Persons have not effected any transactions in Shares of the Issuer. Information concerning transactions in the Shares effected by the 3G Reporting Persons and the applicable Additional Nominees during the past sixty days is set forth in Appendix A hereto. (d) No person other than the TCI Reporting Persons is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the TCI Shares, no person other than the 3G Reporting Persons is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the 3G Shares and no person other than each Additional Nominee is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, each Additional Nominee's respective Shares (as applicable). (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER On December 12, 2007 TCIF UK and 3G Capital Ltd. entered into the Letter Agreement to coordinate certain of their efforts with regard (i) the purchase and sale of Securities held by TCIF UK, 3G Capital Ltd. and any investment funds, managed accounts and other investment vehicles managed or advised by either of them, including the other TCI Reporting Persons and the other 3G Reporting Persons, and (ii) the proposal of certain actions and/or transactions to the Issuer. Under the Letter Agreement, certain matters will require mutual agreement of TCIF UK and 3G Capital Ltd.: (i) whether to run a proxy contest involving the Issuer and the selection and nomination of individuals to serve as directors of the Issuer for such proxy contest (as to which matters TCIF UK and 3G Capital Ltd. have agreed), (ii) the making, revising or withdrawing of any proposals to the Issuer regarding the conduct of its business, corporate governance matters, corporate transactions or otherwise, (iii) the admission or withdrawal of any additional members to the group being formed by the Letter Agreement, and (iv) the conduct of any litigation or investigation if the same relates to the group conduct of the parties. If the parties have agreed on a matter set forth in clauses (i), (ii) or (iii) above, TCIF UK will assume decision-making authority with respect to the execution of such matter, including with respect to (i) the conduct of any proxy contest involving the Issuer and (ii) the manner, form, content and timing of any communications with the Issuer as well as any public disclosures, public statements or other third party communications relating to the Issuer, the Securities, the Letter Agreement and the activities of the TCI Reporting Persons and the 3G Reporting Persons pursuant thereto. - -------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 17 OF 20 PAGES - -------------------------------------------------------------------------------- The Letter Agreement provides for certain shared and separate expenses, as well as termination provisions applicable under certain circumstances, which are specified therein. The foregoing is a summary only and this summary and any other references herein to the Letter Agreement are qualified in their entirety by the Letter Agreement, which is attached hereto as Exhibit 4 and incorporated herein by reference. The TCI Reporting Persons currently have contractual agreements with eight credit counterparties: Citigroup Global Markets Limited, Deutsche Bank AG, Goldman Sachs International, Merrill Lynch International, UBS AG, Credit Suisse Securities (Europe) Limited, JP Morgan Chase Bank and Morgan Stanley & Co. International plc (f/k/a Morgan Stanley & Co. International Limited), with regard to cash-settled equity swaps (the "TCI Total Return Swaps") that reference Shares of the Issuer. The TCI Total Return Swaps constitute economic exposure to approximately 11% of the Shares. These contracts do not give the TCI Reporting Persons direct or indirect voting, investment or dispositive control over any securities of the Issuer and do not require the counterparties thereto to acquire, hold, vote or dispose of any securities of the Issuer. Accordingly, the TCI Reporting Persons disclaim any beneficial ownership in securities that may be referenced in such contracts or that may be held from time to time by any counterparties to the contracts. The 3G Reporting Persons currently have contractual agreements with Morgan Stanley & Co. International plc with regard to cash-settled equity swaps (the "3G Total Return Swaps") that reference Shares of the Issuer. The 3G Total Return Swaps constitute economic exposure to approximately 0.8% of the Shares. In addition, the 3G Reporting Persons currently have contractual agreements with Morgan Stanley Capital Services Inc. with regard to credit default swaps that reference debt securities of the Issuer. The contracts regarding the 3G Total Return Swaps and credit default swaps do not give the 3G Reporting Persons direct or indirect voting, investment or dispositive control over any securities of the Issuer and do not require the counterparties thereto to acquire, hold, vote or dispose of any securities of the Issuer. Accordingly, the 3G Reporting Persons disclaim any beneficial ownership in securities that may be referenced in such contracts or that may be held from time to time by any counterparties to the contracts. In addition to the agreements referenced above, the Reporting Persons may, from time to time, enter into and dispose of additional cash-settled equity swap or other similar derivative transactions with one or more counterparties that are based upon the value of Common Stock of the Issuer, which transactions may be significant in amount. The profit, loss and/or return on such additional contracts may be wholly or partially dependent on the market value of the Shares, the relative value of Shares in comparison to one or more other financial instruments, indexes or securities, a basket or group of securities in which the Shares may be included, or a combination of any of the foregoing. The Reporting Persons have entered into a Joint Filing Agreement, dated as of December 18, 2007 (the "Joint Filing Agreement"), a copy of which is attached hereto as Exhibit 1. The Reporting Persons have filed this statement jointly pursuant to the Joint Filing Agreement in view of the Letter Agreement. Except as described herein, there are no contracts, arrangements, understandings or relationships (legal or otherwise) among the persons named in Item 2 hereof and between such persons and any person with respect to any securities of the Issuer, including but not limited to transfer or voting of any other securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, divisions of profits or loss, or the giving or withholding of proxies. - -------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 18 OF 20 PAGES - -------------------------------------------------------------------------------- ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit 1. Joint Filing Agreement. Exhibit 2. Letter from TCIF UK to the CSX Board of Directors dated October 16, 2007 Exhibit 3. Letter from TCIF UK to the CSX Board of Directors dated October 22, 2007 Exhibit 4. Letter Agreement between TCIF UK and 3G Capital Ltd. dated December 12, 2007 - -------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 19 OF 20 PAGES - -------------------------------------------------------------------------------- SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: December 18, 2007 THE CHILDREN'S INVESTMENT FUND MANAGEMENT (UK) LLP /s/ Christopher Hohn ------------------------------ Christopher Hohn Managing Partner THE CHILDREN'S INVESTMENT FUND MANAGEMENT (CAYMAN) LTD. /s/ David DeRosa ------------------------------ David DeRosa Director THE CHILDREN'S INVESTMENT MASTER FUND /s/ David DeRosa ------------------------------ David DeRosa Director /s/ Christopher Hohn ------------------------------ Christopher Hohn 3G CAPITAL PARTNERS, L.P. By: 3G Capital Partners Ltd. Its: General Partner /s/ Alexandre Behring ------------------------------ Alexandre Behring Managing Director 3G CAPITAL PARTNERS LTD. /s/ Alexandre Behring ------------------------------ Alexandre Behring Managing Director 3G FUND L.P. By: 3G Capital Partners, L.P. Its: General Partner By: 3G Capital Partners Ltd. Its: General Partner /s/ Alexandre Behring ------------------------------ Alexandre Behring Managing Director /s/ Alexandre Behring ------------------ Alexandre Behring /s/ Gilbert H. Lamphere ------------------------------ Gilbert H. Lamphere /s/ Timothy T. O'Toole ------------------------------ Timothy T. O'Toole /s/ Gary L. Wilson ------------------------------ Gary L. Wilson - ------------------------------------------------------------------------------- CUSIP NO. 126408103 SCHEDULE 13D PAGE 20 OF 20 PAGES - ------------------------------------------------------------------------------- EXHIBIT INDEX Exhibit 1. Joint Filing Agreement. Exhibit 2. Letter from TCIF UK to the CSX Board of Directors dated October 16, 2007 Exhibit 3. Letter from TCIF UK to the CSX Board of Directors dated October 22, 2007 Exhibit 4. Letter Agreement between TCIF UK and 3G Capital Ltd. dated December 12, 2007 APPENDIX A TRANSACTIONS EFFECTED DURING THE PAST SIXTY DAYS All transactions were effected in the open market. 3G PARTIES - ------------------------------------------------------------------------------- Name Date of Trade Number of Shares Price per Share 3G Fund, L.P. 10/11/07 359,000 42.08 3G Fund, L.P. 10/11/07 63,200 42.08 3G Fund, L.P. 10/12/07 235,500 42.51 3G Fund, L.P. 10/12/07 41,600 42.51 3G Fund, L.P. 10/15/07 214,000 42.56 3G Fund, L.P. 10/15/07 37,700 42.56 3G Fund, L.P. 11/1/07 68,000 43.57 3G Fund, L.P. 11/1/07 358,100 43.84 3G Fund, L.P. 11/1/07 63,200 43.84 3G Fund, L.P. 11/1/07 12,000 43.57 3G Fund, L.P. 11/2/07 425,000 43.33 3G Fund, L.P. 11/2/07 75,000 43.33 3G Fund, L.P. 11/5/07 255,000 43.84 3G Fund, L.P. 11/5/07 45,000 43.84 3G Fund, L.P. 11/7/07 510,000 43.94 3G Fund, L.P. 11/7/07 90,000 43.94 3G Fund, L.P. 11/8/07 85,000 43.94 3G Fund, L.P. 11/8/07 15,000 43.94 - ------------------------------------------------------------------------------- ADDITIONAL NOMINEES - ------------------------------------------------------------------------------- Name Date of Trade Number of Shares Price per Share Gilbert H. Lamphere 11/6/07 18,000 44.81 Gilbert H. Lamphere 11/13/07 4,600 42.92 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Name Date of Trade Number of Shares Price per Share Timothy T. O'Toole 12/6/07 2,500 42.30 APPENDIX B DIRECTORS AND EXECUTIVE OFFICERS OF THE REPORTING PERSONS The following sets forth the name, position, and principal occupation of each director and executive officer of 3G Capital Ltd. Each such individual is a citizen of Brazil. Except as otherwise indicated, the business address of each director and officer is 800 Third Avenue, 31st Floor, New York, New York 10022. To the best of the 3G Reporting Persons' knowledge, except as set forth in this Schedule 13D, none of the directors or executive officers of 3G Capital Ltd. owns any Shares. Name Position Principal Occupation Alexandre Behring Managing Director Managing Director of 3G Capital Ltd. Alexandre Perez Director Director of 3G Capital Ltd. Luis Henrique Moura Director Director of 3G Capital Ltd. EXHIBIT 1 JOINT FILING AGREEMENT The undersigned acknowledge and agree that the foregoing statement on Schedule 13D is filed on behalf of each of the undersigned and that all subsequent amendments to this statement on Schedule 13D may be filed on behalf of each of the undersigned without the necessity of filing additional joint filing agreements. The undersigned acknowledge that each shall be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information concerning him or it contained herein and therein, but shall not be responsible for the completeness and accuracy of the information concerning the others, except to the extent that he or it knows or has reason to believe that such information is inaccurate. Dated: December 18, 2007 THE CHILDREN'S INVESTMENT FUND MANAGEMENT (UK) LLP /s/ Christopher Hohn ------------------------------ Christopher Hohn Managing Partner THE CHILDREN'S INVESTMENT FUND MANAGEMENT (CAYMAN) LTD. /s/ David DeRosa ------------------------------ David DeRosa Director THE CHILDREN'S INVESTMENT MASTER FUND /s/ David DeRosa ------------------------------ David DeRosa Director /s/ Christopher Hohn ------------------------------ Christopher Hohn 3G CAPITAL PARTNERS LTD. /s/ Alexandre Behring ------------------------------ Alexandre Behring Managing Director 3G CAPITAL PARTNERS, L.P. By: 3G Capital Partners Ltd. Its: General Partner /s/ Alexandre Behring ------------------------------ Alexandre Behring Managing Director 3G FUND L.P. By: 3G Capital Partners, L.P. Its: General Partner By: 3G Capital Partners Ltd. Its: General Partner /s/ Alexandre Behring ------------------------------ Alexandre Behring Managing Director /s/ Alexandre Behring ------------------------------ Alexandre Behring /s/ Gilbert H. Lamphere ------------------------------ Gilbert H. Lamphere /s/ Timothy T. O'Toole ------------------------------ Timothy T. O'Toole /s/ Gary L. Wilson ------------------------------ Gary L. Wilson EX-99 2 corresp2.txt CORRESPONDENCE 2 EXHIBIT 2 October 16, 2007 Board of Directors CSX Corporation 500 Water Street Jacksonville, FL 32202 Dear Board of Directors: As you are aware, The Children's Investment Master Fund (TCI) is a long-term, value-oriented investment fund that currently owns 17.8 million shares, or 4.1% of CSX. This makes TCI one of CSX's largest shareholders. TCI is an engaged, long-term investor with a track record of helping companies reach their potential with management's cooperation, or without it. While some investors seek short-term gains, TCI has a long-term view -- our outlook is decades, not years, or months, or weeks. Over the past year we have repeatedly, but unsuccessfully, attempted to engage in a constructive dialogue with the Board and top management of CSX on concerns we have about the business. Except for a single `one-on-one' meeting with Oscar Munoz, top management and the Board have refused all our offers to meet privately. Over the past few months, CSX has refused even to return our calls or to allow us to attend meetings at CSX with an analyst and other investors. Instead CSX management has opted to communicate through a paid advertising campaign and an abbreviated investor day. The investor day reaffirmed to us the weakness of the CSX management team and strategy. We conclude this weakness must be made public as our attempts to discuss it privately have consistently been rebuffed. We do so in the interest of TCI investors, as well as CSX employees, customers and shareholders. It is our view that CSX management does not fully understand the economics of the business, is cavalier about potential risks, is undisciplined about spending, is unrealistic about future prospects, is complacent about operational under-performance and is unnecessarily adversarial towards labor, shippers and shareholders. We hold the Board accountable for these failings. We have a simple long-term desire - a stronger CSX. CSX has the potential to be the leading railroad in the United States - providing the best service, running the safest network, generating the highest returns and thus able to invest to fully meet America's freight transportation needs now and in the future. CSX's legacy dates back to America's first railroad; it should return to its rightful place as America's best. Unfortunately, the glaring and unavoidable fact is that on virtually every major metric of operational and financial performance, CSX today is last or near last among the five major North American railroads. Perhaps the only exception is executive compensation -- Michael Ward made $36 million over the past two years, the highest compensation of any CEO in the industry. - ------------------------ The Children's Investment Fund Management (UK) LLP is a limited liability partnership registered in England and Wales with registered number OC304797. A list of members' names is open to inspection at its registered office and principal place of business 7 Clifford Street, London, W1S 2WE, England. The Children's Investment Fund Management (UK) LLP is authorized and regulated by the Financial Services Authority. The issues at CSX are real, meaningful, and addressable. We therefore urge the Board to act immediately and act voluntarily to strengthen CSX's corporate governance, management, business performance, and the Board itself. The Board should: o Separate the Chairman and CEO roles o Refresh the Board with new independent directors o Allow shareholders to call special shareholder meetings o Align management compensation with shareholder interests o Provide a plan to improve operations o Justify the capital spending plan o Promote open and constructive relations with labor, shippers and shareholders Failure to take these actions would, in our opinion, be negligent of your duty to shareholders. We urge the Board to be open-minded as it reads this letter as we share a common goal - to ensure that CSX is a strong and viable company able to provide the service that its shippers demand, a working environment that its employees can be proud of, and the returns that its shareholders deserve. Achieving operational excellence and maximizing shareholder value are inextricably linked, not mutually exclusive. We also urge open-mindedness as the views and frustrations expressed in this letter are widely held. Relations with labor, shippers and shareholders are strained. The Board should question whether the views of so many constituencies could really be wrong. The Board should also question why Warren Buffett, a legendary investor known for identifying and backing good management teams, has chosen to invest in each of the major US railroads, except CSX. Not open to question is the fact that CSX lags its peers on almost every major operational and financial metric. It is not just the fact that CSX ranks poorly on these metrics that causes us concern. It is the fact that management refuses to acknowledge the underperformance, discuss it with shareholders, or present a plan to address it. The Board should know that TCI is also a shareholder in other US railroads. However, the other management teams have been willing to engage in an open and constructive dialogue with us, through which we have gained confidence in their abilities and strategies. We had hoped for a similarly constructive relationship with CSX. CSX has a long and rich tradition. It is an essential part of America's infrastructure and commerce. It is a vital artery for thousands of businesses, large and small. It is the fruit of labor and source of livelihood of tens of thousands of workers. It helps fund retirements, scholarships and the lives of hundreds of thousands of investors through pension funds, university endowments and personal investment accounts. A CSX that operates at anything less than its fullest potential is a disappointment and disservice to all. I. CORPORATE GOVERNANCE Sound corporate governance is essential to successful performance - it provides checks and balances, accountability and aligned incentives. Corporate governance at CSX is lacking in all of these criteria and shareholder confidence in the Board needs to be restored. We therefore ask the Board to take the following actions: o SEPARATE THE CHAIRMAN AND CEO ROLES. This is widely recognized as a `best practice' in corporate governance; how can a Chairman independently question his own failings as a CEO? Further, we believe Michael Ward's interests are not reflective of and not aligned with CSX shareholders. His comments in a recent Bloomberg interview are telling - in response to a question on how CSX would spend its cashflow, he drew an analogy to a farmer winning the lottery who, when asked how he would spend the winnings, answered that he would "keep farming UNTIL EVERY PENNY OF IT IS GONE." The farmer may do as he wishes with his own money, but Michael Ward is managing ours - the shareholders'. We fear he wants to spend everything he can, whether it creates shareholder value or not. His consistent personal sales of CSX stock while increasing CSX's spending speaks volumes, as if to say "this spending is good enough for your [shareholder] capital, but not good enough for mine." o CHANGE BOARD COMPOSITION. While one independent director has some railroad background, not a single independent director has direct railroad management experience, leaving the Board unable to credibly challenge management. In addition, over half of the independent directors have been on the Board for over a decade, leading us to question their independence, as does the fact that our requests to the Board to discuss concerns about management were flatly denied. Who should shareholders speak to on these issues if not the independent members of the Board? The Board needs to be refreshed with new independent directors acceptable to large shareholders, including TCI, who not only respect and invite the views of shareholders, but also have the railroad or other relevant business expertise to challenge management, and the courage to do so. Shareholder confidence in the Board needs to be restored. o ALLOW SHAREHOLDERS TO CALL SPECIAL MEETINGS. At CSX's most recent annual shareholder meeting, shareholders voted OVERWHELMINGLY (nearly 2.3 votes in favor for every 1 vote against) in favor of amending the bylaws to allow shareholders to call special meetings, and yet the Board has failed to act on this. We believe the threshold should be set at 10% for any individual or group of shareholders. Michael Ward said at the investor day that allowing shareholders to call special meetings was still under consideration by the Board. We view this statement as disingenuous - it does not (or certainly should not) take five months to make this decision. In fact, the Board has found the time to amend the bylaws twice since the shareholder meeting, including incorporating the majority voting resolution, which passed by a much smaller margin (only 1.3 votes in favor for every 1 vote against). If the Board has decided to ignore the views of its shareholders, it should immediately make that decision public. Ignoring the issue, or the shareholders who care about it, is poor corporate governance, and unwise. o ALIGN MANAGEMENT COMPENSATION WITH SHAREHOLDER INTERESTS. Shareholder value is created by increasing returns on capital, and that is how management should be compensated. In fact, that is largely how they are compensated at the four other large Class I railroads. However, at CSX long-term executive compensation is now predominantly tied to the company's operating ratio. Improvements in the operating ratio can be `gamed' by accounting adjustments or re-allocations from operating costs to capex, and `bought' by investing in projects that would directly or immediately improve the operating ratio instead of projects that earn the best risk-adjusted returns on capital. For example, it provides a clear incentive to buy assets instead of lease them, irrespective of which is better economically(1). We note that since the Board changed compensation away from free cash flow, CSX's annual capex budget has increased by over 50%. [GRAPHIC] II. OPERATIONAL IMPROVEMENT CSX is not a well run railroad in our opinion. Unlike management, TCI does not benchmark relative to history and claim success; we benchmark relative to potential and assess failure. As you can see below, CSX is last or near last among the five major North American rails on almost every key operational metric (ranking is best at top to worst at bottom)(2). --------------------------------------------------------------- VELOCITY DWELL ACCIDENT LABOR/SALES COST COST/UNIT TIME RATE INFLATION INFLATION --------------------------------------------------------------- CN CN NSC CN CN CN BNSF NSC CN BNSF NSC NSC UP BNSF CSX NSC UP UP NSC CSX BNSF UP CSX BNSF CSX UP UP CSX BNSF CSX While the type of network can make a difference, this chart makes clear that CSX's underperformance is not due to its network type - there is one of each type of railroad (eastern, western and Canadian) that consistently outperforms CSX. The issue is management. This is our belief, the belief of nearly every ex-railroad (including ex-CSX) executive and employee we have spoken with, the belief of nearly every railroad research analyst, and it is what the data - ---------- (1) The $200 million project highlighted at the investor day to replace leased with owned locomotives illustrates this point. There are two effects from this that improve the operating ratio. First, it will move the financing component of lease expense (currently an operating cost) to interest expense. Second, the lease term is typically shorter than the depreciable life, so lease expense is being replaced by a smaller depreciation expense. These effects would occur irrespective of whether the transaction truly created shareholder value. Therefore management would be able to improve the operating ratio, and increase its compensation, despite not creating shareholder value. (2) TCI Analysis. Based on publicly available data for 12 months ended June 30, 2007. Cost inflation is based on operating expenses excluding fuel and depreciation. shows. We simply cannot ignore all of these views and facts. The following from industry analysts sum up well what we believe is a commonly shared view: "...WE SEE NO REASON WHY INITIATIVES AT CSX CANNOT RESULT IN SUBSTANTIALLY BETTER MARGINS. A FAILURE TO ACHIEVE SUCH MARGINS OVER TIME COULD SUGGEST IT IS MORE AN ISSUE OF MANAGEMENT." WILLIAM GREENE, MORGAN STANLEY "WE THINK ~6% PRICE INCREASES AND MID-SINGLE Y/Y GAINS IN AVERAGE TRAIN SPEEDS AND TERMINAL DWELL SHOULD BE GENERATING MORE OPERATING MARGIN IMPROVEMENTS THAN WE'VE SEEN SO FAR. THERE'S STILL A LOT OF FAT ON THIS PIG." RICK PATERSON, UBS A well run business with sound corporate governance would never be referred to as a `pig.' The fact that CSX is because of its weak management is tragic. CSX is a coveted franchise with a storied history - the Board shouldn't tarnish this by giving anyone reason to refer to the company in this way. While the underperformance is dramatic, management's refusal to acknowledge it compounds our concern. At the investor day, management once again failed to provide any specific long-term operating targets. Management's operating ratio target (low-to-mid 70s operating ratio by 2010) can be achieved by price increases alone, as the following analysis illustrates. This leaves us to conclude that management has no plan to improve the operations, or at least not a plan they can be held accountable for by shareholders. 2007 2008 2009 2010 ------------------------------------------- Revenue 10.0 10.6 11.1 11.7 PRICE GROWTH 5.5% 5.5% 5.5% VOLUME GROWTH 0% 0% 0% Operating expenses (7.8) (8.0) (8.3) (8.5) COST INFLATION 3.0% 3.0% 3.0% Operating income 2.2 2.5 2.9 3.2 - ------------------------------------------------------------------------------ OPERATING RATIO 78% 76% 74% 73% - ------------------------------------------------------------------------------ The analysis set forth above assumes NO volume growth, NO earnings contribution from growth investment and NO productivity or efficiency improvement. Nevertheless, the operating ratio achieves management's `low-to-mid 70s' target by 2010(3). The lack of spending discipline seems to us to be cultural. Take for example the fact that every major US railroad has responded in some way to the current soft environment, except CSX. Norfolk Southern, already noticeably more efficient than CSX, cut operating costs so that in H1 2007 they were actually 2% BELOW the absolute level of costs in H1 2006, despite inflation; in contrast, CSX's costs are UP 4% in the same comparison. Burlington Northern CUT its 2007 capex budget TWICE (in contrast, CSX RAISED its capex budget TWICE). Union Pacific has managed to keep cost growth lower than CSX despite having much stronger volumes. The inescapable conclusion is whatever CSX is doing, it could be doing it better and its competitors, in fact, are. Since Michael Ward was appointed CEO, the gap in operating ratio - ------------------------ (3) TCI Analysis. Pricing assumption based on an extrapolation of management guidance. between CSX and both Norfolk Southern and Canadian National, the industry leaders, has actually widened. Yet somehow the Board has found it acceptable to make Michael Ward the highest compensated CEO in the industry over the past two years. We must question the Board's judgment. While we recognize that CSX's share price has performed well over the past several years, and its operations have improved, we note that both improvements are off of a low base; this low base seems largely attributable, to us, to poor execution of the Conrail integration. As a senior manager at CSX over the past decade, and in particular as the VP responsible for the Conrail merger planning and integration, Michael Ward was at least partly responsible for CSX being at that low base in the first place. It seems irrational to us to reward someone merely for making some progress towards getting the company out of a mess he was largely responsible for getting the company into. Frankly, a similar logic could be applied to longstanding members of the Board. We therefore recommend the Board and management take the following actions: o PRESENT TO SHAREHOLDERS A DETAILED AND CREDIBLE PLAN TO IMPROVE OPERATIONS. Investors need both a clear idea of management's view of the potential to improve the business as well as yardsticks to judge their ability to execute on their plan. This requires a detailed operating plan with specific long-term operational and cost targets, not simply operating ratio targets (as the operating ratio is impacted by both price and operations). o RE-EVALUATE THE ABSOLUTE LEVELS OF MANAGEMENT COMPENSATION. In addition to changing the primary metric on which compensation is based, the Board should consider whether the absolute levels of payouts are reasonable. To be clear, we have no issues with managements being well paid. However, we have serious issues with managements being overpaid (i.e., well paid but under-delivering). III. RETURNS ON CAPITAL Does the Board really believe CSX is close to earning its cost of capital? Economically, CSX earns just a 1-3% return on its capital, not the ~9% management proclaimed at their investor day(4). While return on invested capital (ROIC) may be used for accounting or regulatory purposes (inappropriately we believe), it shouldn't be the focus of dialogue between management and shareholders if it doesn't reflect economic reality. In this case, it certainly does not. We are therefore surprised that management chose to focus on ROIC and disappointed that we as shareholders, instead of the Board or management, must explain how to evaluate true economic returns for the company you are entrusted to manage. We question whether CSX management understands the economics of the business. If they do, they are being disingenuous in asserting they have `earned the right to spend' because CSX is close to earning its cost of capital; obviously this claim cannot be made on the true returns. - ---------------------- (4) CSX earns a taxed-EBIT of roughly $1.3 billion, which is a 1% return on the $100 billion replacement value we estimate. No matter how one calculates replacement value, it is unthinkable that the replacement value for CSX could be below $50 billion, implying at most a return of 3%. Returns must be calculated on the fair value of the capital today. This is best approximated by replacement value, which we estimate is close to $100 billion for CSX, as opposed to the approximately $16 billion management uses as a capital base. The $16 billion is the invested capital AT HISTORIC COST as opposed to at today's cost. Why does management, and the Board, believe CSX should earn a fair return only on the historic cost of its land and network as opposed to the value of that land and network today? You cannot buy the land for the same price as you could in the l800s, nor can you buy locomotives for the same price as you could 30 years ago, nor can you replace rail for the same price as you could 20 years ago. Using historic cost is the same flawed logic as a landlord charging rent on a 100 year-old home based on what it cost to buy the land and build that home 100 years ago, as opposed to a rent based on the value of that home today. In our mind there is simply no justification for publicly asserting to shareholders that CSX is "achieving returns approaching cost of capital in 2007" when the reality is CSX's returns will likely not approach its cost of capital for decades. We therefore ask the Board and management to take the following actions: o PRESENT A CORRECTED STRONGER RETURNS ON LONG-TERM INVESTMENTS SLIDE. Management needs to present to shareholders a truer reflection of the returns CSX generates. This requires an estimation of replacement value, but even a rough approximation of replacement value will suffice to make the point. It is better to be approximately right than precisely wrong. o ENSURE THAT ALL RETURNS-BASED DECISIONS REFLECT ECONOMIC REALITY. THERE are many decisions that management and the Board make based on return on capital, including pricing and capital investment decisions. We fear these decisions are being made on overstated returns, leading to wrong decisions. IV. CAPITAL SPENDING US railroads could require up to $150 billion of growth investment over the next 30 years to meet America's growing freight transportation needs. CSX's management is putting the ability of CSX, and the other major US railroads, to make the needed future investments at severe risk by advocating an illogical and undisciplined capital spending plan. Reckless spending will undermine confidence in CSX and the railroad sector, and will result in less access to capital for them all. This is of great concern to us, as we firmly believe that shareholder value is created through SUSTAINABLE investment in safety, maintenance, infrastructure and training. Recognizing this fact, the CEOs of all of the major US railroads, with the notable exception of Michael Ward, are trying to establish credibility as DISCIPLINED guardians of capital, as their comments in recent letters to the STB show: "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 "INCREASED INVESTMENT IN ADDITIONAL CAPACITY CANNOT ALWAYS BE ECONOMICALLY JUSTIFIED BECOMES QUESTIONABLE WHETHER A COMPANY CAN MEET ITS COST OF CAPITAL ON AN ONGOING BASIS." WICK MOORMAN, CEO OF NORFOLK SOUTHERN "THE OWNERS OF THE UNION PACIFIC (OUR SHAREHOLDERS) HAVE A FIDUCIARY RESPONSIBILITY TO ENSURE THAT MANAGEMENT WILL OPERATE THE COMPANY IN A PROFITABLE MANNER AND MAKE PRUDENT DECISIONS REGARDING FUTURE CAPITAL INVESTMENTS." JIM YOUNG, CEO OF UNION PACIFIC These CEOs recognize that capital spending must be economically justified, as the inevitable consequence of spending recklessly is losing the confidence of the owners of the business, who will have no choice but to restrain future capital spending. Individuals who overspend lose their creditworthiness and thus their ability to spend in the future. The underlying logic and result is no different for shareholder-owned companies. Further, just as over-extended subprime lending has resulted in a crisis of confidence among all lenders - resulting in even prime borrowers now finding it difficult to obtain mortgages - CSX's undisciplined spending plan could prove damaging for all US railroads, even the disciplined ones. Unfortunately, as many companies and sectors have learned, once confidence is lost it can take years or decades to be re-established. So while Michael Ward's seeming objective to spend "until every penny of it is gone" may sound like it addresses the long-term investment need of the industry, it actually undermines it. Reckless spending is a short-term strategy, with the dire long-term consequence of less access to capital for CSX and other US railroads. US railroads are in the infancy of a very exciting growth phase; CSX management should not ruin it by undermining shareholder confidence, as they are doing. To protect CSX's ability to invest sustainably in the future, the Board must work to re-establish shareholder confidence. This confidence has been undermined by management's unwillingness or inability to justify a capital spending plan that seems totally out of touch with the economic reality, as well as by glaring inconsistencies between management's statements and actions regarding maintenance capex. GROWTH INVESTMENT. Management has consistently over-estimated volume growth for CSX, and as a result has spent for growth that CSX has not delivered. At CSX's 2005 investor day management forecasted annual volume growth of 2-3%, accommodated by $1.2 billion in annual capex. Since then volumes have declined and yet the capex budget has increased. We firmly believe in making investments to meet the future needs of the business, but the estimate of future needs should be realistic and credible. Estimating that CSX volumes will be 43% above current levels by 2010 is neither. Yet 43% growth by 2010 seems to be what management is estimating, as the following analysis illustrates: [GRAPHIC] PLEASE REFER TO FOOTNOTE 5 FOR DETAILS The ~23% spare capacity CSX already has (6% volume decline + 17% capacity created through productivity) seems adequate for a decade of 2-3% annual volume growth. Yet management has increased the capex budget TWICE in 2007. It is certainly reasonable for shareholders to question why management believes 43% volume growth by 2010 is realistic, especially in light of a weakening and uncertain US economy, and considering management's consistent over-estimation of volume growth historically. We acknowledge these are very rough system-wide approximations, but even if the estimates are half of these amounts, what leads management to conclude volumes will be even 20% higher than current levels by 2010, much less 43% higher? We are not the only ones seeking an answer to this question - the JP Morgan analyst commented after the investor day as follows: "WE WALKED AWAY WITHOUT MUCH CONVICTION OR VISIBILITY TO HOW THEY WILL TRANSITION FROM SEVERAL YEARS OF NO VOLUME GROWTH TO MEANINGFUL VOLUME GROWTH IN THE FUTURE" "WE LACK VISIBILITY TO IMPROVED VOLUME PERFORMANCE FOR CSX THAT WOULD HELP JUSTIFY THE STRONG INVESTMENT" "IN OUR VIEW, THE COMBINATION OF A VERY STRONG CAPITAL SPENDING PLAN WITH AN UNFAVORABLE MEDIUM-TERM VOLUME OUTLOOK IS NOT A GOOD RECIPE FOR UPSIDE FOR THIS STOCK" There is a striking analogy here, with important lessons that hopefully do not have to be re-learned. The last time mature network-oriented businesses expected this type of growth was the telecom companies in the dot com era. Almost without exception, the growth did not materialize, huge value was destroyed, the management teams were replaced and access to capital thereafter was (and in many cases still is) significantly diminished. Confidence in the telecom sector has still not fully recovered. - -------------------------------------- (5) TCI Analysis. 43% comprised as follows: (i) 6% volume decline since 2004 implies at least 6% excess capacity today; (ii) since Q2 2004 dwell time and velocity have improved by 18% and 5% respectively, which we estimate creates 17% capacity assuming trains spend 90% of their time dwelling and 10% moving; (iii) management stated at the 2005 investor day that capex equal to 12-13% of revenue would finance 2-3% volume growth, implying roughly $100 million of capex for 1% volume growth. The 2007-2010 capital budget includes over $2 billion of expansion capex (per Oscar Munoz's presentation at the Merrill Lynch conference, June 2007), so approximately 20% volume growth. Management may argue that the capital spending is not just for capacity increases, but also for productivity gains and efficiency improvements. However, in the railroad business, productivity gains are essentially capacity increases and, as discussed, management's operating ratio guidance seems to include no benefits from productivity or efficiency gains. All of this begs the question - where is this $2 billion of shareholders' capital going, and for what returns? The Board should be asking this question, but management's inability to answer it leaves us to conclude that it isn't. MAINTENANCE CAPEX. Senior management had REPEATEDLY told us in the past that they had NOT been under-investing in the network and there was no further `catch-up' capex required post-2006(6). Yet at the investor day management announced a huge increase in the annual rail and tie replacement program and suggested they had underspent previously; this was the message that the market took away: "DETAILED CAPEX FORECASTS SUGGEST UNDERSPENDING IN PRIOR YEARS, WHICH COULD HINDER FUTURE RETURNS...IN FACT, MICHAEL WARD, THE COMPANY'S CEO, SUGGESTED THAT THE COMPANY'S IRREGULAR CAPITAL SPENDING IN PRIOR YEARS MAY BE TO BLAME FOR SOME OF THE HIGHER CAPITAL EXPENDITURES NEAR-TERM" WILLIAM GREENE, MORGAN STANLEY Based on GTMs and useful lives, the old level of rail and tie replacement seems appropriate, and it is also consistent (GTM-adjusted) with the replacement program at Norfolk Southern, widely considered the industry leader in network maintenance. This would suggest that management is now bloating the maintenance capex budget and wasting valuable shareholder capital. Alternatively, we could conclude that management HAD under-invested and had misled us and others about doing so. If this was the case, we find the under-investment of capex when compensation was free cashflow-based, and then catching up on capex once the compensation system had moved away from free cashflow, to be questionable at best. Not only is confidence in CSX management undermined by a capital spending plan that seems economically unjustifiable and inconsistencies related to maintenance capex, it is also undermined by their advocating an approach to capital allocation, the `balanced approach', which lacks financial logic. The `balanced approach' is an easy way out for a management that is unable or unwilling to truly distinguish the merits of various options for capital deployment. Capital should be allocated to where it is able to achieve its highest long term, risk-adjusted return. Instead CSX is allocating capital based on an arbitrary `balance' and a pre-determined preference, based on Michael Ward's comments, to invest in new projects irrespective of whether better returns can be achieved elsewhere, and to return capital to shareholders via - ----------------------- (6) In late 2006 both Oscar Munoz and David Baggs told us on different occasions that maintenance capex would be $850-900 million. Alarmingly management has raised this by over 25% to $1.1 billion in the latest capital budget (per Oscar Munoz's presentation at the Merrill Lynch conference, June 2007). dividends instead of share repurchases, despite the stock being fundamentally cheap in our opinion(7). A company's ability to invest continuously for the long-term rests on management's ability to maintain confidence and credibility with its shareholders. CSX is not an exception to this rule, and this confidence does not exist today. To re-establish it, management and the Board need to prove rationality, discipline and integrity to us and the other shareholders. Capital allocation deserves rigorous analysis and a transparent and financially solid logic. Management has provided none of that in our view. We therefore ask the Board and management to take the following action: o JUSTIFY THE 2007-10 CAPITAL SPENDING PLAN TO SHAREHOLDERS. It is time to shed biases, be transparent and realistic, and commit to deploying capital in the best interest of shareholders. Management should present details of each key project in the capital plan, the main pricing and volume assumptions, and the expected after-tax returns, so if growth investment is resumed it is done with the support of shareholders(8). We acknowledge that this level of disclosure is not customary, but it is necessary - the Board has failed to provide proper oversight and discipline, so the shareholders must. Shareholders need the information to hold management accountable for delivering returns. It is, after all, our capital. V. RESPONSE TO REGULATORY PRESSURE Over the past year, the STB has issued several decisions against the railroads, including those related to smaller shipper rate cases, fuel surcharges and the cost of capital. The STB's slashing of the cost of capital coupled with a refusal to simultaneously consider replacement cost has significantly increased regulatory risk. We do not believe CSX management fully appreciates the regulatory and legislative risks facing the industry. In fact, CSX management is fanning the anti-rail flames and thus only increasing these risks by massively overstating CSX's true returns. We therefore ask the Board and management take the following actions: o EDUCATE POLICYMAKERS AND REGULATORS ON THE TRUE STATE OF THE INDUSTRY. US railroads earn lower economic returns than almost any industry in the world, and CSX earns among the lowest returns even within that group. Instead of portraying this truthful state of the industry, management is focused on developing a paid advertising campaign about how wonderfully CSX is performing. In addition to being a waste of management time - ---------------------- (7) We recognize that CSX's returns significantly more capital via buyback than dividends, However, Oscar Munoz's statement at the investor day is alarming, "our Chairman in particular has a strong affinity for returning value to share owners through this methodology [dividends]." The buyback versus dividend decision should be based on what most shareholders desire and on whether the stock is cheap or not. It should not be based on a Chairman's attachment to dividends. (8) As discussed further in this letter, all growth capital spending should be frozen until the heightened risk of re-regulation passes. If the risk passes, management should proceed with a plan that is economically justified to shareholders. and shareholder money, it is simply not true. CSX needs to stop the sloganeering and start the education. If railroads can not earn adequate returns on replacement value they cannot justify investment, which means even more trucks on the highway, even more shippers complaining about service, and even more pollution in the atmosphere. o PROVIDE THE STB A PRACTICAL METHODOLOGY TO ESTIMATE REPLACEMENT VALUE. Replacement value or current cost accounting are widely accepted and used standards for both accounting and regulation around the world. In its recent cost of capital decision, the STB not only opened the door for the railroads to present a methodology that would allow calculation of returns on replacement cost, but cited its predecessor, the ICC, in saying that a replacement cost methodology was PREFERABLE to use of historic costs. Yet, the STB also has claimed that a practical methodology for estimating replacement cost has not been presented to it. This is a dramatic failure on the rail industry's part, and it needs to be rectified immediately by CSX alone or in conjunction with other US railroads. o FREEZE GROWTH INVESTMENT UNTIL THE FATE OF THE RE-REGULATION BILL IS KNOWN. It is irresponsible to make long-term investments without knowing the long-term returns, and the long-term returns are unknowable while the re-regulation risk persists at this heightened level. This is a sad outcome, and ironic as Washington acknowledges the railroads' need to make long-term investments, and yet it is the uncertainty emanating from Washington that ensures such investments cannot be justifiably made. VI. MANAGEMENT APPROACH TO KEY CONSTITUENCIES It is completely counter-intuitive to us that at the time of the brightest long-term prospects for the industry, putting the heightened risk of re-regulation aside, CSX has managed to alienate its workers, its customers, and its owners. Railroads are unique in American industry in that they have the largest self-managed workforce in the country, touch nearly every sector and every community, and re-invest the highest level of capital per revenue dollar of any major industry. Thus, while good relations with workers, customers and owners are always important, they seem essential for railroads. Yet, in our experience, and those relayed to us by others, CSX management has too often taken an `us versus them' approach, resulting in tension instead of solutions. We strongly urge the Board and management to re-evaluate this adversarial approach, as workers will be more productive, shippers more accommodating, and shareholders more understanding if management fosters an open, collaborative and constructive relationship with all of them. All of our interests should be, largely, aligned. We hope you receive this as a constructive letter from an informed shareholder with a simple aim - a better and stronger CSX. We have no desire to be disrespectful to the Board or the management team. Our views of CSX, as with all of our investments, are based on the facts. We do not have preconceived notions of the right actions or strategies a company should pursue. We have supported management in many of the companies in which we invest, and opposed it in others. We have supported acquisitions and increased investment in some companies in which we invest, and opposed it in others. Our view is always informed by an open-minded and objective assessment of the facts and the situation. As our record shows, our views have usually proven over time to be in the best long-term interest of the companies in which we invest. To us, this is being a good shareholder, and that is what we strive to be. We hope you appreciate that it is incumbent on us to raise these issues on behalf of all of the stakeholders of CSX, and as we are guardians of others' capital and have a duty to act in their best long-term interests, as you do to act in ours, the shareholders'. We sincerely hope you will act now -- and act voluntarily -- to address the serious issues facing CSX. We are available, as always, to discuss issues relevant to CSX. Sincerely, /s/ CHRIS HOHN /s/ SNEHAL AMIN - ----------------------------- -------------------------- Chris Hohn Snehal Amin MANAGING PARTNER PARTNER EX-99 3 corresp.txt CORRESPONDENCE EXHIBIT 3 October 22, 2007 Board of Directors CSX Corporation 500 Water Street Jacksonville, FL 32202 Dear Board of Directors: We are shocked at the reckless and irresponsible statements CSX management have made in response to our letter. While we will not highlight all of them, we must highlight two because they are so inaccurate and so potentially damaging to CSX and the other railroads. They are also further evidence that management do not take seriously their role as a guardian of shareholders' capital and that Michael Ward does not fully understand the economics of CSX's business. First, CSX distributed in Washington DC last week an email that included the following statement: "TCI IS TELLING THE CSX BOARD OF DIRECTORS TO `FREEZE INVESTMENT' UNTIL THE FATE OF THE REGULATION BILL IS KNOWN. PUBLIC SERVICE COMPANIES DO NOT OPERATE THAT WAY..." CSX is a publicly traded company that performs services essential to the public, but it must do so profitably and in full compliance with all applicable regulations. UPS, Waste Management and countless other companies also provide essential services to America, but doing so does not make them, per se, public service companies. Referring to CSX purely as a public service company implies, wrongly, that CSX (and other railroads) should be considered an extension of the government, devoid of the need to balance obligations to the public with the obligations to their owners. Jim Young, CEO of Union Pacific, made this clear in his recent testimony in Washington DC: "AS A PUBLICLY OWNED COMPANY, WE HAVE A FIDUCIARY DUTY TO OUR OWNERS (THE SHAREHOLDERS) TO OPERATE THE COMPANY IN A PROFITABLE MANNER AND MAKE PRUDENT DECISIONS REGARDING FUTURE CAPITAL INVESTMENTS." The fact that the CSX management does not believe that regulatory or legislative risks and uncertainty should impact investment spending is simply ridiculous. Other railroad CEOs have made clear, as would any responsible CEO, that regulatory and legislative uncertainty will, and should rightly, impact capital spending: "UNCERTAINTY ACROSS THE REGULATORY AND LEGISLATIVE LANDSCAPE IS MAKING IT CHALLENGING TO DETERMINE WHETHER RAILROADS SHOULD CONTINUE TO INVEST AT CURRENT LEVELS... ALREADY, RECENT EFFORTS BY THE SURFACE TRANSPORTATION BOARD, WHICH AT A MINIMUM ARE INJECTING UNCERTAINTY INTO THE INDUSTRY AND AT WORST COULD SUBSTANTIALLY IMPACT OUR ABILITY TO EARN - --------------- The Children's Investment Fund Management (UK) LLP is a limited liability partnership registered in England and Wales with registered number OC304797. A list of members' names is open to inspection at its registered office and principal place of business 7 Clifford Street, London, W1S 2WE, England. The Children's Investment Fund Management (UK) LLP is authorized and regulated by the Financial Services Authority. OUR COST OF CAPITAL, ARE CAUSING US TO LOOK HARD AT OUR WILLINGNESS TO INVEST IN THE FUTURE" WICK MOORMAN, CEO OF NORFOLK SOUTHERN "THE SURFACE TRANSPORTATION BOARD'S RECENT PROPOSAL ON THE CALCULATION OF THE INDUSTRY'S COST OF CAPITAL, ITS NEW REGIME FOR BRINGING RATE CASES, AND THE LEGISLATION PENDING BEFORE THIS COMMITTEE - IF ADOPTED - WOULD REQUIRE US TO RECONSIDER FUTURE INVESTMENT" JIM YOUNG, CEO OF UNION PACIFIC These statements were made in testimony before Congress. These CEOs had the strength and courage to stand before members of Congress and convey economic reality, even if it was unwelcome. In contrast, CSX management is pandering to Washington, but we are confident that Washington will see this for what it is - a self-serving attempt to use Washington to cover for and protect incompetent management. Second, in response to a question on CSX's third quarter earnings call of what CSX's returns would look like on a replacement cost basis, which as you know we feel strongly is the appropriate measure of economic returns for railroads, Michael Ward rejected the question outright by responding ignorantly: "WHAT INDUSTRY LOOKS AT THE ROIC ON A REPLACEMENT COST BASIS? I DON'T KNOW OF ANY INDUSTRY THAT DOES THAT" Fortunately, Jim Young answered the question only two days later when asked a similar question: "WE LOOK INTERNALLY AT REPLACEMENT COSTS WHEN WE'RE LOOKING AT HOW WE APPROACH A BUSINESS SEGMENT IN TERMS OF THE COST NUMBERS." The reality is that replacement cost, or some proxy for it, is used around the world for long-lived asset businesses, including railroads, water utilities, electric utilities, gas transmission networks, and airports. Whatever your differences may be with TCI, we urge you to keep the dialogue and management's public statements honest, factual, thoughtful and responsible. You have a duty to act in the best long-term interest of the company and its shareholders. Making statements that portray, or give others reason to believe, that US railroads are purely public service companies devoid of the need to operate profitably, or that ROIC is an appropriate measure of returns when it overstates true economic returns by 4-5x, is negligent of this duty. This `scorched earth' strategy is damaging to CSX and the other US railroads, and the CSX Board should not allow it to continue. Sincerely, /s/ SNEHAL AMIN - ------------------ Snehal Amin Partner The Children's Investment Fund Management (UK) LLP is a limited liability partnership registered in England and Wales with registered number OC304797. A list of members' names is open to inspection at its registered office and principal place of business 7 Clifford Street, London, W1S 2WE, England. The Children's Investment Fund Management (UK) LLP is authorized and regulated by the Financial Services Authority. EX-99 4 corresp1.txt CORRESPONDENCE 1 EXHIBIT 4 [LOGO] December 12, 2007 3G Capital Partners Ltd. 800 Third Avenue, 31st Floor New York New York 10022 Attention: Alexandre Behring Re: CSX Corporation (the "Company") Gentlemen: The purpose of this letter agreement is to confirm the agreement between The Children's Investment Fund Management (UK) LISP ("TCI Management") and 3G Capital Partners Ltd. ("3G Capital Partners" and, together with TCI Management, the "Parties") to coordinate certain of their efforts with respect to: (i) the purchase and sale of common stock of the Company and/or options, swaps or other derivative securities or instruments that constitute or may by their terms create beneficial ownership of the common stock of the Company ("Securities"); and (ii) the proposal of certain actions and/or transactions to the Company. This letter agreement extends to any and all investment funds, managed accounts and other investment vehicles managed or advised by TCI Management and 3G Capital Partners (individually a "Subject Fund", collectively the "Subject Funds"). Schedule I attached hereto sets forth all of the Securities held by the Subject Funds. SALE OF SECURITIES. Without mutual consent, neither Party shall sell or otherwise dispose of any Securities or cause any Subject Fund to sell or otherwise dispose of any Securities during the Term, unless (i) such sale is required to be in compliance with the constitutive or offering document governing that Subject Fund, or (ii) the sale is to another Subject Fund. The intent of the foregoing is that the Parties will not reduce their economic interest in the Company without mutual consent. OTHER COORDINATED ACTIVITIES. The following matters shall require the mutual agreement of the Patties: (i) whether to run a proxy contest (the "proxy contest") involving the Company and the selection and nomination of individuals to serve as directors of the Company for such proxy contest; (ii) the making, revising or withdrawing of any proposals to the Company regarding the conduct of its business, corporate governance matters, corporate transactions or otherwise; (iii) the admission or withdrawal of any additional members to the group being formed hereby; and (iv) the conduct of any litigation or investigation to the extent the same relates to the group conduct of the Parties, provided, that in the case of this clause (iv), the conduct of any litigation or Investigation that would not materially affect one of the Parties shall not require the agreement of such Party, to the extent decisions regarding such conduct do not adversely affect the interests of such Party. If the Parties have agreed on a matter set forth in clause (i), (ii) or (iii) above, TCI Management will assume decision-making authority with respect to the execution of such matter, including without limitation with respect to (i) the conduct of any proxy contest involving the Company and (ii) the manner, form, content and timing of any communications with the Company as well as any public disclosures, public statements or other - --------------------------- The Children's Investment Fund Management (UK) is a limited liability partnership registered in England and Wales with registered number OC304797. A list of members' names is open to inspection at its registered office and principal place of business 7 Clifford Street, London, WIS 2WE, England. The Children's Investment Fund Management (UK) LLP is authorised and regulated by the Financial Services Authority. third party communications relating to the Company, the Securities, this letter agreement and the activities of the Parties pursuant hereto. In connection with all of the foregoing actions set forth in the immediately preceding sentence, TCI Management will give 3G Capital Partners reasonable advance notice and a reasonable period of consultation, it being understood that the particular circumstances may require prompt action. The Parties will jointly cooperate in the defense of any third party litigation or regulatory investigation with respect to the activities engaged in by them pursuant to this letter agreement. Each Party will make disclosures in Item 4 of any required Schedule 13D (or amendment thereto) that are consistent with such Party's rights and obligations under this letter agreement. SHARED EXPENSES. Each Party will pay 50% of all reasonable expenses incurred by the Parties after the date hereof in furtherance of the activities engaged in by them pursuant to this letter agreement (including, if applicable, any third party litigation in respect thereof); provided, however, that (i) each Party will bear its own expenses relating to any regulatory filings not made on a joint basis by the Parties and (ii) TCI Management shall bear the fees and expenses of Schulte Roth & Zabel LLP, except that the Parties shall equally bear the fees and expenses of such firm to the extent related to the preparation, filing and clearance with the SEC of any proxy statement or other solicitation materials, and 3G Capital Partners shall bear the fees and expenses of Kirkland & Ellis LLP, except that the Parties shall equally bear the fees and expenses of such firm to the extent related to the preparation, filing and clearance with the SEC of any proxy statement or other solicitation materials. Each Party will promptly upon request reimburse the other Party for its respective portion of any such shared expenses paid or advanced by the other Party. Upon request, the Party seeking reimbursement hereunder will provide the other Party with reasonable documentation evidencing its expenses. Notwithstanding the foregoing, a Party will not be entitled to contribution for any expense or liability arising out of such Party's or its affiliates' fraud, willful misconduct, gross negligence, or activities or actions prior to the date hereof or any liability or expense relating specifically to such Party. REGULATORY REPORTING. If any transaction entered into pursuant to this letter agreement gives rise to a requirement that a Party hereto and/or any of its affiliates file any schedule or report pursuant to the '34 Act or any other U.S. or non-U.S. governmental or regulatory requirement, such person(s) will make the required filings within the time period required. If any such schedule or report may be flied jointly by the Parties and/or their respective affiliates, the Parties will mutually determine whether a joint filing shall be made (provided that the foregoing is not intended to relate to the filing of solicitation material in any proxy contest, which shall be subject to the second and third sentences under "Other Coordinated Activities" above). TCI Management will prepare and timely file all such joint filings; provided that the content thereof relating to 3G Capital Partners or any of its affiliates shall be reasonably satisfactory to 3G Capital Partners, who will be given the opportunity to review and comment on each such filing a reasonable period of time before such filing is made. Each Party will cooperate with the other, including by providing all necessary information, in order to facilitate the timely and accurate filing of all joint and individual filings. TERMINATION. This letter agreement will terminate at 11:59 p.m. (New York time) on the earlier of (i) the 12 month anniversary of the date hereof; (ii) the 10th day after the date that the next meeting of stockholders of the Company at which directors are elected, once held, is completed; (iii) in the event that the Parties have sought to but, as set forth in a written notice given by a Party to the other, failed to reach agreement on a decision requiring their mutual agreement under the terms of this letter agreement after good faith efforts to reach such agreement, upon the receipt of such notice; or (iv) upon receipt by a Party of a written notice from the other Party that such Party chooses to terminate based on a force majeure, which includes without limitation catastrophic accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God. The provisions set forth herein regarding shared expenses and governing law will survive any termination hereof with respect to expenses incurred prior to the termination hereof. The period from the date hereof until termination in accordance with the preceding sentence is referred to as the "Term". ACTIVITIES OF THE PARTIES. No Party shall be obligated to do or perform any act or thing in connection with the matters contemplated by this letter agreement not expressly set forth herein. No Party shall in any event be deemed to have any fiduciary or other duties to the other Party by virtue of this letter agreement except as expressly provided herein. MISCELLANEOUS. The terms and provisions of this letter agreement may not be amended, waived or modified except by a writing signed by each Party. This letter agreement (a) will be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict of laws principles, (b) may not be assigned by either Party without the prior written consent of the other Party, (c) may be executed in counterparts, each of which shall be deemed an original but both of which together shall constitute one find the same instrument, and (d) represents the entire agreement between the Parties hereto. Each Party represents that neither it nor any of its Subject Funds are in possession of any material not-public information regarding the Company, whether received from the Company or any third party, and that in no event shell a Party make available to the other Party any such information that it may in the future obtain unless expressly authorized by such other Party to do so. The Parties acknowledge that from time to time during the course of the arrangements set out in this letter, one or both of them may be in possession of information which may preclude (whether by virtue of law or regulation) the sale or purchase of Securities or the taking of other steps or behavior which would otherwise be required or permitted by this Letter. Each Party acknowledges that it will be responsible for assessing the nature of information in its possession in relation to legal and regulatory requirements. Neither Party shall be considered to be in breach of the provisions of the agreement set out in this letter if it fails to take a step which it would have been precluded by law or regulation from taking. Nothing in this letter agreement shall be construed as creating a joint venture, partnership or agency relationship or taxable entity between or among the Parties, nor shall either Party, except as expressly set forth herein, have the right, power or authority to create any obligations or duty, express or implied, on behalf of the other Party hereto, it being understood that the Parties are independent contractors vis-a-vis one another. Neither Party shall have any liability for the repayment or discharge of any debts and obligations of the other Party. For the avoidance of doubt, there are no profit-sharing or similar arrangements between the Parties with respect to this letter agreement or otherwise. Should the foregoing agree with your understanding, please so indicate in the space provided below, whereupon this letter agreement will become a binding agreement between us. Very truly yours, THE CHILDREN'S INVESTMENT FUND MANAGEMENT (UK) LLP By: /s/ Christopher Hohn ------------------------------------ Name: Christopher Hohn Title: Managing Partner Agreed to and accepted as of the date first written above: 3G CAPITAL PARTNERS LTD. By: /s/ ALEXANDRE BEHRING -------------------------- Name: Alexandre Behring Title: Managing Director Schedule I Securities Held by 3G Capital Partners Subject Funds NAME OF SUBJECT FUND NO. OF SECURITIES HELD - -------------------- ---------------------- The Children's Investment Master Fund 17,796,998 3G Fund L.P. 17,232,854 -----END PRIVACY-ENHANCED MESSAGE-----