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Annual Report
2019
In this Report
2 Message from the CEO
4 Delivering Results
5 Safety Focused
6 Raising the Bar on Rail Service
7 Positioned for Growth
8 Environmental, Social and Governance
BC Our Board of Directors and Executive Management
Major Terminal
CSX Rail Service
CSX Operating Agreements
3
Powered
to Perform
CSX brings on-time delivery, first-class service, and a
seamless shipping experience to customers across an
extensive network that reaches nearly two-thirds of the U.S.
population and a diverse set of consumers and industrial end
markets. A leading supplier of rail-based freight transportation,
CSX is powered to deliver comprehensive service solutions.
CSX Revenue Mix
66%
Merchandise
21% Chemicals
12% Agricultural and Food
11% Automotive
8% Forest Products
6% Metals and Equipment
5% Minerals
4% Fertilizers
18%
Coal
15%
Intermodal
Message from
the CEO
Transforming Service into Growth
Dear Fellow Shareholders,
CSX’s 2019 results have set a new standard of financial and
operating performance for U.S. railroads. CSX employees
ran the network better than at any point in the company’s
history, setting new efficiency records throughout the year.
The CSX team delivered unparalleled service and reliability
for customers, laying the foundation for long-term business
growth in the months and years ahead, all while driving
industry-leading safety performance.
Notably, we achieved these results in a sluggish industrial
economy, demonstrating the inherent ability of the CSX
operating model to adapt quickly and sustain solid financial
performance in unfavorable market conditions. The company’s
2019 revenue of $11.9 billion was 3% below 2018, while
earnings increased by 1%, earnings per share increased by
9% and adjusted free cash flow* increased by 9 %.The
ability to control costs and improve asset utilization enabled
us to lower the full-year operating ratio — the amount of
each dollar of operating revenue needed to cover operating
costs — to 58.4%, a new U.S. Class I railroad record.
Safety performance continued to be a major focus in
2019, and employees responded by achieving a 15%
improvement in the personal injury rate and a 41%
reduction in the train accident rate. Enhanced training,
increased field safety contacts and intensified focus on
critical rules compliance reinforced the safety culture
and reestablished CSX as a rail safety leader.
Optimizing the customer experience was also a critical
2019 focus area, as employees across all departments
designed, delivered and supported exceptional rail service.
We measure service success for merchandise and
intermodal shipments by our performance on meeting trip
plan schedules, calculated to the hour and minute, for every
carload, container and trailer on the railroad, including
empties destined for customers. For intermodal shipments,
the company achieved trip plan performance above 95%
in the final quarter of the year, and carload performance
was nearly 83%. We also continued to improve operating
metrics and move freight more quickly across the network.
Average train velocity increased 14% for the year, and car
dwell — the time cars spend in terminals and awaiting
customer delivery — improved 9% to the best levels in
company history.
In addition to providing excellent service, we offered
customers unprecedented transparency into our network
operating performance. Although trip plans were created
originally as an internal measurement to support operations
improvement, the company opened up trip plan data to
customers in 2019 through a new Trip Plan Performance
tool. One of several major enhancements made to the
ShipCSX customer service portal during the year, the new
tool enables carload and intermodal customers to view
CSX performance at the system, location and lane level,
providing them with unprecedented transparency for
2
* See reconciliations of these non-GAAP measures to corresponding GAAP measures
in the Non-GAAP Measures section of the Company’s 2019 Form 10-K.
managing their supply chains and making shipping decisions.
Also in 2019, CSX became the first North American railroad
to join TradeLens, a global blockchain shipping information
platform that further enhances supply-chain transparency
and shipment status visibility.
Another customer-centric initiative in 2019 was the realignment
of the sales and marketing organization, as we positioned
the company to generate business growth built on an
improved service product. We intensified efforts to partner
with customers on service solutions that will convert
significant traffic volume from highway to rail. We enhanced
marketing of our value-added services, such as the CSX
TRANSFLO terminal network, which offers transloading,
warehousing and real-time inventory visibility, and teamed
with local and regional economic development organizations
to increase visibility of rail-served properties.
The ultimate strategy for maximizing CSX shareholder value
is to profitably and sustainably grow our business faster
than the U.S. economy, and our efforts throughout 2019
placed the company in a strong position to achieve that
vision. CSX entered 2020 with a service product that can
successfully compete with trucks and a robust strategy for
capturing new business opportunities. We anticipate that
much of this new business will come from the merchandise
and intermodal networks, which represent more than
80% of our revenue and transport freight to industries and
businesses in markets representing 200 million consumers
across the eastern United States. As our business grows,
so will the favorable environmental impact of rail versus
highway transportation. Trains are far more fuel efficient than
trucks, and CSX is a rail industry leader, setting a new
company record for fuel efficiency in 2019.
We have many miles yet to travel to reach our company’s
full potential, but my confidence in the company’s ability
to execute our growth strategy is stronger than ever. It lies
not only in the reach of our network and the effectiveness of
the operating model, but in the quality of the team we have
built. The railroaders of CSX have embraced the company’s
guiding principles — operate safely, improve customer service,
control costs, optimize asset utilization and value and
develop employees — and are excited to see the business
grow as we enter the next phase of our transformation.
They have shown that they are the best operators in the
industry and we are proud of their accomplishments in
making CSX the best run railroad in North America and
helping establish tremendous opportunity for future growth.
James M. Foote
President and Chief Executive Officer
3
CSX Corporation 2019 Annual Report Delivering Results
With safe operations as the solid foundation, CSX continues to find
opportunities to run the business more efficiently.
Financial Results
Revenue
(Millions)
FY 2018
$12,250
FY 2019
$11,937
-3%
Operating Income
(Millions)
FY 2018
$4,869
FY 2019
$4,965
+2%
Net Earnings Per Share
($)
Operating Ratio
(%)
FY 2018
$3.84
FY 2019
$4.17
+9%
FY 2018
60.3%
FY 2019
58.4%
190
basis point improvement
Adjusted Free Cash Flow and Returns to Shareholders
Adjusted Free Cash
Flow* Before Dividends
(Millions)
FY 2018
$3,199
FY 2019
$3,478
+9%
Dividends
per Share
($)
FY 2018
$0.88
FY 2019
$0.96
+9%
Shareholder
Distributions
(Millions)
FY 2018
$5,422
FY 2019
$4,136
-24%
4
* See reconciliations of these non-GAAP measures to corresponding GAAP measures
in the Non-GAAP Measures section of the Company’s 2019 Form 10-K.
Safety Focused
CSX prioritizes safe operations every day and is committed to
continued safety improvement.
• In 2019, CSX led the industry with the lowest FRA personal injury frequency rate
• Full year 2019 personal injury rate declined 15%
• Full year 2019 train accident rate reduced by 41%
• Maintaining rigorous safety and continuing education program in 2020
Safety is a Guiding Principle at CSX
FRA Personal Injury
Frequency Index
FY 2018
1.03
FY 2019
0.88
-15%
FRA Train
Accident Rate
FY 2018
3.64
FY 2019
2.14
-41%
On track.
On time.
On target.
5
CSX Corporation 2019 Annual Report Raising the Bar
on Rail Service
CSX is translating efficiencies into higher asset utilization across the
network, and leveraging operating improvements to deliver more reliable
service for customers.
Train Velocity
(Miles per Hour)
Terminal Car Dwell
(Hours)
FY 2018
18.0
FY 2019
20.5
Car Miles
per Day
FY 2018
124
FY 2019
134
FY 2018
9.5
FY 2019
8.6
Gallons of Fuel
per kGTM
FY 2018
1.05
FY 2019
1.01
Carload Trip Plan Performance
Intermodal Trip Plan Performance
82.6%
73.9% 74.4%
75.7%
67.3%
78.3%
73.4%
94.2%
95.5%
89.8%
4Q18
1Q19
2Q19
3Q19
4Q19
4Q18
1Q19
2Q19
3Q19
4Q19
6
Positioned for
Growth
Since the operational transformation
began in 2017, CSX has made
tremendous strides in improving
service and increasing the value
of our product to customers.
The next phase of transformation focuses on
capturing the full value of the improved service
by generating profitable and sustainable
revenue growth.
CSX is an effective supply chain partner for its
customers, delivering comprehensive tools and
solutions that can ensure mutual growth and
long-term success.
Earn customer confidence that our
service reliability is real
and lasting.
Identify and capture opportunities to
convert freight from highway
to rail.
Emphasize value-added
services that address our
customers’ supply chain challenges.
Continue to provide
unprecedented transparency
into network performance.
CSX Corporation 2019 Annual Report
7
7
Environmental,
Social and
Governance
CSX’s operating model is inherently aligned with environmental,
social and governance (“ESG”) standards that are increasingly
important to stakeholders. CSX demonstrates its ESG commitment
every day by utilizing assets more efficiently, improving safety,
engaging with communities and transparently reporting its
activities. The CSX Sustainability Statement, Environmental Policy
and other ESG-related information can be found at csx.com.
8
Environmental Sustainability
CSX believes that sustainable growth of rail transportation
is inseparable from sustainable environmental practices.
The CSX Public Safety, Health and Environmental
Management System underwent a full audit in 2019 and
achieved a statement of conformity with American Chemistry
Council’s Responsible Care Management System. In
addition, nearly 100 reviews of CSX facilities to ensure
compliance with local, state and federal regulations showed
that the company maintained compliance with its more
than 40 Clean Air Act and 155 Clean Water Act permits
systemwide. The company’s environmental commitment
also extends throughout the workforce and to all CSX
stakeholders. In 2019, CSX employees won both of the
individual environmental awards presented annually by the
Association of American Railroads (“AAR”), including the
AAR Chafee Award and the AAR Environmental Professional
Award. The company also awarded 70 customers with
Chemical Safety Excellence Awards for their commitment
to the safe transportation of hazardous materials.
The company’s environmental commitment was further
recognized by the 2019 Dow Jones Sustainability Index for
North America (“DJSI”), which included CSX for the ninth
consecutive year. CSX was the only U.S. railroad to appear
on DJSI. The company also achieved a “Leadership” level
score in the CDP environmental disclosure initiative for
the seventh consecutive year, and was the only U.S. railroad
to earn the high-level ranking. In 2019, CSX also received a
Sustainability Award from World Finance magazine, which
named the railroad the most sustainable company in the
logistics category; and received accolade from ISS ESG,
which named CSX a “Prime” company and its “U.S.
Transport & Logistics Industry Leader.”
As the most fuel-efficient mode of freight transportation
on land, railroads are uniquely positioned to contribute to
a more-sustainable society. CSX’s success in moving
freight more reliably and with less asset and fuel intensity
is allowing customers to take freight off the highway and
reduce their overall carbon footprint. In 2019, CSX further
improved upon its 2018 record efficiency, becoming the
first U.S. Class I railroad to operate below 1 gallon of fuel
per thousand gross ton-miles for a quarter. The company
exceeded its 2020 greenhouse gas emissions reduction
target set in 2011, and began work toward establishing new
environmental targets, to be announced in 2020.
500 miles
Distance CSX moves one ton of
freight on a single gallon of fuel
1.0 gallon/kGTM
First U.S. Class I Railroad to
cross this efficiency threshold
12%
Improvement in fuel efficiency
since 2015
9 consecutive years
Dow Jones Sustainability Index
North America Listing
7 consecutive years
CDP environmental disclosure
Leadership Level
CSX Corporation 2019 Annual Report
9
85,000+ service
men, women and
family members reached
28 scholarships
provided to family members of
military and first responders
8,900+ employee volunteer
hours contributed to community
service projects
Best Places to Work
for Disability Inclusion
Social Responsibility
In addition to operating safely and
sustainably, CSX is committed to
exercising social responsibility by being
a leader in addressing community needs
across its network.
The company donated more than $10 million in 2019
through grants and in-kind contributions to nonprofit
organizations. CSX strives to extend its impact by working
with select service partners, and the company’s Dollars
for Doers program encourages employee volunteerism by
making CSX Foundation contributions to charitable
causes after employees volunteer at least 15 hours with
a qualified organization. CSX employees reported more
than 8,900 volunteer hours through the program in 2019.
The company donated $425,000 in matching contributions
to causes supported by employees during the year.
The company’s signature community investment program
is Pride in Service, an initiative that benefitted more than
85,000 members of the military, veterans, first responders
and family members through nearly 200 community
events in 2019, its first full year of operation. In cooperation
with five signature partners that offer programs for service
members and first responders, Pride in Service is well
on its way to exceeding its goal of positively impacting more
than 100,000 individuals and their families over the next
two years.
Supporting workforce diversity is another way CSX reflects
its social values while advancing its business goals. The
company believes that teams with diverse backgrounds
support innovation and solve challenges more effectively.
CSX’s commitment to diversity and inclusion has been
recognized by many organizations, including, in 2019,
being named a “Best Place to Work for Disability Inclusion”
by Disability:IN and the American Association of People
with Disabilities. The company achieved a 100% score on
Disability:IN’s disability equality index.
10
Governance
CSX recognizes that good governance
requires well-defined practices, clear
expectations and robust training.
The company has developed policies, in consultation
with its Board of Directors, designed to ensure proper
disclosure of information, auditing and compliance, and
it requires management employees to complete annual
ethics training. In 2019, the ethics training compliance
rate was 100%. The company believes its good
governance practices are essential for mitigating risk
and supporting long-term growth and business success.
Some of the key attributes of the CSX governance
program include the following:
• Annual election of directors
• Majority voting standard for election of directors
• Independent chairman of the board
• Stock ownership guidelines for officers and directors
• Policy against hedging or pledging of CSX shares
• Proxy access
• Pay for performance alignment
11
CSX Corporation 2019 Annual Report Board of Directors
Executive Management
CSX Corporation 2019 Annual Report
Linda H. Riefler
Director of MSCI and Former
Chairman of Global Research
for Morgan Stanley
Suzanne M. Vautrinot
President of Kilovolt
Consulting, Inc. and Retired
U.S. Air Force Major General
J. Steven Whisler
Retired Chairman and Chief
Executive Officer of Phelps
Dodge Corporation
John J. Zillmer
Chairman of the Board
and Chief Executive Officer
and Director of
Aramark Corporation
Diana B. Sorfleet
Executive Vice President and
Chief Administrative Officer
Mark K. Wallace
Executive Vice President
of Sales and Marketing
From left to right
Donna M. Alvarado
Founder and President
of Aguila International
Pamela L. Carter
Retired President of Cummins
Inc. and President of Cummins
Distribution Business
James M. Foote
President and Chief Executive
Officer of CSX
Steven T. Halverson
Retired Chief Executive Officer
of The Haskell Company
Paul C. Hilal
Founder and Managing
Member of Mantle Ridge
GP LLC
John D. McPherson
Retired President and Chief
Operating Officer of Florida
East Coast Railway
David M. Moffett
Retired Chief Executive
Officer and a Director of
the Federal Home Loan
Mortgage Corporation
From left to right
James M. Foote
President and Chief
Executive Officer
Kevin Boone
Executive Vice President
and Chief Financial Officer
Jamie Boychuk
Executive Vice President of
Operations
Nathan D. Goldman
Executive Vice President
and Chief Legal Officer
Edmond L. Harris
Executive Vice President
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(
) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(
) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
For the fiscal year ended December 31, 2019
OR
Commission File Number 1-8022
CSX CORPORATION
(Exact name of registrant as specified in its charter)
Virginia
62-1051971
(I.R.S. Employer Identification No.)
500 Water Street
15th Floor
Jacksonville
FL
32202
904
359-3200
(Address of principal executive offices)
(Zip Code)
(Telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $1 Par Value
Trading Symbol(s)
Name of exchange on which registered
CSX
Nasdaq Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Securities registered pursuant to Section 12(g) of the Act: None
Yes (X) No ( )
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ( ) No (X)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes (X) No ( )
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files).
Yes (X) No ( )
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or an emerging growth company. (as defined in Exchange Act Rule 12b-2).
Large Accelerated Filer (X) Accelerated Filer ( ) Non-accelerated Filer ( ) Smaller reporting company (
Emerging growth company (
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ( )
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).
)
)
Yes (
) No (X)
On June 30, 2019 (which is the last day of the second quarter and the required date to use), the aggregate market value of the Registrant’s voting
stock held by non-affiliates was approximately $59 billion (based on the close price as reported on the NASDAQ National Market System on such
date).
There were 773,825,565 shares of Common Stock outstanding on January 31, 2020 (the latest practicable date that is closest to the filing date).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Definitive Proxy Statement (the “Proxy Statement”) to be filed no later than 120 days after the end of the fiscal year with
respect to its 2020 annual meeting of shareholders.
CSX 2019 Form 10-K p.1
CSX CORPORATION
FORM 10-K
TABLE OF CONTENTS
Item No.
Page
1. Business
1A. Risk Factors
1B. Unresolved Staff Comments
2. Properties
3. Legal Proceedings
4. Mine Safety Disclosures
Executive Officers of the Registrant
PART I
PART II
5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
6. Selected Financial Data
7. Management's Discussion and Analysis of Financial Condition and Results of Operations
· Terms Used by CSX
· 2019 Highlights
· Results of Operations
· Liquidity and Capital Resources
· Schedule of Contractual Obligations and Commercial Commitments
· Off-Balance Sheet Arrangements
· Labor Agreements
· Critical Accounting Estimates
· Forward-Looking Statements
7A. Quantitative and Qualitative Disclosures about Market Risk
8. Financial Statements and Supplementary Data
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
9A. Controls and Procedures
9B. Other Information
PART III
10. Directors, Executive Officers of the Registrant and Corporate Governance
11. Executive Compensation
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
13. Certain Relationships and Related Transactions, and Director Independence
14. Principal Accounting Fees and Services
15. Exhibits, Financial Statement Schedules
PART IV
Signatures
3
7
11
12
16
16
17
19
21
22
22
24
24
32
35
36
36
36
41
43
44
108
108
111
111
111
111
111
111
111
116
CSX 2019 Form 10-K p.2
Item 1. Business
CSX CORPORATION
PART I
CSX Corporation together with its subsidiaries ("CSX" or the “Company”), based in Jacksonville,
Florida, is one of the nation's leading transportation companies. The Company provides rail-based freight
transportation services including traditional rail service, the transport of intermodal containers and trailers,
as well as other transportation services such as rail-to-truck transfers and bulk commodity operations. CSX
and the rail industry provide customers with access to an expansive and interconnected transportation
network that plays a key role in North American commerce and is critical to the long-term economic success
and improved global competitiveness of the United States. In addition, freight railroads provide the most
economical and environmentally efficient means to transport goods over land.
CSX Transportation, Inc.
CSX’s principal operating subsidiary, CSX Transportation, Inc. (“CSXT”), provides an important link
to the transportation supply chain through its approximately 20,000 route mile rail network, which serves
major population centers in 23 states east of the Mississippi River, the District of Columbia and the Canadian
provinces of Ontario and Quebec. It has access to over 70 ocean, river and lake port terminals along the
Atlantic and Gulf Coasts, the Mississippi River, the Great Lakes and the St. Lawrence Seaway. This access
allows the Company to meet the dynamic transportation needs of manufacturers, industrial producers, the
automotive industry, construction companies, farmers and feed mills, wholesalers and retailers, and energy
producers. The Company’s intermodal business links customers to railroads via trucks and terminals. CSXT
also serves thousands of production and distribution facilities through track connections with other Class I
railroads and more than 230 short-line and regional railroads.
CSXT is also responsible for the Company's real estate sales, leasing, acquisition and management
and development activities. Substantially all of these activities are focused on supporting railroad operations.
Other Entities
In addition to CSXT, the Company’s subsidiaries include CSX Intermodal Terminals, Inc. (“CSX
Intermodal Terminals”), Total Distribution Services, Inc. (“TDSI”), Transflo Terminal Services, Inc. (“Transflo”),
CSX Technology, Inc. (“CSX Technology”) and other subsidiaries. CSX Intermodal Terminals owns and
operates a system of intermodal terminals, predominantly in the eastern United States and also performs
drayage services (the pickup and delivery of intermodal shipments) for certain customers and trucking
dispatch operations. TDSI serves the automotive industry with distribution centers and storage
locations. Transflo connects non-rail served customers to the many benefits of rail by transferring products
from rail to trucks. The biggest Transflo markets are chemicals and agriculture, which includes shipments
of plastics and ethanol. CSX Technology and other subsidiaries provide support services for the Company.
CSX 2019 Form 10-K p.3
CSX CORPORATION
PART I
Lines of Business
During 2019, the Company's services generated $11.9 billion of revenue and served three
primary lines of business: merchandise, coal and intermodal.
• The merchandise business shipped 2.7 million carloads (43 percent of volume) and generated
64 percent of revenue in 2019. The Company’s merchandise business is comprised of shipments
in the following diverse markets: chemicals, automotive, agricultural and food products, minerals,
fertilizers, forest products, and metals and equipment.
• The coal business shipped 843 thousand carloads (14 percent of volume) and generated 17
percent of revenue in 2019. The Company transports domestic coal, coke and iron ore to
electricity-generating power plants, steel manufacturers and industrial plants as well as export
coal to deep-water port facilities. Roughly one-third of export coal and the majority of the domestic
coal that the Company transports is used for generating electricity.
• The intermodal business shipped 2.7 million units (43 percent of volume) and generated 15
percent of revenue in 2019. The intermodal business combines the superior economics of rail
transportation with the flexibility of trucks and offers a cost and environmental advantage over
long-haul trucking. Through a network of approximately 30 terminals, the intermodal business
serves all major markets east of the Mississippi River and transports mainly manufactured
consumer goods in containers, providing customers with truck-like service for longer shipments.
Other revenue accounted for 4 percent of the Company’s total revenue in 2019. This category
includes revenue from regional subsidiary railroads, demurrage, storage at intermodal facilities, revenue
for customer volume commitments not met, switching, other incidental charges and adjustments to revenue
reserves. Revenue from regional railroads includes shipments by railroads that the Company does not
directly operate. Demurrage represents charges assessed when freight cars or other equipment are held
beyond a specified period of time. Switching represents charges assessed when a railroad switches cars
for a customer or another railroad.
Employees
The Company's number of employees was nearly 21,000 as of December 2019, which includes
approximately 17,000 union employees. Most of the Company’s employees provide or support transportation
services.
Operating Model
The Company is focused on developing and strictly maintaining a scheduled service plan with an
emphasis on optimizing assets. When this operating model is executed effectively, customer service is
improved, enabling the Company to better compete for an increased share of the U.S. freight market. Further,
this model leads to reduced costs and strong free cash flow generation.
Financial Information
See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
for operating revenue, operating income and total assets for each of the last three fiscal years.
CSX 2019 Form 10-K p.4
CSX CORPORATION
PART I
Company History
A leader in freight rail transportation for more than 190 years, the Company’s heritage dates back
to the early nineteenth century when The Baltimore and Ohio Railroad Company (“B&O”) – the nation’s first
common carrier – was chartered in 1827. Since that time, the Company has built on this foundation to create
a railroad that could safely and reliably service the ever-increasing demands of a growing nation.
Since its founding, numerous railroads have combined with the former B&O through merger and
consolidation to create what has become CSX. Each of the railroads that combined into the CSX family
brought new geographical reach to valuable markets, gateways, cities, ports and transportation corridors.
CSX Corporation was incorporated in 1978 under Virginia law. In 1980, the Company completed the
merger of the Chessie System and Seaboard Coast Line Industries into CSX. The merger allowed the
Company to connect northern population centers and Appalachian coal fields to growing southeastern
markets. Later, the Company’s acquisition of key portions of Conrail, Inc. ("Conrail") allowed CSXT to link
the northeast, including New England and the New York metropolitan area, with Chicago and midwestern
markets as well as the growing areas in the Southeast already served by CSXT. This current rail network
allows the Company to directly serve every major market in the eastern United States with safe, dependable,
environmentally responsible and fuel efficient freight transportation and intermodal service.
Competition
The business environment in which the Company operates is highly competitive. Shippers typically
select transportation providers that offer the most compelling combination of service and price. Service
requirements, both in terms of transit time and reliability, vary by shipper and commodity. As a result, the
Company’s primary competition varies by commodity, geographic location and mode of available
transportation and includes other railroads, motor carriers that operate similar routes across its service area
and, to a less significant extent, barges, ships and pipelines.
CSXT’s primary rail competitor is Norfolk Southern Railway, which operates throughout much of the
Company’s territory. Other railroads also operate in parts of the Company’s territory. Depending on the
specific market, competing railroads and deregulated motor carriers may exert pressure on price and service
levels. For further discussion on the risk of competition to the Company, see Item 1A. Risk Factors.
Regulatory Environment
The Company's operations are subject to various federal, state, provincial (Canada) and local laws
and regulations generally applicable to businesses operating in the United States and Canada. In the U.S.,
the railroad operations conducted by the Company's subsidiaries, including CSXT, are subject to the
regulatory jurisdiction of the Surface Transportation Board (“STB”), the Federal Railroad Administration
(“FRA”), and its sister agency within the U.S. Department of Transportation ("DOT"), the Pipeline and
Hazardous Materials Safety Administration (“PHMSA”). Together, FRA and PHMSA have broad jurisdiction
over railroad operating standards and practices, including track, freight cars, locomotives and hazardous
materials requirements. In addition, the U.S. Environmental Protection Agency (“EPA”) has regulatory
authority with respect to matters that impact the Company's properties and operations.
The Transportation Security Administration (“TSA”), a component of the Department of Homeland
Security, has broad authority over railroad operating practices that may have homeland security implications.
In Canada, the railroad operations conducted by the Company’s subsidiaries, including CSXT, are subject
to the regulatory jurisdiction of the Canadian Transportation Agency.
CSX 2019 Form 10-K p.5
CSX CORPORATION
PART I
Although the Staggers Act of 1980 significantly deregulated the U.S. rail industry, the STB has broad
jurisdiction over rail carriers. The STB regulates routes, fuel surcharges, conditions of service, rates for non-
exempt traffic, acquisitions of control over rail common carriers and the transfer, extension or abandonment
of rail lines, among other railroad activities. Any new rules from the STB regarding, among other things,
competitive access or revenue adequacy could have a material adverse effect on the Company's financial
condition, results of operations and liquidity as well as its ability to invest in enhancing and maintaining vital
infrastructure. For further discussion on regulatory risks to the Company, see Item 1A. Risk Factors.
Positive Train Control
In 2008, Congress enacted the Rail Safety Improvement Act (the “RSIA”). The legislation included
a mandate that all Class I freight railroads implement an interoperable positive train control system (“PTC”)
by December 31, 2015. Implementation of a PTC system is designed to prevent train-to-train collisions,
over-speed derailments, incursions into established work-zone limits, and train diversions onto another set
of tracks. PTC must be installed on all main lines with passenger and commuter operations as well as most
of those over which toxic-by-inhalation hazardous materials are transported.
On October 29, 2015, the President of the United States signed the Positive Train Control
Enforcement and Implementation Act of 2015 into law extending the deadline. In accordance with this Act,
the Company completed installation of all PTC hardware by December 31, 2018. The Company met all
criteria required by the Act to be approved for an extension by the FRA. The PTC system is now required
to be fully operational by December 31, 2020. CSX remains on track to meet this regulatory requirement.
The Company expects to continue incurring capital costs in connection with the implementation of
PTC as well as related ongoing operating expenses. CSX currently estimates that the total multi-year cost
of PTC implementation will be approximately $2.4 billion for the Company. Total PTC investment through
2019 was $2.3 billion.
Other Information
CSX makes available on its website www.csx.com, free of charge, its annual reports on Form 10-
K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as
soon as reasonably practicable after such reports are filed with or furnished to the Securities and Exchange
Commission (“SEC”). The information on the CSX website is not part of this annual report on Form 10-
K. Additionally, the Company has posted its code of ethics on its website, which is also available to any
shareholder who requests it. This Form 10-K and other SEC filings made by CSX are also accessible through
the SEC’s website at www.sec.gov.
CSX has included the certifications of its Chief Executive Officer (“CEO”) and the Chief Financial
Officer (“CFO”) required by Section 302 of the Sarbanes-Oxley Act of 2002 (“the Act”) as Exhibit 31, as well
as Section 906 of the Act as Exhibit 32 to this Form 10-K report.
The information set forth in Item 6. Selected Financial Data is incorporated herein by reference. For
additional information concerning business conducted by the Company during 2019, see Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations.
CSX 2019 Form 10-K p.6
Item 1A. Risk Factors
CSX CORPORATION
PART I
The risks set forth in the following risk factors could have a material adverse effect on the Company's
financial condition, results of operations or liquidity, and could cause those results to differ materially from
those expressed or implied in the Company's forward-looking statements. Additional risks and uncertainties
not currently known to the Company or that the Company currently does not deem to be material also may
materially impact the Company's financial condition, results of operations or liquidity.
New legislation or regulatory changes could impact the Company's earnings or restrict its ability to
independently negotiate prices.
Legislation passed by Congress, new regulations issued by federal agencies or executive orders
issued by the President of the United States could significantly affect the revenues, costs and profitability
of the Company's business. In addition, statutes or regulations imposing price constraints or affecting rail-
to-rail competition could adversely affect the Company's profitability.
Government regulation and compliance risks may adversely affect the Company's operations and
financial results.
The Company is subject to the jurisdiction of various regulatory agencies, including the STB, FRA,
PHMSA, TSA, EPA and other state, provincial and federal regulatory agencies for a variety of economic,
health, safety, labor, environmental, tax, legal and other matters. New or modified rules or regulations by
these agencies could increase the Company's operating costs, adversely impact revenue or reduce operating
efficiencies and affect service performance. For example, the RSIA, as amended, mandated that the
installation of PTC hardware be completed by December 31, 2018, and requires that the PTC system be
fully operational by December 31, 2020 on main lines that carry certain hazardous materials and on lines
that have commuter or passenger operations. Although CSX remains on track to meet this regulatory
requirement, noncompliance with these and other applicable laws or regulations could erode public
confidence in the Company and can subject the Company to fines, penalties and other legal or regulatory
sanctions.
CSXT, as a common carrier by rail, is required by law to transport hazardous materials, which could
expose the Company to significant costs and claims.
A train accident involving the transport of hazardous materials could result in significant claims arising
from personal injury, property or natural resource damage, environmental penalties and remediation
obligations. Such claims, if insured, could exceed existing insurance coverage or insurance may not
continue to be available at commercially reasonable rates. Under federal regulations, CSXT is required to
transport hazardous materials under the legal duty referred to as the common carrier mandate.
CSXT is also required to comply with regulations regarding the handling of hazardous materials. In
November 2008, the TSA issued final rules placing significant new security and safety requirements on
passenger and freight railroad carriers, rail transit systems and facilities that ship hazardous materials by
rail. Noncompliance with these rules can subject the Company to significant penalties and could be a factor
in litigation arising out of a train accident. Finally, legislation preventing the transport of hazardous materials
through certain cities could result in network congestion and increase the length of haul for hazardous
substances, which could increase operating costs, reduce operating efficiency or increase the risk of an
accident involving the transport of hazardous materials.
CSX 2019 Form 10-K p.7
CSX CORPORATION
PART I
The Company faces competition from other transportation providers.
The Company experiences competition in pricing, service, reliability and other factors from various
transportation providers including railroads and motor carriers that operate similar routes across its service
area and, to a less significant extent, barges, ships and pipelines. Other transportation providers generally
use public rights-of-way that are built and maintained by governmental entities, while CSXT and other
railroads must build and maintain rail networks largely using internal resources. Any future improvements
or expenditures materially increasing the quality or reducing the cost of alternative modes of transportation
such as through the use of automation, autonomy or electrification, or legislation providing for less stringent
size or weight restrictions on trucks, could negatively impact the Company's competitive position. Additionally,
any future consolidation in the rail industry could materially affect the regulatory and competitive environment
in which the Company operates.
Global economic conditions could negatively affect demand for commodities and other freight.
A decline or disruption in general domestic and global economic conditions that affects demand for
the commodities and products the Company transports, including import and export volume, could reduce
revenues or have other adverse effects on the Company's cost structure and profitability. For example, slower
rates of economic growth in Asia, contraction of European economies, and changes in the global supply of
seaborne coal or price of seaborne coal have adverse impacts on U.S. export coal volume and result in
lower coal revenue for CSX. Additionally, changes to trade agreements or policies could result in reduced
import and export volumes due to increased tariffs and lower consumer demand. If the Company experiences
significant declines in demand for its transportation services with respect to one or more commodities and
products, the Company may experience reduced revenue and increased operating costs, workforce
adjustments, and other related activities, which could have a material adverse effect on the Company's
financial condition, results of operations and liquidity.
Changing dynamics in the U.S. and global energy markets could negatively impact profitability.
Increases in production and source locations of natural gas in the U.S. have resulted in lower natural
gas prices in CSX’s service territory. As a result of sustained low natural gas prices, many coal-fired power
plants have been displaced by natural gas-fired power generation facilities. If natural gas prices were to
remain low, additional coal-fired plants could be displaced, which would likely further reduce the Company's
domestic coal volumes and revenues. Additionally, crude oil prices combined with increased pipeline activity
have resulted in volatility in domestic crude oil production, which has affected crude oil volumes for CSX.
The Company relies on the security, stability and availability of its technology systems to operate
its business.
The Company relies on information technology in all aspects of its business. The performance and
reliability of the Company's technology systems are critical to its ability to operate and compete safely and
effectively. A cybersecurity attack, which is a deliberate theft of data or impairment of information technology
systems, or other significant disruption or failure, could result in a service interruption, train accident,
misappropriation of confidential information, process failure, security breach or other operational difficulties.
Such an event could result in decreased revenues and increased capital, insurance or operating costs,
including increased security costs to protect the Company's infrastructure. Insurance maintained by the
Company to protect against loss of business and other related consequences resulting from cyber incidents
may not be sufficient to cover all damages. A disruption or compromise of the Company's information
technology systems, even for short periods of time, could have a material adverse effect.
CSX 2019 Form 10-K p.8
CSX CORPORATION
PART I
The Company’s operations and financial results could be negatively impacted by climate change
and regulatory and legislative responses to climate change.
There is potential for operational impacts from changing weather patterns or rising sea levels in the
Company's operational territory, which could impact the Company's network or other assets. Climate change
and other emissions-related laws and regulations have been proposed and, in some cases adopted, on the
federal, state, provincial and local levels. These final and proposed laws and regulations take the form of
restrictions, caps, taxes or other controls on emissions. In particular, the EPA has issued various regulations
and may issue additional regulations targeting emissions, including rules and standards governing emissions
from certain stationary sources and from vehicles.
Any of
laws or
these pending or proposed
the
Company's operations and financial results by, among other things: (i) reducing coal-fired electricity
generation due to mandated emission standards; (ii) reducing the consumption of coal as a viable energy
resource in the United States and Canada; (iii) increasing the Company's fuel, capital and other operating
costs and negatively affecting operating and fuel efficiencies; and (iv) making it difficult for the Company's
customers in the U.S. and Canada to produce products in a cost competitive manner. Any of these factors
could reduce the amount of shipments the Company handles and have a material adverse effect on the
Company's financial condition, results of operations or liquidity.
regulations could adversely affect
The Company is subject to environmental laws and regulations that may result in significant
costs.
The Company is subject to wide-ranging federal, state, provincial and local environmental laws and
regulations concerning, among other things, emissions into the air, ground and water; the handling, storage,
use, generation, transportation and disposal of waste and other materials; the clean-up of hazardous material
and petroleum releases and the health and safety of our employees. If the Company violates or fails to
comply with these laws and regulations, CSX could be fined or otherwise sanctioned by regulators. The
Company can also be held liable for consequences arising out of human exposure to any hazardous
substances for which CSX is responsible. In certain circumstances, environmental liability can extend to
formerly owned or operated properties, leased properties, adjacent properties and properties owned by third
parties or Company predecessors, as well as to properties currently owned, leased or used by the Company.
The Company has been, and may in the future be, subject to allegations or findings to the effect that
it has violated, or is strictly liable under, environmental laws or regulations, and such violations can result
in the Company's incurring fines, penalties or costs relating to the clean-up of environmental contamination.
Although the Company believes it has appropriately recorded current and long-term liabilities for known and
reasonably estimable future environmental costs, it could incur significant costs that exceed reserves or
require unanticipated cash expenditures as a result of any of the foregoing. The Company also may be
required to incur significant expenses to investigate and remediate known, unknown or future environmental
contamination.
The Company may be subject to various claims and lawsuits that could result in significant
expenditures.
As part of its railroad and other operations, the Company is subject to various claims and lawsuits
related to disputes over commercial practices, labor and unemployment matters, occupational and personal
injury claims, property damage, environmental and other matters. The Company may experience material
judgments or incur significant costs to defend existing and future lawsuits. Although the Company maintains
insurance to cover some of these types of claims and establishes reserves when appropriate, final amounts
determined to be due on any outstanding matters may exceed the Company's insurance coverage or differ
materially from the recorded reserves. Additionally, the Company could be impacted by adverse
developments not currently reflected in the Company's reserve estimates.
CSX 2019 Form 10-K p.9
CSX CORPORATION
PART I
Disruption to a key railroad industry supplier could negatively affect operating efficiency and
increase costs.
The capital intensive and unique nature of core rail equipment (including rolling stock equipment,
locomotives, rail, and ties) limits the number of railroad equipment suppliers. If any of the current
manufacturers stops production or experiences a supply shortage, CSXT could experience a significant
cost increase or material shortage. In addition, a few critical railroad suppliers are foreign and, as such,
adverse developments in international relations, new trade regulations, disruptions in international shipping
or increases in global demand could make procurement of these supplies more difficult or increase CSXT's
operating costs. Additionally, if a fuel supply shortage were to arise, the Company would be negatively
impacted.
Network constraints could have a negative impact on service and operating efficiency.
CSXT could experience rail network difficulties related to: (i) increased volume; (ii) locomotive or
crew shortages; (iii) extreme weather conditions; (iv) impacts from changes in yard capacity, or network
structure or composition, including train routes; (v) increased passenger activities; or (vi) regulatory changes
impacting where and how fast CSXT can transport freight or maintain routes, which could impact CSXT's
operational fluidity, leading to deterioration of service, asset utilization and overall efficiency.
Future acts of terrorism, war or regulatory changes to combat the risk of terrorism may cause
significant disruptions in the Company's operations.
Terrorist attacks, along with any government response to those attacks, may adversely affect the
Company's financial condition, results of operations or liquidity. CSXT's rail lines, other key infrastructure
and information technology systems may be targets or indirect casualties of acts of terror or war. This risk
could cause significant business interruption and result in increased costs and liabilities and decreased
revenues. In addition, premiums charged for some or all of the insurance coverage currently maintained by
the Company could increase dramatically, or the coverage may no longer be available.
Furthermore, in response to the heightened risk of terrorism, federal, state and local governmental
bodies are proposing and, in some cases, have adopted legislation and regulations relating to security
issues that impact the transportation industry. For example, the Department of Homeland Security adopted
regulations that require freight railroads to implement additional security protocols when transporting
hazardous materials. Complying with these or future regulations could continue to increase the Company's
operating costs and reduce operating efficiencies.
Severe weather or other natural occurrences could result in significant business interruptions and
expenditures in excess of available insurance coverage.
The Company's operations may be affected by external factors such as severe weather and other
natural occurrences, including floods, fires, hurricanes and earthquakes. As a result, the Company's rail
network may be damaged, its workforce may be unavailable, fuel costs may rise and significant business
interruptions could occur. In addition, the performance of locomotives and railcars could be adversely
affected by extreme weather conditions. Insurance maintained by the Company to protect against loss of
business and other related consequences resulting from these natural occurrences is subject to coverage
limitations, depending on the nature of the risk insured. This insurance may not be sufficient to cover all of
the Company's damages or damages to others, and this insurance may not continue to be available at
commercially reasonable rates. Even with insurance, if any natural occurrence leads to a catastrophic
interruption of service, the Company may not be able to restore service without a significant interruption in
operations.
CSX 2019 Form 10-K p.10
CSX CORPORATION
PART I
Failure to complete negotiations on collective bargaining agreements could result in strikes and/or
work stoppages.
Most of CSX's employees are represented by labor unions and are covered by collective bargaining
agreements. These agreements are either bargained for nationally by the National Carriers Conference
Committee or locally between CSX and the union. Such agreements are negotiated over the course of
several years and previously have not resulted in any extended work stoppages. Under the Railway Labor
Act's procedures (which include mediation, cooling-off periods and the possibility of an intervention by the
President of the United States), during negotiations neither party may take action until the procedures are
exhausted. If, however, CSX is unable to negotiate acceptable agreements, the employees covered by the
Railway Labor Act could strike, which could result in loss of business and increased operating costs as a
result of higher wages or benefits paid to union members.
The unavailability of critical resources could adversely affect the Company’s operational efficiency
and ability to meet demand.
Marketplace conditions for resources like locomotives as well as the availability of qualified personnel,
particularly engineers and conductors, could each have a negative impact on the Company’s ability to meet
demand for rail service. Although the Company believes that it has adequate resources and personnel for
the current business environment, unpredictable increases in demand for rail services or extreme weather
conditions may exacerbate such risks, which could have a negative impact on the Company’s operational
efficiency and otherwise have a material adverse effect on the Company’s financial condition, results of
operations, or liquidity in a particular period.
Weaknesses in the capital and credit markets could negatively impact the Company’s access to
capital.
The Company regularly relies on capital markets for the issuance of long-term debt instruments,
commercial paper and bank financing from time to time. Instability or disruptions of the capital markets,
including credit markets, or the deterioration of the Company’s financial condition due to internal or external
factors, could restrict or prohibit access and could increase financing costs. A significant deterioration of the
Company’s financial condition could also reduce credit ratings and could limit or affect its access to external
sources of capital and increase the costs of short and long-term debt financing.
Item 1B. Unresolved Staff Comments
None
CSX 2019 Form 10-K p.11
Item 2. Properties
CSX CORPORATION
PART I
The Company’s properties primarily consist of track and its related infrastructure, locomotives and
freight cars and equipment. These categories and the geography of the network are described below.
Track and Infrastructure
Serving 23 states, the District of Columbia, and the Canadian provinces of Ontario and Quebec, the
CSXT rail network serves, among other markets, New York, Philadelphia and Boston in the Northeast and
Mid-Atlantic, the southeast markets of Atlanta, Miami and New Orleans, and the midwestern markets of St.
Louis, Memphis and Chicago.
CSXT’s track structure includes mainline track, connecting terminals and yards, track within terminals
and switching yards, sidings used for passing trains, track connecting CSXT's track to customer locations
and track that diverts trains from one track to another known as turnouts. Total track miles, which reflect the
size of CSXT’s network that connects markets, customers and western railroads, are greater than CSXT’s
approximately 20,000 route miles. At December 2019, the breakdown of track miles was as follows:
Mainline track
Terminals and switching yards
Passing sidings and turnouts
Total
Track
Miles
25,793
9,316
921
36,030
In addition to its physical track structure, the Company operates numerous yards and terminals for
rail and intermodal service. These serve as points of connectivity between the Company and its local
customers and as sorting facilities where railcars and intermodal containers are received, classed for
destination and placed onto outbound trains, or arrive and are delivered to the customer. The Company’s
largest yards and terminals based on 2019 volume (number of railcars or intermodal containers processed)
are listed below.
Yards and Terminals
Waycross, GA
Bedford Park Intermodal Terminal - Chicago, IL
Nashville, TN
Selkirk, NY
Avon, IN (Indianapolis)
Cincinnati, OH
Louisville, KY
Fairburn, GA Intermodal Terminal
Walbridge, OH (Toledo)
Chicago, IL
Annual Volume
874,474
820,362
648,311
642,869
609,468
567,582
397,246
377,736
323,672
308,653
CSX 2019 Form 10-K p.12
CSX CORPORATION
PART I
Network Geography
CSXT’s operations are primarily focused on four major transportation networks and corridors which
are defined geographically and by commodity flows below.
to support high-speed service across
Interstate 90 (I-90) Corridor – This CSXT corridor links Chicago and the Midwest to metropolitan areas in
New York and New England. This route, also known as the “waterlevel route,” has minimal hills and grades
and nearly all of it has two main tracks (referred to as double track). These engineering attributes permit
the corridor
intermodal, automotive and merchandise
commodities. This corridor is a primary route for import traffic coming from the far east through western
ports moving eastward across the country, through Chicago and into the population centers in the
Northeast. The I-90 Corridor is also a critical link between ports in New York, New Jersey, and Pennsylvania
and consumption markets in the Midwest. This route carries goods from all three of the Company’s major
markets – merchandise, coal and intermodal.
Interstate 95 (I-95) Corridor – The CSXT I-95 Corridor connects Charleston, Jacksonville, Miami and many
other cities throughout the Southeast with the heavily populated mid-Atlantic and northeastern cities of
Baltimore, Philadelphia and New York. CSXT primarily transports food and consumer products, as well as
metals and chemicals along this line. It is the leading rail corridor along the eastern seaboard south of the
District of Columbia, and provides access to major eastern ports.
Southeastern Corridor – This critical part of the network runs between CSXT’s western gateways of Chicago,
St. Louis and Memphis through the cities of Nashville, Birmingham, and Atlanta and markets in the
Southeast. The Southeastern Corridor is the premier rail route connecting these key cities, gateways, and
markets and positions CSXT to efficiently handle projected traffic volumes of intermodal, automotive and
general merchandise traffic. The corridor also provides direct rail service between the coal reserves of the
southern Illinois basin and the demand for coal in the Southeast.
Coal Network – The CSXT coal network connects the coal mining operations in the Appalachian mountain
region and Illinois basin with industrial areas in the Southeast, Northeast and Mid-Atlantic, as well as many
river, lake, and deep water port facilities. The domestic coal market has declined significantly over the last
decade and export coal remains subject to a high degree of volatility. CSXT’s coal network remains well
positioned to supply utility markets in both the Northeast and Southeast and to transport coal shipments for
export outside of the U.S. Roughly one-third of the tons of export coal and the majority of the domestic coal
that the Company transports is used for generating electricity.
See the following page for a map of the CSX Rail Network. Also included on the map, CSX Operating
Agreement indicates areas within which CSX can operate through trackage rights beyond the CSX network.
CSX 2019 Form 10-K p.13
CSX CORPORATION
PART I
CSX Rail Network
CSX 2019 Form 10-K p.14
CSX CORPORATION
PART I
Locomotives
At December 2019, CSXT owned more than 3,500 locomotives. From time to time, the Company
also short-term leases locomotives based on business needs. Freight locomotives are used primarily to pull
trains while switching locomotives are used in yards. Auxiliary units are typically used to provide extra traction
for heavy trains in hilly terrain. Of owned locomotives, approximately 65% were in active service as of
December 31, 2019, and the remainder were in storage to be utilized as needed. Storing locomotives and
equipment allows the Company to quickly adjust its active fleet based on demand and other factors while
avoiding delays due to supply limitations or excessive lead times to acquire additional equipment. At
December 2019, CSXT’s fleet of owned locomotives consisted of the following types:
Freight
Switching
Auxiliary Units
Total
Equipment
Locomotives
%
Average Age
(years)
3,162
220
179
3,561
89%
6%
5%
100%
20
42
27
21
The Company owns or long-term leases equipment, including several types of freight cars and
intermodal containers. Of total owned and long-term leased equipment, approximately 65% was in active
service on December 31, 2019, and the remainder was in storage to be utilized as needed. At December
2019, the Company’s owned and long-term leased equipment consisted of the following:
Equipment
Gondolas
Multi-level flat cars
Covered hoppers
Open-top hoppers
Box cars
Flat cars
Other cars
Subtotal freight cars
Containers
Total equipment
Number of Units
%
37%
22%
16%
14%
9%
1%
1%
100%
19,102
11,172
8,346
7,405
4,509
702
262
51,498
17,981
69,479
At any time, over half of the railcars on the CSXT system are not owned or leased by the
Company. Examples of these include railcars owned by other railroads (which are utilized by CSXT), shipper-
furnished or private cars (which are generally used only in that shipper’s service), multi-level railcars used
to transport automobiles (which are shared between railroads) and double-stack railcars, or well cars (which
are industry pooled), that allow for two intermodal containers to be loaded one above the other.
CSX 2019 Form 10-K p.15
CSX CORPORATION
PART I
The Company’s revenue-generating equipment, either owned or long-term leased, consists of
freight cars and containers as described below.
Gondolas – Support CSXT’s metals markets and provide transport for woodchips and other bulk
commodities. Some gondolas are equipped with special hoods for protecting products like coil and sheet
steel.
Multi-level flat cars – Transport finished automobiles and are differentiated by the number of levels: bi-
levels for large vehicles such as pickup trucks and SUVs and tri-levels for sedans and smaller automobiles.
Covered hoppers – Have a permanent roof and are segregated based upon commodity density. Lighter
bulk commodities such as grain, fertilizer, flour, salt, sugar, clay and lime are shipped in large cars called
jumbo covered hoppers. Heavier commodities like cement, ground limestone and industrial sand are
shipped in small cube covered hoppers.
Open-top hoppers – Transport heavy dry bulk commodities such as coal, coke, stone, sand, ores and
gravel that are resistant to weather conditions.
Box cars – Include a variety of tonnages, sizes, door configurations and heights to accommodate a wide
range of finished products, including paper, auto parts, appliances and building materials. Insulated box
cars deliver food products, canned goods, beer and wine.
Flat cars – Used for shipping intermodal containers and trailers or bulk and finished goods, such as
lumber, pipe, plywood, drywall and pulpwood.
Other cars – Primarily leased refrigerator cars and slab steel cars.
Containers – Weather-proof boxes used for bulk shipment of freight.
Item 3. Legal Proceedings
For further details, please refer to Note 8. Commitments and Contingencies of this annual report
on Form 10-K.
Item 4. Mine Safety Disclosure
Not Applicable
CSX 2019 Form 10-K p.16
Executive Officers of the Registrant
CSX CORPORATION
PART I
Executive officers of the Company are elected by the CSX Board of Directors and generally hold
office until the next annual election of officers. There are no family relationships or any arrangement or
understanding between any officer and any other person pursuant to which such officer was elected. As of
the date of this filing, the executive officers’ names, ages and business experience are:
Name and Age
Business Experience During Past Five Years
James M. Foote, 66
President and Chief Executive
Officer
Foote has served as President and Chief Executive Office since December 2017.
He joined CSX in October 2017 as Chief Operating Officer, with responsibility for
both operations and sales and marketing.
Kevin S. Boone, 42
Executive Vice President and
Chief Financial Officer
Mr. Foote has more than 40 years of railroad industry experience. Most recently,
he was President and Chief Executive Officer of Bright Rail Energy. Before heading
Bright Rail, he was Executive Vice President, Sales and Marketing with Canadian
National Railway Company. At Canadian National, Mr. Foote also served as Vice
President – Investor Relations and Vice President Sales and Marketing –
Merchandise.
Boone was named Executive Vice President and Chief Financial Officer in October
2019 after serving as Interim Chief Financial Officer since May 2019. In this role,
he is responsible for all financial aspects of the Company's business including
financial and economic analysis, accounting, tax, treasury, real estate and
purchasing activities.
Mr. Boone has more than 18 years of experience in finance, accounting, mergers
and acquisitions, and transportation performance analysis. He joined CSX in
September 2017 as Vice President of Corporate Affairs and Chief Investor
Relations Officer and was later named Vice President, Marketing and Strategy
leading research and data analysis to advance growth strategies for CSX. Before
joining CSX in 2017, Mr. Boone worked as a Senior Equity Research Analyst at
Janus Capital. He also served as a Vice President at Morgan Stanley in equity
research and an associate at Merrill Lynch in the mergers and acquisitions group.
Jamie J. Boychuk, 42
Executive Vice President of
Operations
Boychuk has served as CSXT's Executive Vice President of Operations since
October 2019. In this role, he is responsible for mechanical, engineering,
transportation and network operations, including terminals.
Since joining CSXT in 2017, he has held the positions of Senior Vice President
of Network, Engineering, Mechanical and Intermodal Operations; Vice President
of Scheduled Railroading; and Assistant Vice President of Transportation Support.
Mr. Boychuk previously worked at Canadian National Railway, where he served
for 20 years in various operational roles of increasing responsibility, including sub-
region General Manager.
Edmond L. Harris, 70
Executive Vice President
Harris has served as an Executive Vice President of CSX since October 2019. In
this role, he is responsible for safety, performance metrics, operational planning,
and facilities.
In 2018, he joined CSXT as Executive Vice President of Operations. Mr. Harris
has more than 40 years of railroad industry experience, including service as a
senior adviser to Global Infrastructure Partners, an independent fund that invests
in infrastructure assets worldwide; Chairman of Omnitrax Rail Network; and a
member of the board of directors for Universal Rail Services. His previous
experience also includes having served as Chief Operations Officer at Canadian
Pacific, and subsequently, a member of the Board. He also served as Executive
Vice President of Operations at Canadian National.
CSX 2019 Form 10-K p.17
CSX CORPORATION
PART I
Name and Age
Business Experience During Past Five Years
Nathan D. Goldman, 62
Executive Vice President and
Chief Legal Officer
Goldman has served as Executive Vice President and Chief Legal Officer, and
Corporate Secretary of CSX since November 2017. In this role, he directs the
Company’s legal affairs, government relations, corporate communications, risk
management, public safety, environmental, and audit functions.
During his 16 years with the Company, Mr. Goldman has previously served as
Vice President of Risk Compliance and General Counsel and has overseen work
in compliance, risk management and safety programs.
Diana B. Sorfleet, 55
Executive Vice President and
Chief Administrative Officer
Sorfleet was named Executive Vice President and Chief Administrative Officer in
July 2018. In this role, her responsibilities include human resources, information
technology, labor relations, people systems and analytics, total rewards and
aviation.
During her 8 years with the Company, Ms. Sorfleet has previously served as Chief
Human Resources Officer. Prior to joining CSX, she worked in human resources
for 20 years.
Mark K. Wallace, 50
Executive Vice President and
Chief Sales & Marketing Officer
Wallace has served as Executive Vice President of Sales and Marketing since
July 2018. In his current role, Mr. Wallace is responsible for the commercial
organization. He joined the Company in March 2017 and previously served as
Executive Vice President and Chief Administrative Officer and Executive Vice
President of Corporate Affairs and Chief of Staff to the CEO.
Prior to joining CSX, he served as the Vice President of Corporate Affairs at
Canadian Pacific Railway Limited with responsibility
the corporate
communications and public affairs, investor relations, facilities and real estate
functions. Prior to his time at Canadian Pacific, Mr. Wallace spent more than 15
years in various senior management positions with Canadian National Railway
Company.
for
Angela C. Williams, 45
Vice President and Chief
Accounting Officer
Williams has served as Vice President and Chief Accounting Officer of CSX since
March 2018. She is responsible for financial and regulatory reporting, freight billing
and collections, payroll, accounts payable and various other accounting
processes.
During her 16 years with the Company, she previously served as Assistant Vice
President - Assistant Controller and in other various accounting roles. Prior to
joining CSX, she held various accounting and auditing positions for over 6 years.
Ms. Williams is a Certified Public Accountant.
CSX 2019 Form 10-K p.18
CSX CORPORATION
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Market Information
CSX’s common stock is listed on the Nasdaq Global Select Market, which is its principal trading
market, and is traded over-the-counter and on exchanges nationwide. The official trading symbol is “CSX.”
Description of Common and Preferred Stock
A total of 1.8 billion shares of common stock are authorized, of which 773,470,825 shares were
outstanding as of December 31, 2019. Each share is entitled to one vote in all matters requiring a vote of
shareholders. There are no preemptive rights, which are privileges extended to select shareholders that
would allow them to purchase additional shares before other members of the general public in the event of
an offering. At January 31, 2020, the latest practicable date that is closest to the filing date, there were
25,127 common stock shareholders of record. The weighted average of common shares outstanding, which
was used in the calculation of diluted earnings per share, was 798 million as of December 31, 2019. (See
Note 2, Earnings Per Share.) A total of 25 million shares of preferred stock is authorized, none of which is
currently outstanding.
The following table sets forth, for the quarters indicated, the dividends declared on CSX common
stock.
Quarter
1st
2nd
3rd
4th
Year
2019
2018
$
$
0.24 $
0.22 $
0.24 $
0.22 $
0.24 $
0.22 $
0.24 $
0.22 $
0.96
0.88
Stock Performance Graph
The cumulative shareholder returns, assuming reinvestment of dividends, on $100 invested at
December 31, 2014 are illustrated on the graph below. The Company references the Standard & Poor's
500 Stock Index (“S&P 500 ®”), and the Dow Jones U.S. Transportation Average Index, which provide
comparisons to a broad-based market index and other companies in the transportation industry.
CSX 2019 Form 10-K p.19
CSX Purchases of Equity Securities
CSX CORPORATION
PART II
The Company continues to repurchase shares under the $5 billion program announced in January
2019. For more information about share repurchases, see Note 2 Earnings Per Share. Share repurchase
activity of $606 million for the fourth quarter 2019 was as follows:
CSX Purchases of Equity Securities for the Quarter
Fourth Quarter
Beginning Balance
October 1 - October 31, 2019
November 1 - November 30, 2019
December 1 - December 31, 2019
Total Number
of Shares
Purchased
Average
Price
Paid per
Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs(a)
7,738,077
$
67.74
1,191,270
—
70.42
—
7,719,147
1,191,270
—
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans
or Programs
$
2,362,512,464
1,839,693,245
1,755,803,734
1,755,803,734
Ending Balance
(a) The difference between the "Total Number of Shares Purchased" and the "Total Number of Shares Purchased as Part of Publicly Announced
Plans or Programs" of 18,930 shares for the quarter represents shares purchased to fund the Company's contribution to a 401(k) plan that covers
certain union employees.
1,755,803,734
8,910,417
8,929,347
68.10
$
$
CSX 2019 Form 10-K p.20
Item 6. Selected Financial Data
CSX CORPORATION
PART II
Selected financial data related to the Company’s financial results for the last five fiscal years are
listed below.
(Dollars and Shares in Millions, Except Per Share Amounts)
2019
2018
Fiscal Years
2017
2016
2015
Financial Performance
Revenue
Expense
Operating Income
Adjusted Operating Income(a)
Net Earnings from Continuing Operations
Adjusted Net Earnings from Continuing Operations(a)
Operating Ratio
Adjusted Operating Ratio(a)
Net Earnings Per Share:
From Continuing Operations, Basic
From Continuing Operations, Assuming Dilution
Adjusted From Continuing Operations, Assuming
Dilution(a)
Average Common Shares Outstanding
Basic
Assuming Dilution
Financial Position
Cash, Cash Equivalents and Short-term Investments
Total Assets
Long-term Debt
Shareholders' Equity
Dividend Per Share
Additional Data
Capital Expenditures
Employees -- Annual Averages (estimated)
Employees -- Year-end Count (estimated)
$11,937
$12,250
$11,408
$11,069
$11,811
6,972
7,381
7,688
7,656
8,183
$ 4,965
4,965
$ 3,331
3,331
$ 4,869
4,869
$ 3,309
3,309
$ 3,720
3,818
$ 5,471
2,097
$ 3,413
3,413
$ 1,714
1,714
$ 3,628
3,628
$ 1,968
1,968
58.4%
58.4%
60.3%
60.3%
67.4%
66.5%
69.2%
69.2%
69.3%
69.3%
$ 4.18
$ 3.86
$ 6.01
$ 1.81
$ 2.00
4.17
4.17
796
798
3.84
3.84
857
861
5.99
2.30
911
914
1.81
1.81
947
948
2.00
2.00
983
984
$ 1,954
38,257
15,993
11,863
$ 1,111
36,729
14,739
12,580
419
$
35,739
11,790
14,721
$ 1,020
35,414
10,962
11,694
$ 1,438
34,745
10,515
11,668
$ 0.96
$ 0.88
$ 0.78
$ 0.72
$ 0.70
$ 1,657
$ 1,745
$ 2,040
$ 2,705
$ 2,562
21,561
20,908
22,901
22,475
25,230
24,006
27,350
26,628
31,285
29,410
(a) Adjusted operating income, adjusted net earnings and adjusted earnings per share assuming dilution are non-GAAP measures that exclude
the impacts of tax reform and restructuring activities in 2017. These non-GAAP measures are unlikely to be comparable to similar measures
presented by other companies. The presentation of these non-GAAP measures should not be considered in isolation from, as a substitute for,
or as superior to the financial information presented in accordance with GAAP. Reconciliations of non-GAAP measures to corresponding GAAP
measures are presented in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
CSX 2019 Form 10-K p.21
CSX CORPORATION
PART II
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
TERMS USED BY CSX
When used in this report, unless otherwise indicated by the context, these terms are used to mean
the following:
Car hire - A charge paid by one railroad for its use of cars belonging to another railroad or car owner.
Class I freight railroad - One of the largest line haul freight railroads as determined based on operating
revenue; the exact revenue required to be in each class is periodically adjusted for inflation by the Surface
Transportation Board. Smaller railroads are classified as Class II or Class III.
Common carrier mandate - A federal mandate that requires U.S. railroads to accommodate reasonable
requests from shippers to carry any freight, including hazardous materials.
Demurrage - A charge assessed by railroads for the use of rail cars by shippers or receivers of freight beyond
a specified free time.
Department of Transportation ("DOT") - A U.S. government agency with jurisdiction over matters of all
modes of transportation.
Depreciation study - Conducted by a third-party specialist and analyzed by management, a periodic statistical
analysis of fixed asset service lives, salvage values, accumulated depreciation, and other factors for group
assets along with a comparison of similar asset groups at other companies.
Double-stack - Stacking containers two-high on specially equipped cars.
Drayage - The pickup or delivery of intermodal shipments by truck.
Environmental Protection Agency (“EPA”) - A U.S. government agency that has regulatory authority with
respect to environmental law.
Federal Railroad Administration ("FRA") - The branch of the DOT that is responsible for developing and
enforcing railroad safety regulations, including safety standards for rail infrastructure and equipment.
Free cash flow - The calculation of a non-GAAP measure by using net cash provided by operating activities
and adjusting for property additions and certain other investing activities. Free cash flow is a measure of cash
available for paying dividends, share repurchases and principal reduction on outstanding debt.
Group-life depreciation - A type of depreciation in which assets with similar useful lives and characteristics
are aggregated into groups. Instead of calculating depreciation for individual assets, depreciation is calculated
as a whole for each group.
Incidental revenue - Revenue for switching, demurrage, storage, etc.
Intermodal - A flexible way of transporting freight over highway, rail and water without being removed from
the original transportation equipment, namely a container or trailer.
Mainline - The main track thoroughfare, exclusive of terminals, yards, sidings and turnouts.
CSX 2019 Form 10-K p.22
CSX CORPORATION
PART II
Pipeline and Hazardous Materials Safety Administration (“PHMSA”) - An agency within the DOT that,
together with the FRA, has broad jurisdiction over railroad operating standards and practices, including
hazardous materials requirements.
Positive Train Control ("PTC") - An interoperable train control system designed to prevent train-to-train
collisions, over-speed derailments, incursions into established work-zone limits, and train diversions onto
another set of tracks.
Revenue adequacy - The achievement of a rate of return on investment at least equal to the industry cost
of investment capital, as measured by the STB.
Shipper - A customer shipping freight via rail.
Siding - Track adjacent to the mainline used for passing trains.
Staggers Act of 1980 - Congressional law which significantly deregulated the rail industry, replacing the
regulatory structure in existence since the 1887 Interstate Commerce Act. Where previously rates were
controlled by the Interstate Commerce Commission, the Staggers Act allowed railroads to establish their own
rates for shipments, enhancing their ability to compete with other modes of transportation.
Surface Transportation Board ("STB") - An independent governmental adjudicatory body administratively
housed within the DOT, responsible for the economic regulation of interstate surface transportation within the
United States.
Switching - Putting cars in a specific order, placing cars for loading, retrieving empty cars or adding or removing
cars from a train at an intermediate point.
Terminal - A facility, typically owned by a railroad, for the handling of freight and for the breaking up, making
up, forwarding and servicing of trains.
Transportation Security Administration (“TSA”) - A component of the Department of Homeland Security
with broad authority over railroad operating practices that may have homeland security implications.
TTX Company ("TTX") - A company that provides its owner-railroads with standardized fleets of intermodal,
automotive and general use railcars at time and mileage rates. CSX owns about 20 percent of TTX's common
stock, and the remainder is owned by the other leading North American railroads and their affiliates.
Turnout - A track that diverts trains from one track to another.
Yard - A system of tracks, other than main tracks and sidings, used for making up trains, storing cars and
other purposes.
CSX 2019 Form 10-K p.23
CSX CORPORATION
PART II
2019 HIGHLIGHTS
• Revenue of $11.9 billion decreased $313 million or 3% versus the prior year.
• Expenses of $7.0 billion decreased $409 million or 6% year over year.
• Operating income of $5.0 billion increased $96 million or 2% year over year.
• Operating ratio of 58.4% improved 190 basis points from 60.3%.
• Earnings per diluted share of $4.17 increased $0.33 or 9% year over year.
2019 vs. 2018 Results of Operations
RESULTS OF OPERATIONS
(Dollars in Millions)
Revenue
Expense
Labor and Fringe
Materials, Supplies and Other
Depreciation
Fuel
Equipment and Other Rents
Equity Earnings of Affiliates
Total Expense
Operating Income
Interest Expense
Other Income - Net
Income Tax Expense
Net Earnings
Earnings Per Diluted Share:
Net Earnings
Operating Ratio
Fiscal Years
2019
2018
$
Change
%
Change
$ 11,937
$
12,250
$
(313)
(3)%
2,616
1,784
1,349
906
408
(91)
6,972
4,965
(737)
88
(985)
3,331
4.17
58.4%
$
$
$
$
2,738
1,967
1,331
1,046
395
(96)
7,381
4,869
(639)
74
(995)
3,309
3.84
60.3%
$
$
122
183
(18)
140
(13)
(5)
409
96
(98)
14
10
22
4
9
(1)
13
(3)
(5)
6
2
(15)
19
1
1
0.33
9 %
190
bps
CSX 2019 Form 10-K p.24
2019 vs. 2018 Results of Operations, continued
CSX CORPORATION
PART II
Volume and Revenue (Unaudited)
Volume (Thousands of units); Revenue (Dollars in Millions); Revenue Per Unit (Dollars)
Volume
Revenue
Revenue Per Unit
2019
2018
%
Change
2019
2018
%
Change
2019
2018
%
Change
Chemicals
Agricultural and Food Products
Automotive
Minerals
Forest Products
Metals and Equipment
Fertilizers
Total Merchandise
Coal
Intermodal
Other
Total
668
469
456
335
288
248
243
2,707
843
2,670
—
675
447
463
315
285
267
248
2,700
887
2,895
—
6,220
6,482
(1)% $ 2,343
5 %
1,410
(2)%
6 %
1 %
(7)%
(2)%
— %
(5)%
(8)%
1,236
550
878
741
431
7,589
2,070
1,760
— %
518
(4)% $11,937
$ 2,339
1,306
1,267
518
850
769
442
7,491
2,246
1,931
582
$12,250
— % $ 3,507
8 %
3,006
(2)%
6 %
3 %
(4)%
(2)%
1 %
(8)%
(9)%
2,711
1,642
3,049
2,988
1,774
2,803
2,456
659
(11)%
—
(3)% $ 1,919
$ 3,465
2,922
2,737
1,644
2,982
2,880
1,782
2,774
2,532
667
—
$ 1,890
1 %
3 %
(1)%
— %
2 %
4 %
— %
1 %
(3)%
(1)%
— %
2 %
CSX 2019 Form 10-K p.25
CSX CORPORATION
PART II
Revenue
In 2019, revenue decreased $313 million, or 3%, when compared to the previous year due to volume
declines, lower other revenue and decreases in fuel recovery. These decreases were partially offset by
merchandise and intermodal pricing gains and favorable mix.
Merchandise Volume
Chemicals - Declined due to reduced natural gas liquids and fly ash shipments, partially offset by
growth in crude oil as well as industrial and municipal waste.
Agricultural and Food Products - Increased due to gains in feed grain and ingredients, ethanol, as
well as sweeteners and oils.
Automotive - Declined due to lower passenger car shipments, partially offset by higher shipments
of trucks and SUVs.
Minerals - Increased due to higher shipments for highway construction and paving projects.
Forest Products - Increased due to higher demand for wood pulp and other fiber products as well
as lumber, partially offset by reduced pulpboard shipments.
Metals and Equipment - Declined due to reduced metals shipments, primarily in the steel, construction
and scrap markets.
Fertilizers - Declined due to unfavorable weather conditions throughout the year that impacted
fertilizer applications.
Coal Volume
Domestic coal declined primarily due to lower shipments of utility coal as a result of continued
competition from natural gas, partially offset by stronger shipments for coke, iron ore and other coal.
Export coal declined due to lower international shipments of both thermal and metallurgical coal as
global benchmark prices declined.
Intermodal Volume
Domestic and international intermodal declined primarily due to rationalization of low-density lanes.
Other
Other revenue decreased $64 million versus prior year primarily due to lower revenue for storage
at intermodal facilities and a decrease in settlements from customers that did not meet volume
commitments. These decreases were partially offset by a favorable contract settlement with a
customer.
CSX 2019 Form 10-K p.26
CSX CORPORATION
PART II
Expense
In 2019, total expenses decreased $409 million, or 6%, compared to prior year. Descriptions of each
expense category as well as significant year-over-year changes are described below.
Labor and Fringe expenses include employee wages and related payroll taxes, health and welfare costs,
pension, other post-retirement benefits and incentive compensation. These expenses decreased $122
million due to the following items:
•
•
•
Efficiency and volume savings of $157 million primarily resulted from lower headcount and
reduced crew starts.
Incentive compensation decreased $12 million primarily due to lower expected annual
incentive payouts, partially offset by the acceleration of stock compensation expense for
certain retirement-eligible employees.
Other costs increased $47 million primarily due to inflation that was partially offset by several
non-significant items.
Materials, Supplies and Other expenses consist primarily of contracted services to maintain infrastructure
and equipment, terminal and pier services and professional services. This category also includes costs
related to materials, travel, casualty claims, environmental remediation, train accidents, property and sales
tax, utilities and other items including gains on property dispositions. Total materials, supplies and other
expenses decreased $183 million driven by the following:
•
•
•
Efficiency and volume savings of $201 million primarily resulted from lower operating support
costs, reduced equipment maintenance expenses and lower terminal and trucking costs.
Gains from real estate and line sales were $151 million in 2019 compared to $154 million in
2018.
All other costs increased $15 million primarily due to inflation and favorable adjustments to
casualty reserves in 2018, partially offset by other items.
Depreciation expense primarily relates to recognizing the costs of a capital asset, such as locomotives,
railcars and track structure, over its useful life. This expense is impacted primarily by the capital expenditures
made each year. Depreciation expense increased $18 million due to a larger asset base and a 2019
equipment depreciation study that resulted in $10 million of additional expense, partially offset by other non-
significant items.
Fuel expense includes locomotive diesel fuel as well as non-locomotive fuel. This expense is largely driven
by the market price and locomotive consumption of diesel fuel. Fuel expense decreased $140 million primarily
due to an 8% price decrease that drove savings of $74 million, a 4% improvement in fuel efficiency and
volume savings.
Equipment and Other expenses include rent paid for freight cars owned by other railroads or private
companies, net of rents received by CSXT for use of its equipment. This category of expenses also includes
expenses for short-term and long-term leases of locomotives, railcars, containers and trailers, offices and
other rentals. These expenses increased $13 million primarily due to inflation as well as several non-
significant items, partially offset by volume and efficiency savings.
Equity Earnings of Affiliates includes earnings from operating equity method investments. Equity earnings
of affiliates decreased $5 million primarily due to lower net earnings at TTX.
CSX 2019 Form 10-K p.27
CSX CORPORATION
PART II
Interest Expense
Interest Expense includes interest on long-term debt, equipment obligations and finance leases. Interest
expense increased $98 million to $737 million primarily due to higher average debt balances, partially offset
by lower average rates.
Other Income - Net
Other Income - Net includes investment gains, losses and interest income, as well as components of net
periodic pension and post-retirement benefit cost and other non-operating activities. Other income increased
$14 million to $88 million primarily due to increased interest income as a result of higher average investment
balances.
Income Tax Expense
Income Tax Expense decreased $10 million primarily due to tax benefits from the impacts of stock option
exercises and the vesting of other equity awards as well as the resolution of certain state tax matters, partially
offset by benefits in 2018 related to state legislative changes and a federal deferred tax adjustment.
Net Earnings and Earnings per Diluted Share
Net Earnings increased $22 million to $3.3 billion, and earnings per diluted share increased $0.33 to $4.17,
due to the factors mentioned above. Average shares outstanding was lower as a result of share repurchase
activity during the year and had a favorable impact on earnings per diluted share.
2018 vs. 2017 Results of Operations
See discussion of 2018 results of operations compared to 2017 results of operations in Part II, Item
7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the
Company's Annual Report on Form 10-K for the year ended December 31, 2018.
CSX 2019 Form 10-K p.28
CSX CORPORATION
PART II
Non-GAAP Measures - Unaudited
CSX reports its financial results in accordance with United States generally accepted accounting
principles ("GAAP"). CSX also uses certain non-GAAP measures that fall within the meaning of Securities
and Exchange Commission Regulation G and Regulation S-K Item 10(e), which may provide users of the
financial information with additional meaningful comparison to prior reported results. Non-GAAP measures
do not have standardized definitions and are not defined by GAAP. Therefore, CSX’s non-GAAP measures
are unlikely to be comparable to similar measures presented by other companies. The presentation of these
non-GAAP measures should not be considered in isolation from, as a substitute for, or as superior to the
financial information presented in accordance with GAAP. Reconciliations of non-GAAP measures to
corresponding GAAP measures are below.
2017 Adjusted Operating Results
Management believes that adjusted operating income, adjusted operating ratio, adjusted net earnings
and adjusted net earnings per share, assuming dilution are important in evaluating the Company’s operating
performance and for planning and forecasting future business operations and future profitability. These non-
GAAP measures provide meaningful supplemental information regarding operating results because they
exclude certain significant items that are not considered indicative of future financial trends.
The impact of tax reform and the restructuring charge on 2017 operating results are shown in the
following table. There were no adjustments to operating results in 2018 or 2019.
(in millions, except operating ratio and net
earnings per share, assuming dilution)
Operating
Income
Operating
Ratio
Net
Earnings
Net
Earnings
Per Share,
Assuming
Dilution
For the Year ended December 31, 2017
GAAP Operating Results
Restructuring Charge (a)(b)
Tax Reform Benefit (net)
Adjusted Operating Results (non-GAAP)
(a) The restructuring charge was tax effected using rates reflective of the applicable tax amounts for each component of the restructuring charge.
(b) The total restructuring charge was $325 million, of which $85 million was included in Restructuring Charge - Non-Operating on the consolidated
income statement.
5,471
203
(3,577)
2,097 $
3,720
240
(142)
3,818
5.99
0.22
(3.91)
2.30
67.4
(2.1)
1.2
66.5% $
$
CSX 2019 Form 10-K p.29
CSX CORPORATION
PART II
Free Cash Flow and Adjusted Free Cash Flow
Management believes that free cash flow is useful to investors as it is important in evaluating the
Company’s financial performance. More specifically, free cash flow measures cash generated by the
business after reinvestment. This measure represents cash available for both equity and bond investors to
be used for dividends, share repurchases or principal reduction on outstanding debt. Free cash flow is
calculated by using net cash from operations and adjusting for property additions and certain other investing
activities, which includes proceeds from property dispositions. Adjusted free cash flow excludes the impact
of cash payments for restructuring charge. Free cash flow and adjusted free cash flow should be considered
in addition to, rather than a substitute for, cash provided by operating activities. Adjusted free cash flow
before dividends increased $279 million year-over-year to $3.5 billion primarily due to an increase in cash
provided by operating activities and a decrease in property additions.
The following table reconciles cash provided by operating activities (GAAP measure) to free cash
flow and adjusted free cash flow (both non-GAAP measures).
(Dollars in Millions)
Net cash provided by operating activities
Property additions
Other investing activities
Free Cash Flow, before dividends (non-GAAP)
Add back: Cash Payments for Restructuring Charge (after-tax) (a)
Adjusted Free Cash Flow, before dividends (non-GAAP)
135
1,701
(a) The restructuring charge impact to free cash flow was tax effected using the applicable tax rate of the charge. During 2018 and 2017, the
Company made cash payments of $15 million and $187 million, respectively, related to the restructuring charge. Also in 2017, the Company made
$30 million in payments to a former CEO and a former President for previously accrued non-qualified pension benefits that are not included in the
restructuring charge.
— $
3,478 $
11 $
3,199 $
$
$
2019
Fiscal Years
2018
2017
$
$
4,850 $
(1,657)
285
3,478 $
4,641 $
(1,745)
292
3,188 $
3,472
(2,040)
134
1,566
CSX 2019 Form 10-K p.30
Operating Statistics (Estimated)
CSX CORPORATION
PART II
Operations Performance
Train Velocity (Miles per hour)(a)
Dwell (Hours)(a)
Revenue Ton- Miles (Billions)
Merchandise
Coal
Intermodal
Total Revenue Ton-Miles
Total Gross Ton-Miles (Billions)
On-Time Originations
On-Time Arrivals(b)
Safety
FRA Personal Injury Frequency Index
FRA Train Accident Rate
Fiscal Years
2019
2018
Improvement/
(Deterioration)
20.5
8.6
128.0
41.1
26.9
196.0
388.3
89%
79%
0.88
2.14
18.0
9.5
128.1
45.5
29.3
202.9
402.7
82%
75%
1.03
3.64
14 %
9 %
— %
(10)%
(8)%
(3)%
(4)%
9 %
5 %
15 %
41 %
(a) The methodology for calculating train velocity and dwell differ from that prescribed by the STB as the Company believes these numbers more
accurately reflect railroad performance. CSXT will continue to report train velocity and dwell, using the prescribed methodology, to the STB on a
weekly basis. See additional discussion on the Company's website.
(b) During 2019, the calculation of on-time arrivals has changed to consider a train "on time" if it is delivered within two hours of scheduled
arrival. Prior year periods have been restated to conform to this change.
Certain operating statistics are estimated and can continue to be updated as actuals settle.
Key Performance Measures Definitions
Train Velocity - Average train speed between origin and destination in miles per hour (does not include locals, yard jobs, work trains or passenger
trains). Train velocity measures the profiled schedule of trains (from departure to arrival and all interim time), and train profiles are periodically
updated to align with a changing operation.
Dwell - Average amount of time in hours between car arrival to and departure from the yard.
Revenue Ton-Miles (RTM's) - The movement of one revenue-producing ton of freight over a distance of one mile.
Gross Ton-Miles (GTM's) - The movement of one ton of train weight over one mile. GTM's are calculated by multiplying total train weight by distance
the train moved. Total train weight is comprised of the weight of the freight cars and their contents.
On-Time Originations - Percent of scheduled road trains that depart the origin yard on-time or ahead of schedule.
On-Time Arrivals - Percent of scheduled road trains that arrive at the destination yard on-time to within two hours of scheduled arrival.
FRA Personal Injury Frequency Index - Number of FRA-reportable injuries per 200,000 man-hours.
FRA Train Accident Rate - Number of FRA-reportable train accidents per million train-miles.
The Company strives for continuous improvement in safety and service performance through training,
innovation and investment. Investment in training and technology also is designed to allow the Company's
employees to have an additional layer of protection that can detect and avoid many types of human factor
incidents. Safety programs are designed to prevent incidents that can adversely impact employees,
customers and communities. Continued capital investment in the Company's assets, including track, bridges,
signals, equipment and detection technology also supports safety performance.
Operating performance continued to improve in 2019, as train velocity and car dwell achieved all-
time record levels for the second consecutive year. The operational plan remains focused on delivering
further service gains, improving transit times and driving asset utilization while controlling costs.
From a safety perspective, FRA personal injury index and train-accident rate improved 15% and
41% from the prior year, respectively. In 2019, the number of FRA reportable injuries and the number of
train accidents were both all-time record lows. The Company is committed to continuous safety improvement
and remains focused on reducing risk and enhancing the overall safety of its employees, customers and
the communities in which the Company operates.
CSX 2019 Form 10-K p.31
CSX CORPORATION
PART II
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is a company’s ability to generate adequate amounts of cash to meet both current and
future needs for obligations as they mature and to provide for planned capital expenditures, including those
to address regulatory and legislative requirements. To have a complete picture of a company’s liquidity, its
sources and uses of cash, balance sheet and external factors should be reviewed.
Significant Cash Flows
The following charts highlight the components of the change in cash and cash equivalents for
operating, investing and financing activities for full years 2019, 2018 and 2017.
In 2019, the Company generated $4.9 billion of cash provided by operating activities, which was
$209 million higher than prior year primarily driven by favorable working capital activities and higher cash-
generating income. In 2018, the Company generated $4.6 billion of cash provided by operating activities,
which was $1.2 billion higher than the prior year primarily driven by higher cash-generating income which
included the impact of a lower income tax rate, partially offset by lower working capital and other activities.
In 2019, net cash used in investing activities was $2.1 billion, an increase in net spend of $418 million
from the prior year primarily driven by an increase in net purchases of short-term investments. In 2018, net
cash used in investing activities was $1.7 billion, an increase of $189 million from the prior year primarily
driven by an increase in net short-term investment purchases, partially offset by lower property additions
and higher proceeds from property dispositions.
In 2019, net cash used in financing activities was $2.6 billion, which represents an increase in net
spend of $148 million from the prior year primarily due to lower proceeds from debt issuances and higher
debt repayments, partially offset by lower share repurchases. In 2018, net cash used in financing activities
was $2.5 billion, which represents an increase of $321 million from the prior year primarily driven by higher
share repurchases, partially offset by higher net debt issued.
CSX 2019 Form 10-K p.32
CSX CORPORATION
PART II
Sources of Cash and Liquidity
The Company has multiple sources of liquidity, including cash generated from operations and
financing sources. The Company filed a shelf registration statement with the SEC in February 2019 which
is unlimited as to amount and may be used to issue debt or equity securities at CSX’s discretion, subject
to market conditions and CSX Board authorization. While CSX seeks to give itself flexibility with respect to
cash requirements, there can be no assurance that market conditions would permit CSX to sell such securities
on acceptable terms at any given time, or at all. In 2019, CSX issued a total of $2.0 billion of new long-term
debt.
CSX has access to a $1.2 billion five-year unsecured revolving credit facility backed by a diverse
syndicate of banks that expires in March 2024. As of December 31, 2019, the Company had no outstanding
balances under this facility. See Note 10, Debt and Credit Agreements for more information. The Company
also has a commercial paper program, backed by the revolving credit facility, under which the Company
may issue unsecured commercial paper notes up to a maximum aggregate principal amount of $1.0 billion
outstanding at any one time. At December 31, 2019, the Company had no outstanding debt under the
commercial paper program.
Uses of Cash
CSX uses current cash balances for general corporate purposes, which may include working capital
requirements, repayment of additional indebtedness outstanding from time to time, repurchases of CSX's
common stock, capital investments, improvements in productivity and other cost reduction initiatives.
In 2019, CSX continued to invest in its business to create long-term value for shareholders. The
Company is committed to maintaining and improving its existing infrastructure and to positioning itself for
long-term, profitable growth through optimizing network and terminal capacity. Funds used for property
additions are further described below.
Capital Expenditures (Dollars in Millions)
Track
Bridges, Signals and Other
Total Infrastructure
Capacity and Commercial Facilities
Regulatory (including PTC)
Freight Cars
Locomotives
Total Capital Expenditures
Fiscal Years
2018
2017
2019
$
$
860 $
493
1,353
141
91
17
55
1,657
771 $
491
1,262
246
225
9
3
1,745
733
570
1,303
417
284
20
16
2,040
Planned capital investments for 2020 are expected to be between $1.6 billion and $1.7 billion. Of
the 2020 investment, the majority will be used to sustain the core infrastructure. The remaining amounts
will be allocated to projects supporting service enhancements, productivity initiatives and profitable growth.
CSX intends to fund capital investments through cash generated from operations.
The Company expects to continue incurring capital costs in connection with the implementation of
PTC. CSX estimates that the total multi-year cost of PTC implementation will be approximately $2.4 billion.
This estimate includes costs for installing the new system along tracks, upgrading locomotives, adding
communication equipment and developing new technologies. Total PTC spending through 2019 was $2.3
billion.
CSX 2019 Form 10-K p.33
CSX CORPORATION
PART II
CSX is continually evaluating market and regulatory conditions that could affect the Company’s
ability to generate sufficient returns on capital investments. CSX may revise its future estimates for capital
spending as a result of changes in business conditions, tax legislation or the enactment of new laws or
regulations, which could have a material adverse effect on the Company’s operations and financial
performance in the future (see Risk Factors under Item 1A of this Form 10-K).
The Company also uses cash for scheduled payments of debt and leases, share repurchases and
to pay dividends to shareholders. On February 12, 2020, the Company's Board of Directors authorized an
8% increase in the quarterly cash dividend to $0.26 per common share.
Material Changes in the Consolidated Balance Sheets and Working Capital
CSX's balance sheet reflects its strong capital base and the impact of CSX's balanced approach in
deploying capital for the benefit of its shareholders, which includes investments in infrastructure, dividend
payments and share repurchases. Further, CSX is well positioned from a liquidity standpoint. The Company
ended the year with $2.0 billion of cash, cash equivalents and short-term investments.
Total assets as well as total liabilities and shareholders' equity increased $1.5 billion from prior year.
The increase in assets was primarily due to the net increase in short-term investments of $743 million, the
right-of-use lease asset of $532 million resulting from the adoption of the new lease accounting standard,
and property additions net of retirements of $295 million. The increase in total liabilities and shareholders'
equity combined was driven by net earnings of $3.3 billion, the issuance of $2.0 billion in long-term debt
and the total lease liability of $550 million resulting from the adoption of the new lease accounting standard.
These increases were partially offset by share repurchases of $3.4 billion and dividends paid of $763 million.
Working capital is considered a measure of a company’s ability to meet its short-term needs. CSX
had a working capital surplus of $1.1 billion at December 2019 and $650 million at December 2018. The
increase in current assets was primarily driven by cash proceeds from the $2.0 billion issuance of long-term
debt, partially offset by dividend payments of $763 million and the early redemption of long-term debt
originally due October 2020 of $500 million. The increase in current assets was offset by an increase in
current liabilities primarily due to the reclassification of $245 million from long-term debt to current maturities
of long-term debt.
The Company’s working capital balance varies due to factors such as the timing of scheduled debt
payments and changes in cash and cash equivalent balances as discussed above. Although the Company
currently has a surplus, a working capital deficit is not unusual for CSX or other companies in the industry
and does not indicate a lack of liquidity. The Company continues to maintain adequate current assets to
satisfy current liabilities and maturing obligations when they come due. Furthermore, CSX has sufficient
financial capacity, including its revolving credit facility, commercial paper program and shelf registration
statement to manage its day-to-day cash requirements and any anticipated obligations. The Company from
time to time accesses the credit markets for additional liquidity.
Credit Ratings
Credit ratings reflect an independent agency’s judgment on the likelihood that a borrower will repay
a debt obligation at maturity. The ratings reflect many considerations, such as the nature of the borrower’s
industry and its competitive position, the size of the company, its liquidity and access to capital and the
sensitivity of a company’s cash flows to changes in the economy. The two largest rating agencies, Standard
& Poor’s Ratings Services (“S&P”) and Moody’s Investors Service (“Moody’s”), use alphanumeric codes to
designate their ratings. The highest quality rating for long-term credit obligations is AAA and Aaa for S&P
and Moody’s, respectively. A credit rating is not a recommendation to buy, sell or hold securities and may
be subject to revision or withdrawal at any time by the assigning rating agency.
CSX 2019 Form 10-K p.34
CSX CORPORATION
PART II
The cost and availability of unsecured financing are materially affected by CSX's long-term credit
ratings. CSX's credit ratings remained stable during 2019. As of December 2019 and December 2018, S&P's
long-term rating on CSX was BBB+ (Stable), and Moody's was Baa1 (Stable). Ratings of BBB- and Baa3
or better by S&P and Moody’s, respectively, reflect ratings on debt obligations that fall within a band of credit
quality considered to be investment grade. If CSX's credit ratings were to decline to below investment grade
levels, the Company could experience significant increases in its interest cost for new debt. In addition, a
decline in CSX’s credit ratings to below investment grade levels could adversely affect the market’s demand,
and thus the Company’s ability to readily issue new debt.
CSX is committed to returning cash to shareholders and maintaining an investment grade credit
profile. Capital structure, capital investments and cash distributions, including dividends and share
repurchases, are reviewed at least annually by the Board of Directors.
SCHEDULE OF CONTRACTUAL OBLIGATIONS AND COMMERCIAL
COMMITMENTS
The following tables set forth maturities of the Company's contractual obligations and other significant
commitments:
Type of Obligation
2020
2021
2022
2023
2024 Thereafter
Total
(Dollars in Millions) (Unaudited)
Contractual Obligations
Total Debt (See Note 10)
Interest on Debt
Purchase Obligations (See Note 8)
Other Post-Employment Benefits (See Note 9) (a)
Operating Leases - Net (See Note 7)
Agreements with Conrail (b)
Total Contractual Obligations
$ 245 $ 401 $ 162 $ 639 $ 551 $
686
229
26
48
29
$ 1,381 $ 1,410 $ 1,180 $ 1,658 $ 1,574 $
649
290
25
37
22
700
197
29
54
29
720
292
37
58
29
672
254
25
39
29
14,240 $16,238
14,056
10,629
3,710
2,448
250
108
1,444
1,208
138
—
28,633 $35,836
$
Other Commitments (c)
78 $
(a) Other post-employment benefits include estimated other post-retirement medical and life insurance payments and payments under non-qualified
pension plans which are unfunded. No amounts are included for funded pension obligations as no contributions are currently required.
(b) Agreements with Conrail represent minimum future payments of $138 million under the shared asset area agreements (see Note 15, Related
Party Transactions).
(c) Other commitments of $82 million consisted of surety bonds, letters of credit, uncertain tax positions and public private partnerships. Surety
bonds of $36 million and letters of credit of $27 million arise from assurances issued by a third-party that CSX will fulfill certain obligations and are
typically a contract, state, federal or court requirement. Uncertain tax positions of $13 million, which include interest and penalties, are all included
in year 2020 as the year of settlement cannot be reasonably estimated. Contractual commitments related to public-private partnerships are $6
million.
2 $ — $ — $
— $
2 $
82
CSX 2019 Form 10-K p.35
CSX CORPORATION
PART II
OFF-BALANCE SHEET ARRANGEMENTS
For detailed information about the Company’s guarantees, operating leases and purchase
obligations, see Note 8, Commitments and Contingencies. There are no off-balance sheet arrangements
that are reasonably likely to have a material effect on the Company’s financial condition, results of operations
or liquidity.
LABOR AGREEMENTS
Approximately 17,000 of the Company's nearly 21,000 employees are members of a labor union.
In November 2019, notices were served to the 13 rail unions that participate in national bargaining to begin
negotiations for benefits, wages and work rules for the next labor bargaining round for 2020. Current
agreements remain in place until modified by these negotiations. Typically, such negotiations take several
years before agreements are reached.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires that management make estimates in reporting the amounts of certain assets
and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and
certain revenues and expenses during the reporting period. Actual results may differ from those estimates.
These estimates and assumptions are discussed with the Audit Committee of the Board of Directors on a
regular basis. Significant estimates using management judgment are made for the following areas:
• personal injury, environmental and legal reserves;
• pension and post-retirement medical plan accounting; and
• depreciation policies for assets under the group-life method.
Personal Injury, Environmental and Legal Reserves
Personal Injury
Personal Injury reserves of $129 million and $143 million for 2019 and 2018, respectively, represent
liabilities for employee work-related and third-party injuries. CSXT retains an independent actuary to assist
management in assessing the value of personal injury claims. The methodology used by the actuary includes
a development factor to reflect growth or reduction in the value of these personal injury claims. It is based
largely on CSXT's historical claims and settlement experience. Actual results may vary from estimates due
to the number, type and severity of the injury, costs of medical treatments and uncertainties in litigation. For
additional details, including a description of our related accounting policies, see Note 5, Casualty,
Environmental and Other Reserves in the consolidated financial statements.
CSX 2019 Form 10-K p.36
CSX CORPORATION
PART II
Critical Accounting Estimates, continued
Environmental
Environmental reserves were $74 million and $80 million in 2019 and 2018, respectively. The
Company is a party to various proceedings related to environmental issues, including administrative and
judicial proceedings involving private parties and regulatory agencies. The Company has been identified as
a potentially responsible party at approximately 220 environmentally impaired sites. The Company reviews
its potential liability with respect to each site identified, giving consideration to a number of factors such as:
•
type of clean-up required;
• nature of the Company’s alleged connection to the location (e.g., generator of waste sent to the
site or owner or operator of the site);
• extent of the Company’s alleged connection (e.g., volume of waste sent to the location and other
relevant factors); and
• number, connection and financial viability of other named and unnamed potentially responsible
parties at the location.
Conditions that are currently unknown could, at any given location, result in additional exposure, the
amount and materiality of which cannot presently be reasonably estimated. For additional details, including
a description of our related accounting policies, see Note 5, Casualty, Environmental and Other Reserves
in the consolidated financial statements.
Legal
The Company is involved in litigation incidental to its business and is a party to a number of legal
actions and claims, various governmental proceedings and private civil lawsuits. The Company evaluates
all exposures relating to legal liabilities at least quarterly and adjusts reserves when appropriate. The amount
of a particular reserve may be influenced by factors that include official rulings, newly discovered or developed
evidence, or changes in laws, regulations and evidentiary standards. An unexpected adverse resolution of
one or more of these items could have a material adverse effect on the Company's financial condition, results
of operations or liquidity in that particular period. For additional details, including a description of our related
accounting policies, see Note 5, Casualty, Environmental and Other Reserves in the consolidated financial
statements. Additionally, see Item 3. Legal Proceedings for further discussion of these items.
Pension and Post-retirement Medical Plan Accounting
The Company sponsors defined benefit pension plans principally for salaried, management
personnel. For employees hired prior to 2003, the plans provide eligible employees with retirement benefits
based predominantly on years of service and compensation rates near retirement. For employees hired in
2003 or thereafter, benefits are determined based on a cash balance formula, which provides benefits by
utilizing interest and pay credits based upon age, service and compensation. Beginning in 2020, the CSX
Pension Plan is closed to new participants. As of December 2019, the projected benefit obligation for the
Company’s pension plans was $3.1 billion.
In addition to these plans, the Company sponsors a post-retirement medical plan and a non-
contributory life insurance plan that provide certain benefits to full-time, salaried, management employees,
hired prior to 2003, upon their retirement if certain eligibility requirements are met. Beginning in 2019, both
the life insurance benefit for eligible active employees and health savings account contributions made by
the Company to eligible retirees younger than 65 were eliminated. Beginning in 2020, the employer-funded
health reimbursement arrangements for eligible retirees 65 years or older were eliminated. As a result of
these plan amendments, the Company recognized a decrease in 2018 of $102 million in the post-retirement
benefit liability. As of December 2019, the projected benefit obligation for the Company’s other post-retirement
benefit plans was $117 million.
CSX 2019 Form 10-K p.37
Critical Accounting Estimates, continued
CSX CORPORATION
PART II
For information related to the funded status of the Company's pension and other post-retirement
benefit plans, see Note 9, Employee Benefit Plans.
The accounting for these plans is subject to the guidance provided in the Compensation-Retirement
Benefits Topic in the ASC. This rule requires that management make certain assumptions relating to the
following:
• discount rates used to measure future obligations and interest expense;
•
•
long-term rate of return on plan assets;
salary scale inflation rates; and
• other assumptions.
The Company engages independent actuaries to compute the amounts of liabilities and expenses
relating to these plans subject to the assumptions that the Company determines are appropriate based on
historical trends, current market rates and future projections. These amounts are reviewed by management.
Discount Rates
Discount rates affect the amount of liability recorded and the service and interest cost components
of pension and post-retirement expense. Discount rates reflect the rates at which pension and other post-
retirement benefits could be effectively settled, or in other words, how much it would cost the Company to
buy enough high quality bonds to generate cash flow equal to the Company's expected future benefit
payments. The Company determines the discount rate based on the market yield as of year-end for high
quality corporate bonds whose maturities match the plans' expected benefit payments.
The Company measures the service and interest cost components of the net pension and post-
retirement benefits expense by using individual spot rates matched with separate cash flows for each future
year. Under the spot rate approach, individual spot discount rates along the same high quality corporate
bonds yield curve used to measure the pension and post-retirement benefit liabilities are applied to the
relevant projected cash flows at the relevant maturity.
The weighted average discount rates used by the Company to value its 2019 pension and post-
retirement obligations are 3.13 percent and 2.87 percent, respectively. For 2018, the weighted average
discount rates used by the Company to value its pension and post-retirement obligations were 4.24 percent
and 3.98 percent, respectively. Discount rates may differ for pension and post-retirement benefits due to
varying duration of the liabilities for projected payments for each plan. As of December 2019, the estimated
duration of pensions and post-retirement benefits is approximately 12 years and 7 years, respectively.
Each year, these discount rates are reevaluated and adjusted using the current market interest rates
for high quality corporate bonds to reflect the best estimate of the current effective settlement rates. In
general, if interest rates decline or rise, the assumed discount rates will change.
CSX 2019 Form 10-K p.38
CSX CORPORATION
PART II
Critical Accounting Estimates, continued
Long-term Rate of Return on Plan Assets
The expected long-term average rate of return on plan assets reflects the average rate of earnings
expected on the funds invested, or to be invested, to provide for benefits included in the projected benefit
obligation. In estimating that rate, the Company gives appropriate consideration to the returns being earned
by the plan assets in the funds and the rates of return expected to be available for reinvestment as well
as the current and projected asset mix of the funds. Management balances market expectations obtained
from various investment managers and economists with both market and actual plan historical returns to
develop a reasonable estimate of the expected long-term rate of return on assets. As this assumption is
long-term, the annual review may result in less frequent adjustment than other assumptions used in pension
accounting. The long-term rate of return on plan assets used by the Company to value its benefit cost for
the subsequent plan year was 6.75 percent in both 2019 and 2018.
Salary Scale Inflation Rates
Salary scale inflation rates are based on current trends and historical data accumulated by the
Company. The Company reviews recent wage increases and management incentive compensation
payments over the past five years in its assessment of salary scale inflation rates. The Company used a
salary scale rate of 4.60 percent in both 2019 and 2018 to value its pension obligations.
Other Assumptions
The calculations made by the actuaries also include assumptions relating to health care cost trend
rates, mortality rates, turnover and retirement age. These assumptions are based upon historical data, recent
plan experience and industry trends and are determined by management.
2020 Estimated Pension and Post-retirement Expense
Net periodic pension and post-retirement benefits expenses for 2020 are expected to be a $5 million
expense and a $2 million credit, respectively. Net periodic pension and post-retirement benefits expenses
for 2020 are expected to include service cost expense of $40 million and $1 million, respectively. Service
cost expense is included in labor and fringe on the consolidated income statement and all other components
of net pension expense and post-retirement benefits expense are included in other income - net. Net periodic
pension expense and post-retirement benefits expense in 2019 were credits of $7 million and $4 million,
respectively. The net increase in the expected expense is primarily due to impacts from the decline in discount
rates, partially offset by favorable pension asset experience.
The following sensitivity analysis illustrates the effects of a one percent change in certain assumptions
like discount rates, long-term rate of return and salaries on the 2020 estimated pension and post-retirement
expense:
(Dollars in Millions)
Discount Rate
Long-term Rate of Return
Salary Inflation
Pension
Expense
Post-
Retirement
Expense
$
$
$
13 $
26
6
—
N/A
N/A
CSX 2019 Form 10-K p.39
Critical Accounting Estimates, continued
CSX CORPORATION
PART II
Depreciation Policies for Assets Utilizing the Group-Life Method
The depreciable assets of the Company are depreciated using either the group-life or straight-line
method of accounting, which are both acceptable depreciation methods in accordance with GAAP. The
Company depreciates its railroad assets, including main-line track, locomotives and freight cars, using the
group-life method of accounting. Assets depreciated under the group-life method comprise 87% of total fixed
assets of $45 billion on a gross basis at December 31, 2019. The remaining depreciable assets of the
Company, including non-railroad assets and assets under finance leases, are depreciated using the straight-
line method on a per asset basis. Land is not depreciated.
Management performs a review of depreciation expense and useful lives on a regular basis. Under
the group-life method, the service lives and salvage values for each group of assets are determined by
completing periodic depreciation studies and applying management’s methods to determine the service
lives of its properties. There are several factors taken into account during the depreciation study and they
include:
•
•
statistical analysis of historical life and salvage data for each group of property;
statistical analysis of historical retirements for each group of property;
• evaluation of current operations;
• evaluation of technological advances and maintenance schedules;
• previous assessment of the condition of the assets;
• management's outlook on the future use of certain asset groups;
• expected net salvage to be received upon retirement; and
•
comparison of assets to the same asset groups with other companies.
In 2019, the Company completed a depreciation study for its equipment assets which resulted in
changes to accumulated depreciation, service lives, salvage values, and other related factors for certain
assets. The effect of this change in estimate was not material to depreciation expense in 2019. The continued
impacts of the study are expected to result in additional depreciation expense of approximately $30 million
in 2020. There were no depreciation studies in 2018 or 2017. A one percent change in the average estimated
useful life of all group-life assets would result in an approximate $12 million change to the Company’s annual
depreciation expense. For additional details, including a more detailed description of our related accounting
policies, see Note 6, Properties in the consolidated financial statements.
New Accounting Pronouncements and Changes in Accounting Policy
See Note 1, Nature of Operations and Significant Accounting Policies under the caption, “New
Accounting Pronouncements and Changes in Accounting Policy.”
CSX 2019 Form 10-K p.40
CSX CORPORATION
PART II
FORWARD-LOOKING STATEMENTS
Certain statements in this report and in other materials filed with the Securities and Exchange
Commission, as well as information included in oral statements or other written statements made by the
Company, are forward-looking statements. The Company intends for all such forward-looking statements
to be covered by the safe harbor provisions for forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These forward-looking statements within the meaning
of the Private Securities Litigation Reform Act may contain, among others, statements regarding:
• projections and estimates of earnings, revenues, margins, volumes, rates, cost-savings,
expenses, taxes or other financial items;
• expectations as to results of operations and operational initiatives;
• expectations as to the effect of claims, lawsuits, environmental costs, commitments, contingent
liabilities, labor negotiations or agreements on the Company's financial condition, results of
operations or liquidity;
• management's plans, strategies and objectives for future operations, capital expenditures,
workforce levels, dividends, share repurchases, safety and service performance, proposed
new services and other matters that are not historical facts, and management's expectations
as to future performance and operations and the time by which objectives will be achieved;
and
• future economic, industry or market conditions or performance and their effect on the
Company's financial condition, results of operations or liquidity.
Forward-looking statements are typically identified by words or phrases such as "will," "should,"
“believe,” “expect,” “anticipate,” “project,” “estimate,” “preliminary” and similar expressions. The Company
cautions against placing undue reliance on forward-looking statements, which reflect its good faith beliefs
with respect to future events and are based on information currently available to it as of the date the forward-
looking statement is made. Forward-looking statements should not be read as a guarantee of future
performance or results and will not necessarily be accurate indications of the timing when, or by which, such
performance or results will be achieved.
Forward-looking statements are subject to a number of risks and uncertainties and actual
performance or results could differ materially from those anticipated by any forward-looking statements.
The Company undertakes no obligation to update or revise any forward-looking statement. If the Company
does update any forward-looking statement, no inference should be drawn that the Company will make
additional updates with respect to that statement or any other forward-looking statements.
CSX 2019 Form 10-K p.41
CSX CORPORATION
PART II
The following important factors, in addition to those discussed in Part II, Item 1A. Risk Factors and
elsewhere in this report, may cause actual results to differ materially from those contemplated by any forward-
looking statements:
• legislative, regulatory or legal developments involving transportation, including rail or
intermodal transportation, the environment, hazardous materials, taxation, international trade
and initiatives to further regulate the rail industry;
• the outcome of litigation, claims and other contingent liabilities, including, but not limited to,
those related to fuel surcharge, environmental matters, taxes, shipper and rate claims subject
to adjudication, personal injuries and occupational illnesses;
• changes in domestic or international economic, political or business conditions, including those
affecting the transportation industry (such as the impact of industry competition, conditions,
performance and consolidation, as well as the impact of international trade agreements and
tariffs) and the level of demand for products carried by CSXT;
• natural events such as severe weather conditions, including floods, fire, hurricanes and
earthquakes, a pandemic crisis affecting the health of the Company's employees, its shippers
or the consumers of goods, or other unforeseen disruptions of the Company's operations,
systems, property, equipment or supply chain;
• competition from other modes of freight transportation, such as trucking, and competition and
consolidation or financial distress within the transportation industry generally;
• the cost of compliance with laws and regulations that differ from expectations (including those
associated with PTC implementation) as well as costs, penalties and operational and liquidity
impacts associated with noncompliance with applicable laws or regulations;
• the impact of increased passenger activities in capacity-constrained areas, including potential
effects of high speed rail initiatives, or regulatory changes affecting when CSXT can transport
freight or service routes;
• unanticipated conditions in the financial markets that may affect timely access to capital markets
and the cost of capital, as well as management's decisions regarding share repurchases;
• changes in fuel prices, surcharges for fuel and the availability of fuel;
• the impact of natural gas prices on coal-fired electricity generation;
• the impact of global supply and price of seaborne coal on CSX's export coal market;
• availability of insurance coverage at commercially reasonable rates or insufficient insurance
coverage to cover claims or damages;
• the inherent business risks associated with safety and security, including the transportation of
hazardous materials or a cybersecurity attack which would threaten the availability and
vulnerability of information technology;
• adverse economic or operational effects from actual or threatened war or terrorist activities
and any governmental response;
CSX 2019 Form 10-K p.42
CSX CORPORATION
PART II
• loss of key personnel or the inability to hire and retain qualified employees;
• labor and benefit costs and labor difficulties, including stoppages affecting either the Company's
operations or customers' ability to deliver goods to the Company for shipment;
• the Company's success in implementing its strategic, financial and operational initiatives;
• the impact of conditions in the real estate market on the Company's ability to sell assets;
• changes in operating conditions and costs or commodity concentrations; and
• the inherent uncertainty associated with projecting economic and business conditions.
Other important assumptions and factors that could cause actual results to differ materially from
those in the forward-looking statements are specified elsewhere in this report and in CSX's other SEC
reports, which are accessible on the SEC's website at www.sec.gov and the Company's website at
www.csx.com. The information on the CSX website is not part of this annual report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
CSX does not hold or issue derivative financial instruments for trading purposes. Historically, the
Company has used derivative financial instruments to address market risk exposure to fluctuations in interest
rates. As of December 2019, CSX does not have a material amount of floating rate debt obligations
outstanding, and therefore fluctuations in the interest rate would not have a material impact on the Company's
financial condition, results of operations or liquidity.
Changes in interest rates could impact the fair value of the Company's fixed rate long-term debt.
The potential decrease in fair value of the Company's fixed rate long-term debt resulting from a hypothetical
10% increase in interest rates, or approximately 25 basis points, is estimated to be $498 million as of
December 31, 2019 and $472 million as of December 31, 2018. The underlying fair values of our long-term
debt were estimated based on quoted market prices or on the current rates offered for debt with similar
terms and maturities.
CSX 2019 Form 10-K p.43
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
CSX Corporation
Consolidated Financial Statements and Notes to Consolidated Financial Statements
Herewith:
Consolidated Income Statements for the Fiscal Years Ended:
December 31, 2019
December 31, 2018
December 31, 2017
Consolidated Comprehensive Income Statements for the Fiscal Years Ended:
December 31, 2019
December 31, 2018
December 31, 2017
Consolidated Balance Sheets as of:
December 31, 2019
December 31, 2018
Consolidated Cash Flow Statements for Fiscal Years Ended:
December 31, 2019
December 31, 2018
December 31, 2017
Consolidated Statements of Changes in Shareholders' Equity:
December 31, 2019
December 31, 2018
December 31, 2017
Notes to Consolidated Financial Statements
Page
45
47
48
49
50
51
52
CSX 2019 Form 10-K p.44
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of CSX Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of CSX Corporation (the Company) as of
December 31, 2019 and 2018, and the related consolidated statements of income, comprehensive income,
cash flows, and changes in shareholders’ equity for each of the three years in the period ended December
31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February
12, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on the Company’s financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our
opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1)
relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below providing a separate opinion on the critical audit matter or on
the accounts or disclosure to which it relates.
CSX 2019 Form 10-K p.45
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, continued
Description of
the Matter
Depreciation Policies for Assets Utilizing the Group-Life Method
At December 31, 2019, assets depreciated under the group-life method comprised
87% of total gross fixed assets of $45 billion. As discussed in Note 6 of the
consolidated financial statements, the group-life method aggregates assets with
similar lives and characteristics into groups and depreciates each of these groups
as a whole. When using the group-life method, an underlying assumption is that
each group of assets, as a whole, is used and depreciated to the end of the group’s
recoverable life. The Company utilizes different depreciable asset categories to
account for depreciation expense for the railroad assets that are depreciated under
the group-life method.
Under the group-life method, depreciation studies are completed to review asset
service lives, salvage values, accumulated depreciation and other factors related
to group assets. Depreciation studies are performed every three years for equipment
assets and every six years for road and track assets. A depreciation study was
performed in 2019 for equipment assets and 2014 for road and track assets. The
most recent depreciation studies are reviewed by management each year to
determine if there have been significant factors that result in changes to the group-
life method key assumptions.
Auditing depreciation expense for assets subject to the group-life method was
complex and required the involvement of specialists due to the nature of the methods
used in the depreciation studies to determine the useful service lives and salvage
values of the Company’s assets. These methods have a significant effect on
depreciation expense.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating
effectiveness of controls over the Company’s process related to the assessment of
periodic depreciation studies of its group-life assets. For example, we tested controls
over management’s review of the depreciation study for equipment assets and
review of depreciation expense and useful lives. We also tested controls over
management’s review of asset activity and assumptions that could impact the most
recent depreciation study of road and track assets.
To test the estimated useful lives and salvage values of the Company’s group-life
assets, we performed audit procedures that included, among others: obtaining the
periodic depreciation studies provided by the Company’s third-party specialist and
subsequent updates by management; assessing the completeness and accuracy
of the data provided to the third-party specialist and used by management; and
including a specialist on our team to evaluate the methods used by the third-party
specialist and management in determining the average service lives and salvage
values of assets to perform the depreciation studies.
We compared the significant methods used by management to those used
throughout the industry and within other useful life studies. We also assessed the
historical accuracy of management’s estimates via retrospective review and
independently calculated a sample of the annual depreciation rates.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1981.
Jacksonville, Florida
February 12, 2020
CSX 2019 Form 10-K p.46
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED INCOME STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
Revenue
Expense
Labor and Fringe
Materials, Supplies and Other
Depreciation
Fuel
Equipment and Other Rents
Restructuring Charge (Note 1)
Equity Earnings of Affiliates
Total Expense
Fiscal Years
2018
12,250 $
2019
11,937 $
$
2017
11,408
2,616
1,784
1,349
906
408
—
(91)
6,972
2,738
1,967
1,331
1,046
395
—
(96)
7,381
2,946
2,113
1,315
864
429
240
(219)
7,688
Operating Income
4,965
4,869
3,720
Interest Expense
Restructuring Charge - Non-Operating (Note 1)
Other Income - Net (Note 14)
Earnings Before Income Taxes
Income Tax (Expense) Benefit (Note 12)
Net Earnings
Per Common Share (Note 2)
Net Earnings Per Share
Basic
Assuming Dilution
Average Common Shares Outstanding (Millions)
Basic
Assuming Dilution
(737)
—
88
4,316
(639)
—
74
4,304
(546)
(85)
53
3,142
(985)
3,331 $
(995)
3,309 $
2,329
5,471
4.18 $
4.17 $
3.86 $
3.84 $
6.01
5.99
796
798
857
861
911
914
$
$
$
See accompanying Notes to Consolidated Financial Statements.
CSX 2019 Form 10-K p.47
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS
(Dollars in Millions)
Net Earnings
Other Comprehensive (Loss) Income - Net of Tax:
Pension and Other Post-Employment Benefits
Other
Total Other Comprehensive (Loss) Income
Comprehensive Earnings (Note 16)
Fiscal Years
2018
$ 3,331 $ 3,309 $ 5,471
2019
2017
(15)
1
(14)
140
14
154
$ 3,317 $ 3,134 $ 5,625
(164)
(11)
(175)
See accompanying Notes to Consolidated Financial Statements.
CSX 2019 Form 10-K p.48
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
ASSETS
December
2019
December
2018
Current Assets:
Cash and Cash Equivalents (Note 1)
Short-term Investments
Accounts Receivable - Net (Note 1)
Materials and Supplies
Other Current Assets
Total Current Assets
Properties
Accumulated Depreciation
Properties - Net (Note 6)
Investment in Conrail (Note 15)
Affiliates and Other Companies
Right of Use Lease Asset (Note 7)
Other Long-term Assets
Total Assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable
Labor and Fringe Benefits Payable
Casualty, Environmental and Other Reserves (Note 5)
Current Maturities of Long-term Debt (Note 10)
Income and Other Taxes Payable
Other Current Liabilities
Total Current Liabilities
Casualty, Environmental and Other Reserves (Note 5)
Long-term Debt (Note 9)
Deferred Income Taxes - Net (Note 12)
Long-term Lease Liability (Note 7)
Other Long-term Liabilities
Total Liabilities
Shareholders' Equity:
Common Stock, $1 Par Value (Note 3)
Other Capital
Retained Earnings (Note 1)
Accumulated Other Comprehensive Loss (Note 16)
Noncontrolling Minority Interest
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
$
$
$
$
958 $
996
986
261
77
3,278
45,100
(12,932)
32,168
982
897
532
400
38,257 $
1,043 $
489
100
245
69
205
2,151
205
15,993
6,961
493
591
26,394
773
346
11,404
(675)
15
11,863
38,257 $
858
253
1,010
263
181
2,565
44,805
(12,807)
31,998
943
836
—
387
36,729
949
550
113
18
106
179
1,915
211
14,739
6,690
—
594
24,149
818
249
12,157
(661)
17
12,580
36,729
See accompanying Notes to Consolidated Financial Statements.
CSX 2019 Form 10-K p.49
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED CASH FLOW STATEMENTS
(Dollars in Millions)
OPERATING ACTIVITIES
Net Earnings
Adjustments to Reconcile Net Earnings to Net Cash
Provided by Operating Activities:
Depreciation
Restructuring Charge (Note 1)
Cash Payments for Restructuring Charge
Deferred Income Taxes
Earnings of Equity-method Investments
Gain on Property Dispositions
Other Operating Activities
Changes in Operating Assets and Liabilities:
Accounts Receivable
Other Current Assets
Accounts Payable
Income and Other Taxes Payable
Other Current Liabilities
Net Cash Provided by Operating Activities
INVESTING ACTIVITIES
Property Additions
Purchase of Short-term Investments
Proceeds from Sales of Short-term Investments
Proceeds from Property Dispositions
Other Investing Activities
Net Cash Used in Investing Activities
FINANCING ACTIVITIES
Long-term Debt Issued (Note 10)
Long-term Debt Repaid (Note 10)
Dividends Paid
Shares Repurchased
Other Financing Activities
Net Cash Used in Financing Activities
Net Increase (Decrease) in Cash and Cash Equivalents
CASH AND CASH EQUIVALENTS
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period
SUPPLEMENTAL CASH FLOW INFORMATION
Interest Paid - Net of Amounts Capitalized
Income Taxes Paid
2019
Fiscal Years
2018
2017
$
3,331 $
3,309 $
5,471
1,349
—
—
273
(91)
(151)
22
45
68
98
2
(96)
4,850
(1,657)
(2,838)
2,108
254
31
(2,102)
2,000
(518)
(763)
(3,373)
6
(2,648)
100
1,331
—
(15)
279
(96)
(154)
(21)
(46)
101
104
(104)
(47)
4,641
(1,745)
(736)
505
319
(27)
(1,684)
3,000
(19)
(751)
(4,671)
(59)
(2,500)
457
858
958 $
401
858 $
717 $
691 $
614 $
814 $
$
$
$
1,315
325
(187)
(3,233)
(219)
(18)
(17)
(70)
1
41
20
43
3,472
(2,040)
(782)
1,193
97
37
(1,495)
850
(333)
(708)
(1,970)
(18)
(2,179)
(202)
603
401
555
911
See accompanying Notes to Consolidated Financial Statements.
CSX 2019 Form 10-K p.50
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS’ EQUITY
(Dollars in Millions)
December 30, 2016
Comprehensive Earnings:
Net Earnings
Other Comprehensive Income (Note 16)
Total Comprehensive Earnings
Common stock dividends, $0.78 per share
Share Repurchases
Other
December 31, 2017
Comprehensive Earnings:
Net Earnings
Other Comprehensive Loss (Note 16)
Total Comprehensive Earnings
Common stock dividends, $0.88 per share
Share Repurchases
Other
December 31, 2018
Comprehensive Earnings:
Net Earnings
Other Comprehensive Loss (Note 16)
Total Comprehensive Earnings
Common stock dividends, $0.96 per share
Share Repurchases
Other
December 31, 2019
Common
Shares
Outstanding
(Thousands)
Common
Stock and
Other
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income
(Loss) (a)
Non-
controlling
Minority
Interest
Total
Shareholders'
Equity
928,180 $
1,066 $
11,253 $
(640) $
15 $
11,694
—
—
—
(38,785)
456
—
—
—
(39)
80
5,471
—
(708)
(1,931)
(1)
889,851
1,107
14,084
—
—
—
(72,264)
593
—
—
—
(72)
32
3,309
—
(751)
(4,599)
114
—
154
—
—
—
(486)
—
(175)
—
—
—
818,180
1,067
12,157
(661)
—
—
—
(47,819)
3,110
—
—
—
(48)
100
3,331
—
(763)
(3,325)
4
—
(14)
—
—
—
—
—
—
—
1
16
—
—
—
—
1
17
—
—
—
—
(2)
773,471 $
1,119 $
11,404 $
(675) $
15 $
5,471
154
5,625
(708)
(1,970)
80
14,721
3,309
(175)
3,134
(751)
(4,671)
147
12,580
3,331
(14)
3,317
(763)
(3,373)
102
11,863
(a) Accumulated Other Comprehensive Loss year-end balances shown above are net of tax. The associated taxes were $184 million, $180 million
and $162 million for 2019, 2018 and 2017, respectively. For additional information see Note 16, Other Comprehensive Income.
See accompanying Notes to Consolidated Financial Statements.
CSX 2019 Form 10-K p.51
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Nature of Operations and Significant Accounting Policies
Business
CSX Corporation together with its subsidiaries ("CSX" or the “Company”), based in Jacksonville,
Florida, is one of the nation's leading transportation companies. The Company provides rail-based
transportation services including traditional rail service, the transport of intermodal containers and trailers,
as well as other transportation services such as rail-to-truck transfers and bulk commodity operations.
CSX Transportation, Inc.
CSX’s principal operating subsidiary, CSX Transportation, Inc. (“CSXT”), provides an important link
to the transportation supply chain through its approximately 20,000 route mile rail network, which serves
major population centers in 23 states east of the Mississippi River, the District of Columbia and the Canadian
provinces of Ontario and Quebec. It has access to over 70 ocean, river and lake port terminals along the
Atlantic and Gulf Coasts, the Mississippi River, the Great Lakes and the St. Lawrence Seaway. The
Company’s intermodal business links customers to railroads via trucks and terminals. CSXT also serves
thousands of production and distribution facilities through track connections to more than 230 short-line and
regional railroads.
CSXT is also responsible for the Company's real estate sales, leasing, acquisition and management
and development activities. Substantially all of these activities are focused on supporting railroad operations.
Other Entities
In addition to CSXT, the Company’s subsidiaries include CSX Intermodal Terminals, Inc. (“CSX
Intermodal Terminals”), Total Distribution Services, Inc. (“TDSI”), Transflo Terminal Services, Inc. (“Transflo”),
CSX Technology, Inc. (“CSX Technology”) and other subsidiaries. CSX Intermodal Terminals owns and
operates a system of intermodal terminals, predominantly in the eastern United States and also performs
drayage services (the pickup and delivery of intermodal shipments) for certain customers and trucking
dispatch operations. TDSI serves the automotive industry with distribution centers and storage
locations. Transflo connects non-rail served customers to the many benefits of rail by transferring products
from rail to trucks. The biggest Transflo markets are chemicals and agriculture, which includes shipments
of plastics and ethanol. CSX Technology and other subsidiaries provide support services for the Company.
CSX 2019 Form 10-K p.52
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 1. Nature of Operations and Significant Accounting Policies, continued
Lines of Business
During 2019, the Company's services generated $11.9 billion of revenue and served three primary
lines of business: merchandise, coal and intermodal.
• The merchandise business shipped 2.7 million carloads (43 percent of volume) and generated
64 percent of revenue in 2019. The Company’s merchandise business is comprised of shipments
in the following diverse markets: chemicals, automotive, agricultural and food products, minerals,
fertilizers, forest products, and metals and equipment.
• The coal business shipped 843 thousand carloads (14 percent of volume) and generated 17
percent of revenue in 2019. The Company transports domestic coal, coke and iron ore to
electricity-generating power plants, steel manufacturers and industrial plants as well as export
coal to deep-water port facilities. Roughly one-third of export coal and the majority of the domestic
coal that the Company transports is used for generating electricity.
• The intermodal business shipped 2.7 million units (43 percent of volume) and generated 15
percent of revenue in 2019. The intermodal business combines the superior economics of rail
transportation with the flexibility of trucks and offers a cost and environmental advantage over
long-haul trucking. Through a network of approximately 30 terminals, the intermodal business
serves all major markets east of the Mississippi River and transports mainly manufactured
consumer goods in containers, providing customers with truck-like service for longer shipments.
Other revenue accounted for 4 percent of the Company’s total revenue in 2019. This revenue category
includes revenue from regional subsidiary railroads, demurrage, storage at intermodal facilities, revenue for
customer volume commitments not met, switching, other incidental charges and adjustments to revenue
reserves. Revenue from regional railroads includes shipments by railroads that the Company does not
directly operate. Demurrage represents charges assessed when freight cars or other equipment are held
beyond a specified period of time. Switching represents charges assessed when a railroad switches cars
for a customer or another railroad.
Employees
The Company's number of employees was nearly 21,000 as of December 2019, which includes
approximately 17,000 union employees. Most of the Company’s employees provide or support transportation
services.
Basis of Presentation
In the opinion of management, the accompanying consolidated financial statements contain all
normal, recurring adjustments necessary to fairly present the financial position of CSX and its subsidiaries
at December 31, 2019 and December 31, 2018, and the consolidated statements of income, comprehensive
income, cash flows and changes in shareholders’ equity for fiscal years 2019, 2018 and 2017. Where
applicable, prior year information has been reclassified to conform to current presentation. In addition,
management has evaluated and disclosed all material events occurring subsequent to the date of the financial
statements up to the date this annual report is filed on Form 10-K.
CSX 2019 Form 10-K p.53
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 1. Nature of Operations and Significant Accounting Policies, continued
Fiscal Year
Through the second quarter 2017, CSX followed a 52/53 week fiscal reporting calendar with the last
day of each reporting period ending on a Friday. On July 7, 2017, the Board of Directors of CSX approved
a change in the fiscal reporting calendar from a 52/53 week year ending on the last Friday of December to
a calendar year ending on December 31 each year, effective beginning with fiscal third quarter 2017. Related
to the change in the fiscal calendar, 2019 and 2018 both contained 365 days while 2017 contained 366
days.
This change did not materially impact comparability of the Company’s financial results for fiscal year
2017. Accordingly, the change to a calendar fiscal year was made on a prospective basis and operating
results for prior periods were not adjusted. The Company was not required to file a transition report because
this change was not deemed a change in fiscal year for purposes of reporting subject to Rule 13a-10 or
Rule 15d-10 of the Securities Exchange Act of 1934 as the new fiscal year commenced with the end of the
prior fiscal year end. Except as otherwise specified, references to full years indicate CSX’s fiscal years
ended on December 31, 2019, December 31, 2018 and December 31, 2017.
Principles of Consolidation
The consolidated financial statements include results of operations of CSX and subsidiaries over
which CSX has majority ownership or financial control. All significant intercompany accounts and transactions
have been eliminated. Most investments in companies that were not majority-owned were carried at cost
(if less than 20% owned and the Company has no significant influence) or were accounted for under the
equity method (if the Company has significant influence but does not have control). These investments are
reported within Investment in Conrail or Affiliates and Other Companies on the consolidated balance sheets.
Cash and Cash Equivalents
On a daily basis, cash in excess of current operating requirements is invested in various highly liquid
investments having a typical maturity date of three months or less at the date of acquisition. These
investments are carried at cost, which approximated market value, and are classified as cash equivalents.
Investments
Investments in instruments with original maturities greater than three months that will mature in less
than one year are classified as short-term investments. Investments with original maturities of one year or
greater are initially classified within other long-term assets, and the classification is re-evaluated at each
balance sheet date.
Materials and Supplies
Materials and supplies in the consolidated balance sheets are carried at average costs and consist
primarily of parts used in the repair and maintenance of track structure, equipment, and CSXT’s freight car
and locomotive fleets, as well as fuel.
CSX 2019 Form 10-K p.54
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 1. Nature of Operations and Significant Accounting Policies, continued
New Accounting Pronouncements
In February 2016, the FASB issued ASU, Leases, which requires lessees to recognize most leases
on their balance sheets as a right-of-use asset with a corresponding lease liability. Lessor accounting under
the standard is substantially unchanged. Additional qualitative and quantitative disclosures are also required.
CSX adopted the standard effective January 1, 2019 using the cumulative-effect adjustment transition
method, which applies the provisions of the standard at the effective date without adjusting the comparative
periods presented. The Company adopted the following practical expedients and elected the following
accounting policies related to this standard update:
• Carry forward of historical lease classifications and current accounting treatment for existing land
easements;
• Short-term lease accounting policy election allowing lessees to not recognize right-of-use assets
and liabilities for leases with a term of 12 months or less; and
• The option to not separate lease and non-lease components for certain equipment lease asset
categories such as freight car, vehicles and work equipment.
Adoption of this standard resulted in the recognition of operating lease right-of-use assets and
corresponding lease liabilities of $534 million on the consolidated balance sheet as of January 1, 2019. This
amount is lower than previous estimates due to a lease amendment. The Company’s accounting for finance
leases remained substantially unchanged. The standard did not materially impact operating results or
liquidity. Disclosures related to the amount, timing and uncertainty of cash flows arising from leases are
included in Note 7, Leases.
In June 2016, the FASB issued ASU Measurement of Credit Losses on Financial Instruments, which
replaces current methods for evaluating impairment of financial instruments not measured at fair value,
including trade accounts receivable and certain debt securities, with a current expected credit loss model.
CSX adopted this new standard update effective January 1, 2020. Adoption will not have a material effect
on the Company's results of operations.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires that management make estimates in reporting the amounts of certain assets
and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amount of certain revenues and expenses during the reporting period. Actual results may differ
from those estimates. Critical accounting estimates using management judgment are made for the following
areas:
• personal injury, environmental and legal reserves (see Note 5, Casualty, Environmental and
Other Reserves);
• pension and post-retirement medical plan accounting (see Note 9, Employee Benefit Plans); and
• depreciation policies for assets under the group-life method (see Note 6, Properties).
CSX 2019 Form 10-K p.55
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 1. Nature of Operations and Significant Accounting Policies, continued
Restructuring Charge
Through an involuntary separation program with enhanced benefits to further its strategic objectives,
CSX reduced its management workforce by approximately 950 employees during 2017. The Company was
focused on driving efficiencies through process improvement and responding to business mix shifts. These
management reductions were designed to further streamline general and administrative and operating
support functions to speed decision making and further control costs. The involuntary separation program
was essentially completed in April 2017.
The restructuring charge in 2017 includes costs related to the management workforce reduction
program, executive retirements, reimbursement arrangements with MR Argent Advisor LLC (“Mantle Ridge”)
and the Company’s former President and Chief Executive Officer, E. Hunter Harrison, the proration of equity
awards and other advisory costs related to the leadership transition. Payments related to the 2017
restructuring charge were substantially complete as of March 31, 2018.
Expenses related to the management workforce reduction and other restructuring costs totaled $325
million in 2017 and are shown in the following table.
(Dollars in millions)
Severance and Pension
Other Post-Retirement Benefits Curtailment
Employee Equity Awards Proration and Other
Subtotal Management Workforce Reduction
Reimbursement Arrangements
Executive Equity Awards Proration
Pension Settlement Charge
Advisory Fees Related to Shareholder Matters
Total Restructuring Charge
Fiscal Year 2017
Operating
Restructuring
Charge
Non-Operating
Restructuring
Charge
$
$
$
98 $
—
23
121 $
84
24
—
11
240 $
56
17
—
73
—
—
12
—
85
CSX 2019 Form 10-K p.56
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 2. Earnings Per Share
The following table sets forth the computation of basic earnings per share and earnings per share,
assuming dilution:
Numerator (Dollars in Millions):
Net Earnings
Dividend Equivalents on Restricted Stock
Net Earnings, Attributable to Common Shareholders
Denominator (Units in Millions):
Average Common Shares Outstanding
Other Potentially Dilutive Common Shares
Average Common Shares Outstanding, Assuming Dilution
Net Earnings Per Share, Basic
Net Earnings Per Share, Assuming Dilution
$
$
$
$
Fiscal Years
2018
2017
2019
3,331 $
—
3,331 $
3,309 $
(1)
3,308 $
5,471
(1)
5,470
796
2
798
857
4
861
4.18 $
4.17 $
3.86 $
3.84 $
911
3
914
6.01
5.99
Basic earnings per share is based on the weighted-average number of shares of common stock
outstanding. Earnings per share, assuming dilution, is based on the weighted-average number of shares of
common stock outstanding and common stock equivalents adjusted for the effects of common stock that
may be issued as a result of potentially dilutive instruments. CSX's potentially dilutive instruments are made
up of equity awards including performance units and employee stock options.
When calculating diluted earnings per share, the potential shares that would be outstanding if all
outstanding stock options were exercised are included. This number is different from outstanding stock
options, which is included in Note 4, Stock Plans and Share-Based Compensation, because it is offset by
shares CSX could repurchase using the proceeds from these hypothetical exercises to obtain the common
stock equivalent. Approximately 877 thousand, 479 thousand and 7.6 million of total average outstanding
stock options for 2019, 2018 and 2017, respectively, were excluded from the diluted earnings per share
calculation because their effect was antidilutive.
Share Repurchase Programs
In January 2019, the Company announced a $5 billion share repurchase program ("January 2019
program"). At December 31, 2019, approximately $1.8 billion of authority remains under this program.
Previously, share repurchases were completed under the following:
• A share repurchase program originally announced in October 2017 for $1.5 billion, and later
increased to $5 billion in February 2018, that was completed in January 2019 ("October 2017
program").
• A share repurchase program originally announced in April 2017 for $1 billion, and later increased
to $1.5 billion in July 2017, that was completed in October 2017.
• A $2 billion share repurchase program announced in April 2015 that was completed in April 2017.
CSX 2019 Form 10-K p.57
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 2. Earnings Per Share, continued
Share repurchases may be made through a variety of methods including, but not limited to, open
market purchases, purchases pursuant to Rule 10b5-1 plans, accelerated share repurchases and negotiated
block purchases. The timing of share repurchases depends upon management's assessment of marketplace
conditions and other factors, and the program remains subject to the discretion of the Board of Directors.
Future share repurchases are expected to be funded by cash on hand, cash generated from operations and
debt issuances. Shares are retired immediately upon repurchase. In accordance with the Equity Topic in
the Accounting Standards Codification ("ASC"), the excess of repurchase price over par value is recorded
in retained earnings.
Share Repurchase Activity
During 2019, 2018, and 2017, CSX repurchased the following shares:
Shares Repurchased (Units in Millions)
Cost of Shares (Dollars in Millions)
Average Price Paid per Share
2019
Fiscal Years
2018
2017
48
3,373 $
70.54 $
72
4,671 $
64.64 $
39
1,970
50.80
$
$
On October 17, 2019, the Company repurchased 4.7 million shares for $319 million from MR Argent
Advisor LLC, a CSX shareholder, on behalf of certain limited partners of its affiliated funds (“Mantle Ridge”)
under the January 2019 program. A member of CSX’s Board of Directors, Paul C. Hilal, founded and controls
Mantle Ridge and each of its related entities. The ownership position of Mantle Ridge is detailed in the
Company's Proxy Statement on Schedule 14A filed on March 22, 2019, and subsequent Form 4 filings with
the SEC. Shares purchased from Mantle Ridge are included in the table above.
In August 2019, the Company entered into an agreement to repurchase shares of the Company’s
common stock under the January 2019 program. Under this agreement, the Company made a prepayment
of $250 million to a financial institution and settlement occurred in September 2019. At settlement, the
Company received approximately 4 million shares, calculated based on the volume-weighted average price
of the Company’s common stock over the term of the agreement, less a discount. Shares purchased under
this agreement are included in the table above.
During 2018, the Company entered into four accelerated share repurchase agreements to repurchase
shares of the Company’s common stock under the October 2017 program. Under these agreements, the
Company paid $1.5 billion and received approximately 22 million total shares. Shares purchased under
accelerated share repurchase agreements are included in the table above.
CSX 2019 Form 10-K p.58
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 3. Shareholders’ Equity
Common and preferred stock consists of the following:
Common Stock, $1 Par Value
Common Shares Authorized
Common Shares Issued and Outstanding
Preferred Shares Authorized
Preferred Shares Issued and Outstanding
Preferred Stock
December 2019
(Units in Millions)
1,800
773
25
—
Holders of common stock are entitled to one vote on all matters requiring a vote for each share
held. Preferred stock is senior to common stock with respect to dividends and upon liquidation of CSX.
NOTE 4. Stock Plans and Share-Based Compensation
Under CSX's share-based compensation plans, awards consist of performance units, stock options,
restricted stock units and restricted stock awards for management and stock grants for directors. Awards
granted under the various programs are determined and approved by the Compensation Committee of the
Board of Directors or, in certain circumstances, by the full Board for awards to the Chief Executive Officer
or by the Chief Executive Officer for awards to management employees other than senior executives. The
Board of Directors approves awards granted to CSX's non-management directors upon recommendation
of the Governance Committee.
Share-based compensation expense for awards under share-based compensation plans and
purchases made as part of the employee stock purchase plan is measured using the fair value of the award
on the grant date and is recognized on a straight-line basis over the service period of the respective award.
Forfeitures are recognized as they occur. Total pre-tax expense and income tax benefits associated with
share-based compensation are shown in the table below. Income tax benefits include impacts from option
exercises and the vesting of other equity awards. Modifications to the terms of awards (see Equity Award
Modifications below) impacted share-based compensation expense in 2017.
(Dollars in Millions)
Share-Based Compensation Expense
Performance Units
Stock Options
Restricted Stock Units and Awards
Stock Awards for Directors
Employee Stock Purchase Plan
Total Share-based Compensation Expense
Income Tax Benefit
Fiscal Years
2018
2017
2019
$
$
$
42 $
18
8
2
4
74 $
43 $
28 $
13
6
2
2
51 $
26 $
49
22
15
3
—
89
42
CSX 2019 Form 10-K p.59
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 4. Stock Plans and Share-Based Compensation, continued
Long-term Incentive Plans
The CSX Long-term Incentive Plans (“LTIP”) were adopted under the 2010 CSX Stock and Incentive
Award Plan. On May 3, 2019, shareholders approved the CSX 2019 Stock and Incentive Award Plan, under
which future awards will be granted. The objective of these plans is to motivate and reward certain employees
for achieving and exceeding certain financial goals. Grants were made in performance units, with each unit
being equivalent to one share of CSX common stock, and payouts will be made in CSX common stock. The
payout range for most participants will be between 0% and 200% of the target awards depending on Company
performance against predetermined goals for each three-year cycle. In 2019, 2018, and 2017, target
performance units were granted to certain employees under three separate LTIP plans covering three-year
cycles: the 2019-2021 ("2019-2021 LTIP"), the 2018-2020 (“2018-2020 LTIP”), and the 2017-2019
(“2017-2019 LTIP”) plans.
The key financial targets for the 2017-2019 LTIP plan are based on the achievement of goals related
to both operating ratio and return on assets (tax-adjusted operating income divided by net property) excluding
certain items as disclosed in the Company's financial statements. The three-year cumulative operating ratio
and average return on assets over the performance period will each comprise 50% of the payout and are
measured independently of the other. This plan states that payouts for certain executive officers are subject
to downward adjustment by up to 30% based upon total shareholder return relative to specified comparable
groups.
Payouts of performance units for the 2018-2020 and 2019-2021 LTIP plans will be based on the
achievement of goals related to both operating ratio and free cash flow, in each case excluding non-recurring
items as disclosed in the Company’s financial statements. For the 2018-2020 LTIP plan, the final year
operating ratio and cumulative free cash flow over the plan period will each comprise 50% of the payout
and will be measured independently of the other. For the 2019-2021 LTIP plan, the cumulative operating
ratio and cumulative free cash flow over the plan period will each comprise 50% of the payout and will be
measured independently of the other. For these plans, payouts for certain executive officers are subject to
formulaic upward or downward adjustment by up to 25%, capped at an overall payout of 200% for the 2018
plan and 250% for the 2019 plan, based upon the Company’s total shareholder return relative to specified
comparable groups over the performance period.
The fair value of the performance units awarded during the years ended December 2019 and 2018
were calculated using a Monte-Carlo simulation model with the following weighted-average assumptions:
Weighted-average assumptions used:
Annual dividend yield
Risk-free interest rate
Annualized volatility
Expected life (in years)
2019
2018
1.4%
2.4%
27.4%
2.8
1.6%
2.3%
29.1%
2.9
CSX 2019 Form 10-K p.60
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 4. Stock Plans and Share-Based Compensation, continued
Performance unit grant and vesting information is summarized as follows:
Weighted-average grant date fair value
Fair value of units vested in fiscal year ending (in millions)
$
$
66.18 $
17 $
55.57 $
14 $
49.50
26
The performance unit activity related to the outstanding long-term incentive plans and corresponding
fair value is summarized as follows:
2019
Fiscal Years
2018
2017
Unvested at December 31, 2018
Granted
Forfeited
Vested
Unvested at December 31, 2019
Performance Units
Outstanding
(in Thousands)
Weighted-Average
Fair Value at Grant
Date
722 $
337
(75)
(341)
643 $
52.58
66.18
57.20
49.52
60.58
As of December 2019, there was $23 million of total unrecognized compensation cost related to
performance units that is expected to be recognized over a weighted-average period of approximately two
years.
Stock Options
Stock options in 2019, 2018, and 2017 were primarily granted along with the corresponding LTIP
plans. Under this program, an employee receives an award that provides the opportunity in the future to
purchase CSX shares at the closing market price of the stock on the date the award is granted (the strike
price). Options granted in 2019 become exercisable either in equal installments on the anniversary of the
grant date over a vesting period (three-year graded), or three years after the grant date (three-year cliff),
depending on the individual grant. The options granted in 2018 and 2017 vest three years after the grant
date (three-year cliff). All options expire 10 years from the grant date if they are not exercised.
The fair value of stock options granted was estimated as of the dates of grant using the Black-
Scholes-Merton option model which uses the following assumptions: dividend yield, risk-free interest rate,
annualized volatility and expected life. The annual dividend yield is based on the most recent quarterly CSX
dividend payment annualized. The risk-free interest rate is based on U.S. Treasury yield curve in effect at
the time of grant. The annualized volatility is based on historical volatility of daily CSX stock price returns
over a 6.1 year look-back period ending on the grant date. The expected life is calculated using the safe
harbor approach due to lack of historical data on CSX options, which is the midpoint between the vesting
schedule and contractual term (10 years).
In March 2017, the Company granted 9 million stock options to former CEO E. Hunter Harrison at
a fair value of $12.88 per option. These options were granted with a 10-year term and an exercise price
equal to the closing market price of the underlying stock on the date of grant. Upon his death in December
2017, all of Mr. Harrison's 9 million options were forfeited.
CSX 2019 Form 10-K p.61
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 4. Stock Plans and Share-Based Compensation, continued
Assumptions and inputs used to estimate fair value of stock options are summarized as follows:
Weighted-average grant date fair value
$
17.87
$
14.65
$
12.84
Fiscal Years
2018
2017
2019
Stock options valuation assumptions:
Annual dividend yield
Risk-free interest rate
Annualized volatility
Expected life (in years)
Other pricing model inputs:
1.3%
2.4%
25.7%
6.1
1.5%
2.6%
27.0%
6.5
1.5%
2.2%
27.1%
6.3
Weighted-average grant-date market price of CSX stock
(strike price)
$
70.01
$
54.19
$
49.63
The stock option activity is summarized as follows:
Stock Options
Outstanding
(in Thousands)
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life
(in Years)
Aggregate
Intrinsic Value
(in Millions)
Outstanding at December 31, 2018
Granted
Forfeited
Exercised
Outstanding at December 31, 2019
Exercisable at December 31, 2019
4,673 $
1,187
(212)
(1,853)
3,795 $
1,026 $
34.89
70.01
55.35
24.48
49.78
24.60
7.5 $
6.0 $
87
49
Unrecognized compensation expense related to stock options as of December 2019 was $15 million
and is expected to be recognized over a weighted-average period of approximately two years. The Company
issues new shares upon stock option exercises. There were no significant exercises during 2017 or 2018.
Additional information on stock option exercises in 2019 is summarized as follows:
(Dollars in Millions)
Intrinsic value of stock options exercised
Cash received from option exercises
2019
87
45
$
$
CSX 2019 Form 10-K p.62
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 4. Stock Plans and Share-Based Compensation, continued
Restricted Stock Grants
Restricted stock grants consist of units and awards, each equivalent to one share of CSX
stock. Restricted stock units are primarily issued along with corresponding LTIP plans and vest three years
after the date of grant. Separately, restricted stock awards generally vest over an employment period of up
to five years. Participants receive cash dividend equivalents on the unvested shares during the restriction
period. These awards are time-based and not based upon CSX’s attainment of operational targets.
Restricted stock grant and vesting information is summarized as follows:
Weighted-average grant date fair value
Fair value of units and awards vested during fiscal year ended
(in millions)
$
$
Fiscal Years
2018
2017
2019
69.19 $
7 $
62.60 $
9 $
48.35
8
The restricted stock activity related to the outstanding long-term incentive plans and other awards
and corresponding fair value is summarized as follows:
Unvested at December 31, 2018
Granted
Forfeited
Vested
Unvested at December 31, 2019
Restricted Stock
Units and Awards
Outstanding
(in Thousands)
Weighted-Average
Fair Value at Grant
Date
684 $
88
(30)
(315)
427 $
39.30
69.19
53.28
24.21
57.29
As of December 2019, unrecognized compensation expense for these restricted stock units and
awards was approximately $8 million, which will be expensed over a weighted-average remaining period of
two years.
Equity Award Modifications
In 2017, as part of an enhanced severance benefit under the management streamlining and
realignment initiative discussed in Note 1, unvested performance units, restricted stock units and stock
options for separated employees not eligible for retirement were permitted to vest on a pro-rata basis.
Additionally, the terms of unvested equity awards for a former Chief Executive Officer, Michael J. Ward, and
a former President, Clarence W. Gooden, were modified prior to their retirements on March 6, 2017 to permit
prorated vesting through May 31, 2018.
The award modifications impacted approximately 75 employees and resulted in an increase to share-
based compensation expense for revaluation of the affected awards of $39 million for the year ended
December 31, 2017. The expense associated with these award modifications was included in the 2017
restructuring charge. No significant award modifications took place in 2019 or 2018.
CSX 2019 Form 10-K p.63
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 4. Stock Plans and Share-Based Compensation, continued
Stock Awards for Directors
CSX’s non-management directors receive a base annual retainer of $112,500 to be paid quarterly
in cash, unless the director chooses to defer the retainer in the form of cash or CSX common stock.
Additionally, non-management directors receive an annual grant of common stock in the amount of
approximately $162,500, with the number of shares to be granted based on the average closing price of
CSX stock in the months of November, December and January. The independent non-executive Chairman
also receives an annual grant of common stock in the amount of approximately $250,000, with the number
of shares to be granted based on the average closing price of CSX stock in the months of November,
December, and January.
Employee Stock Purchase Plan
In May 2018, shareholders approved the 2018 CSX Employee Stock Purchase Plan (“ESPP”) for
the benefit of Company employees. The Company registered 4 million shares of common stock that may
be issued pursuant to this plan. Under the ESPP, employees may contribute between 1% and 10% of base
compensation, after-tax, to purchase up to $25,000 of CSX common stock per year at 85% of the closing
market price on either the grant date or the last day of the six-month offering period, whichever is lower.
During 2019, the Company issued approximately 250 thousand shares under the ESPP.
NOTE 5. Casualty, Environmental and Other Reserves
Activity related to casualty, environmental and other reserves is as follows:
(Dollars in Millions)
December 30, 2016
Charged to Expense
Payments
December 31, 2017
Charged to Expense
Payments
December 31, 2018
Charged to Expense
Payments
December 31, 2019
Casualty
Reserves
$
Environmental
Reserves
Other
Reserves
229 $
43
(44)
228
21
(50)
199
56
(68)
95 $
26
(31)
90
10
(20)
80
17
(23)
74 $
Total
50 $ 374
45
114
(114)
(39)
56
374
72
41
(122)
(52)
45
324
34
107
(126)
(35)
44 $ 305
$
187 $
CSX 2019 Form 10-K p.64
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 5. Casualty, Environmental and Other Reserves, continued
Personal injury and environmental reserves are considered critical accounting estimates due to the
need for management judgment. In the table above, the impacts of changes in estimates are included in
the charged to expense amount and were not material in 2019, 2018, or 2017. Casualty, environmental and
other reserves are provided for in the consolidated balance sheets as shown in the table below.
(Dollars in Millions)
Casualty:
Personal Injury
Occupational
Total Casualty
Environmental
Other
Total
December 2019
Long-term
Current
Total
Current
December 2018
Long-term
Total
$
$
$
42 $
6
48 $
31
21
100 $
87 $
52
139 $
43
23
205 $
129 $
58
187 $
74
44
305 $
40 $
10
50 $
39
24
113 $
103 $
46
149 $
41
21
211 $
143
56
199
80
45
324
These liabilities are accrued when probable and reasonably estimable in accordance with the
Contingencies Topic in the ASC. Actual settlements and claims received could differ and final outcomes of
these matters cannot be predicted with certainty. Considering the legal defenses currently available, the
liabilities that have been recorded and other factors, it is the opinion of management that none of these
items individually, when finally resolved, will have a material adverse effect on the Company's financial
condition, results of operations or liquidity. Should a number of these items occur in the same period, however,
their combined effect could be material in that particular period.
Casualty
Casualty reserves of $187 million and $199 million for 2019 and 2018, respectively, represent accruals
for personal injury, occupational disease and occupational injury claims. The Company increased its self-
insured retention amount for these claims from $50 million to $75 million per occurrence for claims occurring
on or after June 1, 2018. Currently, no individual claim is expected to exceed the self-insured retention
amount. Most of the Company's casualty claims relate to CSXT. In accordance with the Contingencies Topic
in the ASC, to the extent the value of an individual claim exceeds the self-insured retention amount, the
Company would present the liability on a gross basis with a corresponding receivable for insurance
recoveries.
These reserves fluctuate based upon the timing of payments as well as changes in estimate. Actual
results may vary from estimates due to the number, type and severity of the injury, costs of medical treatments
and uncertainties in litigation. Defense and processing costs, which historically have been insignificant and
are anticipated to be insignificant in the future, are not included in the recorded liabilities. Changes in casualty
reserves are included in materials, supplies and other on the consolidated income statements.
CSX 2019 Form 10-K p.65
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 5. Casualty, Environmental and Other Reserves, continued
Personal Injury
Personal
injury reserves represent
third-party
liabilities
injuries. Work-related injuries for CSXT employees are primarily subject to the Federal Employers' Liability
Act ("FELA"). CSXT retains an independent actuary to assist management in assessing the value of personal
injury claims. An analysis is performed by the actuary quarterly and is reviewed by management. The
methodology used by the actuary includes a development factor to reflect growth or reduction in the value
of these personal injury claims based largely on CSXT's historical claims and settlement experience. This
analysis did not result in a material adjustment to the personal injury reserve in 2019, 2018 or 2017.
for employee work-related and
Occupational
Occupational reserves represent liabilities for occupational disease and injury claims. Occupational
disease claims arise primarily from allegations of exposure to asbestos in the workplace. Occupational injury
claims arise from allegations of exposure to certain other materials in the workplace, such as solvents,
soaps, chemicals (collectively referred to as “irritants”) and diesel fuels (like exhaust fumes) or allegations
of chronic physical injuries resulting from work conditions, such as repetitive stress injuries. An analysis
performed by management did not result in a material adjustment to the occupational reserve in 2019, 2018
or 2017.
Environmental
Environmental reserves were $74 million and $80 million for 2019 and 2018, respectively. The
Company is a party to various proceedings related to environmental issues, including administrative and
judicial proceedings involving private parties and regulatory agencies. The Company has been identified as
a potentially responsible party at approximately 220 environmentally impaired sites. Many of these are, or
may be, subject to remedial action under the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), also known as the Superfund Law, or similar state
statutes. Most of these proceedings arose from environmental conditions on properties used for ongoing or
discontinued railroad operations. A number of these proceedings, however, are based on allegations that
the Company, or its predecessors, sent hazardous substances to facilities owned or operated by others for
treatment, recycling or disposal. In addition, some of the Company’s land holdings were leased to others
for commercial or industrial uses that may have resulted in releases of hazardous substances or other
regulated materials onto the property and could give rise to proceedings against the Company.
In any such proceedings, the Company is subject to environmental clean-up and enforcement actions
under the Superfund Law, as well as similar state laws that may impose joint and several liability for clean-
up and enforcement costs on current and former owners and operators of a site without regard to fault or
the legality of the original conduct. These costs could be substantial.
CSX 2019 Form 10-K p.66
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 5. Casualty, Environmental and Other Reserves, continued
In accordance with the Asset Retirement and Environmental Obligations Topic in the ASC, the
Company reviews its role with respect to each site identified at least quarterly, giving consideration to a
number of factors such as:
•
type of clean-up required;
• nature of the Company’s alleged connection to the location (e.g., generator of waste sent to the
site or owner or operator of the site);
• extent of the Company’s alleged connection (e.g., volume of waste sent to the location and other
relevant factors); and
• number, connection and financial viability of other named and unnamed potentially responsible
parties at the location.
Based on the review process, the Company has recorded amounts to cover contingent anticipated
future environmental remediation costs with respect to each site to the extent such costs are reasonably
estimable and probable. The recorded
future environmental costs are
undiscounted. The liability includes future costs for remediation and restoration of sites as well as any
significant ongoing monitoring costs, but excludes any anticipated insurance recoveries. Payments related
to these liabilities are expected to be made over the next several years. Environmental remediation costs
are included in materials, supplies and other on the consolidated income statements.
for estimated
liabilities
Currently, the Company does not possess sufficient information to reasonably estimate the amounts
of additional liabilities, if any, on some sites until completion of future environmental studies. In addition,
conditions that are currently unknown could, at any given location, result in additional exposure, the amount
and materiality of which cannot presently be reasonably estimated. Based upon information currently
available, however, the Company believes its environmental reserves accurately reflect the estimated cost
of remedial actions currently required.
Other
Other reserves were $44 million and $45 million for 2019 and 2018, respectively. These reserves
include liabilities for various claims, such as property, automobile and general liability. Also included in other
reserves are longshoremen disability claims related to a previously owned international shipping business
(these claims are in runoff) as well as claims for current port employees.
CSX 2019 Form 10-K p.67
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 6. Properties
A detail of the Company’s net properties are as follows:
(Dollars in Millions)
December 2019
Road
Accumulated Net Book
Annual
Depreciation
Estimated
Useful Life
Depreciation
Cost
Depreciation
Value
Rate
( Avg. Years)
Method
Rail and Other Track
Material
$ 8,194
$
(1,719) $
6,475
Ties
Grading
Ballast
Bridges, Trestles, and
Culverts
Signals and Interlockers
Buildings
Other
6,041
2,763
3,156
2,529
3,077
1,335
5,030
Equipment
Locomotive
Freight Cars
Total Road
32,125
5,320
2,964
Work Equipment and Other
2,424
Total Equipment
10,708
Land
Construction In Progress
1,836
431
(1,666)
(595)
(1,013)
4,375
2,168
2,143
2.5%
3.7%
1.4%
2.7%
(334)
2,195
1.6%
(819)
(492)
(1,980)
(8,618)
(2,020)
(880)
(1,414)
(4,314)
—
—
2,258
843
3,050
23,507
3,300
2,084
1,010
6,394
1,836
431
4.0%
2.5%
4.2%
3.6%
2.9%
8.2%
N/A
N/A
40
27
72
37
61
25
40
24
27
35
12
Group Life
Group Life
Group Life
Group Life
Group Life
Group Life/
Straight Line (a)
Group Life
Group Life
Group Life
Group Life
Group Life/
Straight Line (a)
N/A
N/A
N/A
N/A
Total Properties
$ 45,100
$
(12,932) $ 32,168
(a) For depreciation method, certain asset categories contain intermodal terminals or technology-related assets, which are depreciated using the
straight-line method.
CSX 2019 Form 10-K p.68
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 6. Properties, continued
(Dollars in Millions)
December 2018
Road
Accumulated Net Book
Annual
Depreciation
Estimated
Useful Life
Depreciation
Cost
Depreciation
Value
Rate
(Avg. Years)
Method
Rail and Other Track
Material
$ 7,964
$
(1,698) $
6,266
Ties
Grading
Ballast
Bridges, Trestles, and
Culverts
Signals and Interlockers
Buildings
Other
5,860
2,757
3,076
2,506
2,975
1,318
4,955
Equipment
Locomotive
Freight Cars
Total Road
31,411
5,661
3,093
Work Equipment and Other
2,338
Total Equipment
11,092
Land
Construction In Progress
1,845
457
(1,557)
(572)
(971)
4,303
2,185
2,105
2.5%
3.7%
1.4%
2.7%
(382)
2,124
1.6%
(693)
(486)
(1,964)
(8,323)
(2,266)
(882)
(1,336)
(4,484)
—
—
2,282
832
2,991
23,088
3,395
2,211
1,002
6,608
1,845
457
4.0%
2.5%
4.2%
3.5%
2.9%
7.4%
N/A
N/A
40
27
72
37
61
25
40
24
29
35
14
Group Life
Group Life
Group Life
Group Life
Group Life
Group Life/
Straight Line (a)
Group Life
Group Life
Group Life
Group Life
Group Life/
Straight Line (a)
N/A
N/A
N/A
N/A
Total Properties
$ 44,805
$
(12,807) $ 31,998
(a) For depreciation method, certain asset categories contain intermodal terminals or technology-related assets, which are depreciated using the
straight-line method.
CSX 2019 Form 10-K p.69
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 6. Properties, continued
Capital Expenditures
The Company’s capital investment includes purchased and self-constructed assets and property
additions that substantially extend the service life or increase the utility of those assets. Indirect costs that
can be specifically traced to capital projects are also capitalized. The Company is committed to maintaining
and improving its existing infrastructure and expanding its network capacity for long-term growth. Rail
operations are capital intensive and CSX accounts for these costs in accordance with GAAP and the
Company’s capitalization policy. All properties are stated at historical cost less an allowance for accumulated
depreciation.
The Company’s largest category of capital investment is the replacement of track assets and the
acquisition or construction of new assets that enable CSX to enhance its operations or provide new capacity
offerings to its customers. These construction projects are primarily completed by CSXT employees. Costs
for track asset replacement and capacity projects that are capitalized include:
•
•
labor costs, because many of the assets are self-constructed;
costs to purchase or construct new track or to prepare ground for the laying of track;
• welding (rail, field and plant) which are processes used to connect segments of rail;
• new ballast, which is gravel and crushed stone that holds track in line;
•
fuels and lubricants associated with tie, rail and surfacing work which is the process of raising
track to a designated elevation over an extended distance;
•
cross, switch and bridge ties which are the braces that support the rails on a track;
• gauging which is the process of standardizing the distance between rails;
• handling costs associated with installing rail, ties or ballast;
• usage charge of machinery and equipment utilized in construction or installation; and
• other track materials.
Labor is a significant cost in self-constructed track replacement work. CSXT engineering employees
directly charge their labor to the track replacement project (the capitalized depreciable property). In replacing
track, these employees concurrently perform deconstruction and installation of track material. Because of
this concurrent process, CSX must estimate the amount of labor that is related to deconstruction versus
installation. As a component of the depreciation study for road and track assets, management performs an
analysis of labor costs related to the self-constructed track replacement work, which includes direct
observation of track replacement processes. Through this analysis, CSX determined that approximately
20% of labor costs associated with track replacement is related to the deconstruction of old track, for which
certain elements are expensed, and 80% is associated with the installation of new track, which is capitalized.
Capital investment related to locomotives and freight cars comprises the second largest category of
the Company’s capital assets. This category includes purchases of locomotives and freight cars as well as
certain equipment leases that are considered to be finance leases in accordance with the Leases Topic in
the ASC. In addition, costs to modify or rebuild these assets are capitalized if the investment incurred extends
the asset’s service life or improves utilization. Improvement projects must meet specified dollar thresholds
to be capitalized and are reviewed by management to determine proper accounting treatment. Routine
repairs, overhauls and other maintenance costs, for all asset categories, are expensed as incurred.
CSX 2019 Form 10-K p.70
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 6. Properties, continued
Depreciation Method
The depreciable assets of the Company are depreciated using either the group-life or straight-line
method of accounting, which are both acceptable depreciation methods in accordance with GAAP. The
Company depreciates its railroad assets, including main-line track, locomotives and freight cars, using the
group-life method. Assets depreciated under the group-life method comprise 87% of total fixed assets of
$45.1 billion on a gross basis as of December 2019. The remaining depreciable assets of the Company,
including non-railroad assets and assets under finance leases, are depreciated using the straight-line method
on a per asset basis. Land is not depreciated.
The group-life method aggregates assets with similar lives and characteristics into groups and
depreciates each of these groups as a whole. When using the group-life method, an underlying assumption
is that each group of assets, as a whole, is used and depreciated to the end of its group’s recoverable life.
The Company currently utilizes different depreciable asset categories to account for depreciation expense
for the railroad assets that are depreciated under the group-life method. By utilizing various depreciable
categories, the Company can more accurately account for the use of its assets. All assets of the Company
are depreciated on a time or life basis.
The group-life method of depreciation closely approximates the straight-line method of
depreciation. Additionally, due to the nature of most of its assets (e.g. track is one contiguous, connected
asset), the Company believes that this is the most accurate and effective way to properly depreciate its
assets.
Estimated Useful Life
Management performs a review of depreciation expense and useful lives on a regular basis. Under
the group-life method, the service lives and salvage values for each group of assets are determined by
completing periodic depreciation studies and applying management’s methods to determine the service
lives of its properties. A depreciation study is the periodic review of asset service lives, salvage values,
accumulated depreciation, and other related factors for group assets conducted by a third-party specialist,
analyzed by the Company’s management and approved by the STB, the regulatory board that has broad
jurisdiction over railroad practices. The STB requires depreciation studies be performed every three years
for equipment assets (e.g. locomotives and freight cars) and every six years for road and track assets (e.g.
bridges, signals, rail, ties, and ballast). The Company believes the frequency of depreciation studies currently
required by the STB, complemented by annual data reviews conducted by a third-party specialist and
analyzed by the Company's management, provides adequate review of asset service lives and that a more
frequent review would not result in a material change due to the long-lived nature of most of the assets.
In 2019, the Company completed a depreciation study for its equipment assets which resulted in
changes to accumulated depreciation, service lives, salvage values, and other related factors for certain
assets. The effect of this change in estimate was not material to depreciation expense in 2019. The continued
impacts of the study are expected to result in additional depreciation expense of approximately $30 million
in 2020. The Company plans to complete the next depreciation study for road and track assets in 2020 and
equipment assets in 2022.
CSX 2019 Form 10-K p.71
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 6. Properties, continued
Group-Life Assets Sales and Retirements
Since the rail network is one contiguous, connected network it is impractical to maintain specific
identification records for these assets. For track assets (e.g. rail, ties, and ballast), CSX utilizes a first-in,
first-out approach to asset retirements. Equipment assets (e.g. locomotives and freight cars) are specifically
identified at retirement. When an equipment asset is retired that has been depreciated using the group-life
method, the cost is reduced from the cost base and recorded in accumulated depreciation.
For sales or retirements of assets depreciated under the group-life method that occur in the ordinary
course of business, the asset cost (net of salvage value or sales proceeds) is charged to accumulated
depreciation and no gain or loss is immediately recognized. This practice is consistent with accounting
treatment prescribed under the group-life method. As part of the depreciation study, an assessment of the
recorded amount of accumulated depreciation is made to determine if it is deficient (or in excess) of the
appropriate amount indicated by the study. Any such deficiency (or excess), including any deferred gains
or losses, is amortized as a component of depreciation expense over the remaining service life of the asset
group until the next required depreciation study. Since the overall assumption with the group-life method is
that the assets within the group on average have the same service life and characteristics, it is therefore
concluded that the deferred gains and losses offset over time.
For sales or retirements of assets depreciated under the group-life method that do not occur in the
ordinary course of business, a gain or loss may be recognized if the sale or retirement meets each of the
following three criteria: (i) it is unusual, (ii) it is material in amount, and (iii) it varies significantly from the
retirement profile identified through our depreciation studies. No material gains or losses were recognized
on the sale of assets depreciated using the group-life method in 2019, 2018, or 2017 as no sales met the
criteria described above.
Land and Straight-line Assets Sales and Retirements
When the Company sells or retires land, land-related easements or assets depreciated under the
straight-line method, a gain or loss is recognized in materials, supplies and other on the consolidated
statements of income. In 2019, the Company recognized gains on the sale of properties of $151 million as
a result of its initiative to monetize non-core properties. In 2018 and 2017, the Company recognized gains
on the sale of properties of $154 million and $18 million, respectively.
Impairment Review
Properties and other long-lived assets are reviewed for impairment whenever events or business
conditions indicate the carrying amount of such assets may not be fully recoverable. Initial assessments of
recoverability are based on estimates of undiscounted future net cash flows associated with an asset or a
group of assets in accordance with the Property, Plant, and Equipment Topic in the ASC. Where impairment
is indicated, the assets are evaluated and their carrying amount is reduced to fair value based on discounted
net cash flows or other estimates of fair value. In 2019, impairment expense of $22 million was related to
an intermodal terminal sale agreement. In 2018 and 2017, impairment expense of $24 million and $25
million, respectively, was primarily due to the discontinuation of certain in-progress projects. Impairment
expense is recorded in materials, supplies and other expense on the consolidated income statement.
CSX 2019 Form 10-K p.72
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 7. Leases
CSX has various lease agreements with terms up to 50 years, including leases of land, land with
integral equipment (e.g. track), buildings and various equipment. Some leases include options to purchase,
terminate or extend for one or more years. These options are included in the lease term when it is reasonably
certain that the option will be exercised.
At inception, the Company determines if an arrangement contains a lease and whether that lease
meets the classification criteria of a finance or operating lease. Some of the Company’s lease arrangements
contain lease components (e.g. minimum rent payments) and non-lease components (e.g. maintenance,
labor charges, etc.). The Company generally accounts for each component separately based on the
estimated standalone price of each component. For certain equipment leases, such as freight car, vehicles
and work equipment, the Company accounts for the lease and non-lease components as a single lease
component.
Certain of the Company’s lease agreements include rental payments that are adjusted periodically
for an index or rate. The leases are initially measured using the projected payments adjusted for the index
or rate in effect at the commencement date. The Company’s lease agreements do not contain any material
residual value guarantees or material restrictive covenants.
Operating Leases
Operating leases are included in right-of-use lease assets, other current liabilities and long-term
lease liabilities on the consolidated balance sheets. These assets and liabilities are recognized at the
commencement date based on the present value of remaining lease payments over the lease term using
the Company’s secured incremental borrowing rates or implicit rates, when readily determinable. Short-term
operating leases, which have an initial term of 12 months or less, are not recorded on the balance sheet.
The Company has various lease agreements with other parties with terms up to 50 years. Non-
cancelable, long-term leases may include provisions for maintenance, options to purchase and options to
extend the terms. Lease expense for operating leases, including leases with escalations over their terms,
is recognized on a straight-line basis over the lease term. Variable lease expense is recognized in the period
in which the obligation for those payments is incurred. Lease expense is included in equipment and other
rents on the consolidated income statements and is reported net of lease income. Lease income was not
material to the results of operations for 2019, 2018 or 2017.
CSX 2019 Form 10-K p.73
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 7. Leases, continued
A significant operating lease was renewed in 2018 with the State of Georgia for approximately 137
miles of right-of-way with integral equipment for an additional term of 50 years with an annual 2.5% increase.
The following table presents information about the amount, timing and uncertainty of cash flows arising from
the Company’s operating leases as of December 31, 2019.
(Dollars in Millions)
Maturity of Lease Liabilities
2020
2021
2022
2023
2024
Thereafter
Total undiscounted operating lease payments
Less: Imputed interest
Present value of operating lease liabilities
Balance Sheet Classification
Current lease liabilities (recorded in other current liabilities)
Long-term lease liabilities
Total operating lease liabilities
Other Information
Weighted-average remaining lease term for operating leases
Weighted-average discount rate for operating leases
December 2019
Lease Payments
58
54
48
39
37
1,208
1,444
(894)
550
57
493
550
33 years
5.0%
$
$
$
$
Cash Flows
An initial right-of-use asset of $534 million was recognized as a non-cash asset addition upon adoption
of the new lease accounting standard effective January 1, 2019. Additional right-of-use assets of $51 million
were recognized as non-cash asset additions that resulted from new operating lease liabilities during the
year ended December 31, 2019. Cash paid for amounts included in the present value of operating lease
liabilities was $60 million during the year ended December 31, 2019 and is included in operating cash flows.
Operating Lease Costs
These costs are primarily related to long-term operating leases, but also include immaterial amounts
for variable leases and short-term leases with terms greater than 30 days. These amounts are shown in the
table below.
(Dollars in Millions)
Rent Expense on Operating Leases
Fiscal Years
2018
2017
2019
$
84 $
66 $
78
CSX 2019 Form 10-K p.74
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 7. Leases, continued
Finance Leases
Finance leases are included in properties-net and long-term debt on the consolidated balance sheets
and were not material as of December 2019 or December 2018. The associated amortization expense and
interest expense are included in depreciation and interest expense, respectively, on the consolidated income
statements and were not material to the results of operations for 2019, 2018 or 2017.
NOTE 8. Commitments and Contingencies
Purchase Commitments
CSXT's long-term locomotive maintenance program agreement with a third-party contains
commitments related to specific locomotive rebuilds and a long-term maintenance program that covers a
portion of CSXT’s fleet of locomotives. The maintenance program costs are based on the maintenance cycle
for each covered locomotive, which is determined by the asset's age and type. Expected future costs may
change as required maintenance schedules are revised and locomotives are placed into or removed from
service. Under CSXT’s current obligations, the agreement will expire no earlier than 2035.
The following table summarizes the number of locomotives covered and CSXT’s payments under
the long-term maintenance program.
(Dollars in Millions)
Amounts Paid
Number of Locomotives
Fiscal Years
2018
170 $
2019
139 $
1,897
1,910
2017
197
2,062
$
The total of annual payments under the agreement, including those related to locomotive rebuilds
and the long-term locomotive maintenance program, are estimated in the table below.
Additionally, the Company has various other commitments to purchase technology, communications,
railcar maintenance and other services from various suppliers. Total annual payments under all of these
purchase commitments are also estimated in the table below.
(Dollars in Millions)
2020
2021
2022
2023
2024
Thereafter
Total
Locomotive
Maintenance &
Rebuild
Payments
$
$
233
178
211
237
273
2,337
3,469
Other
Commitments
59
$
19
18
17
17
111
241
$
Total
292
197
229
254
290
2,448
3,710
$
$
CSX 2019 Form 10-K p.75
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 8. Commitments and Contingencies, continued
Insurance
The Company maintains insurance programs with substantial limits for property damage (which
includes business interruption) and third-party liability. A certain amount of risk is retained by the Company
on each of the property and liability programs. The Company has a $50 million per occurrence retention for
floods and named windstorms and a $25 million per occurrence retention for property losses other than
floods and named windstorms. For claims occurring on or after June 1, 2018, the Company increased its
self-insured retention for third-party liability claims from $50 million to $75 million per occurrence. While the
Company believes its insurance coverage is adequate, future claims could exceed existing insurance
coverage or insurance may not continue to be available at commercially reasonable rates.
Legal
The Company is involved in litigation incidental to its business and is a party to a number of legal
actions and claims, various governmental proceedings and private civil lawsuits, including, but not limited
to, those related to fuel surcharge practices, tax matters, environmental and hazardous material exposure
matters, FELA and labor claims by current or former employees, other personal injury or property claims
and disputes and complaints involving certain transportation rates and charges. Some of the legal
proceedings include claims for compensatory as well as punitive damages and others are, or are purported
to be, class actions. While the final outcome of these matters cannot be predicted with certainty, considering,
among other things, the legal defenses available and liabilities that have been recorded along with applicable
insurance, it is currently the opinion of management that none of these pending items will have a material
adverse effect on the Company's financial condition, results of operations or liquidity. An unexpected adverse
resolution of one or more of these items, however, could have a material adverse effect on the Company's
financial condition, results of operations or liquidity in that particular period.
The Company is able to estimate a range of possible loss for certain legal proceedings for which a
loss is reasonably possible in excess of reserves established. The Company has estimated this range to
be $1 million to $29 million in aggregate at December 31, 2019. This estimated aggregate range is based
upon currently available information and is subject to significant judgment and a variety of assumptions.
Accordingly, the Company's estimate will change from time to time, and actual losses may vary significantly
from the current estimate.
Fuel Surcharge Antitrust Litigation
In May 2007, class action lawsuits were filed against CSXT and three other U.S.-based Class I
railroads alleging that the defendants' fuel surcharge practices relating to contract and unregulated traffic
resulted from an illegal conspiracy in violation of antitrust laws. The class action lawsuits were consolidated
into one case in federal court in the District of Columbia. In 2017, the District Court issued its decision
denying class certification. On August 16, 2019, the U.S. Court of Appeals for the D.C. Circuit affirmed the
District Court’s ruling.
The District Court had delayed proceedings on the merits of the consolidated case pending the
outcome of the class certification proceedings. The consolidated case is now moving forward without class
certification. Because a class was not certified, shippers other than those who brought the original lawsuit
in 2007 must decide whether to bring their own individual claim against one or more railroads. Some individual
shipper claims have been filed.
CSX 2019 Form 10-K p.76
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 8. Commitments and Contingencies, continued
CSXT believes that its fuel surcharge practices were arrived at and applied lawfully and that the case
is without merit. Accordingly, the Company intends to defend itself vigorously. However, penalties for violating
antitrust laws can be severe, and resolution of these matters individually or when aggregated could have a
material adverse effect on the Company's financial condition, results of operations or liquidity in that particular
period.
Environmental
CSXT is indemnifying Pharmacia LLC (formerly known as Monsanto Company) for certain liabilities
associated with real estate located in Kearny, New Jersey along the Lower Passaic River (the “Property”).
The Property, which was formerly owned by Pharmacia, is now owned by CSXT. CSXT's indemnification
and defense duties arise with respect to several matters. The U.S. Environmental Protection Agency ("EPA"),
using its CERCLA authority, seeks the investigation and cleanup of hazardous substances in the 17-mile
Lower Passaic River Study Area (the "Study Area”). CSXT, on behalf of Pharmacia, and a significant number
of other potentially responsible parties are together conducting a Remedial Investigation and Feasibility
Study of the Study Area pursuant to an Administrative Settlement Agreement and Order on Consent with
the EPA. Pharmacia’s share of responsibility, indemnified by CSXT, for the investigation and cleanup costs
of the Study Area may be determined through various mechanisms including (a) an allocation and settlement
with EPA; (b) litigation brought by EPA against non-settling parties; or (c) litigation among the responsible
parties.
In March 2016, EPA issued its Record of Decision detailing the agency’s mandated remedial process
for the lower 8 miles of the Study Area. Approximately 80 parties, including Pharmacia, are participating in
an EPA-directed allocation process to assign responsibility for costs to be incurred implementing the remedy
selected for the lower 8 miles of the Study Area. CSXT is participating in the allocation process on behalf
of Pharmacia. At a later date, EPA will select a remedy for the remainder of the Study Area and is expected
to again seek the participation of private parties to implement the selected remedy using EPA’s CERCLA
authority to compel such participation, if necessary.
CSXT is also defending and indemnifying Pharmacia with regard to the Property in litigation filed by
Occidental Chemical Corporation, which is seeking to recover various costs. These costs include costs for
the remedial design of the lower 8 miles of the Study Area, as well as anticipated costs associated with the
future remediation of the lower 8 miles of the Study Area and potentially the entire Study Area. Alternatively,
Occidental seeks to compel some, or all of the defendants to participate in the remediation of the Study
Area. Pharmacia is one of approximately 110 defendants in this federal lawsuit filed by Occidental on June
30, 2018.
CSXT is also defending and indemnifying Pharmacia in a cooperative natural resource damages
assessment process related to the Property. Based on currently available information, the Company does
not believe any indemnification or remediation costs potentially allocable to CSXT with respect to the Property
and the Study Area would be material to the Company's financial condition, results of operations or liquidity.
CSX 2019 Form 10-K p.77
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 9. Employee Benefit Plans
The Company sponsors defined benefit pension plans principally for salaried, management
personnel. For employees hired prior to 2003, the plans provide eligible employees with retirement benefits
based predominantly on years of service and compensation rates near retirement. For employees hired in
2003 to 2019, benefits are determined based on a cash balance formula, which provides benefits by utilizing
interest and pay credits based upon age, service and compensation. Beginning in 2020, the CSX Pension
Plan is closed to new participants.
In addition to these plans, the Company sponsors a post-retirement medical plan and a life insurance
plan that provide certain benefits to full-time, salaried, management employees hired prior to 2003, upon
their retirement if certain eligibility requirements are met. Changes to the post-retirement medical and life
insurance plans were communicated to participants in October 2018. Beginning January 2019, both the life
insurance benefit for eligible active employees and health savings account contributions made by the
Company to eligible retirees younger than 65 were eliminated. Beginning in 2020, the employer-funded
health reimbursement arrangements for eligible retirees 65 years or older have been eliminated. As a result
of these plan amendments, the company recognized a decrease of $102 million in the post-retirement benefit
liability and a corresponding gain in other comprehensive income in 2018. These changes did not result in
a curtailment loss as there was no material impact to service costs for active plan participants.
The Company engages independent actuaries to compute the amounts of liabilities and expenses
relating to these plans subject to the assumptions that the Company determines are appropriate based on
historical trends, current market rates and future projections. These amounts are reviewed by management.
In order to perform this valuation, the actuaries are provided with the details of the population covered at
the beginning of the year, summarized in the table below, and projects that population forward to the end
of the year.
Summary of Participants as of
January 1, 2019
Pension
Plans
Post-retirement
Medical Plan
Active Employees
Retirees and Beneficiaries
Other(a)
Total
(a) For pension plans, the other category consists mostly of terminated but vested former employees. For post-retirement plans, the other category
3,521
12,016
4,012
19,549
616
8,393
40
9,049
consists of employees on long-term disability that have not yet retired.
CSX 2019 Form 10-K p.78
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 9. Employee Benefit Plans, continued
The benefit obligation for these plans represents the liability of the Company for current and retired
employees and is affected primarily by the following:
service cost (benefits attributed to employee service during the period);
interest cost (interest on the liability due to the passage of time);
•
•
• actuarial gains/losses (experience during the year different from that assumed and changes in
plan assumptions); and
• benefits paid to participants.
Cash Flows
Plan assets are amounts that have been segregated and restricted to provide qualified pension plan
benefits and include amounts contributed by the Company and amounts earned from invested contributions,
net of benefits paid. Qualified pension plan obligations are funded in accordance with regulatory requirements
and with an objective of meeting or exceeding minimum funding requirements necessary to avoid restrictions
on flexibility of plan operation and benefit payments. The Company funds the cost of the post-retirement
medical and life insurance benefits as well as nonqualified pension benefits on a pay-as-you go basis. No
qualified pension plan contributions were made during 2019, 2018 and 2017. No contributions to the
Company's qualified pension plans are expected in 2020.
Future expected benefit payments are as follows:
(Dollars in Millions)
2020
2021
2022
2023
2024
2025-2029
Total
Expected Cash Flows
Pension
Benefits
Post-retirement
Benefits
$
$
193 $
188
186
184
182
897
1,830 $
20
12
10
9
9
34
94
CSX 2019 Form 10-K p.79
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 9. Employee Benefit Plans, continued
Plan Assets
The CSX Investment Committee (the “Investment Committee”), whose members are selected by
the Chief Financial Officer, is responsible for oversight and investment of plan assets. The Investment
Committee utilizes an investment asset allocation strategy that is monitored on an ongoing basis and updated
periodically in consideration of plan or employee changes, or changing market conditions. Periodic studies
provide an extensive modeling of asset investment return in conjunction with projected plan liabilities and
seek to evaluate how to maximize return within the constraints of acceptable risk. The current asset allocation
targets 60% equity investments and 40% fixed income investments and cash. Within equity, a further target
is currently established for 37% of total plan assets in domestic equity and 23% in international equity.
Allocations are evaluated for levels within 3% of targeted allocations and are adjusted quarterly as necessary.
The distribution of pension plan assets as of the measurement date is shown in the table below, and
these assets are reported net of pension liabilities on the balance sheet.
(Dollars in Millions)
Equity
Fixed Income
Cash and Cash Equivalents
Total
December 2019
December 2018
Amount
Percent of
Total Assets
Amount
$
$
1,770
818
237
2,825
63% $
29
8
100% $
1,698
704
29
2,431
Percent of
Total Assets
70%
29
1
100%
Under the supervision of the Investment Committee, individual investments or fund managers are
selected in accordance with standards of prudence applicable to asset diversification and investment
suitability. The Company also selects fund managers with differing investment styles and benchmarks their
investment
is continuously
indices. Fund
monitored. Acceptable performance is determined in the context of the long-term return objectives of the
fund and appropriate asset class benchmarks.
returns against appropriate
investment performance
Within the Company's equity funds, domestic stock is diversified among large and small capitalization
stocks. International stock is diversified in a similar manner as well as in developed versus emerging markets
stocks. Guidelines established with individual managers limit investment by industry sectors, individual stock
issuer concentration and the use of derivatives and CSX securities.
Fixed income securities guidelines established with individual managers specify the types of
allowable investments, such as government, corporate and asset-backed bonds, target certain allocation
ranges for domestic and foreign investments and limit the use of certain derivatives. Additionally, guidelines
stipulate minimum credit quality constraints and any prohibited securities. For detailed information regarding
the fair value of pension assets, see Note 13, Fair Value Measurements.
CSX 2019 Form 10-K p.80
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 9. Employee Benefit Plans, continued
Benefit Obligation, Plan Assets and Funded Status
Changes in benefit obligation and the fair value of plan assets for the 2019 and 2018 calendar plan
years are as follows:
Pension Benefits
Plan Year
Plan Year
Post-retirement Benefits
Plan Year
Plan Year
2019
2018
2019
2018
2,963 $
3,122
2,623
2,758 $
N/A
117 $
N/A
118
2,758 $
34
3,002 $
36
118 $
1
103
—
—
418
(191)
3,122 $
2,431 $
568
17
92
—
—
(173)
(199)
2,758 $
2,833 $
(220)
17
—
(199)
2,431
(327) $
2
7
—
22
(33)
117 $
— $
—
26
7
(33)
—
(117) $
250
2
7
5
(102)
(10)
(34)
118
—
—
30
4
(34)
—
(118)
(Dollars in Millions)
Actuarial Present Value of Benefit Obligation
Accumulated Benefit Obligation
Projected Benefit Obligation
Change in Projected Benefit Obligation:
Projected Benefit Obligation at Beginning of Plan
Year
Service Cost (a)
Interest Cost
Plan Participants' Contributions
Post-retirement Plan Amendment
Actuarial Loss (Gain)
Benefits Paid
Benefit Obligation at End of Plan Year
Change in Plan Assets:
Fair Value of Plan Assets at Beginning of Plan Year
Actual Return on Plan Assets Gain (Loss)
Non-qualified Employer Contributions
$
$
$
$
Benefits Paid
Plan Participants' Contributions
—
(191)
2,825
(297) $
Funded Status at End of Plan Year
(a) Service cost for each 2019 and 2018 includes capitalized service costs of $3 million.
Fair Value of Plan Assets at End of Plan Year
$
CSX 2019 Form 10-K p.81
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 9. Employee Benefit Plans, continued
For qualified plan funding purposes, assets and discounted liabilities are measured in accordance
with the Employee Retirement Income Security Act ("ERISA"), as well as other related provisions of the
Internal Revenue Code and related regulations. Under these funding provisions and the alternative
measurements available thereunder, the Company estimates its unfunded obligation for qualified plans on
an annual basis.
In accordance with Compensation-Retirement Benefits Topic in the ASC, an employer must recognize
the funded status of a pension or other post-retirement benefit plan by recording a liability (underfunded
plan) or asset (overfunded plan) for the difference between the projected benefit obligation (or the
accumulated post-retirement benefit obligation for a post-retirement benefit plan) and the fair value of plan
assets at the plan measurement date. Amounts related to pension and post-retirement benefits recorded in
other long-term assets, labor and fringe benefits payable and other long-term liabilities on the balance sheet
are as follows:
(Dollars in Millions)
Amounts Recorded in Consolidated
Balance Sheets:
Long-term Assets (a)
Current Liabilities
Long-term Liabilities
Net Amount Recognized in
Consolidated Balance Sheets
Pension Benefits
December
2019
December
2018
Post-retirement Benefits
December
December
2018
2019
$
$
25 $
(17)
(305)
13 $
(16)
(324)
— $
(20)
(97)
—
(34)
(84)
(297) $
(327) $
(117) $
(118)
(a) Long-term assets as of December 2019 and 2018 relate to qualified pension plans where assets exceed projected benefit obligations.
The funded status, or amount by which the benefit obligation exceeds the fair value of plan assets,
represents a liability. At December 2019, the status of CSX plans with a net liability only is disclosed below.
The total fair value of all plan assets as of December 2019 was $2.8 billion, which includes the qualified
pension plans with net assets.
(Dollars in Millions)
Benefit Obligations in Excess of Plan Assets
Projected Benefit Obligation
Accumulated Benefit Obligation
Aggregate
Fair Value
Aggregate
of Plan Assets Benefit Obligation
(3,037)
$
(2,878)
2,715 $
2,715
CSX 2019 Form 10-K p.82
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 9. Employee Benefit Plans, continued
Net Benefit Expense
Only the service cost component of net periodic benefit costs is included in labor and fringe expense
on the consolidated income statement. All other components of net periodic benefit cost are included in
other income - net or, if related to prior year restructuring activities, in restructuring charge - non-operating.
The following table describes the components of expense/(income) related to net benefit expense recorded
on the income statement.
(Dollars in Millions)
Service Cost Included in Labor and Fringe
Pension Benefits
Fiscal Years
2018
2017
2019
Post-retirement Benefits
Fiscal Years
2018
2017
2019
$
31 $
32 $
36 $
1 $
2 $
2
103
(171)
30
—
(38)
Total Income Included in Other Income - Net
Interest Cost
Expected Return on Plan Assets
Amortization of Net Loss
Amortization of Prior Service Cost
7
—
—
—
7
9
13
—
22
(a) Charges related to special termination benefits and curtailment costs were the result of the management workforce reductions in first quarter
2017. See Restructuring Charge in Note 1, Nature of Operations and Significant Accounting Policies.
Restructuring Charge - Non Operating(a)
Settlement (Gain) Loss
92
(176)
41
—
(43)
(11) $
—
(1)
(12) $
2
—
—
(7)
(5)
(4) $
—
—
(4) $
7
—
—
(2)
5
7 $
—
—
7 $
Net Periodic Benefit (Credit) Expense
92
(171)
41
—
(38)
(2) $
60
11
69 $
(7) $
—
—
(7) $
Total (Credit) Expense
$
$
As a result of the management workforce reduction programs initiated in 2017, $85 million in charges
were incurred related to special termination benefits, curtailment and settlement changes. In 2017, the
Company recorded special termination pension benefits of $56 million and remeasured the pension and
other post-retirement benefits assets and obligations and recorded a curtailment loss of $4 million and $13
million, respectively, in restructuring charge - non-operating on the income statement.
Pension settlement (gains) losses were recognized as a result of lump-sum payments to retirees
exceeding the sum of the plan’s service and interest cost. The Company recorded an $11 million net
settlement loss in 2017, of which a $12 million loss resulted from the retirements of former executives and
is reported in restructuring charge - non-operating on the income statement. The other settlement gains in
2018 and 2017 were from one of the Company’s qualified pension plans with insignificant balances and
were recorded in other income - net on the income statement.
CSX 2019 Form 10-K p.83
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 9. Employee Benefit Plans, continued
Pension and Other Post-retirement Benefits Adjustments
The following table shows the pre-tax change in other comprehensive loss (income) attributable to
certain components of net benefit expense and the change in benefit obligation for CSX for pension and
other post-employment benefits.
(Dollars in Millions)
Components of Other Comprehensive
Loss (Income)
Recognized in the Balance Sheet
Losses (Gains)
Expense (Income) Recognized in the Income
Statement
Amortization of Net Losses (a)
Settlement (Gain) Loss
Amortization of Prior Service Costs
Pension Benefits
Post-retirement
Benefits
December December December December
2019
2018
2019
2018
$
$
21 $
223 $
22 $
(112)
30 $
—
—
41 $
(1)
—
— $
—
(7)
—
—
(2)
(a) Amortization of net losses estimated to be expensed for 2020 is approximately $57 million for pension benefits.
As of December 2019, the balances to be amortized related to the Company's pension obligations
is a pre-tax loss of $879 million and related to post-retirement obligations is a pre-tax gain of $74 million.
These amounts are included in accumulated other comprehensive loss, a component of shareholders’ equity.
Assumptions
The expected long-term average rate of return on plan assets reflects the average rate of earnings
expected on the funds invested, or to be invested, to provide for benefits included in the projected benefit
obligation. In estimating that rate, the Company gives appropriate consideration to the returns being earned
by the plan assets in the funds and the rates of return expected to be available for reinvestment as well
as the current and projected asset mix of the funds. Management balances market expectations obtained
from various investment managers and economists with both market and actual plan historical returns to
develop a reasonable estimate of the expected long-term rate of return on assets. This assumption is
reviewed annually and adjusted as deemed appropriate.
The Company measures the service cost and interest cost components of the net pension and post-
retirement benefits expense by using individual spot rates matched with separate cash flows for each future
year.
CSX 2019 Form 10-K p.84
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 9. Employee Benefit Plans, continued
The weighted averages of assumptions used by the Company to value its pension and post-retirement
obligations were as follows:
Pension Benefits
2018
2019
Post-retirement
Benefits
2019
2018
Expected Long-term Return on Plan Assets:
Benefit Cost for Current Plan Year
Benefit Cost for Subsequent Plan Year
6.75%
6.75%
6.75%
6.75%
N/A
N/A
N/A
N/A
Discount Rates:
Benefit Cost for Plan Year
Service Cost for Plan Year
Interest Cost for Plan Year
Benefit Obligation at End of Plan Year
4.40%
3.87%
3.13%
3.74%
3.15%
4.24%
4.14%
3.51%
2.87%
4.14% (a)
3.45% (a)
3.98%
Salary Scale Inflation
4.60%
4.60%
N/A
N/A
(a) The post-retirement benefits service cost and interest cost for 2018 were based on a weighted average discount rate of 3.68% and 2.79%,
respectively, prior to the post-retirement plan amendments approved in 2018 and were increased to 4.14% and 3.45%, respectively, after the
Company remeasured the other post-retirement benefits obligation in the fourth quarter of 2018.
The impact of the health care cost trend rate is immaterial to the post-retirement benefit cost and
obligation due to the plan's health reimbursement arrangement that covers Medicare-eligible retirees.
Other Plans
Under collective bargaining agreements, the Company participates in a multi-employer benefit plan,
which provides certain post-retirement health care and life insurance benefits to eligible contract employees.
Premiums under this plan are expensed as incurred and amounted to $26 million, $30 million and $40 million
in 2019, 2018 and 2017, respectively.
The Company maintains savings plans for virtually all full-time salaried employees and certain
employees covered by collective bargaining agreements. Expense associated with these plans was $41
million, $41 million and $39 million for 2019, 2018 and 2017, respectively, and is included in labor and fringe
expense on the consolidated income statement.
CSX 2019 Form 10-K p.85
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 10. Debt and Credit Agreements
Debt at December 2019 and December 2018 is shown in the table below. For information regarding
the fair value of debt, see Note 13, Fair Value Measurements.
(Dollars in Millions)
Notes
Equipment Obligations(a)
Finance Leases
Maturity at
December
2019
2020-2068
2020-2023
2020-2026
Average
Interest
Rates at
December December December
2019
16,056 $
178
4
2019
4.4%
6.3%
15.0%
$
2018
14,558
195
4
14,757
(18)
Subtotal Long-term Debt (including current portion)
Less Debt Due within One Year
Long-term Debt (excluding current portion)
(a) Equipment obligations are secured by an interest in certain railroad equipment.
$
$
16,238 $
(245)
15,993 $
14,739
Debt Issuance & Early Redemption of Long-term Debt
CSX issued the following notes which are included in the consolidated balance sheets under long-
term debt and may be redeemed by the Company at any time, subject to payment of certain make-whole
premiums:
• On September 12, 2019, issued $400 million of 2.40% notes due 2030 and $600 million of 3.35%
notes due 2049. On October 15, 2019, a portion of the net proceeds was used to fully redeem
CSX’s outstanding $500 million of 3.70% notes that otherwise would have matured on October
30, 2020.
• On February 28, 2019, issued $600 million of 4.25% notes due 2029, which was a reopening of
existing notes originally issued in November 2018, and $400 million of 4.50% notes due 2049.
• On November 15, 2018, issued $350 million of 4.25% notes due 2029 and $650 million of 4.75%
notes due 2048.
• On February 20, 2018, issued $800 million of 3.80% notes due 2028, $850 million of 4.30% notes
due 2048, and $350 million of 4.65% notes due 2068.
The net proceeds from debt issuances were used for general corporate purposes, which may include
repurchases of CSX's common stock, capital investment, working capital requirements, improvements in
productivity and other cost reductions at the Company’s major transportation units.
CSX 2019 Form 10-K p.86
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 10. Debt and Credit Agreements, continued
Long-term Debt Maturities (Net of Discounts, Premiums and Issuance Costs)
(Dollars in Millions)
Fiscal Years Ending
2020
2021
2022
2023
2024
Thereafter
Total Long-term Debt Maturities, including current portion
Maturities at
December 2019
245
401
162
639
551
14,240
16,238
$
$
Credit Facilities
In March 2019, CSX replaced its existing $1.0 billion unsecured, revolving credit facility with a new
$1.2 billion unsecured, revolving credit facility backed by a diverse syndicate of banks. The new facility
allows same-day borrowings at floating interest rates, based on LIBOR or an agreed-upon replacement,
plus a spread that depends upon CSX's senior unsecured debt ratings. LIBOR is the London Interbank
Offered Rate which is a daily reference rate based on the interest rates at which banks offer to lend unsecured
funds. This facility expires in March 2024, and as of December 31, 2019, the Company had no outstanding
balances under this facility.
Commitment fees and interest rates payable under the facility were similar to fees and rates available
to comparably rated investment-grade borrowers. As of December 31, 2019, CSX was in compliance with
all covenant requirements under the facility.
Commercial Paper
Under its commercial paper program, which is backed by the revolving credit facility, the Company
may issue unsecured commercial paper notes up to a maximum aggregate principal amount of $1.0 billion.
Proceeds from issuances of the notes are expected to be used for general corporate purposes. At December
31, 2019, the Company had no commercial paper outstanding.
CSX 2019 Form 10-K p.87
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 11. Revenues
The Company’s revenues are primarily derived from the transportation of freight as performance
obligations that arise from its contracts with customers are satisfied. The following table presents the
Company’s revenues disaggregated by market as this best depicts how the nature, amount, timing and
uncertainty of revenue and cash flows are affected by economic factors.
(Dollars in millions)
Chemicals
Agricultural and Food Products
Automotive
Forest Products
Metals and Equipment
Minerals
Fertilizers
Total Merchandise
Coal
Intermodal
Other
Total
Fiscal Years
2018
2017
2019
$
2,343 $
1,410
1,236
878
741
550
431
7,589
2,070
1,760
2,339 $
1,306
1,267
850
769
518
442
7,491
2,246
1,931
2,210
1,262
1,195
755
703
477
466
7,068
2,107
1,799
518
11,937 $
582
12,250 $
434
11,408
$
Revenue Recognition
The Company generates revenue from freight billings under contracts with customers generally on
a rate per carload, container or ton-basis based on length of haul and commodities carried. The Company’s
performance obligation arises when it receives a bill of lading (“BOL”) to transport a customer's commodities
at a negotiated price contained in a transportation services agreement or a publicly disclosed tariff rate.
Once a BOL is received, a contract is formed whereby the parties are committed to perform, collectability
of consideration is probable and the rights of the parties, shipping terms and conditions, and payment terms
are identified. A customer may submit several BOLs for transportation services at various times throughout
a service agreement term but each shipment represents a distinct service that is a separately identified
performance obligation.
The average transit time to complete a shipment is between 3 to 8 days depending on market.
Payments for transportation services are normally billed once a BOL is received and are generally due within
15 days after the invoice date. The Company recognizes revenue over transit time of freight as it moves
from origin to destination. Revenue for services started but not completed at the reporting date is allocated
based on the relative transit time in each reporting period, with the portion allocated for services subsequent
to the reporting date considered remaining performance obligations.
CSX 2019 Form 10-K p.88
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 11. Revenues, continued
The certain key estimates included in the recognition and measurement of revenue and related
accounts receivable are as follows:
• Revenue associated with shipments in transit is recognized ratably over transit time and is based
on average cycle times to move commodities and products from their origin to their final destination
or interchange;
• Adjustments to revenue for billing corrections and billing discounts;
• Adjustments to revenue for overcharge claims filed by customers, which are based on historical
•
payments to customers for rate overcharges as a percentage of total billing; and
Incentive-based refunds to customers, which are primarily volume-related, are recorded as a
reduction to revenue on the basis of the projected liability (this estimate is based on historical activity,
current volume levels and forecasted future volume).
Revenue related to interline transportation services that involve the services of another party, such
as another railroad, is reported on a net basis. The portion of the gross amount billed to customers that is
remitted by the Company to another party is not reflected as revenue.
Other revenue is comprised of revenue from regional subsidiary railroads and incidental charges,
including demurrage and switching. It is recorded upon completion of the service and accounts for an
immaterial percentage of the Company’s total revenue. Revenue from regional subsidiary railroads includes
shipments by railroads that the Company does not directly operate. Demurrage represents charges assessed
when freight cars are held by a customer beyond a specified period of time. Switching represents charges
assessed when a railroad switches cars for a customer or another railroad.
During 2019, 2018 and 2017, revenue recognized from performance obligations related to prior
periods (for example, due to changes in transaction price), was not material.
Remaining Performance Obligations
Remaining performance obligations represent the transaction price allocated to future reporting
periods for freight services started but not completed at the reporting date. This includes the unearned
portion of billed and unbilled amounts for cancellable freight shipments in transit. The Company expects to
recognize the unearned portion of revenue for freight services in transit within one week of the reporting
date. As of December 31, 2019, remaining performance obligations were not material.
Contract Balances and Accounts Receivable
The timing of revenue recognition, billings and cash collections results in accounts receivable and
customer advances and deposits (contract liabilities) on the consolidated balance sheets. Contract assets,
contract liabilities and deferred contract costs recorded on the consolidated balance sheet as of
December 31, 2019 were not material.
CSX 2019 Form 10-K p.89
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 11. Revenues, continued
The Company’s accounts receivable - net consists of freight and non-freight receivables, reduced
by an allowance for doubtful accounts.
(Dollars in millions)
Freight Receivables
Freight Allowance for Doubtful Accounts
Freight Receivables, net
Non-Freight Receivables
Non-Freight Allowance for Doubtful Accounts
Non-Freight Receivables, net
Total Accounts Receivable, net
December 31,
2019
December 31,
2018
$
$
790 $
(21)
769
226
(9)
217
986 $
846
(18)
828
190
(8)
182
1,010
Freight receivables include amounts earned, billed and unbilled, and currently due from customers
for transportation-related services. Non-freight receivables include amounts billed and unbilled and currently
due related to government reimbursement receivables and other non-revenue receivables. The Company
maintains an allowance for doubtful accounts to provide for the estimated amount of receivables that will
not be collected. The allowance is based upon an assessment of customer creditworthiness, historical
payment experience, the age of outstanding receivables and economic conditions. Impairment losses
recognized on the Company’s accounts receivable were not material in 2019 and 2018.
NOTE 12. Income Taxes
Earnings before income taxes of $4.3 billion, $4.3 billion and $3.1 billion for fiscal years 2019, 2018
and 2017, respectively, represent earnings from domestic operations. The breakdown of income tax expense
between current and deferred is as follows:
(Dollars in Millions)
Current:
Federal
State
Subtotal Current
Deferred:
Federal
State
Subtotal Deferred
Total
2019
Fiscal Years
2018
2017
$
$
608 $
104
712
235
38
273
985 $
572 $
144
716
275
4
279
995 $
787
117
904
(3,277)
44
(3,233)
(2,329)
CSX 2019 Form 10-K p.90
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 12. Income Taxes, continued
The Company recorded a 2019 income tax benefit of $77 million primarily as a result of the additional
tax benefit associated with vesting of share-based awards, the settlement of certain state tax matters, federal
and state legislative change, and a change in the valuation of deferred taxes as a result of filing the 2018
tax returns.
The Company recorded a 2018 income tax benefit of $62 million primarily as a result of the additional
tax benefit associated with vesting of share-based awards, state legislative changes, the settlement of certain
state tax matters and a change in the valuation of deferred taxes as a result of filing the 2017 tax returns.
With the enactment of the Tax Cuts and Jobs Act (the "Act" or "tax reform") on December 22, 2017,
the Company's 2017 financial results included a $3.5 billion, or $3.81 per share, non-cash reduction in
income tax expense, primarily resulting from revaluing the Company's net deferred tax liabilities to reflect
the enacted 21% federal corporate tax rate effective January 1, 2018. During third quarter 2018, the Company
filed its 2017 Federal Income Tax return which resulted in an immaterial adjustment to the deferred tax
liability and tax expense. Accordingly, the Company's accounting for the federal rate reduction under the
Act is now complete.
The Company's affiliates also revalued their deferred tax liabilities to reflect the lower federal corporate
tax rate, which resulted in the Company recognizing a benefit in 2017 of $142 million, or $0.10 per share
after-tax, in equity earnings of affiliates, which is included in operating income. (See additional discussion
over equity earnings of affiliates in Note 15, Related Parties and Affiliates.)
In addition to the tax benefit related to tax reform, the Company recorded a 2017 income tax benefit
of $21 million primarily as a result of the additional tax benefit associated with vesting of share-based awards,
state legislative changes, a change in the apportionment of state taxable income and the related impact on
the valuation of deferred taxes and the settlement of certain state tax matters.
Income tax expense reconciled to the tax computed at statutory rates is presented in the following
table.
(Dollars In Millions)
2019
Fiscal Years
2018
2017
Federal Income Taxes
State Income Taxes
Deferred Tax Rate Change
Other
$
906
108
—
(29)
21.0 % $
2.5 %
— %
(0.7)%
Income Tax (Benefit) Expense/Rate
$
985
22.8 % $
904
112
—
(21)
995
21.0 % $ 1,100
102
(3,506)
(25)
2.6 %
— %
(0.5)%
35.0 %
3.2 %
(111.6)%
(0.8)%
23.1 % $ (2,329)
(74.2)%
CSX 2019 Form 10-K p.91
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 12. Income Taxes, continued
The primary factors in the change in year-end net deferred income tax liability balances include the
annual provision for deferred income tax expense and accumulated other comprehensive income/loss. The
significant components of deferred income tax assets and liabilities include:
(Dollars in Millions)
Pension Plans
Other Employee Benefit Plans
Accelerated Depreciation
Other
Total
Net Deferred Income Tax Liabilities
2019
2018
Assets
Liabilities
Assets
Liabilities
$
$
71 $
127
—
426
624 $
$
— $
—
7,020
565
7,585 $
6,961
79 $
146
—
529
754 $
$
—
—
6,799
645
7,444
6,690
The Company files a consolidated federal income tax return, which includes its principal domestic
subsidiaries. CSX and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple
state jurisdictions. CSX participated in a contemporaneous IRS audit of tax years 2019 and 2018. Federal
examinations of original federal income tax returns for all years through 2017 are resolved.
As of December 2019, 2018 and 2017, the Company had approximately $13 million, $12 million and
$24 million, respectively, of total unrecognized tax benefits as a result of uncertain tax positions. Net tax
benefits of $10 million, $9 million and $19 million in 2019, 2018 and 2017, respectively, could favorably
impact the effective income tax rate in each year. The Company does not expect that unrecognized tax
benefits as of December 2019 for various state and federal income tax matters will significantly change over
the next 12 months. The final outcome of these uncertain tax positions is not yet determinable. There were
no material changes to the total gross unrecognized tax benefits and prior year audit resolutions of the
Company during the fiscal year ended December 2019.
CSX’s continuing practice is to recognize net interest and penalties related to income tax matters in
income tax expense. Included in the consolidated income statements is expense of $1 million in 2019, a
benefit of $3 million in 2018, and expense of $3 million in 2017 for changes to reserves for interest and
penalties for all prior year tax positions. The Company had $2 million, $2 million and $6 million accrued for
interest and penalties at 2019, 2018 and 2017, respectively, for all prior year tax positions.
CSX 2019 Form 10-K p.92
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 13. Fair Value Measurements
The Financial Instruments Topic in the ASC requires disclosures about fair value of financial
instruments in annual reports as well as in quarterly reports. For CSX, this statement applies to certain
investments, pension plan assets and long-term debt. Also, the Fair Value Measurements and Disclosures
Topic in the ASC clarifies the definition of fair value for financial reporting, establishes a framework for
measuring fair value and requires additional disclosures about the use of fair value measurements.
Various inputs are considered when determining the value of the Company's investments, pension
plan assets and long-term debt. The inputs or methodologies used for valuing securities are not necessarily
an indication of the risk associated with investing in these securities. These inputs are summarized in the
three broad levels listed below:
• Level 1 – observable market inputs that are unadjusted quoted prices for identical assets or
liabilities in active markets;
• Level 2 – other significant observable inputs (including quoted prices for similar securities, interest
rates, credit risk, etc.); and
• Level 3 – significant unobservable inputs (including the Company’s own assumptions about the
assumptions market participants would use in determining the fair value of investments).
The valuation methods described below may produce a fair value calculation that may not be
indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes
its valuation methods are appropriate and consistent with other market participants, the use of different
methodologies or assumptions to determine the fair value of certain financial instruments could result in a
different fair value measurement at the reporting date.
Investments
The Company's investment assets, valued with assistance from a third-party trustee, consist of
certificates of deposits, commercial paper, corporate bonds and government securities and are carried at
fair value on the consolidated balance sheet per the Fair Value Measurements and Disclosures Topic in
the ASC. There are several valuation methodologies used for those assets as described below:
• Certificates of Deposit and Commercial Paper (Level 2): Valued at amortized cost, which
approximates fair value; and
• Corporate Bonds and Government Securities (Level 2): Valued using broker quotes that utilize
observable market inputs.
CSX 2019 Form 10-K p.93
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 13. Fair Value Measurements, continued
The Company's investment assets are carried at fair value on the consolidated balance sheets as
summarized in the following table. All of the inputs used to determine the fair value of the Company's
investments are Level 2 inputs. The amortized cost basis of these investments was $1.1 billion and $340
million as of December 31, 2019 and December 31, 2018, respectively.
(Dollars in Millions)
Certificates of Deposit and Commercial Paper
Corporate Bonds
Government Securities
Total investments at fair value
Fiscal Years
2019
Level 2
2018
Level 2
$
$
989 $
59
36
1,084 $
250
56
35
341
These investments have the following maturities and are represented on the consolidated balance
sheet within short-term investments for investments with maturities of less than one year, and other long-
term assets for investments with maturities of one year and greater:
(Dollars in Millions)
Less than 1 year
1 - 5 years
5 - 10 years
Greater than 10 years
Total investments at fair value
Long-term Debt
December
2019
December
2018
$
$
996 $
10
25
53
1,084 $
253
14
26
48
341
Long-term debt is reported at carrying amount on the consolidated balance sheets and is the
Company's only financial instrument with fair values significantly different from their carrying amounts. The
majority of the Company's long-term debt is valued with assistance from a third party that utilizes closing
transactions, market quotes or market values of comparable debt. For those instruments not valued by the
third party, the fair value has been estimated by applying market rates of similar instruments to the scheduled
contractual debt payments and maturities. These market rates are provided by the same third party. All of
the inputs used to determine the fair value of the Company's long-term debt are Level 2 inputs.
The fair value of outstanding debt fluctuates with changes in a number of factors. Such factors
include, but are not limited to, interest rates, market conditions, credit ratings, values of similar financial
instruments, size of the transaction, cash flow projections and comparable trades. Fair value will exceed
carrying value when the current market interest rate is lower than the interest rate at which the debt was
originally issued. The fair value of a company's debt is a measure of its current value under present market
conditions. It does not impact the financial statements under current accounting rules.
CSX 2019 Form 10-K p.94
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 13. Fair Value Measurements, continued
The fair value and carrying value of the Company's long-term debt is as follows:
(Dollars in Millions)
Long-term Debt (Including Current Maturities):
Fair Value
Carrying Value
December
2019
December
2018
$
18,503 $
16,238
14,914
14,757
Pension Plan Assets
Pension plan assets are reported at fair value, net of pension liabilities, on the consolidated balance
sheet. The Investment Committee targets an allocation of pension assets to be generally 60% equity and
40% fixed income. There are several valuation methodologies used for those assets as described below.
Investments in the Fair Value Hierarchy
• Common stock (Level 1): Valued at the closing price reported on the active market on which the
individual securities are traded on the last day of the year and classified in Level 1 of the fair value
hierarchy.
• Mutual funds (Level 1): Valued at the net asset value of shares held at year end based on quoted
market prices determined in an active market. These assets are classified in Level 1 of the fair value
hierarchy.
• Cash and cash equivalents (Level 1): Includes cash and short term investments with an original
maturity of three months or less. The carrying value of cash and cash equivalents at year end
approximates fair value. These assets are classified in Level 1 of the fair value hierarchy.
• Corporate bonds, government securities, asset-backed securities and derivatives (Level 2): Valued
using price evaluations reflecting the bid and/or ask sides of the market for a similar investment at
year end. Asset-backed securities include commercial mortgage-backed securities and collateralized
mortgage obligations. These assets are classified in Level 2 of the fair value hierarchy.
Investments Measured at Net Asset Value
• Partnerships: Net asset value of private equity is based on the fair market values associated with
the underlying investments at year end. These funds have redemption restrictions that require
advanced notice of 15 business days.
• Common collective trust funds: This class consists of private funds that invest in government and
corporate securities and various short-term debt instruments and are measured at net asset value
to estimate the fair value of the investments. The net asset value of the investments is determined
by reference to the fair value of the underlying securities, which are valued primarily through the use
of directly or indirectly observable inputs. These funds have redemption restrictions that require
advanced notice of up to 15 business days.
CSX 2019 Form 10-K p.95
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 13. Fair Value Measurements, continued
The pension plan assets at fair value by level, within the fair value hierarchy, as of calendar plan
years 2019 and 2018 are shown in the table below. For additional information related to pension assets,
see Note 9, Employee Benefit Plans.
Fiscal Years
Total
Level 1
2018
Level 2
Total
2019
Level 1 Level 2
$
823 $ — $
823 $ 750 $
(Dollars in Millions)
Common Stock
Mutual funds
Cash and cash equivalents
Corporate bonds
Government securities
Asset-backed securities
Derivatives and other
Total investments in the fair value hierarchy
Investments measured at net asset value (a)
Investments at fair value
78
229
—
—
—
—
$ 1,130 $
n/a
$ 1,130 $
(a) Investments measured at net asset value represent certain investments that have been measured at net asset value per share (or its equivalent)
and thus are not classified in the fair value hierarchy. In accordance with ASC 820, Fair Value Measurements, the fair value amounts presented
in this table are intended to permit reconciliation of the fair value hierarchy to the pension assets disclosed in Note 9, Employee Benefit Plans.
78
229
588
217
8
9
822 $ 1,952 $ 760 $
n/a $
822 $ 2,825 $ 760 $
750
7
3
537
149
10
5
701 $ 1,461
970
n/a $
701 $ 2,431
— $
—
—
537
149
10
5
—
—
588
217
8
9
7
3
—
—
—
—
873
n/a
NOTE 14. Other Income - Net
The Company derives income from items that are not considered operating activities. Income from
these items is reported net of related expense. All components of net periodic pension and post-retirement
benefit costs, excluding service cost, are included in other income - net on the consolidated income statement.
Miscellaneous income (expense) may fluctuate due to timing and includes investment gains, losses and
interest income as well as other non-operating activities.
Interest income increased from 2018 to 2019, and from 2017 to 2018, primarily as a result of higher
average investment balances. Miscellaneous expense in 2019 includes $10 million of costs associated with
the early redemption of long-term debt. Other income – net consisted of the following:
(Dollars in Millions)
Net Periodic Pension and Post-retirement Benefit Credit (a)
Interest Income
Miscellaneous (Expense) Income
Total Other Income - Net
(a) Excludes the service cost component of net periodic benefit cost.
Fiscal Years
2018
2017
2019
$
$
43 $
48
(3)
88 $
38 $
32
4
74 $
32
13
8
53
CSX 2019 Form 10-K p.96
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 15. Related Parties and Affiliates
Conrail
Through a limited liability company, CSX and Norfolk Southern Corporation (“NS”) jointly own Conrail.
CSX has a 42% economic interest and 50% voting interest in the jointly-owned entity, and NS has the
remainder of the economic and voting interests. CSX's investment of $982 million is included on the
consolidated balance sheet as investment in Conrail. Pursuant to the Investments-Equity Method and Joint
Venture Topic in the ASC, CSX applies the equity method of accounting to its investment in Conrail.
Conrail owns rail infrastructure and operates for the joint benefit of CSX and NS. This is known as
the shared asset area. Conrail charges fees for right-of-way usage, equipment rentals and transportation,
switching and terminal service charges in the shared asset area. These expenses are included in materials,
supplies and other on the consolidated income statements. Future payments due to Conrail under the shared
asset area agreements are shown in the table below.
(Dollars in Millions)
Years
2020
2021
2022
2023
2024
Thereafter
Total
Conrail Shared
Asset Agreement
29
29
29
29
22
—
138
$
$
Also, included in equity earnings of affiliates are CSX’s 42 percent share of Conrail’s income and its
amortization of the fair value write-up arising from the acquisition of Conrail and certain other
adjustments. The amortization primarily represents the additional after-tax depreciation expense related to
the write-up of Conrail’s fixed assets when the original purchase price, from the 1997 acquisition of Conrail,
was allocated based on fair value. This write-up of fixed assets resulted in a difference between CSX's
investment in Conrail and its share of Conrail's underlying net equity, which is $339 million as of December
2019.
CSX 2019 Form 10-K p.97
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 15. Related Parties and Affiliates, continued
The following table discloses amounts related to Conrail. Purchase price amortization and equity
earnings are included in equity earnings of affiliates and all other amounts in the table are included in
materials, supplies and other expenses on the Company’s consolidated income statements.
(Dollars in Millions)
Rents, fees and services
Purchase price amortization and other
Equity earnings of Conrail
Total Conrail Expense
Fiscal Years
2018
2017
2019
$
$
119 $
4
(42)
81 $
117 $
4
(43)
78 $
120
4
(58)
66
As required by the Related Party Disclosures Topic in the ASC, the Company has identified amounts
below owed to Conrail, or its subsidiaries, representing liabilities under the operating, equipment and shared
area agreements with Conrail. In 2014, the Company executed two promissory notes with a subsidiary of
Conrail which were included in long-term debt on the consolidated balance sheets. Interest expense from
these promissory notes was $6 million in each 2019, 2018 and 2017.
(Dollars in Millions)
Balance Sheet Information:
CSX accounts payable to Conrail
Promissory notes payable to Conrail subsidiary
2.89% CSX promissory note due October 2044
2.89% CSXT promissory note due October 2044
December
2019
December
2018
$
213 $
73
151
153
73
151
TTX Company
TTX Company ("TTX") is a privately-held corporation engaged in the business of providing its owner-
railroads with standardized fleets of intermodal, automotive and general use railcars at time and mileage
rates. CSX owns about 20 percent of TTX's common stock, and the remaining is owned by the other leading
North American railroads and their affiliates. CSX's investment in TTX is $743 million and is included in
affiliates and other companies in the consolidated balance sheet. Pursuant to the Investments-Equity Method
topic in the ASC, CSX applies the equity method of accounting to its investment in TTX.
CSX 2019 Form 10-K p.98
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 15. Related Parties and Affiliates, continued
As required by the Related Party Disclosures Topic in the ASC, the following table discloses amounts
related to TTX. Car hire rents are included in equipment and other rents expense and equity earnings are
included in equity earnings of affiliates in the Company’s consolidated income statements. Also included
below is balance sheet information related to CSX's payable to TTX, which represents car rental liabilities.
(Dollars in Millions)
Income statement information:
Car hire rents
Equity earnings of TTX
Total TTX expense
Balance sheet information:
CSX payable to TTX
2019
Fiscal Years
2018
2017
$
$
223 $
(56)
167 $
223 $
(60)
163 $
237
(157)
80
December
2019
December
2018
$
34 $
36
Tax Reform Effect on Equity Earnings of Affiliates
Due to the enactment of tax reform, the Company recognized a benefit in 2017 of $142 million, or
$0.10 per share after-tax, in its equity earnings of affiliates. This benefit was primarily the result of the
Company's affiliates (primarily TTX and Conrail) revaluing their deferred tax liabilities to reflect the lower
federal corporate tax rate, which favorably impacted their net earnings for 2017. See additional discussion
of tax reform in Note 12, Income Taxes.
Other Related Party Transactions
On October 17, 2019, the Company repurchased 4.7 million shares for $319 million from MR Argent
Advisor LLC, a CSX shareholder. See additional discussion in Note 2, Earnings Per Share.
NOTE 16. Other Comprehensive Income / (Loss)
CSX reports comprehensive earnings or loss in accordance with the Comprehensive Income Topic
in the ASC in the consolidated comprehensive income statement. Total comprehensive earnings are defined
as all changes in shareholders' equity during a period, other than those resulting from investments by and
distributions to shareholders (e.g. issuance of equity securities and dividends). Generally, for CSX, total
comprehensive earnings equal net earnings plus or minus adjustments for pension and other post-retirement
liabilities. Total comprehensive earnings represent the activity for a period net of tax and were $3.3 billion,
$3.1 billion and $5.6 billion for 2019, 2018 and 2017, respectively.
CSX 2019 Form 10-K p.99
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 16. Other Comprehensive Income / (Loss), continued
While total comprehensive earnings is the activity in a period and is largely driven by net earnings
in that period, accumulated other comprehensive income or loss (“AOCI”) represents the cumulative balance
of other comprehensive income, net of tax, as of the balance sheet date. For CSX, AOCI is primarily the
cumulative balance related to pension and other post-retirement benefit adjustments and CSX's share of
AOCI of equity method investees.
Changes in the AOCI balance by component are shown in the following table. Amounts reclassified
in pension and other post-employment benefits to net earnings relate to the amortization of actuarial losses
and are included in other income-net on the consolidated income statements. See Note 9. Employee Benefit
Plans for further information. Other primarily represents CSX's share of AOCI of equity method investees.
Amounts reclassified in other to net earnings are included in equity earnings of affiliates on the consolidated
income statements.
(Dollars in millions)
Balance December 30, 2016 - Net of Tax
Other Comprehensive Income (Loss)
Income Before Reclassifications
Amounts Reclassified to Net Earnings
Tax Expense
Total Other Comprehensive Income
Balance December 31, 2017 - Net of Tax
Other Comprehensive Income (Loss)
Reclassification of Stranded Tax Effects (a)
Loss Before Reclassifications
Amounts Reclassified to Net Earnings
Tax Benefit
Total Other Comprehensive Loss
Balance December 31, 2018 - Net of Tax
Other Comprehensive Income (Loss)
Pension and
Other Post-
Employment
Benefits
Accumulated
Other
Comprehensive
Income (Loss)
Other
$
(580) $
(60) $
148
56
(64)
140
(440)
(108)
(111)
38
17
(164)
(604)
13
2
(1)
14
(46)
1
(8)
(6)
2
(11)
(57)
(640)
161
58
(65)
154
(486)
(107)
(119)
32
19
(175)
(661)
Loss Before Reclassifications
Amounts Reclassified to Net Earnings
Tax Benefit
(48)
31
3
(14)
(675)
Balance December 31, 2019 - Net of Tax
(a) As the result of a standard update adopted in 2018, certain tax effects stranded in accumulated other comprehensive income as a result of tax
(43)
23
5
(15)
(619) $
Total Other Comprehensive (Loss) Income
(5)
8
(2)
1
(56) $
$
reform were reclassified to retained earnings.
CSX 2019 Form 10-K p.100
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 17. Quarterly Financial Data (Unaudited)
Pursuant to Article 3 of the SEC’s Regulation S-X, the following are selected quarterly financial data:
Fiscal Year Ended December 2019
Quarters
(Dollars in Millions, Except Per Share Amounts)
Revenue
Operating Income
Net Earnings
1st
2nd
3rd
Full Year
$ 3,013 $ 3,061 $ 2,978 $ 2,885 $ 11,937
4,965
3,331
1,305
870
1,154
771
1,287
856
1,219
834
4th
Earnings Per Share, Basic
Earnings Per Share, Assuming Dilution
$
1.02 $
1.02
1.08 $
1.08
1.08 $
1.08
0.99 $
0.99
4.18
4.17
Fiscal Year Ended December 2018
Revenue
Operating Income
$ 2,876 $ 3,102 $ 3,129 $ 3,143 $ 12,250
4,869
1,293
1,249
1,283
1,044
Net Earnings
695
877
894
843
3,309
Earnings Per Share, Basic
Earnings Per Share, Assuming Dilution
$
0.78 $
0.78
1.02 $
1.01
1.05 $
1.05
1.02 $
1.01
3.86
3.84
NOTE 18. Summarized Consolidating Financial Data
In 2007, CSXT, a wholly-owned subsidiary of CSX Corporation, sold secured equipment notes maturing
in 2023 in a registered public offering. CSX has fully and unconditionally guaranteed the notes. In connection with
the notes, the Company is providing the following condensed consolidating financial information in accordance
with SEC disclosure requirements. Each entity in the consolidating financial information follows the same
accounting policies as described in the consolidated financial statements, except for the use of the equity method
of accounting to reflect ownership interests in subsidiaries which are eliminated upon consolidation and the
allocation of certain expenses of CSX incurred for the benefit of its subsidiaries. Condensed consolidating financial
information for the obligor, CSXT, and parent guarantor, CSX, is shown in the following tables.
CSX 2019 Form 10-K p.101
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 18. Summarized Consolidating Financial Data, continued
Consolidating Income Statements
(Dollars in Millions)
Fiscal Year Ended December 2019
Revenue
Expense
Operating Income
Equity in Earnings of Subsidiaries
Interest Expense
Other Income - Net
Earnings Before Income Taxes
Income Tax Benefit (Expense)
Net Earnings
Total Comprehensive Earnings
Fiscal Year Ended December 2018
Revenue
Expense
Operating Income
Equity in Earnings of Subsidiaries
Interest Expense
Other Income - Net
Earnings Before Income Taxes
Income Tax Benefit (Expense)
Net Earnings
Total Comprehensive Earnings
Fiscal Year Ended December 2017
Revenue
Expense
Operating Income
Equity in Earnings of Subsidiaries
Interest Expense
Other Income - Net
Earnings Before Income Taxes
Income Tax Benefit
Net Earnings
Total Comprehensive Earnings
CSX
Corporation
$
— $
CSX
Transportation
Eliminations
and Other
CSX
Consolidated
11,937
81 $
(549)
549
3,505
(878)
25
3,201
130
11,856 $
7,688
4,168
—
(42)
207
4,333
(1,009)
(167)
248
(3,505)
183
(144)
(3,218)
(106)
6,972
4,965
—
(737)
88
4,316
(985)
3,331
3,331 $
3,324 $
(3,324) $
3,317 $
3,306 $
(3,306) $
3,317
— $
12,174 $
76 $
12,250
(344)
344
3,580
(742)
24
3,206
103
7,868
4,306
—
(39)
152
4,419
(1,036)
(143)
219
(3,580)
142
(102)
(3,321)
(62)
3,309 $
3,383 $
(3,383) $
7,381
4,869
—
(639)
74
4,304
(995)
3,309
3,134 $
3,441 $
(3,441) $
3,134
— $
11,334 $
74 $
11,408
(158)
158
5,810
(582)
7
5,393
78
8,009
3,325
—
(29)
(19)
3,277
2,247
(163)
237
(5,810)
65
(20)
(5,528)
4
5,471 $
5,524 $
(5,524) $
5,625 $
5,538 $
(5,538) $
7,688
3,720
—
(546)
(32)
3,142
2,329
5,471
5,625
$
$
$
$
$
$
$
$
CSX 2019 Form 10-K p.102
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 18. Summarized Consolidating Financial Data, continued
Consolidating Balance Sheets
(Dollars in Millions)
As of December 31, 2019
Current Assets:
Cash and Cash Equivalents
Short-term Investments
Accounts Receivable - Net
Receivable from Affiliates
Materials and Supplies
Other Current Assets
Total Current Assets
Properties
Accumulated Depreciation
Properties - Net
Investments in Conrail
Affiliates and Other Companies
Investment in Consolidated Subsidiaries
Right of Use Lease Asset
Other Long-term Assets
Total Assets
Current Liabilities:
Accounts Payable
Labor and Fringe Benefits Payable
Payable to Affiliates
Casualty, Environmental and Other Reserves
Current Maturities of Long-term Debt
Income and Other Taxes Payable
Other Current Liabilities
Total Current Liabilities
Casualty, Environmental and Other Reserves
Long-term Debt
Deferred Income Taxes - Net
Long-term Lease Liability
Other Long-term Liabilities
Total Liabilities
Shareholders' Equity:
Common Stock, $1 Par Value
Other Capital
Retained Earnings
Accumulated Other Comprehensive Loss
Noncontrolling Minority Interest
Total Shareholders' Equity
CSX
Corporation
CSX
Transportation
Eliminations
and Other
CSX
Consolidated
ASSETS
$
814
989
4
1,054
—
26
2,887
1
(1)
—
—
(39)
34,528
—
3
$
136
$
—
969
7,405
261
30
8,801
42,110
(11,199)
30,911
—
923
—
514
629
$
8
7
13
(8,459)
—
21
(8,410)
2,989
(1,732)
1,257
982
13
(34,528)
18
(232)
958
996
986
—
261
77
3,278
45,100
(12,932)
32,168
982
897
—
532
400
$
37,379
$
41,778
$
(40,900) $
38,257
LIABILITIES AND SHAREHOLDERS' EQUITY
$
153
$
38
9,552
—
—
(286)
—
9,457
—
15,534
(152)
—
692
773
346
11,404
(675)
—
11,848
830
386
574
87
245
340
192
2,654
169
459
6,827
481
215
181
5,096
25,646
35
15
$
$
60
65
(10,126)
13
—
15
13
(9,960)
36
—
286
12
(316)
(9,942)
(181)
(5,096)
(25,646)
(35)
—
30,973
(30,958)
1,043
489
—
100
245
69
205
2,151
205
15,993
6,961
493
591
26,394
773
346
11,404
(675)
15
11,863
38,257
25,531
10,805
Total Liabilities and Shareholders' Equity
$
37,379
$
41,778
$
(40,900) $
CSX 2019 Form 10-K p.103
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 18. Summarized Consolidating Financial Data, continued
Consolidating Balance Sheets
(Dollars in Millions)
As of December 31, 2018
Current Assets
Cash and Cash Equivalents
Short-term Investments
Accounts Receivable - Net
Receivable from Affiliates
Materials and Supplies
Other Current Assets
Total Current Assets
Properties
Accumulated Depreciation
Properties - Net
Investments in Conrail
Affiliates and Other Companies
Investment in Consolidated Subsidiaries
Other Long-term Assets
Total Assets
Current Liabilities
Accounts Payable
CSX
Corporation
CSX
Transportation
Eliminations
and Other
CSX
Consolidated
ASSETS
$
716
250
1
1,020
—
63
2,050
1
(1)
—
—
(39)
32,033
2
$
130
$
12
$
—
1,003
5,214
263
104
6,714
41,897
(11,194)
30,703
—
859
—
598
3
6
(6,234)
—
14
(6,199)
2,907
(1,612)
1,295
943
16
(32,033)
(213)
858
253
1,010
—
263
181
2,565
44,805
(12,807)
31,998
943
836
—
387
$
34,046
$
38,874
$
(36,191) $
36,729
LIABILITIES AND SHAREHOLDERS' EQUITY
$
132
$
Labor and Fringe Benefits Payable
Payable to Affiliates
Casualty, Environmental and Other Reserves
Current Maturities of Long-term Debt
Income and Other Taxes Payable
Other Current Liabilities
Total Current Liabilities
Casualty, Environmental and Other Reserves
Long-term Debt
Deferred Income Taxes - Net
Other Long-term Liabilities
Total Liabilities
Shareholders' Equity
Common Stock, $1 Par Value
Other Capital
Retained Earnings
Accumulated Other Comprehensive Loss
Noncontrolling Minority Interest
Total Shareholders' Equity
41
6,973
—
—
(290)
11
6,867
—
14,029
(134)
721
21,483
818
249
12,157
(661)
—
12,563
763
440
633
99
18
392
162
2,507
176
710
6,601
211
10,205
181
5,096
23,322
53
17
$
$
54
69
(7,606)
14
—
4
6
(7,459)
35
—
223
(338)
(7,539)
(181)
(5,096)
(23,322)
(53)
—
28,669
(28,652)
949
550
—
113
18
106
179
1,915
211
14,739
6,690
594
24,149
818
249
12,157
(661)
17
12,580
36,729
Total Liabilities and Shareholders' Equity
$
34,046
$
38,874
$
(36,191) $
CSX 2019 Form 10-K p.104
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 18. Summarized Consolidating Financial Data, continued
Consolidating Cash Flow Statements
(Dollars in Millions)
Fiscal Year Ended December 2019
Operating Activities
Net Cash Provided by (Used in) Operating Activities
Investing Activities
Property Additions
Purchases of Short-term Investments
Proceeds from Sales of Short-term Investments
Proceeds from Property Dispositions
Other Investing Activities
Net Cash Used in Investing Activities
Financing Activities
Long-term Debt Issued
Long-term Debt Repaid
Dividends Paid
Shares Repurchased
Other Financing Activities
Net Cash (Used in) Provided by Financing Activities
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
CSX
Corporation
CSX
Transportation
Eliminations
and Other
CSX
Consolidated
$
3,440 $
2,272 $
(862) $
4,850
—
(2,838)
2,105
—
15
(718)
2,000
(500)
(763)
(3,373)
12
(2,624)
98
716
(1,506)
(151)
—
—
254
10
(1,242)
—
(18)
—
3
—
6
(142)
—
—
(1,000)
1,000
—
(6)
—
—
(1,024)
1,000
6
130
(4)
12
(1,657)
(2,838)
2,108
254
31
(2,102)
2,000
(518)
(763)
(3,373)
6
(2,648)
100
858
958
Cash and Cash Equivalents at End of Period
$
814 $
136 $
8 $
CSX 2019 Form 10-K p.105
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 18. Summarized Consolidating Financial Data, continued
Consolidating Cash Flow Statements
(Dollars in Millions)
Fiscal Year Ended December 2018
Operating Activities
Net Cash Provided by (Used in) Operating Activities
Investing Activities
Property Additions
Purchases of Short-term Investments
Proceeds from Sales of Short-term Investments
Proceeds from Property Dispositions
Other Investing Activities
Net Cash Used in Investing Activities
Financing Activities
Long-term Debt Issued
Long-term Debt Repaid
Dividends Paid
Shares Repurchased
Other Financing Activities
Net Cash (Used in) Provided by Financing Activities
Net Decrease in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
CSX
Corporation
CSX
Transportation
Eliminations
and Other
CSX
Consolidated
$
3,182 $
1,657 $
(198) $
4,641
(1,580)
(165)
(1,745)
—
(734)
485
—
(4)
(253)
3,000
—
(751)
(4,671)
(65)
(2,487)
442
274
—
—
319
638
(623)
—
(19)
(2)
20
—
(661)
(808)
—
—
(1,000)
1,000
—
(6)
—
12
(1,025)
1,012
9
121
6
6
(736)
505
319
(27)
(1,684)
3,000
(19)
(751)
(4,671)
(59)
(2,500)
457
401
858
Cash and Cash Equivalents at End of Period
$
716 $
130 $
12 $
CSX 2019 Form 10-K p.106
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 18. Summarized Consolidating Financial Data, continued
Consolidating Cash Flow Statements
(Dollars in Millions)
Fiscal Year Ended December 2017
Operating Activities
Net Cash Provided by (Used in) Operating Activities
Investing Activities
Property Additions
Purchases of Short-term Investments
Proceeds from Sales of Short-term Investments
Proceeds from Property Dispositions
Other Investing Activities
Net Cash Provided by (Used in) Investing Activities
Financing Activities
Long-term Debt Issued
Long-term Debt Repaid
Dividends Paid
Shares Repurchased
Other Financing Activities
Net Cash (Used in) Provided by Financing Activities
Net (Decrease) Increase in
Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
CSX
Corporation
CSX
Transportation
Eliminations
and Other
CSX
Consolidated
$
1,719 $
2,112 $
(359) $
3,472
—
(774)
1,190
—
(2)
414
850
(313)
(708)
(1,970)
(23)
(2,164)
(31)
305
(1,848)
(192)
—
—
97
94
(1,657)
—
(20)
(600)
—
5
(615)
(160)
281
(8)
3
—
(55)
(252)
—
—
600
—
—
600
(11)
17
(2,040)
(782)
1,193
97
37
(1,495)
850
(333)
(708)
(1,970)
(18)
(2,179)
(202)
603
401
Cash and Cash Equivalents at End of Period
$
274 $
121 $
6 $
CSX 2019 Form 10-K p.107
CSX CORPORATION
PART II
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of December 31, 2019, under the supervision and with the participation of CSX's Chief Executive
Officer (“CEO”) and Chief Financial Officer (“CFO”), management has evaluated the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the
CEO and CFO concluded that, as of December 31, 2019, the Company's disclosure controls and procedures
were effective at the reasonable assurance level in timely alerting them to material information required to
be included in CSX’s periodic SEC reports.
Management's Report on Internal Control over Financial Reporting
CSX’s management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the
supervision and with the participation of the management of CSX, including CSX’s CEO and CFO, CSX
conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as
of December 31, 2019 based on the 2013 framework in Internal Control – Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission, which is also referred to as
COSO. Based on that evaluation, management of CSX concluded that the Company’s internal control over
financial reporting was effective as of December 31, 2019. Management's assessment of the effectiveness
of internal control over financial reporting is expressed at the level of reasonable assurance because a
control system, no matter how well designed and operated, can provide only reasonable, but not absolute,
assurance that the control system's objectives will be met.
The Company’s internal control over financial reporting as of December 31, 2019 has been audited
by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is
included elsewhere herein.
CSX 2019 Form 10-K p.108
CSX CORPORATION
PART II
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of CSX Corporation
Opinion on Internal Control Over Financial Reporting
We have audited CSX Corporation’s internal control over financial reporting as of December 31, 2019, based
on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, CSX
Corporation (the Company) maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2019, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of CSX Corporation as of December 31, 2019
and 2018, and the related consolidated statements of income, comprehensive income, cash flows, and
changes in shareholders’ equity for each of the three years in the period ended December 31, 2019, and
the related notes of the Company and our report dated February 12, 2020 expressed an unqualified opinion
thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to
express an opinion on the Company’s internal control over financial reporting based on our audit. We are
a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk, and performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
CSX 2019 Form 10-K p.109
CSX CORPORATION
PART II
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, continued
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Jacksonville, Florida
February 12, 2020
CSX 2019 Form 10-K p.110
Changes in Internal Control over Financial Reporting
There were no material changes in the Company’s internal control over financial reporting.
CSX CORPORATION
PART II
Item 9B. Other Information
None
PART III
Item 10. Directors, Executive Officers of the Registrant and Corporate Governance
In accordance with Instruction G(3) of Form 10-K, the information required by this item is incorporated
herein by reference to the Proxy Statement. The Proxy Statement will be filed not later than April 30, 2020
with respect to the 2020 annual meeting of shareholders, except for the information regarding the executive
officers of the Company. Information regarding executive officers is included in Part I of this report under
the caption "Executive Officers of the Registrant."
Item 11. Executive Compensation
In accordance with Instruction G(3) of Form 10-K, the information required by this Item is incorporated
herein by reference to the Proxy Statement (see Item 10 above).
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
In accordance with Instruction G(3) of Form 10-K, the information required by this Item is incorporated
herein by reference to the Proxy Statement (see Item 10 above).
Item 13. Certain Relationships and Related Transactions, and Director Independence
In accordance with Instruction G(3) of Form 10-K, the information required by this Item is
incorporated herein by reference to the Proxy Statement (see Item 10 above).
Item 14. Principal Accounting Fees and Services
In accordance with Instruction G(3) of Form 10-K, the information required by this Item is incorporated
herein by reference to the Proxy Statement (see Item 10 above).
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)(1) Financial Statements
See Index to Consolidated Financial Statements on page
44.
(2) Financial Statement Schedules
The information required by Schedule II, Valuation and Qualifying Accounts, is included in
Note 5 to the Consolidated Financial Statements, Casualty, Environmental and Other Reserves. All
other financial statement schedules are not applicable.
(3) Exhibits
The documents listed below are being filed or have previously been filed on behalf of CSX
and are incorporated herein by reference from the documents indicated and made a part hereof.
Exhibits not previously filed are filed herewith.
Pursuant to Regulation S-K, Item 601(b)(4)(iii), instruments that define the rights of holders
of the Registrant's long-term debt securities, where the long-term debt securities authorized under
each such instrument do not exceed 10% of the Registrant's total assets, have been omitted and
will be furnished to the Commission upon request.
CSX 2019 Form 10-K p.111
Exhibit
designation
2.1
3.1
3.2
CSX CORPORATION
PART IV
Nature of exhibit
Distribution Agreement, dated as of July 26, 2004, by and
among CSX Corporation, CSX Transportation, Inc., CSX Rail
Holding Corporation, CSX Northeast Holding Corporation,
Norfolk Southern Corporation, Norfolk Southern Railway
Company, CRR Holdings LLC, Green Acquisition Corp., Conrail
Inc., Consolidated Rail Corporation, New York Central Lines
LLC, Pennsylvania Lines LLC, NYC Newco, Inc. and PRR
Newco, Inc.
Previously filed
as exhibit to
September 2, 2004,
Exhibit 2.1, Form 8-K
Amended and Restated Articles of Incorporation of CSX
Corporation, effective as of October 7, 2015
October 9, 2015,
Exhibit 3.1, Form 8-K
Amended and Restated Bylaws of CSX Corporation, effective
as of July 7, 2017
July 11, 2017,
Exhibit 3.1, Form 8-K
Instruments Defining the Rights of Security Holders, Including Debentures:
4.1(a)(P)
4.1(b)(P)
4.1(c)
4.1(d)
4.1(e)
4.1(f)
4.1(g)
4.1(h)
4.1(i)
Indenture, dated August 1, 1990, between the Registrant and
The Chase Manhattan Bank, as Trustee
September 7, 1990,
Form SE
First Supplemental Indenture, dated as of June 15, 1991,
between the Registrant and The Chase Manhattan Bank, as
Trustee
May 28, 1992,
Exhibit 4(c), Form SE
Second Supplemental Indenture, dated as of May 6, 1997,
between the Registrant and The Chase Manhattan Bank, as
Trustee
June 5, 1997,
Exhibit 4.3, Form S-4
(Registration No. 333-28523)
Third Supplemental Indenture, dated as of April 22, 1998,
between the Registrant and The Chase Manhattan Bank, as
Trustee
May 12, 1998,
Exhibit 4.2, Form 8-K
Fourth Supplemental Indenture, dated as of October 30, 2001,
between the Registrant and The Chase Manhattan Bank, as
Trustee
November 7, 2001,
Exhibit 4.1, Form 10-Q
Fifth Supplemental Indenture, dated as of October 27, 2003
between the Registrant and The Chase Manhattan Bank, as
Trustee
October 27, 2003,
Exhibit 4.1, Form 8-K
Sixth Supplemental Indenture, dated as of September 23, 2004
between the Registrant and JP Morgan Chase Bank, formerly
The Chase Manhattan Bank, as Trustee
November 3, 2004,
Exhibit 4.1, Form 10-Q
Seventh Supplemental Indenture, dated as of April 25, 2007,
between the Registrant and The Bank of New York (as
successor to JP Morgan Chase Bank), as Trustee
April 26, 2007,
Exhibit 4.4, Form 8-K
Eighth Supplemental Indenture, dated as of March 24, 2010,
between the Registrant and The Bank of New York Mellon (as
successor to JP Morgan Chase Bank), as Trustee
April 19, 2010,
Exhibit 4.1, Form 10-Q
4.2
Description of Common Stock
Material Contracts:
July 19, 2018
Form 8-K
10.1**
10.2**
10.3**
10.4**
CSX Directors’ Pre-2005 Deferred Compensation Plan (as
amended through January 8, 2008)
February 22, 2008,
Exhibit 10.2, Form 10-K
CSX Directors’ Deferred Compensation Plan effective January
1, 2005
February 22, 2008,
Exhibit 10.3, Form 10-K
CSX Directors' Charitable Gift Plan, as amended
March 4, 1994,
Exhibit 10.4, Form 10-K
CSX Directors' Matching Gift Plan (as amended through
February 9, 2011)
March 4, 1994,
Exhibit 10.5, Form 10-K
CSX 2019 Form 10-K p.112
Exhibit
designation
10.5**
10.6**
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
CSX CORPORATION
PART IV
Nature of exhibit
Special Retirement Plan of CSX Corporation and Affiliated
Companies (as amended through February 14, 2001)
Previously filed
as exhibit to
March 4, 2002,
Exhibit 10.23, Form 10-K
Supplemental Retirement Benefit Plan of CSX Corporation and
Affiliated Companies (as amended through February 14, 2001)
March 4, 2002,
Exhibit 10.24, Form 10-K
Transaction Agreement, dated as of June 10, 1997, by and
among CSX Corporation, CSX Transportation, Inc., Norfolk
Southern Corporation, Norfolk Southern Railway Company,
Conrail Inc., Consolidated Rail Corporation and CRR Holdings
LLC, with certain schedules thereto
July 8, 1997,
Exhibit 10, Form 8-K
Amendment No. 1, dated as of August 22, 1998, to the
Transaction Agreement, dated as of June 10, 1997, by and
among CSX Corporation, CSX Transportation, Inc., Norfolk
Southern Corporation, Norfolk Southern Railway Company,
Conrail Inc., Consolidated Rail Corporation and CRR Holdings,
LLC
June 11, 1999,
Exhibit 10.1, Form 8-K
Amendment No. 2, dated as of June 1, 1999, to the Transaction
Agreement, dated as of June 10, 1997, by and among CSX
Corporation, CSX Transportation, Inc., Norfolk Southern
Corporation, Norfolk Southern Railway Company, Conrail Inc.,
Consolidated Rail Corporation and CRR Holdings, LLC
June 11, 1999,
Exhibit 10.2, Form 8-K
Amendment No. 3, dated as of August 1, 2000, to the
Transaction Agreement by and among CSX Corporation, CSX
Transportation, Inc., Norfolk Southern Corporation, Norfolk
Southern Railway Company, Conrail Inc., Consolidated Rail
Corporation, and CRR Holdings, LLC.
March 1, 2001,
Exhibit 10.34, Form 10-K
Amendment No. 4, dated and effective as of June 1, 1999, and
executed in April 2004, to the Transaction Agreement, dated as
of June 10, 1997, by and among CSX Corporation, CSX
Transportation, Inc., Norfolk Southern Corporation, Norfolk
Southern Railway Company, Conrail Inc., Consolidated Rail
Corporation and CRR Holdings, LLC
August 6, 2004,
Exhibit 99.1, Form 8-K
Amendment No. 5, dated as of August 27, 2004, to the
Transaction Agreement, dated as of June 10, 1997, by and
among CSX Corporation, CSX Transportation, Inc., Norfolk
Southern Corporation, Norfolk Southern Railway Company,
Conrail Inc., Consolidated Rail Corporation and CRR Holdings
LLC
September 2, 2004,
Exhibit 10.1, Form 8-K
Shared Assets Area Operating Agreement for Detroit, dated as
of June 1, 1999, by and among Consolidated Rail Corporation,
CSX Transportation, Inc. and Norfolk Southern Railway
Corporation, with exhibit thereto
June 11, 1999,
Exhibit 10.6, Form 8-K,
Shared Assets Area Operating Agreement for North Jersey,
dated as of June 1, 1999, by and among Consolidated Rail
Corporation, CSX Transportation, Inc. and Norfolk Southern
Railway Company, with exhibit thereto
Shared Assets Area Operating Agreement for South Jersey/
Philadelphia, dated as of June 1, 1999, by and among
Consolidated Rail Corporation, CSX Transportation, Inc. and
Norfolk Southern Railway Company, with exhibit thereto
June 11, 1999,
Exhibit 10.4, Form 8-K
June 11, 1999,
Exhibit 10.5, Form 8-K
Monongahela Usage Agreement, dated as of June 1, 1999, by
and among CSX Transportation, Inc., Norfolk Southern Railway
Company, Pennsylvania Lines LLC and New York Central Lines
LLC, with exhibit thereto
June 11, 1999,
Exhibit 10.7, Form 8-K
CSX 2019 Form 10-K p.113
Exhibit
designation
10.17
10.18**
10.19**
10.20**
10.21**
10.22**
10.23**
10.24**
10.25**
10.26**
10.27**
10.28**
10.29**
10.30
10.31**
10.32**
10.33**
CSX CORPORATION
PART IV
Nature of exhibit
Tax Allocation Agreement, dated as of August 27, 2004, by and
among CSX Corporation, Norfolk Southern Corporation, Green
Acquisition Corp., Conrail Inc., Consolidated Rail Corporation,
New York Central Lines LLC and Pennsylvania Lines LLC
CSX Stock and Incentive Award Plan
Restricted Stock Award Agreement with Frank A. Lonegro
Previously filed
as exhibit to
September 2, 2004,
Exhibit 10.2, Form 8-K
May 7, 2010,
Exhibit 10.1, Form 8-K
February 16, 2016,
Exhibit 10.5, Form 8-K
CSX Executives' Deferred Compensation Plan (as amended
and restated effective January 1, 2017)
October 12, 2016,
Exhibit 10.1, Form 10-Q
CSX 2017-2019 Long Term Incentive Plan, effective as of
February 22, 2017
February 27, 2017
Exhibit 10.1, Form 8-K
CSX Section 16 Officer Severance Benefit Plan, effective as of
February 22, 2017
February 27, 2017
Exhibit 10.4, Form 8-K
Employment Agreement, effective as of January 8, 2018,
between CSX Corporation and Edmond L. Harris
January 12, 2018
Exhibit 10.1, Form 8-K
Employment Agreement, effective as of March 29, 2017,
between CSX Corporation and Mark K. Wallace
February 7, 2018
Exhibit 10.41, Form 10-K
Employment Agreement, effective as of December 22, 2017,
between CSX Corporation and James M. Foote
February 7, 2018
Exhibit 10.42, Form 10-K
Form of Change of Control Agreement, effective February 7,
2018
February 7, 2018
Exhibit 10.43, Form 10-K
CSX 2018-2020 Long-Term Incentive Plan
CSX 2019-2021 Long-Term Incentive Plan
Form of 2019 Stock Option Agreement
$1,200,000,000 Five-Year Revolving Credit Agreement, dated
as of March 29, 2019, among CSX Corporation, as borrower,
the lenders party thereto, and JPMorgan Chase Bank, N.A., as
administrative agent
February 12, 2018
Exhibit 10.1, Form 8-K
February 12, 2019
Exhibit 10.1, Form 8-K
February 12, 2019
Exhibit 10.2, Form 8-K
April 3, 2019
Exhibit 10.1, Form 8-K
CSX 2019 Stock and Incentive Award Plan (incorporated by
reference to Appendix A to the registrant’s Definitive Proxy
Statement on Schedule 14A filed March 22, 2019)
May 8, 2019
Exhibit 10.1, Form 8-K
Employment Separation Agreement and Release, dated as of
June 4, 2019, between CSX Corporation and Frank A. Lonegro
June 4, 2019
Exhibit 10.1, Form 8-K/A
Amendment to Employment Agreement, effective as of October
8, 2019, between CSX Corporation and Edmond L. Harris
October 8, 2019
Exhibit 10.1, Form 8-K
Officer certifications:
31*
32*
Rule 13a-14(a) Certifications
Section 1350 Certifications
Interactive data files:
CSX 2019 Form 10-K p.114
Exhibit
designation
101*
CSX CORPORATION
PART IV
Nature of exhibit
Previously filed
as exhibit to
The following financial information from CSX Corporation’s
Annual Report on Form 10-K for the year ended December 31,
2019 filed with the SEC on February 12, 2020, formatted in
XBRL includes: (i) Consolidated Income Statements for the
fiscal periods ended December 31, 2019, December 31, 2018,
and December 31, 2017, (ii) Consolidated Comprehensive
Income Statements for the fiscal periods ended December 31,
2019, December 31, 2018, and December 31, 2017, (iii)
Consolidated Balance Sheets at December 31, 2019 and
December 31, 2018, (iv) Consolidated Cash Flow Statements
for the fiscal periods ended December 31, 2019, December 31,
2018 and December 31, 2017, (v) Consolidated Statements of
Changes in Shareholders' Equity for the fiscal periods ended
December 31, 2019, December 31, 2018 and December 31,
2017, and (vi) the Notes to Consolidated Financial Statements.
Other exhibits:
21*
23*
24*
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm
Powers of Attorney
* Filed herewith
** Management Contract or Compensatory Plan or Arrangement
(P) This Exhibit has been paper filed and is not subject to Item 601 of Reg S-K for hyperlinks.
Note: Items not filed herewith have been submitted in previous SEC filings.
CSX 2019 Form 10-K p.115
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CSX CORPORATION
(Registrant)
By: /s/ ANGELA C. WILLIAMS
Angela C. Williams
Vice President and Chief Accounting Officer
(Principal Accounting Officer)
Dated: February 12, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities indicated on February 12,
2020.
Signature
Title
/s/ JAMES M. FOOTE
James M. Foote
/s/ KEVIN S. BOONE
Kevin S. Boone
President, Chief Executive Officer and Director
(Principal Executive Officer)
Executive Vice President and Chief Financial
Officer (Principal Financial Officer)
/s/ ANGELA C. WILLIAMS
Angela C. Williams
Vice President and Chief Accounting Officer
(Principal Accounting Officer)
/s/ NATHAN D. GOLDMAN
Nathan D. Goldman
Executive Vice President and Chief Legal Officer,
Corporate Secretary
*Attorney-in-Fact
CSX 2019 Form 10-K p.116
Signature
*
John J. Zillmer
*
Donna M. Alvarado
*
Pamela L. Carter
*
Steven T. Halverson
*
Paul C. Hilal
*
John D. McPherson
*
David M. Moffett
*
Linda H. Riefler
*
Suzanne M. Vautrinot
*
J. Steven Whisler
SIGNATURES
Title
Chairman of the Board and Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
CSX 2019 Form 10-K p.117
Exhibit 21
Subsidiaries of the Registrant
As of December 31, 2019, the Registrant was the beneficial owner of 100% of the common stock of the
following significant subsidiaries:
CSX Transportation, Inc. (a Virginia corporation)
As of December 31, 2019, none of the other subsidiaries included in the Registrant's consolidated financial
statements constitute a significant subsidiary.
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
Exhibit 23
• Registration Statement (Form S-8 No. 333-231259) pertaining to the CSX 2019
Stock and Incentive Award Plan,
• Registration Statement (Form S-8 No. 333-226248) pertaining to the CSX
Corporation 2018 Employee Stock Purchase Plan,
• Registration Statement (Form S-8 No. 333-201172) pertaining to the CSX Directors’
Deferred Compensation Plan,
• Registration Statement (Form S-8 No. 333-201167) pertaining to the CSX
Executives’ Deferred Compensation Plan,
• Registration Statement (Form S-8 No. 333-193785) pertaining to the Tax Savings
Thrift Plan for Employees of CSX Corporation and Affiliated Companies,
• Registration Statement (Form S-8 No. 333-166769) pertaining to the 2010 CSX
Stock and Incentive Award Plan,
• Registration Statement (Form S-8 No. 333-160652) pertaining to the CSX
Corporation Capital Builder Plan,
• Registration Statement (Form S-8 No. 333-110589) pertaining to the 2002 Deferred
Compensation Plan of CSX Corporation and Affiliated Companies, and
• Registration Statement (Form S-3ASR No. 333-209541) of CSX Corporation, CSX
Capital Trust I and CSX Transportation, Inc.
of our reports dated February 12, 2020, with respect to the consolidated financial statements of CSX
Corporation, and the effectiveness of internal control over financial reporting of CSX Corporation, included
in this Annual Report (Form 10-K) of CSX Corporation for the year ended December 31, 2019.
/s/ Ernst & Young LLP
Jacksonville, Florida
February 12, 2020
POWER OF ATTORNEY
Exhibit 24
KNOW ALL PERSONS BY THESE PRESENTS that each of the undersigned directors of CSX
CORPORATION, a Virginia Corporation, which is to file with the Securities and Exchange Commission,
Washington, D. C., a Form 10 K for fiscal year ended December 31, 2019 hereby constitutes and appoints
Angela C. Williams and Nathan D. Goldman his/her true and lawful attorneys in fact and agents, for him/
her and in his/her name, place and stead to sign said Form 10 K, and any and all amendments thereto,
with power where appropriate to affix the corporate seal of CSX Corporation thereto and to attest said seal,
and to file said Form 10 K, and any and all other documents in connection therewith, with the Securities
and Exchange Commission, hereby granting unto said attorneys in fact and agents, and each of them, full
power and authority to do and perform any and all acts and things requisite and necessary to be done in
and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby
ratifying and confirming all that said attorneys in fact and agents, or either of them, may lawfully do or cause
to be done by virtue hereof.
/s/ DONNA M. ALVARADO
Donna M. Alvarado
February 12, 2020
/s/ PAMELA L. CARTER
Pamela L. Carter
February 10, 2020
/s/ DAVID M. MOFFETT
David M. Moffett
February 12, 2020
/s/ LINDA H. RIEFLER
Linda H. Riefler
February 12, 2020
/s/ STEVEN T. HALVERSON
Steven T. Halverson
February 12, 2020
/s/ SUZANNE M. VAUTRINOT
Suzanne M. Vautrinot
February 12, 2020
/s/ PAUL C. HILAL
Paul C. Hilal
February 12, 2020
/s/ JOHN D. MCPHERSON
John D. McPherson
February 12, 2020
/s/ J. STEVEN WHISLER
J. Steven Whisler
February 12, 2020
/s/ JOHN J. ZILLMER
John J. Zillmer
February 12, 2020
Exhibit 31
CERTIFICATION OF CEO AND CFO PURSUANT TO EXCHANGE ACT RULE
13a - 14(a) OR RULE 15d-14(a)
I, James M. Foote, certify that:
1.
I have reviewed this Annual Report on Form 10-K of CSX Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting
that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: February 12, 2020
/s/ JAMES M. FOOTE
James M. Foote
President and Chief Executive Officer
I, Kevin S. Boone, certify that:
1.
I have reviewed this Annual Report on Form 10-K of CSX Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting
that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: February 12, 2020
/s/ KEVIN S. BOONE
Kevin S. Boone
Executive Vice President and Chief Financial Officer
CERTIFICATION OF CEO AND CFO REQUIRED BY RULE 13a-14(b) OR RULE 15D-14(b) AND SECTION 1350
OF CHAPTER 63 OF TITLE 18 OF THE U.S. CODE
Exhibit 32
In connection with the Annual Report of CSX Corporation on Form 10-K for the fiscal year ended December 31, 2019
as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James M. Foote, Chief
Executive Officer of the registrant, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, to my knowledge, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the registrant.
Date: February 12, 2020
/s/ JAMES M. FOOTE
James M. Foote
President and Chief Executive Officer
In connection with the Annual Report of CSX Corporation on Form 10-K for the fiscal year ended December 31, 2019
as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kevin S. Boone, Chief
Financial Officer of the registrant, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, to my knowledge, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the registrant.
Date: February 12, 2020
/s/ KEVIN S. BOONE
Kevin S. Boone
Executive Vice President and Chief Financial Officer
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Corporate Headquarters
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