2022
Annual Report
In this Report
Message from the CEO
Powered to Perform
Financial Performance
Safety Performance
Service Performance
Growth Opportunities
Environmental, Social and Governance
Board of Directors
Executive Management
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04
06
07
08
10
12
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01
Message from the CEO
Driven to
Deliver More
Dear Fellow Shareholders,
CSX produced excellent financial results in 2022
putting us on a path to re-attain — and surpass
and finished the year in a strong position to leverage
— the performance highs we reached prior to the
service improvement and build upon its momentum
to grow the business. Across all stakeholder groups
— customers, employees, investors and the public
— we achieved important objectives and overcame
significant challenges. For the first time since the
pandemic. We also completed the acquisition of Pan
Am Railways, significantly expanding our reach in
New England markets, and we introduced innovative
supply chain solutions offering dock-to-dock service.
pandemic disrupted supply chains and tightened
For our employees, we took concrete actions
labor markets, we re-established the momentum that
to improve labor-management relations as our
will enable our company to fully realize the potential
industry engaged in a difficult round of national
of our proven operating model centered on safety,
bargaining. The national rail labor agreement signed
service, efficiency and people.
For our shareholders, we increased earnings per
share 16% on the strength of a 19% increase in
in November provides a 24% wage increase during
the five-year period from 2020 through 2024. Here
at CSX, we introduced several provisions to ease
punitive attendance policies as well as improve the
revenue to $14.9 billion, an 8% increase in operating
work environment and quality of life for front-line
income to $6 billion and a 10% increase in net
employees. Perhaps most importantly, we advanced
earnings to $4.2 billion. We finished 2022 with a full-
our ONE CSX workplace culture built on teamwork
year operating ratio of 59.5%, as we absorbed higher
across all levels, all departments and all locations.
expenses related to inflation and labor.
For our customers, we worked with great urgency
and resolve to hire train crew employees to handle
their unmet demand for rail service. By the end
of the year, we had nearly reached our target of
7,000 active train-and-engine employees and were
on track to eclipse that goal in the first days of
ONE CSX emphasizes communication and the
importance of every employee in delivering safe,
reliable service. It begins with a strong safety culture
and recognizes the contributions of employees who
move freight, maintain our track and equipment and
create value for our customers.
For the public, we continued to introduce innovative
2023. Our successful hiring campaign significantly
technologies that reduce emissions and offer the most
increased our ability to handle customer business
and supported service improvements that gained
increasing momentum in the fourth quarter,
sustainable mode of freight transportation on land.
We worked with customers to help them achieve their
carbon-reduction goals by switching from highway
to rail transportation, which also reduces highway
been impressed by the quality of the leadership team
congestion. We also strengthened our relationships
and the tremendous commitment of our employees
with regulatory agencies and public officials through
who serve our customers. Visiting more than 20
cooperative actions, which included a key agreement
locations in my first 100 days, I met a workforce
that will restore Amtrak passenger rail service in the
ready and eager to provide the best service product
Gulf Coast corridor. We continued to advance our
our industry has ever seen. With great optimism and
Pride in Service community investment initiative,
as ONE CSX, we will deliver.
through which we have made significant financial
and volunteerism contributions in support of our
nation's military community and first responders.
On a personal note, I would like to thank all of our
stakeholder groups — and especially CSX employees
— for welcoming me as the leader of this proud and
Joe Hinrichs
vital company. Since arriving in September, I have
President and Chief Executive Officer
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03
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
55%
Merchandise
16%
Intermodal
16%
Coal
7%
Trucking
6%
Other
17%
Chemicals
11%
Agricultural and Food
7%
Automotive
7%
Forest Products
6%
Metals and Equipment
4%
Minerals
3%
Fertilizers
A leading supplier of rail-based freight
transportation, CSX is powered to deliver
comprehensive service solutions.
CSX Network
SYRACUSE
SYRACUSE
BUFFALO
SELKIRK
SELKIRK
CHICAGO
TOLEDO
CLEVELAND
CLEVELAND
DETROIT
WILLARD
WILLARD
PITTSBURGH
PITTSBURGH
CUMBERLAND
CUMBERLAND
AVONAVON
COLUMBUS
COLUMBUS
BALTIMORE
LOUISVILLE
LOUISVILLE
CINCINNATI
CINCINNATI
RUSSELL
RUSSELL
NASHVILLE
NASHVILLE
BIRMINGHAM
ATLANTA
ATLANTA
RICHMOND
ROCKY MOUNT
HAMLET
HAMLET
FLORENCE
CHARLESTON
MONTGOMERY
MONTGOMERY
SAVANNAH
WAYCROSS
JACKSONVILLE
MOBILE
MOBILE
NEW ORLEANS
TAMPA
MAJOR TERMINAL
CSX RAIL SERVICE
CSX OPERATING
AGREEMENT
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Financial Performance
Safety
CSX delivered excellent financial results
Revenue (million)
in 2022, overcoming staffing challenges,
inflationary pressures and headwinds in
several key markets to increase revenue 19%,
operating income 8% and earnings per share
16%. Operating ratio increased to 59.5%
from the previous year’s 55.3%, primarily
reflecting higher costs for fuel, labor and
services and lower gains from property sales.
2021
2022
$12,522
$14,853
19%
Total volume decreased 1% for the year, with
Operating Income (million)
increases in automotive, agricultural and food
products, and minerals offset by declines in
fertilizers, chemicals, metals and equipment,
coal and forest products. Intermodal volume
was flat for the year.
2021
2022
$5,594
$6,023
8%
CSX employees demonstrated strong safety
to help new hires enabled the company to
culture in 2022, holding the company’s Federal
achieve these results in a year when 2,000 new
Railroad Administration (FRA)-reportable
train-and-engine employees joined the railroad.
personal injury rate at 0.96 per 100,000
employees and lowering its FRA-reportable train
accident rate to 3.18, a 1% improvement. Strong
training, engagement by front-line managers
and a commitment by experienced employees
FRA Personal Injury Frequency Index
FRA Train Accident Rate
2021
2022
2021
2022
0.96
0.96
Flat
3.22
3.18
1%
Net Earnings
Operating Ratio
$3,781
$4,166
59.5%
55.3%
2021
2022
2021
2022
10%
420 bps
increase
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07
Service Performance
Supported by a successful hiring campaign
Train Velocity (miles per hour)
Train Velocity (miles per hour)
for train-and-engine employees, CSX
service performance improved significantly
Q4 2021
Q4 2022
FY 2021
FY 2022
in the second half of 2022 and began
17.4
17.5
1%
17.9
16.1
-10%
tracking toward a return to pre-pandemic
highs. At year-end, key service metrics,
including velocity, car dwell, cars online
and merchandise and intermodal trip
plan performance, were significantly
improved from year-end 2021. Traffic
Terminal Car Dwell (hours per car)
Terminal Car Dwell (hours per car)
Q4 2021
Q4 2022
FY 2021
FY 2022
11.0
10.3
6%
10.7
11.3
-6%
fluidity improved across the network, which
Cars Online
Cars Online
increased the railroad’s capacity to handle
more customer shipments.
Q4 2021
Q4 2022
FY 2021
FY 2022
135,396
130,992
3%
131,564
138,074
-5%
Carload Trip Plan Performance
Carload Trip Plan Performance
Q4 2021
Q4 2022
FY 2021
FY 2022
71%
77%
8%
69%
64%
-7%
Intermodal Trip Plan Performance
Intermodal Trip Plan Performance
Q4 2021
Q4 2022
FY 2021
FY 2022
88%
93%
6%
87%
90%
3%
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09
Growth Opportunities
Profitable growth is the primary objective of
Also in 2022, the company introduced new
CSX’s business strategy. The company laid the
service solutions for customers that support
foundation for growth in 2022 through crew hiring,
highway-to-rail conversion. The company
service improvement and capital investment that
completed the acquisition of Pan Am Railways,
increased network capacity. These advances
expanding CSX’s reach into Northeast
supported initiatives to pursue business growth
markets and creating new single-line service
through highway-to-rail conversions and
opportunities for shippers. In addition, CSX
encouraging development of new manufacturing
continued to pursue innovative service
and industrial facilities on CSX lines.
solutions that combine long- and medium-
haul rail with short-haul trucking, enabling
The company’s Select Site program produced
customers to increase their use of safe and
several signature business wins during the year by
environmentally advantaged rail transportation.
marketing sites that meet customer criteria for size,
The company invested in new technology to
transportation access, utility infrastructure and
enhance the customer experience through
other factors to streamline project development.
its ShipCSX online customer service platform
New announcements included a major lithium
and through business systems that support
hydroxide plant to support a growing electric
more effective communication with
vehicle industry, the first fully integrated
customers and identification of
aluminum mill to be built in the U.S. in 40 years,
business development opportunities.
and several new automotive plants for
manufacturing electric vehicles.
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11
Environmental,
Social and
Governance
Environmental Sustainability
Helping customers capture the environmental
four times more fuel efficient than trucks
advantages of rail is an important component of
on average. The company also continued to
CSX’s highway-to-rail conversion strategy, and the
expand its use of cutting-edge fuel-saving
company continued to pursue initiatives in 2022 to
technologies in its locomotive fleet and began a
widen that advantage.
pilot program for testing locomotives converted
for using bio-fuels in revenue service.
CSX’s greenhouse gas emissions reduction goal is
among the most aggressive in the transportation
Through initiatives like the company's
industry, targeting 37.3% reduction in GHG
Customer Environmental Excellence Awards,
intensity by 2030, against a 2014 base year. In
CSX is helping customers calculate how much
2022, the company continued to innovate to
progress they can make toward their carbon
reduce its Scope 1 and 2 emissions intensity to
reduction goals by switching from truck to rail.
remain on target.
In 2022, customers avoided 12.5 million
metric tons of carbon dioxide emissions —
Fuel efficiency is the primary driver of GHG
the equivalent of taking 2.7 million passenger
reduction, and in 2022 the company was able
vehicles off the road — by choosing rail
to move 1,000 gross ton-miles of freight on less
over trucking.
than one gallon of fuel, making CSX as much as
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Social Responsibility
From supporting workforce diversity to
Through Pride in Service and other community
investing in communities, CSX advanced
initiatives, CSX employees donated more than
its commitment to social responsibility
12,300 volunteer hours and donated more than
in 2022.
$216,000 to charitable causes, including disaster
relief aid to communities impacted by hurricanes
CSX recognizes the critical role of rail
and flooding.
transportation in supporting industries
that provide jobs to people in communities
The company also continued its commitment to
across the company’s 20,000-route-mile
diversity, equity and inclusion through diversity
network. But the company also believes
hiring, business resource groups and a Social
its responsibility extends much further,
Action Plan that funded social justice causes
to promoting rail safety and helping
and promoted employee events. The company
train first responders, and to supporting
collaborated with City Year, a nationwide
The CSX Pride in Service initiative continues to mobilize CSX employees and
initiatives that improve the quality of life for
organization that promotes educational equity, on
partners to impact communities across the United States. In 2022, the initiative
communities and their residents.
a 100,000 Steps Toward Social Justice initiative in
increased the volume of support it’s delivered over the four-year span of its existence.
support of systemically under-resourced schools
In 2022, CSX impacted more than 1,600
in Jacksonville, Philadelphia and Washington,
communities through the company’s
D.C. CSX also sponsored the Jacksonville Civil
financial contributions and its employees’
Rights Conference and Martin Luther King Jr.
volunteer activities. CSX Pride in Service,
Day activities, in addition to providing funding for
the company’s signature community
Congressional Black Caucus Foundation activities
investment initiative, sponsored 751 events
and the Florida Black Expo in Jacksonville, Florida.
throughout the year in cooperation with five
non-profit service partners to benefit the
military community and first responders.
More than 400 Pride in Service grants
were distributed along with 192
student scholarships.
1,600+
Communities impacted
$
12,300 Hours
Donated by employees
400+
Grants distributed to
service members
192
Scholarships granted
to youth
$216K
Donated by employees
751
Events sponsored
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03
Governance
Good governance practices are essential
for mitigating risk, protecting shareholder
value and supporting long-term growth
The company’s practices are deemed essential
and business success. CSX continued to
for ensuring proper disclosure of information,
demonstrate its commitment to these
auditing and compliance. The CSX governance
principles in 2022 through the policies
program includes:
developed and implemented by its
executive team in consultation with the
Annual election of directors
company’s Board of Directors.
The CSX Board of Directors and executive
team are responsible for developing and
communicating CSX’s vision and purpose;
Majority voting standard for election
of directors
Independent chairman of the board
overseeing the implementation of sound
Stock ownership guidelines for officers
governance practices; upholding company
policies, codes, procedures and values;
and ensuring ongoing monitoring of and
adherence to laws and regulations.
and directors
Policy against hedging or pledging of
CSX shares
Proxy access
Pay for performance alignment
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Board of
Directors
Executive
Management
From
left to right:
Donna M. Alvarado
Thomas P. Bostick
Steven T. Halverson
Founder and President
Retired U.S. Army Lieutenant
Chairman and former
Paul C. Hilal
Founder and
of Aguila International
General and former Chief
Chief Executive Officer
Controller of MR Argent Advisor
Operating Officer at Intrexon
of The Haskell Company
LLC
From
left to right:
Joe Hinrichs
Kevin S. Boone
Jamie J. Boychuk
President and Chief
Executive Vice President of
Executive Vice President
Executive Officer
Sales and Marketing
of Operations
Stephen Fortune
Executive Vice President
and Chief Digital and
Technology Officer
Joe Hinrichs
David M. Moffett
Linda H. Riefler
Suzanne M. Vautrinot
President and Chief
Retired Chief Executive Officer
Director of MSCI and
Founder and President of Kilovolt
Executive Officer of
and Director of the Federal
Former Chairman of Global
Consulting, Inc. and Retired U.S.
CSX
Home Loan Mortgage Corporation
Research for Morgan Stanley
Air Force Major General
James L. Wainscott
J. Steven Whisler
John J. Zillmer
Former Chairman, President
Retired Chairman and Chief
Chairman of the Board,
and Chief Executive Officer of
Executive Officer of Phelps
President and Chief Executive
AK Steel Holding Corporation
Dodge Corporation
Officer of Aramark Corporation
Nathan D. Goldman
Sean R. Pelkey
Diana B. Sorfleet
Executive Vice President,
Executive Vice President and
Executive Vice President
Chief Legal Officer and
Corporate Secretary
Chief Financial Officer
and Chief Administrative
Officer
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21
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
For the fiscal year ended December 31, 2022
OR
(☐) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-8022
CSX CORPORATION
(Exact name of registrant as specified in its charter)
Virginia
(State or other jurisdiction of incorporation
or organization)
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report (☒)
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. (□)
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). (□)
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, 2022 (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 $62 billion (based on the close price as reported on the NASDAQ National Market System on such date).
There were 2,062,605,434 shares of Common Stock outstanding on January 31, 2023 (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 2023 annual meeting of shareholders.
22
CSX 2022 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. Reserved
7. Management's Discussion and Analysis of Financial Condition and Results of Operations
· Terms Used by CSX
· 2022 Highlights
· Results of Operations
· Liquidity and Capital Resources
· Contractual Obligations, Other Commitments and 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
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
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
CSX 2022 Form 10-K p.2
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7
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13
17
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31
36
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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 and serves
major population centers in 26 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 240 short-line and regional
railroads. On June 1, 2022, CSX completed its acquisition of Pan Am Systems, Inc. (“Pan Am”) which is
the parent company of Pan Am Railways, Inc. This acquisition expands CSXT’s reach in the Northeastern
United States. For further details, refer to Note 17, Business Combinations.
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 Quality Carriers, Inc. ("Quality Carriers"),
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. Effective July 1, 2021, CSX acquired Quality Carriers, the largest provider of bulk liquid
chemicals truck transportation in North America. For further details, refer to Note 17, Business
Combinations. CSX Intermodal Terminals owns and operates a system of intermodal terminals,
predominantly in the eastern United States, and also provides drayage services (the pickup and delivery
of intermodal shipments) for certain customers. 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.
Operating Model
The Company is focused on developing and strictly maintaining a scheduled service plan with an
emphasis on improving customer service, optimizing assets and increasing employee engagement.
When this operating model is executed effectively, the Company competes for an increased share of the
U.S. freight market. Further, this model leads to reduced costs and strong free cash flow generation.
24
CSX 2022 Form 10-K p.3
CSX CORPORATION
PART I
Lines of Business
During 2022, the Company's services generated $14.9 billion of revenue and served four primary
lines of business: merchandise, intermodal, coal and trucking.
•
•
The merchandise business shipped 2.6 million carloads (41% of volume) and generated $8.2
billion in revenue (55% of revenue) in 2022. The Company’s merchandise business is
comprised of shipments in the following diverse markets: chemicals, agricultural and food
products, minerals, automotive, forest products, metals and equipment, and fertilizers.
The intermodal business shipped 3.0 million units (48% of volume) and generated $2.3 billion
in revenue (16% of revenue) in 2022. 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.
• The coal business shipped 697 thousand carloads (11% of volume) and generated $2.4 billion
in revenue (16% of revenue) in 2022. 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. Most of the export coal the Company transports is
used for steelmaking, while the majority of domestic coal the Company ships is used for
electricity generation.
The trucking business generated $966 million, or 7%, of revenue in 2022. Trucking revenue
includes revenue from the operations of Quality Carriers, which was acquired by CSX effective
July 1, 2021.
•
Other revenue accounted for 6% of the Company’s total revenue in 2022. This category includes
revenue from regional subsidiary railroads and incidental charges, including intermodal storage and
equipment usage, demurrage and switching. Revenue from regional subsidiary railroads includes
shipments by railroads that the Company does not directly operate. Intermodal storage represents
charges for customer storage of containers at an intermodal terminal, ramp facility or offsite location
beyond a specified period of time. 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.
CSX's Committed Workforce
Most of the Company’s employees provide or support transportation services. The Company had
more than 22,500 employees as of December 2022, which includes approximately 17,100 employees
that are members of a rail labor union. As of December 2, 2022, all 12 rail unions at CSX that participated
in national bargaining were covered by national agreements with the Class I railroads and CSX-specific
agreements that will remain in effect through December 31, 2024. In the face of supply chain disruption
and a tight labor market, CSX continues to focus on ensuring the hiring pipeline for frontline railroaders is
adequate to meet customer needs and has implemented new recruiting and staffing measures.
CSX prioritizes workplace safety for employees and is committed to continued improvement
through enhanced processes, training, technology, communication, and continuous collaboration with
customers and peers across the railroad industry. Training programs and processes are focused on injury
and accident prevention as well as emergency preparedness. The attainment of key safety targets is a
component of management's annual incentive program. The FRA Personal Injury Frequency Index, a
measure of the number of FRA-reportable injuries per 200,000 man-hours, was 0.96 in both 2022 and
2021, remaining flat year over year.
CSX 2022 Form 10-K p.4
25
CSX CORPORATION
PART I
The Compensation and Talent Management Committee of the Board of Directors is charged with
oversight of CSX's workforce. The Company is committed to developing a culture that promotes
workforce diversity and inclusion and encourages ethical behavior. As of December 31, 2022,
approximately 21% of CSX's overall workforce and 36% of management was diverse, calculated as the
percentage of males of color and all females. In 2022, CSX was recognized as a “Best Place to Work for
Disability Inclusion” by Disability:IN and the American Association of People with Disabilities for a fourth
consecutive year after receiving a top score on their disability equality index. The CSX Code of Ethics
serves as a guiding standard for ethical behavior and covers many types of matters, including
discrimination and harassment as well as safety. Annually, all management employees are required, and
union employees are highly encouraged, to complete ethics training.
Company History
A leader in freight rail transportation for nearly 200 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,
which now includes the network acquired from Pan Am, 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.
26
CSX 2022 Form 10-K p.5
CSX CORPORATION
PART I
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.
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.
Financial Information
Information regarding the Company's results of operations and financial position can be found in
Item 7. Management’s Discussion and Analysis of Financial Condition.
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.
For additional information concerning business conducted by the Company during 2022, see Item
7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
CSX 2022 Form 10-K p.6
27
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.
Regulatory, Legislative and Legal
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, including
income taxes, 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. Noncompliance with 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.
28
CSX 2022 Form 10-K p.7
CSX CORPORATION
PART I
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.
Operational, Safety and Business Disruption
An epidemic or pandemic and the initiatives to reduce its transmission could adversely affect the
Company's business.
The Company could be materially and adversely affected by a public health crisis, including a
widespread epidemic or pandemic. During a health crisis, policies and initiatives may be instituted by the
public and private sector to reduce transmission, such as closures of businesses and manufacturing
facilities, the promotion of social distancing, the adoption of working from home by companies and
institutions, and travel restrictions. These policies or initiatives could adversely affect demand for the
commodities and products that the Company transports, including import and export volume.
In addition, initiatives to reduce transmission could result in supply chain disruptions, which could
impact volumes and make it more difficult for the Company to serve its customers. Moreover, operations
are negatively affected when a significant number of employees are quarantined as the result of exposure
to a contagious illness. To the extent a public health crisis adversely affects the Company's business and
financial results, it may also have the effect of heightening many of the other risks described herein.
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 security, stability
and availability of the Company’s and its key third-party vendors’ technology systems are critical to its
ability to operate safely and effectively and to compete within the transportation industry. A successful
data breach, cyber-attack, or the occurrence of any similar incident that impacts the Company’s or its key
third-party vendors’ information technology systems could result in a service interruption, train accident,
misappropriation of confidential or proprietary information (including personal information), process
failure, or other operational difficulties. A disruption or compromise of the Company’s information
technology systems, even for short periods of time, and any resulting theft or compromise of Company
confidential or proprietary information (including personal information), could adversely affect the
Company’s business or reputation, create significant legal, regulatory or financial exposure and have a
material adverse impact on CSX’s business, financial condition or operations.
CSX 2022 Form 10-K p.8
29
CSX CORPORATION
PART I
The Company, its third-party vendors and other companies in the rail and transportation industries
have been subject to, and are likely to continue to be the target of, data breaches, cyber-attacks and
other similar incidents. These incidents may include, among other things, malware, ransomware,
distributed denial of service attacks, social engineering, phishing, theft, malfeasance or improper access
by employees or third-party vendors, human error, fraud, or other modes of attack or disruption. Attacks
of these nature are increasing in frequency, levels of persistence, intensity and sophistication. Further, the
Company may be at increased risk of a cyber-attack as a result of being a component of the critical U.S.
infrastructure. As cybersecurity threats continue to evolve, the Company may be required to expend
significant additional resources to continue to modify or enhance its protective measures or to investigate
and remediate any information security vulnerabilities, data breaches, cyber-attacks or other similar
incidents. A public health crisis could also increase the risk that the Company or its third-party vendors
may experience cybersecurity incidents as a result of employees, third-party vendors and other third
parties with which they interact working remotely on less secure systems and environments.
Despite the Company’s efforts to protect its information technology systems, it may not be able to
prevent or anticipate all data breaches, cyber-attacks or other similar incidents, detect or react to such
incidents in a timely manner or adequately remediate any such incident. While CSX’s security protocols
have detected attempts to gain unauthorized access to the Company’s information technology systems,
none of such attempts have resulted in any material breach of or disruption to the Company’s systems.
For example, CSX has experienced distributed denial of service attacks that have resulted in brief system
disruptions, but none have resulted in access to CSX systems. Additionally, despite routine security
assessment of the Company’s key third-party vendors, some vendors have experienced cyber-attacks in
the past, but none of such attacks have had a material adverse impact on CSX’s business or operations.
Due to applicable laws and regulations or contractual obligations, CSX may be held responsible for data
breaches, cyber-attacks or other similar incidents attributed to its third-party vendors as they relate to the
information CSX shares with them.
Additionally, if CSX is unable to acquire, develop or implement new technology, it may suffer a
competitive disadvantage within the rail industry and with companies providing other modes of
transportation service.
Network or supply chain constraints could have a negative impact on service, operating efficiency
or volume of shipments.
CSXT could experience rail network difficulties related to: (i) locomotive or crew shortages; (ii)
labor shortages or other service disruptions in the supply chain affecting trucking, ports, handling
facilities, customer facilities or other railroads; (iii) unpredictable increases in demand; (iv) extreme
weather conditions; (v) regulatory changes resulting in forced access or impacting where and how fast
CSXT can transport freight or maintain routes; (vi) reductions in availability of pooled equipment,
including chassis; (vii) impacts from changes in network capacity or structure; or (viii) increased
passenger activities, 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.
30
CSX 2022 Form 10-K p.9
CSX CORPORATION
PART I
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, hurricanes, fires 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. Hurricanes as well as storm and flooding events have impacted
the Company's network in the past, leading to interrupted service and damage to track and equipment.
Changes in weather patterns caused by climate change are expected to increase the frequency, severity
or duration of certain adverse 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.
Competitive, Economic and Financial
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 or continues to experience the impacts of inflation, 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.
CSX 2022 Form 10-K p.10
31
CSX CORPORATION
PART I
Changing dynamics in the U.S. and global energy markets could negatively impact profitability.
Over time, changing dynamics in the U.S. and global energy markets, including the impacts of
regulation and alternative fuel sources, have resulted in lower energy production from coal-fired power
plants in CSX's service territory. Changes in natural gas prices, or other factors impacting demand for
electricity, could impact future power generation at coal-fired plants, which would affect the Company's
domestic coal volumes and revenues.
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.
Availability of Critical Supplies and Labor
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 strives to maintain 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.
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 rail, ties, freight cars and
locomotives) 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
costs. Additionally, if a fuel supply shortage were to arise, the Company would be negatively impacted.
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.
32
CSX 2022 Form 10-K p.11
Climate Change and Environmental
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 these
pending or proposed laws or regulations, including any proposed or implemented under the Biden
administration, could adversely affect 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.
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 cleanup 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.
Item 1B. Unresolved Staff Comments
None
CSX 2022 Form 10-K p.12
33
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 26 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 turnouts that divert trains from one track to another. 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 2022, the breakdown of track miles was as follows:
Single Mainline Track
Other Mainline Track
Terminals and Switching Yards
Passing Sidings and Turnouts
Total
Track
Miles
19,879
5,662
9,308
901
35,750
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 2022 volume (number of railcars or intermodal containers
processed) are listed below.
Yards and Terminals
Waycross, GA
Bedford Park Intermodal Terminal (Chicago)
Selkirk, NY
Nashville, TN
Cincinnati, OH
Avon, IN (Indianapolis)
Walbridge, OH (Toledo)
Fairburn, GA Intermodal Terminal (Atlanta)
Louisville, KY
Chicago 59th St. Intermodal Terminal
Annual Volume
931,488
886,636
636,750
627,868
622,906
574,775
372,880
358,416
352,029
308,421
34
CSX 2022 Form 10-K p.13
CSX CORPORATION
PART I
Network Geography
CSXT’s operations are primarily focused on four major transportation networks and corridors that
are defined geographically and by commodity flows below.
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 to support high-speed service across 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 rail markets – merchandise, intermodal and coal.
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. Most of the export coal the Company transports is
used for steelmaking, while the majority of domestic coal the Company ships is used for electricity
generation.
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 2022 Form 10-K p.14
35
CSX CORPORATION
PART I
CSX Rail Network
36
CSX 2022 Form 10-K p.15
CSX CORPORATION
PART I
Locomotives
As of December 2022, CSXT owns or long-term leases more than 3,600 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 68%
were in active service as of December 31, 2022, 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. As of December 2022, CSXT’s fleet of owned or long-term leased
locomotives consisted of the following types:
Freight
Switching
Auxiliary Units
Total locomotives
Equipment
Locomotives
%
Average Age
(years)
3,194
237
177
3,608
89 %
6 %
5 %
100 %
23
45
29
25
The Company owns or long-term leases rail equipment, including several types of freight cars and
intermodal containers. Of total owned and long-term leased equipment, approximately 91% was in active
service as of December 31, 2022, and the remainder were in storage to be utilized as needed. As of
December 2022, the Company’s owned and long-term leased equipment consisted of the following:
Equipment
Gondolas
Multi-level Flat Cars
Open-top Hoppers
Covered Hoppers
Box Cars
Flat Cars
Other Cars
Subtotal Freight Cars
Containers
Total Equipment
Number of Units
18,613
10,736
6,403
6,366
3,745
565
596
47,024
19,405
66,429
%
40 %
23 %
14 %
13 %
8 %
1 %
1 %
100 %
At any time, approximately two-thirds 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 2022 Form 10-K p.16
37
CSX CORPORATION
PART I
The Company’s revenue-generating equipment, either owned or long-term leased, primarily
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
including paper, auto parts, appliances and building
wide
materials. Insulated box cars deliver food products, canned goods, beer and wine.
finished products,
range of
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, primarily in intermodal service.
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
38
CSX 2022 Form 10-K p.17
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
Joseph R. Hinrichs, 56
President and Chief Executive
Officer
Hinrichs, a leader with more than 30 years of experience in the global
automotive, manufacturing, and energy sectors, was named President and
Chief Executive Officer in September 2022.
Hinrichs previously worked at Ford Motor Company from 2000 to 2020, most
recently serving as President of Ford's global automotive business. In that role,
he led the company’s automotive operations, overseeing Ford’s global
business units and the Ford and Lincoln brands. He also led Ford’s automotive
skill teams, overseeing product development, purchasing, manufacturing, labor
affairs, marketing and sales, government affairs, information technology,
sustainability, safety and environmental engineering. Other positions he held at
Ford include President of Global Operations, President of the Americas,
President of Asia Pacific and Africa, Chairman and CEO of Ford China, and
Chairman & CEO of Ford Canada.
Over the past four years, Hinrichs has also served in multiple advisory and
board roles of various companies.
Pelkey was named Executive Vice President and Chief Financial Officer in
January 2022 after serving as Vice President and Acting Chief Financial Officer
since June 2021. Prior to these roles, Pelkey held the role of Vice President
Finance & Treasury since 2017. In his current 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.
Prior to 2017, he has held the positions of AVP Capital Markets and Director
Performance Analysis. During his 17 years with CSX, Mr. Pelkey has held a
variety of other roles, including financial planning and technology finance.
Sean R. Pelkey, 43
Executive Vice President and
Chief Financial Officer
Kevin S. Boone, 45
Executive Vice President and
Chief Sales & Marketing Officer
Boone was named Executive Vice President and Chief Sales & Marketing
Officer in June 2021 after serving as Chief Financial Officer since May 2019. In
his current role, he is responsible for the commercial organization.
Mr. Boone has more than 20 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, 45
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 transportation, network
operations including terminals, mechanical, engineering and labor relations.
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.
CSX 2022 Form 10-K p.18
39
CSX CORPORATION
PART I
Name and Age
Business Experience During Past Five Years
Stephen Fortune, 53
Executive Vice President and
Chief Digital and Technology
Officer
Fortune was named CSX's Executive Vice President and Chief Digital and
Technology Officer in April 2022. In this role, he is responsible for leading the
Company's technology strategy development and all aspects of CSX's
information technology systems operations, including cybersecurity.
Prior to joining CSX with nearly 20 years of information technology experience,
he spent 30 years at BP, most recently as Chief Information Officer of the
global BP group.
Nathan D. Goldman, 65
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, risk management, public safety,
environmental, and audit functions.
During his 19 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, 58
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, people
systems and analytics, total rewards, facilities and aviation.
During her 11 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.
Angela C. Williams, 48
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 19 years with the Company, she previously served as Assistant Vice
President - Assistant Controller and in other various accounting roles. With
more than 25 years of experience, Williams held various accounting and
auditing positions prior to joining CSX. Ms. Williams is a Certified Public
Accountant in the state of Florida.
40
CSX 2022 Form 10-K p.19
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 5.4 billion shares of common stock are authorized, of which 2,066,350,050 shares were
outstanding as of December 31, 2022. 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, 2023, the latest practicable date that is closest to the filing date, there
were 22,453 common stock shareholders of record. The weighted average of common shares
outstanding, which was used in the calculation of diluted earnings per share, was 2,141 million as of
December 31, 2022. (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.
2022
2021
Quarter
1st
2nd
3rd
4th
Year
$
$
0.100 $
0.093 $
0.100 $
0.093 $
0.100 $
0.093 $
0.100 $
0.093 $
0.400
0.372
Stock Performance Graph
The cumulative shareholder returns, assuming reinvestment of dividends, on $100 invested at
December 31, 2017 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 2022 Form 10-K p.20
41
CSX Purchases of Equity Securities
CSX CORPORATION
PART II
The Company continues to repurchase shares under the $5 billion program announced in July
2022. Total repurchase authority remaining as of December 31, 2022 was $3.3 billion. For more
information about share repurchases, see Note 2, Earnings Per Share. Share repurchase activity of $1.0
billion for the fourth quarter 2022 was as follows:
CSX Purchases of Equity Securities for the Quarter
Total Number
of Shares
Purchased
Average
Price
Paid per
Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans
or Programs
$ 4,292,997,017
Fourth Quarter
Beginning Balance
October 1 - October 31, 2022
22,101,430
$ 27.50
22,101,430
3,685,141,410
November 1 - November 30, 2022
December 1 - December 31, 2022
6,810,351
6,710,050
29.80
31.33
6,810,351
6,710,050
3,482,205,188
3,271,977,916
Ending Balance
35,621,831
$ 28.66
35,621,831
$ 3,271,977,916
Item 6. Reserved
42
CSX 2022 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.
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 charges - Charges 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 2022 Form 10-K p.22
43
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 that 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.
independent governmental adjudicatory body
Surface Transportation Board
administratively housed within the DOT, responsible for the economic regulation of interstate surface
transportation within the United States.
("STB")
- An
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.
44
CSX 2022 Form 10-K p.23
CSX CORPORATION
PART II
2022 HIGHLIGHTS
• Revenue of $14.9 billion increased $2.3 billion or 19% versus the prior year.
• Expenses of $8.8 billion increased $1.9 billion or 27% year over year.
• Operating income of $6.0 billion increased $429 million or 8% year over year.
• Operating ratio of 59.5% increased 420 basis points from 55.3%.
• Earnings per diluted share of $1.95 increased $0.27 or 16% year over year.
RESULTS OF OPERATIONS
The following section generally discusses the Company's results of operations and financial
condition for the year ended December 31, 2022, compared to the year ended December 31, 2021. A
discussion regarding results of operations and financial condition for the year ended December 31, 2021,
compared to the year ended December 31, 2020, can be found in Part II, Item 7 of CSX's Annual Report
on Form 10-K for the year ended 2021, filed with the Securities and Exchange Commission on February
16, 2022.
2022 vs. 2021 Results of Operations
(Dollars in Millions)
Revenue
Expense
Labor and Fringe
Purchased Services and Other
Fuel
Depreciation and Amortization
Equipment and Other Rents
Gains on Property Dispositions
Total Expense
Operating Income
Interest Expense
Other Income - Net
Income Tax Expense
Net Earnings
Earnings Per Diluted Share
Operating Ratio
Years Ended
2022
2021
$ Change % Change
$ 14,853
$ 12,522
$
2,331
19 %
2,861
2,685
1,626
1,500
396
(238)
8,830
6,023
(742)
133
(1,248)
$ 4,166
$
1.95
59.5 %
$
$
2,550
2,135
913
1,420
364
(454)
6,928
5,594
(722)
79
(1,170)
3,781
1.68
55.3 %
$
$
(311)
(550)
(713)
(80)
(32)
(216)
(1,902)
429
(20)
54
(78)
385
(12)
(26)
(78)
(6)
(9)
(48)
(27)
8
(3)
68
(7)
10
0.27
16 %
(420)
bps
Appointment of New Chief Executive Officer
On September 15, 2022, CSX announced that, as part of a planned succession process, its Board
of Directors appointed Joseph R. Hinrichs as the Company’s new President and Chief Executive Officer
and as a member of the Board of Directors, effective September 26, 2022.
Acquisition of Pan Am Systems, Inc.
On June 1, 2022, CSX acquired Pan Am for a purchase price of $600 million funded through a
combination of common stock valued at $422 million and cash totaling $178 million. Accordingly, the
consolidated 2022 results include the results of Pan Am's operations after the acquisition date. For further
details, refer to Note 17, Business Combinations.
CSX 2022 Form 10-K p.24
45
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
2022
2021
%
Change
2022
2021
%
Change
2022
2021
%
Change
Chemicals
Agricultural and Food Products
Automotive
Minerals
Forest Products
Metals and Equipment
Fertilizers
Total Merchandise
Intermodal
Coal
Trucking (a)
Other
Total
641
481
338
337
291
267
203
2,558
2,963
697
—
—
659
467
318
325
296
277
229
2,571
2,976
706
—
—
(3) % $ 2,584 $ 2,421
7 % $ 4,031 $ 3,674
3 %
6 %
4 %
(2) %
(4) %
(11) %
(1) %
— %
(1) %
— %
— %
1,664
1,054
658
996
828
455
8,239
2,306
2,434
966
908
1,461
886
587
918
796
470
7,539
2,039
1,790
410
744
14 %
19 %
12 %
8 %
4 %
(3) %
9 %
13 %
36 %
3,459
3,118
1,953
3,423
3,101
2,241
3,221
778
3,128
2,786
1,806
3,101
2,874
2,052
2,932
685
3,492
2,535
136 %
22 %
—
—
—
—
6,218
6,253
(1) % $ 14,853 $ 12,522
19 % $ 2,389 $ 2,003
10 %
11 %
12 %
8 %
10 %
8 %
9 %
10 %
14 %
38 %
— %
— %
19 %
(a) Effective third quarter 2021, Trucking revenue is comprised of revenue from the operations of Quality Carriers, which was acquired by CSX effective
July 1, 2021.
46
CSX 2022 Form 10-K p.25
CSX CORPORATION
PART II
Revenue
Total revenue increased by $2.3 billion in 2022, or 19%, when compared to the previous year
primarily due to higher fuel recovery, pricing gains that include the benefit of higher export coal
benchmark rates, and the inclusion of Quality Carriers’ results.
Merchandise Volume
Chemicals - Decreased due to lower shipments of crude oil and other energy-related commodities
as well as waste.
Agricultural and Food Products – Increased as a result of higher shipments of ethanol,
sweeteners and vegetable oils, and grain.
Automotive - Increased due to higher North American vehicle production as semiconductor
availability has improved.
Minerals - Increased due to higher shipments of aggregates driven by construction demand.
Forest Products – Decreased due to lower shipments of pulpboard and building products.
Metals and Equipment - Decreased primarily due to lower steel shipments, partially offset by
higher scrap shipments and equipment moves.
Fertilizers - Decreased due to declines in short-haul and long-haul phosphate shipments.
Intermodal Volume
Lower domestic shipments due to continued supply-side constraints, more subdued seasonal
demand than prior year and a softening truck market were mostly offset by increased international
shipments.
Coal Volume
Domestic coal decreased due to lower shipments of utility coal, including the impacts of limited
coal availability during mine disruptions during the year, as well as lower steel and industrial
shipments. Export coal decreased due to lower shipments of thermal coal, partially driven by
reduced capacity at Curtis Bay coal pier due to an outage at a portion of the facility. The facility is
now back at full capacity.
Trucking Revenue
Trucking revenue increased $556 million versus prior year due to the inclusion of Quality Carriers’
results and higher fuel surcharge.
Other Revenue
Other revenue was $164 million higher than prior year driven by increases in revenue for
intermodal storage and equipment usage, increases in demurrage and higher affiliate revenue.
CSX 2022 Form 10-K p.26
47
CSX CORPORATION
PART II
Expense
In 2022, total expenses increased $1.9 billion, or 27%, 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 increased $311
million due to the following items:
•
•
•
•
The impacts of agreements reached with labor unions as well as inflation totaled $199
million. Of the total, $32 million relates to labor and benefits in prior years.
The inclusion of Quality Carriers' operations for the full year in 2022 versus a portion of the
year in 2021 resulted in increased costs of $74 million.
Incentive compensation costs decreased $29 million primarily due to the impact of
accelerated expense for eligible employees in the prior year.
Other costs increased $67 million primarily due to hiring and retention costs, the inclusion
of Pan Am's operations and other non-significant items.
Purchased Services and Other expenses consist primarily of contracted services to maintain
infrastructure and equipment, terminal and pier services, purchased trucking and other transportation,
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. Total
purchased services and other expenses increased $550 million driven by the following:
•
•
•
•
The inclusion of Quality Carriers' operations for the full year in 2022 versus a portion of the
year in 2021 drove $280 million of additional costs.
Higher operating support costs, primarily due to inflation, higher intermodal terminal costs
and an increased active locomotive fleet, drove an increase of $182 million.
Adjustments to environmental reserves resulted in $21 million higher expense.
All other costs increased $67 million primarily due to several non-significant items
including Pan Am's operations and acquisition-related costs.
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 increased $713
million primarily due to a 66% price increase in locomotive fuel prices and the inclusion of non-locomotive
fuel used for trucking.
Depreciation expense primarily relates to recognizing the costs of capital assets, such as locomotives,
railcars and track structure, over their respective useful lives, which are reviewed periodically as part of
depreciation studies. This expense is impacted primarily by the capital expenditures made each year.
Depreciation expense increased $80 million primarily due to a larger net asset base, which includes
Quality Carriers' assets, as well as the impacts of a 2022 equipment depreciation study.
Equipment and Other Rents expense includes 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, tractors
and trailers, offices and other rentals. These expenses increased $32 million primarily due to increased
car hire costs as well as the addition of Quality Carriers' costs. Car hire costs increased due to higher
days per load and inflation, partially offset by lower volume.
Gains on Property Dispositions decreased to $238 million in 2022 from $454 million in 2021 primarily due
to lower gains from the sale of property rights to the Commonwealth of Virginia. Related to this
transaction, CSX recognized gains of $144 million in 2022 and $349 million in 2021.
48
CSX 2022 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 $20 million primarily as a result of higher average debt balances, partially offset by
increased capitalized interest.
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 $54 million primarily due to higher interest income, driven by increased rates, and an increase
in net pension benefit credits during 2022.
Income Tax Expense
Income Tax Expense increased $78 million primarily due to higher earnings before income taxes, partially
offset by favorable adjustments to deferred state taxes and favorable state legislative changes.
Net Earnings and Earnings per Diluted Share
Net Earnings increased $385 million to $4.2 billion, and earnings per diluted share increased $0.27 to
$1.95, 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.
CSX 2022 Form 10-K p.28
49
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.
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 proceeds from
property dispositions. This measure should be considered in addition to, rather than a substitute for, cash
provided by operating activities. Free cash flow before dividends decreased $101 million year-over-year
to $3.7 billion primarily due to higher property additions and lower proceeds and advances from property
dispositions, mostly attributable to the sale of property rights to the Commonwealth of Virginia. These
decreases were partially offset by higher net cash provided by operating activities.
The following table reconciles cash provided by operating activities (GAAP measure) to free cash
flow (non-GAAP measure).
(Dollars in Millions)
Net Cash Provided by Operating Activities
Property Additions
Proceeds and Advances from Property Dispositions
Other Investing Activities (a)
Free Cash Flow, before Dividends (Non-GAAP)
Years Ended
2022
2021
$
$
5,619 $
(2,133)
246
n/a
3,732 $
5,099
(1,791)
529
(4)
3,833
(a) Effective first quarter 2022, the results of other investing activities are no longer included in free cash flow. Prior year has not been restated as
the change is immaterial.
50
CSX 2022 Form 10-K p.29
CSX CORPORATION
PART II
OPERATING STATISTICS (Estimated)
Certain operating statistics are estimated and can continue to be updated as actuals settle. The
methodology for calculating train velocity, dwell, cars online and trip plan performance differs from that
used by the Surface Transportation Board. The Company will continue to report these metrics to the
Surface Transportation Board using the prescribed methodology.
Fiscal Years
2022
2021
Improvement/
(Deterioration)
Operations Performance
Train Velocity (Miles per hour)(a)
Dwell (Hours)(a)
Cars Online(a)
On-Time Originations(a)
On-Time Arrivals(a)
Carload Trip Plan Performance(a)
Intermodal Trip Plan Performance(a)
Fuel Efficiency
Revenue Ton-Miles (Billions)
Merchandise
Coal
Intermodal
Total Revenue Ton-Miles
Total Gross Ton-Miles (Billions)
Safety
FRA Personal Injury Frequency Index(a)
FRA Train Accident Rate(a)
16.1
11.3
17.9
10.7
138,074
131,564
60 %
52 %
64 %
90 %
75 %
66 %
69 %
87 %
0.99
0.96
126.0
33.8
30.0
189.8
375.5
0.96
3.18
126.3
35.4
31.5
193.2
376.0
0.96
3.22
(10) %
(6) %
(5) %
(20) %
(21) %
(7) %
3 %
(3) %
— %
(5) %
(5) %
(2) %
— %
— %
1 %
(a) These metrics do not include results from the network acquired from Pan Am. These metrics will be updated to include the Pan Am network
results as data becomes available.
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.
Cars Online - Average number of active freight rail cars on lines operated by CSX, excluding rail cars that are being repaired, in storage, those
that have been sold, or private cars dwelling at a customer location more than one day.
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. Carload
Trip Plan Performance - Percent of measured cars destined for a customer that arrive at or ahead of the original estimated time of arrival,
notification or interchange (as applicable).
Intermodal Trip Plan Performance - Percent of measured containers destined for a customer that arrive at or ahead of the original estimated
time of arrival, notification or interchange (as applicable).
Fuel Efficiency - Gallons of locomotive fuel per 1,000 gross ton-miles.
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.
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.
CSX 2022 Form 10-K p.30
51
CSX CORPORATION
PART II
The Company is committed to continuous improvement in safety and service performance
through training, innovation and investment. Training and safety programs are designed to prevent
incidents that can adversely impact employees, customers and communities. Technological innovations
that can detect and avoid many types of human factor incidents are designed to serve as an additional
layer of protection for the Company's employees. Continued capital investment in the Company's assets,
including track, bridges, signals, equipment and detection technology also supports safety performance.
The Company remains focused on safety, service, and controlling costs. Train velocity declined
10% relative to 2021. Dwell increased by 6% and cars online increased 5% in 2022. Compared to 2021,
intermodal trip plan performance improved 3%, while carload trip plan performance decreased 7%. CSX
has seen an improvement in service metrics in the last quarter of 2022 and expects that trend to continue
in 2023.
From a safety perspective, the FRA personal injury index was flat compared to prior year while the
train-accident rate improved by 1%. Safety remains a top priority at CSX, and the Company is committed
to reducing risk and enhancing the overall safety of its employees, customers and communities in which
the Company operates.
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 operating, investing and financing components of the change in
cash and cash equivalents for operating, investing and financing activities for full years 2022 and 2021.
In 2022, the Company generated $5.6 billion of cash from operating activities, which was $520
million more than prior year primarily driven by higher cash-generating income, partially offset by less
favorable working capital activities. Net cash used in investing activities was $2.1 billion, an increase in
net spend of $254 million from the prior year primarily as a result of higher property additions and lower
proceeds and advances from property dispositions, partially offset by decreased costs for business
acquisitions. Cash used in financing activities was $3.8 billion, which represents a decrease in net spend
of $343 million from the prior year mostly driven by the issuance of long-term debt as well as lower
repayments of debt, partially offset by higher share repurchases.
52
CSX 2022 Form 10-K p.31
OPERATING CASH FLOWS (in millions) $5,619$5,09920222021INVESTING CASH FLOWS(in millions) $(2,131)$(1,877)20222021FINANCING CASH FLOWS(in millions) $(3,769)$(4,112)20222021 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 on February 16, 2022,
which 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 2022, CSX issued $2.0 billion of long-term debt. See Note 10, Debt
and Credit Agreements for more information.
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, 2022, the Company had no
outstanding balances under this facility. 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. As of December
31, 2022, 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 capital
expenditures, working capital requirements, reduction or refinancing of outstanding indebtedness,
redemptions and repurchases of CSX common stock, dividends to shareholders, acquisitions and other
business opportunities, and contributions to the Company's qualified pension plan.
In 2022, 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
Strategic Projects and Commercial Facilities
Locomotives
Freight Cars
Regulatory (including PTC)
Total Capital Expenditures
Years Ended
2022
2021
$ 1,000 $
673
1,673
251
104
75
30
$ 2,133
876
567
1,443
194
89
29
36
1,791
Planned capital investments for 2023 are expected to be approximately $2.3 billion. Of the 2023
investment, approximately 75% is expected to be used to sustain the core infrastructure and operating
equipment. The remaining amounts will be used to promote profitable growth, including projects
supporting service enhancements and productivity initiatives. CSX intends to fund capital investments
primarily through cash generated from operations.
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).
CSX 2022 Form 10-K p.32
53
CSX CORPORATION
PART II
CSX is committed to returning cash to shareholders. Capital structure, capital investments and
cash distributions, including dividends and share repurchases, are reviewed at least annually by the
Board of Directors. On February 14, 2023, the Company's Board of Directors authorized a 10% increase
in the quarterly cash dividend to $0.11 per common share effective March 2023. Management's
assessment of market conditions and other factors guides the timing and volume of repurchases. Future
share repurchases are expected to be funded by cash on hand, cash generated from operations and debt
issuances.
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 $2.1 billion of cash, cash equivalents and short-term investments.
Total assets as well as total liabilities and shareholders' equity increased $1.4 billion from prior
year end. The increase in total assets was primarily due to a $1.2 billion increase in net properties and a
$193 million increase in investments in affiliates and other companies, partially offset by a reduction in
cash of $281 million. The increase in net properties was primarily attributable to capital expenditures as
well as fixed assets acquired as part of the Pan Am transaction. In addition, the increase in investments
in affiliates and other companies includes the impact of the acquired interest in Pan Am Southern, LLC as
well as higher values of several affiliates. See Note 17, Business Combinations, for more details on
purchase accounting.
Total liabilities increased $2.3 billion from prior year end primarily due to the issuance of $2.0
billion in long-term debt and a $186 million increase in deferred taxes due to accelerated tax depreciation
and the impact of the Pan Am acquisition. These increases were partially offset by debt repayments of
$186 million. Total shareholders' equity decreased $875 million from prior year end primarily driven by
share repurchases of $4.7 billion and dividends paid of $852 million, partially offset by net earnings of
$4.2 billion and $422 million of common stock issued to acquire Pan Am.
Working capital is considered a measure of a company’s ability to meet its short-term needs. CSX
had a working capital surplus of $1.4 billion at December 2022 and $1.6 billion at December 2021, a
decrease of $262 million. Current assets decreased primarily driven by the net decline in cash of $281
million described above, partially offset by the $165 million increase in accounts receivable. Current
liabilities increased primarily due to the $167 million increase in accounts payable.
54
CSX 2022 Form 10-K p.33
CSX CORPORATION
PART II
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. 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.
Completed Transactions
Acquisition of Pan Am Systems, Inc.
On June 1, 2022, CSX completed its acquisition of Pan Am. The closing price of $600 million was
funded through a combination of common stock valued at $422 million and cash totaling $178 million,
subject to certain customary purchase price adjustments. Total cash consideration paid to acquire the
business includes a $30 million deposit paid in fourth quarter 2020. For further details, refer to Note 17,
Business Combinations.
Acquisition of Quality Carriers, Inc.
On July 1, 2021, CSX acquired Quality Carriers, Inc. for a purchase price of $544 million in cash.
This transaction was funded by cash on hand. For further details, refer to Note 17, Business
Combinations.
Sale of Property Rights to the Commonwealth of Virginia
On March 26, 2021, the Company entered into a comprehensive agreement to sell certain
property rights in three CSX-owned line segments to the Commonwealth of Virginia (“Commonwealth”)
over three phases for a total of $525 million. As of December 31, 2022, all three phases are closed.
Gains and proceeds in 2022 and 2021 related to this transaction are summarized in the following table.
For further details, refer to Note 6, Properties.
(Dollars in millions)
Gains
Proceeds
Years Ended
2021
2022
$
144 $
125
349
400
CSX 2022 Form 10-K p.34
55
CSX CORPORATION
PART II
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.
The cost and availability of unsecured financing are materially affected by CSX's long-term credit
ratings. CSX's credit ratings remained stable during 2022. As of both December 2022 and December
2021, 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. The
Company is committed to maintaining an investment-grade credit profile.
Guaranteed Notes Issued By CSXT
In 2007, CSXT, a wholly-owned subsidiary of CSX Corporation, issued in a registered public
offering $381 million of secured equipment notes maturing in 2023. CSX Corporation has fully and
unconditionally guaranteed the notes. At CSXT’s option, CSXT may redeem any or all of the notes, in
whole or in part, at any time, at the redemption price including premium. In the case of loss or destruction
of any item of equipment securing the notes, if CSXT does not substitute another item of equipment for
the item suffering such loss or destruction, CSXT will be required to redeem the notes in part at par. The
guarantee of the notes will rank equally in right of payment with all existing and future senior obligations
of CSX Corporation and will be effectively subordinated to all future secured indebtedness of CSX
Corporation to the extent of the assets securing such indebtedness. The guarantee is subject to release
in limited circumstances only upon the occurrence of certain customary conditions. As of December 31,
2022, the principal balance of these secured equipment notes was $139 million.
In accordance with SEC rules, including amendments adopted in 2020, CSX is not required to
present separate condensed consolidating financial information for wholly-owned subsidiaries who issued
or guaranteed notes. Additionally, presentation of combined summary financial information regarding
subsidiary issuers and guarantors is not required because the assets, liabilities and results of operations
of the combined issuers and guarantors of the notes are not materially different from the corresponding
amounts presented in the consolidated financial statements.
56
CSX 2022 Form 10-K p.35
CSX CORPORATION
PART II
CONTRACTUAL OBLIGATIONS, OTHER COMMITMENTS AND OFF-BALANCE
SHEET ARRANGEMENTS
Contractual Obligations
CSX is party to contractual arrangements that obligate the Company to make future cash
payments. These obligations impact the Company’s liquidity and capital resource needs. The Company’s
contractual obligations primarily consist of long-term debt and related interest payments, purchase
commitments, leases, other-post employment benefits and agreements with Conrail.
• As of December 31, 2022, the Company had outstanding fixed-rate notes with varying maturities.
See Note 10, Debt and Credit Agreements, for additional information related to future debt
payments. Future interest payments associated with outstanding debt total $14.8 billion, with
$771 million payable in 2023.
• Purchase commitments consist of CSX’s long-term locomotive maintenance program and other
commitments to purchase technology, communications, railcar maintenance and other services.
See Note 8, Commitments and Contingencies, for additional information about future payments
related to purchase commitments.
• Capital expenditures include investments related to public-private partnerships. These partnership
investments are typically for projects that are partially or wholly reimbursed to CSX through
government awards or other funding sources. Project contribution commitments that are not
reimbursable total $80 million as of December 31, 2022.
•
The Company’s leases include property, equipment, and line leases. See Note 7, Leases, for
additional information about future payments related to leases.
• Other post-employment benefits include estimated other post-retirement medical and life
insurance payments and payments under non-qualified pension plans that are unfunded. See
Note 9, Employee Benefit Plans, for additional information about future payments under such
plans.
• 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. See Note 15,
Investment in Affiliates and Related-Party Transactions, for additional information about future
payments related to agreements with Conrail.
Other Commitments and Off-Balance Sheet Arrangements
Other commitments total $178 million and primarily consist of guarantees, letters of credit and
surety bonds, none of which are individually significant. These off-balance sheet arrangements are not
reasonably likely to have a material effect on the Company's financial condition, results of operations or
liquidity.
LABOR AGREEMENTS
Approximately 17,100 of the Company's approximately 22,500 employees are members of a rail
labor union. As of December 2, 2022, all 12 rail unions at CSX that participated in national bargaining
were covered by national agreements with the Class I railroads and CSX-specific agreements that will
remain in effect through December 31, 2024.
CSX 2022 Form 10-K p.36
57
CSX CORPORATION
PART II
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 and environmental reserves;
pension plan accounting;
depreciation policies for assets under the group-life method; and
goodwill and other intangible assets.
Personal Injury and Environmental Reserves
Personal Injury
Personal Injury reserves of $126 million and $118 million for 2022 and 2021, 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.
Environmental
Environmental reserves were $161 million and $108 million for 2022 and 2021, 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 240 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.
•
•
58
CSX 2022 Form 10-K p.37
Critical Accounting Estimates, continued
CSX CORPORATION
PART II
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.
Pension 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 between 2003 and 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 was closed to new participants. As of December 2022, the
projected benefit obligation for the Company’s pension plans was $2.4 billion. For information related to
the funded status of the Company's pension 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; 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.
CSX 2022 Form 10-K p.38
59
CSX CORPORATION
PART II
Critical Accounting Estimates, continued
Discount Rates
Discount rates affect the amount of liability recorded and the service and interest cost components
of pension expense. Discount rates reflect the rates at which pension 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 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 benefit liabilities are applied to the relevant projected cash flows at
the relevant maturity.
The weighted average discount rate used by the Company to value its pension obligations was
5.02% and 2.78% as of December 2022, and December 2021, respectively. As of December 2022, the
estimated duration of pension benefits is approximately 10 years.
Each year, the discount rate is 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 rate will change.
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, with the
assistance of an outsourced investment manager, balances market expectations obtained from various
investment managers 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% in both 2022 and 2021.
Other Assumptions
The calculations made by the actuaries also include assumptions relating to mortality rates,
turnover, retirement age and salary inflation rates. These assumptions are based upon historical data,
recent plan experience and industry trends and are determined by management.
60
CSX 2022 Form 10-K p.39
CSX CORPORATION
PART II
Critical Accounting Estimates, continued
2023 Estimated Pension Expense
Net periodic pension benefit expense for 2023 is expected to be a credit of $1 million. Net periodic
pension benefit expense for 2023 is expected to include service cost expense of $24 million. Service cost
expense is included in labor and fringe on the consolidated income statement and all other components
of net pension expense are included in other income - net. Net periodic pension expense in 2022 was a
credit of $41 million. The net decrease in the expected credit is primarily due to impacts from recent
unfavorable pension asset experience, partially offset by the increase in discount rates.
The following sensitivity analysis illustrates the effects of a 1% change in certain assumptions on
the 2023 estimated pension expense:
(Dollars in Millions)
Discount Rate
Long-term Rate of Return
Pension Expense
16
$
24
$
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 84% of
total fixed assets of $48.1 billion on a gross basis at December 31, 2022. 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.
CSX 2022 Form 10-K p.40
61
Critical Accounting Estimates, continued
CSX CORPORATION
PART II
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 completed a depreciation study for its road and track assets in 2020 and
for equipment assets in 2022, both of which resulted in changes to accumulated depreciation, service
lives, salvage values, and other related factors for certain assets. The 2022 equipment study resulted in
an expected increase in annual depreciation expense of approximately $80 million primarily due to
deferred losses on assets depreciated using the group-life method. Recent experience with depreciation
studies has resulted in changes to accumulated depreciation and depreciation rates that did not
materially affect the Company's depreciation expense of $1.4 billion in both 2021 and 2020.
A 1% 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. There were no
significant changes to the company's asset lives as a result of the 2022 and 2020 studies. For additional
details, including a more detailed description of our related accounting policies, see Note 6, Properties, in
the consolidated financial statements.
Goodwill and Intangible Assets
As of December 2022, the Company had $502 million of Goodwill and Other Intangibles - Net. In
applying the acquisition method of accounting for business combinations, management must determine
the fair value of assets acquired and liabilities assumed in order to properly allocate purchase price
consideration between depreciable and amortizable assets and goodwill. The fair values assigned to
tangible and intangible assets acquired and liabilities assumed are based on management’s estimates
and assumptions, as well as other information compiled by management, including valuations that utilize
customary valuation procedures and techniques. Estimates and assumptions include, but are not limited
to, the cash flows that an asset is expected to generate in the future and the appropriate weighted-
average cost of capital.
CSX evaluates goodwill and intangible assets for impairment on an annual basis, or sooner if
indicators of impairment exist. In performing the qualitative impairment assessment, CSX considers
relevant events and conditions, including but not limited to: macroeconomic trends, industry and market
conditions, overall financial performance, company-specific events, and legal and regulatory factors. If
the qualitative assessments indicate that it is more likely than not that the fair value of the reporting unit or
intangible assets are less than their carrying amounts, the Company would perform a quantitative
impairment test. If the carrying amount of the reporting unit's goodwill or intangible asset exceeded the
fair value under the quantitative test, an impairment loss would be recorded. Measurement of the fair
value of a reporting unit could be based on one or more of the following fair value measures: amounts at
which the unit as a whole could be bought or sold in a current transaction between willing parties, present
value techniques of estimated future cash flows, valuation techniques based on multiples of earnings or
revenue, or a similar performance measure.
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.”
62
CSX 2022 Form 10-K p.41
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.
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;
CSX 2022 Form 10-K p.42
63
CSX CORPORATION
PART II
• 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 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;
• 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,
including acquisitions;
• the impact of conditions in the real estate market on the Company's ability to sell assets;
• changes in operating conditions and costs, including the impacts of inflation, or commodity
concentrations;
• the impacts of a public health crisis and any policies or initiatives instituted in response; 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.
64
CSX 2022 Form 10-K p.43
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
CSX CORPORATION
PART II
Changes in interest rates may impact the cost of future long-term debt issued by the Company,
and as a result, represent interest rate risk to the Company. In an effort to manage this risk, CSX may use
certain financial instruments such as interest rate forward contracts. The following information, together
with information included in Note 10, Debt and Credit Agreements, describes the key aspects of such
contracts and the related market risk to CSX.
Changes in interest rates could impact the fair value of the Company's forward starting interest
rate swap. In 2020, the Company executed two forward starting interest rate swaps with a notional value
of $250 million for an aggregate notional value of $500 million. These swaps were effected to hedge the
benchmark interest rate associated with future interest payments related to the anticipated refinancing of
notes due in 2027. The Company recognized an unrealized gain of $80 million and $8 million net of tax
during the years ended December 31, 2022 and 2021, respectively, in the consolidated statements of
comprehensive income with the related asset on the balance sheet as of December 31, 2022. In fourth
quarter 2022, CSX settled a portion equal to $160 million notional value of the aggregate $500 million
cash flow hedges, which resulted in CSX receiving a cash payment of $52 million. The gain associated
with the settled portion of the hedges will continue to be classified in accumulated other comprehensive
income (“AOCI”) until the associated debt instrument is issued in the future. Upon final settlement of the
swaps, which expire in 2027, the unrealized gain or loss in AOCI will be recognized in earnings as an
adjustment to interest expense over the same period during which the hedged transaction affects
earnings. As of December 31, 2022, the potential change in fair value resulting from a hypothetical 10%
change in interest rates would not be material.
Changes in interest rates could impact the fair value of the Company's fixed-to-floating interest
rate swaps. In 2022, CSX entered into five separate fixed-to-floating interest rate swaps classified as fair
value hedges. The swaps are designed to hedge 10 years of interest rate risk associated with market
fluctuations attributable to the Secured Overnight Financing Rate on a cumulative $800 million of fixed
rate outstanding notes, which are due between 2036 and 2040. As of December 31, 2022, the cumulative
fair value of these swaps was a $118 million liability, which is included in other long-term liabilities on the
consolidated balance sheet. The associated cumulative adjustment to the hedged notes is included in
long-term debt. Gains and losses resulting from changes in fair value of the interest rate swaps offset
changes in the fair value of the hedged portion of the underlying debt with no gain or loss recognized due
to hedge ineffectiveness. The difference in the net fixed-to-float interest settlement on the derivatives is
recognized in interest expense and was not material for the year ending at December 31, 2022. The
swaps will expire in 2032. If settled early, the remaining liability or asset will be amortized over the
remaining life of the associated notes. As of December 31, 2022, the potential change in fair value
resulting from a hypothetical 10% change in interest rates would not be material.
As of December 31, 2022, CSX has no floating rate notes outstanding. However, changes in
interest rates could impact the fair value (but not the carrying 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 U.S. Treasury rates, or approximately 40 basis points, is estimated to be
$709 million as of December 31, 2022, and $448 million as of December 31, 2021. The underlying fair
values of the Company's long-term debt were estimated based on quoted market prices or on the current
rates offered for debt with similar terms and maturities.
CSX 2022 Form 10-K p.44
65
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Page
46
CSX Corporation
Consolidated Financial Statements and Notes to Consolidated Financial Statements
Herewith:
Consolidated Income Statements for the Years Ended:
December 31, 2022
December 31, 2021
December 31, 2020
Consolidated Comprehensive Income Statements for the Years Ended:
December 31, 2022
December 31, 2021
December 31, 2020
Consolidated Balance Sheets as of:
December 31, 2022
December 31, 2021
Consolidated Cash Flow Statements for Years Ended:
December 31, 2022
December 31, 2021
December 31, 2020
Consolidated Statements of Changes in Shareholders' Equity:
December 31, 2022
December 31, 2021
December 31, 2020
Notes to Consolidated Financial Statements
48
49
50
51
52
53
66
CSX 2022 Form 10-K p.45
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, 2022 and 2021, 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, 2022, 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, 2022 and 2021, and the results of its operations
and its cash flows for each of the three years in the period ended December 31, 2022, 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,
2022, 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 15, 2023 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 Matter
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 2022 Form 10-K p.46
67
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
As of December 31, 2022, assets depreciated under the group-life method comprised
84% of total gross fixed assets of $48.1 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 conducted by a third-party
specialist and analyzed by the Company’s management 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. In years when depreciation studies are not performed,
annual data reviews are conducted by a third-party specialist and analyzed by the
Company’s management to review the asset service lives. A depreciation study was
performed in 2022 for equipment assets. For road and track assets, the most recent
depreciation study was performed in 2020 and was evaluated in the current year through
an annual data review.
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 and annual data reviews 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 estimated useful lives. We
also tested controls over management’s annual data review of asset activity and
assumptions that could impact the estimated useful lives determined in 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 and annual data reviews performed by the Company’s third-party
specialist and reviewed by management; assessing the completeness and accuracy of
the data provided by management to the third-party specialist; and including a specialist
on our team to evaluate the methods used by the third-party specialist and reviewed by
management in determining the estimated useful lives and salvage values of assets
resulting from the depreciation studies and any changes to the estimated useful lives and
salvage values, if any, resulting from the annual data reviews.
We compared the methods used by management to those used throughout the industry
and within other depreciation studies. We assessed the historical accuracy of
management’s estimates via retrospective review and independently calculated the
current year depreciation rates.
We have served as the Company’s auditor since 1981.
/s/ Ernst & Young LLP
Jacksonville, Florida
February 15, 2023
68
CSX 2022 Form 10-K p.47
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
Purchased Services and Other
Fuel
Depreciation and Amortization
Equipment and Other Rents
Gains on Property Dispositions
Total Expense
Years Ended
2021
$ 14,853 $ 12,522 $ 10,583
2022
2020
2,861
2,685
1,626
1,500
396
(238)
8,830
2,550
2,135
913
1,420
364
(454)
6,928
2,275
1,719
541
1,383
338
(35)
6,221
Operating Income
6,023
5,594
4,362
Interest Expense
Other Income - Net (Note 14)
Earnings Before Income Taxes
Income Tax Expense (Note 12)
Net Earnings
Per Common Share (Note 2)
Net Earnings Per Share
Basic
Assuming Dilution
Average Common Shares Outstanding (Millions)
Basic
Assuming Dilution
See accompanying Notes to Consolidated Financial Statements.
(742)
133
5,414
(722)
79
4,951
(754)
19
3,627
(1,248)
4,166 $
(1,170)
3,781 $
(862)
2,765
1.95 $
1.95 $
1.68 $
1.68 $
1.20
1.20
2,136
2,141
2,250
2,255
2,300
2,305
$
$
$
CSX 2022 Form 10-K p.48
69
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS
(Dollars in Millions)
Years Ended
2021
$ 4,166 $ 3,781 $ 2,765
2022
2020
(66)
80
6
20
21
62
(6)
77
$ 4,186 $ 3,971 $ 2,842
167
8
15
190
Net Earnings
Other Comprehensive Income (Loss) - Net of Tax:
Pension and Other Post-Employment Benefits
Interest Rate Derivatives
Other
Total Other Comprehensive Income (Loss) (Note 16)
Comprehensive Earnings
See accompanying Notes to Consolidated Financial Statements.
70
CSX 2022 Form 10-K p.49
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
ASSETS
Current Assets:
Cash and Cash Equivalents
Short-term Investments
Accounts Receivable - Net (Note 11)
Materials and Supplies
Other Current Assets
Total Current Assets
Properties
Accumulated Depreciation
Properties - Net (Note 6)
December
December
2022
2021
$
1,958 $
129
1,313
341
108
3,849
48,105
(13,863)
34,242
2,239
77
1,148
339
70
3,873
46,505
(13,490)
33,015
Investment in Affiliates and Other Companies (Note 15)
2,292
2,099
Right of Use Lease Asset (Note 7)
Goodwill and Other Intangible Assets - Net (Note 18)
Other Long-term Assets
Total Assets
Current Liabilities:
Accounts Payable
LIABILITIES AND SHAREHOLDERS' EQUITY
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 10)
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
Accumulated Other Comprehensive Loss (Note 16)
Non-controlling Minority Interest
Total Shareholders' Equity
505
502
522
501
451
592
$
41,912 $
40,531
$
1,130 $
707
144
151
111
228
2,471
292
17,896
7,569
488
571
963
630
118
181
134
207
2,233
250
16,185
7,383
478
502
29,287
27,031
2,066
574
10,363
(388)
10
12,625
2,202
66
11,630
(408)
10
13,500
40,531
Total Liabilities and Shareholders' Equity
$
41,912 $
See accompanying Notes to Consolidated Financial Statements.
CSX 2022 Form 10-K p.50
71
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 and Amortization
Deferred Income Taxes
Gains 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
Purchases of Short-term Investments
Proceeds from Sales of Short-term Investments
Proceeds and Advances from Property Dispositions
Business Acquisition, Net of Cash Acquired (Note 17)
Other Investing Activities
Net Cash Used in Investing Activities
FINANCING ACTIVITIES
Shares Repurchased
Dividends Paid
Long-term Debt Repaid
Long-term Debt Issued (Note 10)
Other Financing Activities
Net Cash Used in Financing Activities
Net (Decrease) Increase 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
Issuance of Common Stock as Consideration for Acquisition
Interest Paid - Net of Amounts Capitalized
Income Taxes Paid
See accompanying Notes to Consolidated Financial Statements.
2022
Years Ended
2021
2020
$
4,166 $
3,781 $
2,765
1,500
117
(238)
(17)
(101)
(22)
140
(39)
113
5,619
(2,133)
(59)
9
246
(227)
33
(2,131)
(4,731)
(852)
(186)
2,000
—
(3,769)
(281)
1,420
167
(454)
12
(141)
(25)
128
72
139
5,099
(1,791)
(75)
5
529
(541)
(4)
(1,877)
(2,886)
(839)
(426)
—
39
(4,112)
(890)
1,383
180
(35)
(32)
83
(75)
(20)
39
(25)
4,263
(1,626)
(426)
1,424
56
—
(77)
(649)
(867)
(797)
(745)
1,000
(34)
(1,443)
2,171
2,239
1,958 $
3,129
2,239 $
958
3,129
422
729 $
1,167 $
—
718 $
931 $
—
750
664
$
$
$
$
72
CSX 2022 Form 10-K p.51
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS’ EQUITY
(Dollars in Millions)
December 31, 2019
Comprehensive Earnings:
Net Earnings
Other Comprehensive Income (Note 16)
Total Comprehensive Earnings
Common stock dividends,$0.35 per share
Share Repurchases
Other
December 31, 2020
Comprehensive Earnings:
Net Earnings
Other Comprehensive Income (Note 16)
Total Comprehensive Earnings
Common stock dividends, $0.37 per share
Share Repurchases
Other
December 31, 2021
Comprehensive Earnings:
Net Earnings
Other Comprehensive Income (Note 16)
Total Comprehensive Earnings
Common stock dividends, $0.40 per share
Share Repurchases
Issuance of common stock for acquisition of Pan
Am Systems, Inc.
Other
December 31, 2022
Common
Shares
Outstanding
(Thousands)
Common
Stock and
Other
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income
(Loss) (a)
Non-
controlling
Minority
Interest
Total
Shareholders'
Equity
2,320,414 $ 2,412 $
10,111 $
(675) $
15 $
11,863
—
—
—
(37,842)
5,015
—
—
—
(38)
66
2,765
—
(797)
(829)
9
—
77
—
—
—
2,287,587
2,440
11,259
(598)
—
—
(90,431)
4,631
—
—
(90)
(82)
3,781
—
(839)
(2,796)
225
2,201,787
2,268
11,630
—
—
—
(151,419)
13,173
2,826
—
—
—
(151)
422
101
4,166
—
(852)
(4,580)
—
(1)
—
190
—
—
(408)
—
20
—
—
—
—
—
—
—
—
(6)
9
—
—
—
1
10
—
—
—
—
—
—
2,765
77
2,842
(797)
(867)
69
13,110
3,781
190
3,971
(839)
(2,886)
144
13,500
4,166
20
4,186
(852)
(4,731)
422
100
2,066,367 $ 2,640 $
10,363 $
(388) $
10 $
12,625
(a) Accumulated Other Comprehensive Loss year-end balances shown above are net of tax. The associated taxes were $122 million, $107
million and $156 million for 2022, 2021 and 2020, respectively. For additional information see Note 16, Other Comprehensive Income.
See accompanying Notes to Consolidated Financial Statements.
CSX 2022 Form 10-K p.52
73
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 and serves
major population centers in 26 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 240
short-line and regional railroads. On June 1, 2022, CSX completed its acquisition of Pan Am Systems,
Inc. (“Pan Am”), which is the parent company of Pan Am Railways, Inc. This acquisition expands CSXT’s
reach in the Northeastern United States. For further details, refer to Note 17, Business Combinations.
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 Quality Carriers, Inc. ("Quality Carriers"),
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. Effective July 1, 2021, CSX acquired Quality Carriers, the largest provider of bulk liquid
chemicals truck transportation in North America. For further details, refer to Note 17, Business
Combinations. CSX Intermodal Terminals owns and operates a system of intermodal terminals,
predominantly in the eastern United States, and also provides drayage services (the pickup and delivery
of intermodal shipments) for certain customers. 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 include shipments of plastics and ethanol. CSX Technology and other subsidiaries provide support
services for the Company.
74
CSX 2022 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
Lines of Business
During 2022, the Company's services generated $14.9 billion of revenue and served four primary
lines of business: merchandise, intermodal, coal and trucking.
•
•
The merchandise business shipped 2.6 million carloads (41% of volume) and generated
$8.2 billion in revenue (55% of revenue) in 2022. The Company’s merchandise business is
comprised of shipments in the following diverse markets: chemicals, agricultural and food
products, minerals, automotive, forest products, metals and equipment, and fertilizers.
The intermodal business shipped 3.0 million units (48% of volume) and generated $2.3 billion
in revenue (16% of revenue) in 2022. 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.
• The coal business shipped 697 thousand carloads (11% of volume) and generated $2.4 billion
in revenue (16% of revenue) in 2022. 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. Most of the export coal the Company transports is
used for steelmaking, while the majority of domestic coal the Company ships is used for
electricity generation.
•
The trucking business generated $966 million, or 7%, of revenue in 2022. Trucking revenue
includes revenue from the operations of Quality Carriers, which was acquired by CSX effective
July 1, 2021.
Other revenue accounted for 6% of the Company’s total revenue in 2022. This category includes
revenue from regional subsidiary railroads and incidental charges, including intermodal storage and
equipment usage, demurrage and switching. Revenue from regional subsidiary railroads includes
shipments by railroads that the Company does not directly operate. Intermodal storage represents
charges for customer storage of containers at an intermodal terminal, ramp facility or offsite location
beyond a specified period of time. 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.
The Company has two operating segments: rail and trucking. Although the Company provides a
breakdown of revenue by line of business, the overall financial and operational performance of the
railroad is analyzed as one operating segment due to the integrated nature of the rail network. As the
trucking segment is not material for separate disclosure, the results of all operations are included in one
reportable segment.
Employees
The Company's number of employees was more than 22,500 as of December 2022, which
includes approximately 17,100 union employees. Most of the Company’s employees provide or support
transportation services.
CSX 2022 Form 10-K p.54
75
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 1. Nature of Operations and Significant Accounting Policies, continued
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, 2022 and December 31, 2021, and the consolidated statements of income,
comprehensive income, cash flows and changes in shareholders’ equity for the years ended 2022, 2021
and 2020. 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.
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 and environmental reserves (see Note 5, Casualty, Environmental and Other
Reserves);
pension plan accounting (see Note 9, Employee Benefit Plans);
depreciation policies for assets under the group-life method (see Note 6, Properties); and
goodwill and other intangible assets (see Note 17, Business Combinations and Note 18,
Goodwill and Other Intangibles).
Fiscal Year
The Company's fiscal periods are based upon the calendar year. Except as otherwise specified,
references to full years indicate CSX’s fiscal years ended on December 31, 2022, December 31, 2021,
and December 31, 2020.
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 Affiliates and Other Companies on the consolidated
balance sheets.
76
CSX 2022 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
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 approximates 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 cost 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.
New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards
Update ("ASU") 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. As
the London Interbank Offered Rate ("LIBOR") will no longer be available beginning July 2023, this
standard update provides practical expedients for contract modifications made as part of the transition
from LIBOR to alternative reference rates. The guidance was effective upon issuance and practical
expedients can generally be applied through the extended period ending December 31, 2024. CSX's
revolving line of credit currently uses LIBOR as a reference rate. As of December 31, 2022, the Company
has not applied the practical expedient to any contracts.
In November 2021, the FASB issued ASU 2021-10, Disclosure by Business Entities about
Government Assistance. This standard update requires annual disclosure of the nature of any
government assistance received, accounting policies related to such assistance and the effect of that
assistance on the entity’s financial statements. The Company adopted this guidance effective year end
2022 and the standard update did not impact the Company's results of operations or financial position as
the update only impacts disclosures. See Note 6, Properties.
CSX 2022 Form 10-K p.56
77
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:
2022
Years Ended
2021
2020
Numerator (Dollars in Millions):
Net Earnings
Dividend Equivalents on Restricted Stock
Net Earnings, Attributable to Common Shareholders
$
$
4,166 $
—
4,166 $
3,781 $
—
3,781 $
Denominator (Units in Millions):
Average Common Shares Outstanding
Other Potentially Dilutive Common Shares
Average Common Shares Outstanding, Assuming Dilution
2,136
5
2,141
2,250
5
2,255
Net Earnings Per Share, Basic
Net Earnings Per Share, Assuming Dilution
$
$
1.95 $
1.95 $
1.68 $
1.68 $
2,765
—
2,765
2,300
5
2,305
1.20
1.20
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. The total average outstanding equity awards that were excluded from the
diluted earnings per share calculation because their effect was antidilutive is in the table below.
Years Ended
2021
2020
2022
Antidilutive Stock Options Excluded from Diluted EPS (in millions)
3
2
6
Share Repurchase Programs
During July 2022, the share repurchase program announced in October 2020 was completed and
the Company began repurchasing shares under the $5 billion share repurchase program approved on
July 19, 2022. Total repurchase authority remaining was $3.3 billion as of December 31, 2022. Previously,
shares were repurchased under a program announced in January 2019 that was completed in June
2021.
78
CSX 2022 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 2022, 2021 and 2020, CSX repurchased the following shares:
Shares Repurchased (Units in Millions)
Cost of Shares (Dollars in Millions)
Average Price Paid per Share
Structured Share Repurchases
2022
Years Ended
2021
2020
151
4,731 $
31.25 $
90
2,886 $
31.91 $
38
867
22.90
$
$
Periodically, CSX enters into structured agreements for the repurchase of CSX shares. Upon
execution of each agreement, the Company pays a fixed amount of cash in exchange for the right to
receive either CSX stock or a predetermined amount of cash, including a premium. Shares acquired
through these structured share repurchase agreements were recorded in common stock and retained
earnings and are included in the share repurchases table above. There were no repurchases under a
structured agreement in 2022.
As a result of entering into and settling structured share repurchase agreements, the Company
paid a net total of approximately $378 million and received approximately 12 million shares during the
year ended 2021. Premiums received were not material.
In December 2020, the Company completed a structured share repurchase. Under this
agreement, the Company paid a total of $100 million and received approximately 3.3 million shares.
Dividend Increase
On February 14, 2023, the Company's Board of Directors authorized a 10% increase in the
quarterly cash dividend to $0.11 per common share effective March 2023.
CSX 2022 Form 10-K p.58
79
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 2022
(Units in Millions)
5,400
2,066
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.
Common Stock Split
On June 4, 2021, CSX announced a three-for-one split of the Company’s common stock in the
form of a stock dividend. Each shareholder of record on June 18, 2021, received two additional shares of
common stock for each share held as of this record date. The new shares were distributed after close of
trading on June 28, 2021. All prior period share and per share amounts, common stock, other capital, and
retained earnings were retroactively adjusted to reflect the impact of the stock split. Proportional
adjustments were also made to outstanding awards under the Company's stock-based compensation
plans.
Other Capital
As a result of the stock split during second quarter 2021, CSX's common stock balance was
increased and its other capital balance was reduced commensurately. Because this adjustment brought
the other capital balance below zero, $1.0 billion was reclassified from retained earnings to other capital
to bring the other capital balance to zero as of June 30, 2021. Prior period amounts have also been
retroactively adjusted as needed to bring the other capital balance to zero.
80
CSX 2022 Form 10-K p.59
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
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 and Talent Management Committee of the Board of Directors. Awards to the Chief
Executive Officer are approved by the full Board and awards to senior executives are approved by the
Compensation and Talent Management Committee. In certain circumstances, the Chief Executive Officer
or delegate approves 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 and Sustainability 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. Alternatively, expense is recognized upon death or upon grant date to certain
retirement-eligible employees whose agreements allow for continued vesting upon retirement. 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.
(Dollars in Millions)
Share-Based Compensation Expense
Performance Units
Stock Options
Restricted Stock Units and Awards
Employee Stock Purchase Plan
Stock Awards for Directors
Total Share-based Compensation Expense
Income Tax Benefit
Long-term Incentive Plans
Years Ended
2021
2020
2022
$
$
$
35 $
17
15
5
2
74 $
17 $
71 $
18
12
4
2
107 $
23 $
(3)
19
6
5
2
29
19
The objective of the CSX Long-term Incentive Plans (“LTIP”) is to motivate and reward certain
employees for achieving and exceeding certain financial goals. The 2022-2024, 2021-2023 and
2020-2022 LTIPs were adopted under the 2019 Stock and Incentive Award Plan. 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.
CSX 2022 Form 10-K p.60
81
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 4. Stock Plans and Share-Based Compensation, continued
In 2022, 2021 and 2020, target performance units were granted to certain employees under three
separate LTIP plans covering three-year cycles: the 2022-2024 ("2022-2024 LTIP"), the 2021-2023
("2021-2023 LTIP") and the 2020-2022 ("2020-2022 LTIP") plans. Payouts of performance units for the
plans will be based on the achievement of certain goals, in each case excluding non-recurring items as
disclosed in the Company’s financial statements.
•
For the 2022-2024 LTIP plan, the average annual operating income growth percentage
and CSX Cash Earnings ("CCE"), in each case excluding non-recurring items as defined in the
plan, will each comprise 50% of the payout and will be measured independently of the other.
Participants will receive stock dividend equivalents declared over the performance period based
on the number of performance units paid upon vesting. As defined under the plan, CCE is a cash-
flow-based measure that incentivizes strategic investments earning more than the required return.
CCE equals CSX’s gross cash earnings (after-tax EBITDA) minus the required return on gross
operating assets.
•
For the 2021-2023 LTIP plan, the average annual operating income growth percentage
and cumulative free cash flow over the plan period will each comprise 50% of the payout and will
be measured independently of the other. Participants will receive stock dividend equivalents
declared over the performance period based on the number of performance units paid upon
vesting.
•
For the 2020-2022 LTIP plan, the cumulative operating income and cumulative free cash
flow over the plan period will each comprise 50% of the payout and will be measured
independently of the other. Participants will receive stock dividend equivalents declared over the
performance period based on the number of performance units paid upon vesting.
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 250%, based upon the Company’s
total shareholder return relative to specified comparable groups over the performance period.
The fair values of the performance units awarded during the years ended December 2022, 2021
and 2020 were calculated primarily using a Monte-Carlo simulation model with the following weighted-
average assumptions:
Weighted-Average Assumptions Used:
Risk-free Interest Rate
Annualized Volatility
Expected Life (in years)
2022
2.3 %
33.0 %
2.7
Years Ended
2021
0.2 %
33.6 %
2.9
2020
1.4 %
24.5 %
2.9
The risk-free interest rate assumptions reflect the U.S. Treasury yield curve in effect at the time of
grant. The annualized volatility is based on observed historical volatility of daily stock returns for the
three-year period preceding the grant date. The expected life is calculated using the remainder of the
performance period.
82
CSX 2022 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
Performance unit grant and vesting information is summarized as follows:
Weighted-Average Fair Value of Units Granted
Fair Value of Units Vested (in millions)
$
$
33.89 $
24 $
30.11 $
19 $
25.39
18
The performance unit activity related to the outstanding long-term incentive plans and
corresponding fair value is summarized as follows:
2022
Years Ended
2021
2020
Unvested at December 31, 2021
Granted
Forfeited
Vested
Unvested at December 31, 2022
Performance Units
Outstanding
(in Thousands)
Weighted-Average
Fair Value at Grant
Date
1,576 $
670
(33)
(959)
1,254 $
27.21
33.89
25.65
25.52
32.14
As of December 2022, 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 2022, 2021 and 2020 were primarily granted along with the corresponding LTIP
plans. With these grants, 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 become exercisable in equal installments on the anniversary of the grant date
over a vesting period (three-year graded). 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 option valuation 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 6.0 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).
CSX 2022 Form 10-K p.62
83
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 Fair Value of Units Granted
$
10.12
$
7.94
$
6.31
Years Ended
2021
2020
2022
Stock Options Valuation Assumptions:
Annual Dividend Yield
Risk-free Interest Rate
Annualized Volatility
Expected Life (in years)
Other Pricing Model Inputs:
1.1 %
2.0 %
30.1 %
6.0
1.2 %
0.7 %
31.2 %
6.0
1.2 %
1.4 %
26.1 %
6.0
Weighted-average Grant-date Market Price of CSX Stock
(Strike Price)
$
35.12
$
29.65
$
26.53
The stock option activity is summarized as follows:
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life
(in Years)
Aggregate
Intrinsic
Value
(in Millions)
Outstanding at December 31, 2021
Granted
Forfeited
Exercised
Outstanding at December 31, 2022
Stock
Options
Outstanding
(in
Thousands)
12,512
1,726
(123)
(715)
13,400
$
$
22.42
35.12
30.19
21.53
24.03
Exercisable at December 31, 2022
9,175
$
20.85
6.6
5.8
$
$
100
93
Unrecognized compensation expense related to stock options as of December 2022 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. Additional information on stock option
exercises is summarized as follows:
(Dollars in Millions)
Intrinsic Value of Stock Options Exercised
Cash Received from Option Exercises
2022
2021
2020
$
$
9 $
15 $
32 $
31 $
30
29
Years Ended
84
CSX 2022 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
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. These awards are time-based and not based upon CSX’s attainment of
operational targets. Participants receive cash or stock dividend equivalents on these shares, depending
on the grant. Restricted stock grant and vesting information is summarized as follows:
Weighted-Average Fair Value of Units Granted
Fair Value of Units and Awards Vested (In Millions)
Years Ended
2021
2020
2022
$
$
34.55 $
5 $
29.84 $
12 $
26.43
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, 2021
Granted
Forfeited
Vested
Unvested at December 31, 2022
Restricted Stock
Units and Awards
Outstanding
(in Thousands)
Weighted-Average
Fair Value at Grant
Date
1,023 $
801
(54)
(218)
1,552 $
27.53
34.55
29.85
23.33
31.68
As of December 2022, unrecognized compensation expense for these restricted stock units and
awards was approximately $22 million, which will be expensed over a weighted-average remaining period
of two years.
CSX 2022 Form 10-K p.64
85
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 $122,500 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 $172,500 and the independent non-executive Chairman also receives an annual grant of
common stock in the amount of approximately $250,000. These awards are evaluated periodically by the
Board of Directors.
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 12 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 market value 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 2022, 2021 and 2020, the Company issued the following shares under this
program.
Shares Issued (In Thousands)
Weighted Average Purchase Price Per Share
2022
Years Ended
2021
2020
726
25.93 $
730
21.90 $
726
20.13
$
86
CSX 2022 Form 10-K p.65
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 5. Casualty, Environmental and Other Reserves
Activity related to casualty, environmental and other reserves is as follows:
(Dollars in Millions)
December 31, 2019
Charged to Expense
Payments
December 31, 2020
Assumed in Acquisition of Quality Carriers
Charged to Expense
Payments
December 31, 2021
Assumed in Acquisition of Pan Am
Charged to Expense
Payments
December 31, 2022
Casualty
Reserves
Environmental
Reserves
Other
Reserves
Total
$
$
187 $
55
(46)
196
—
55
(71)
180
19
45
(50)
194 $
74 $
20
(18)
76
29
26
(23)
108
36
47
(30)
161 $
44 $ 305
107
32
(98)
(34)
314
42
62
33
130
49
(138)
(44)
368
80
55
—
143
51
(50)
(130)
81 $ 436
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 2022, 2021 or 2020. 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 2022
Long-term
Current
Total
Current
December 2021
Long-term
Total
$
$
$
40 $
10
50 $
53
41
144 $
86 $
58
144 $
108
40
292 $
126 $
68
194 $
161
81
436 $
37 $
7
44 $
37
37
118 $
81 $
55
136 $
71
43
250 $
118
62
180
108
80
368
CSX 2022 Form 10-K p.66
87
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 5. Casualty, Environmental and Other Reserves, continued
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 $194 million and $180 million for 2022 and 2021, respectively, represent
accruals for personal injury, occupational disease and occupational injury claims primarily related to
railroad operations. Casualty reserves include liabilities assumed as a result of the Company's acquisition
of Pan Am in 2022. Beginning June 1, 2021, the Company's self-insured retention amount for casualty
claims increased from $75 million to $100 million per occurrence. 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 purchased services and other on the consolidated
income statements.
Personal Injury
Personal injury reserves represent liabilities for employee work-related and third-party 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.
These analyses did not result in a material adjustment to the personal injury reserve in 2022, 2021 or
2020.
88
CSX 2022 Form 10-K p.67
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 5. Casualty, Environmental and Other Reserves, continued
Occupational
Occupational reserves represent liabilities arising from allegations of exposure to certain materials
in the workplace (such as solvents, soaps, chemicals and diesel fumes), past exposure to asbestos or
allegations of chronic physical injuries resulting from work conditions (such as repetitive stress injuries).
The Company retains an independent actuary to analyze the Company’s historical claims, settlement
amounts, and dismissal rates to assist in determining future anticipated claim filing rates and average
settlement values. This analysis is performed by the actuary and reviewed by management quarterly.
There were no material adjustments to the occupational reserve in 2022, 2021 or 2020.
Environmental
Environmental reserves were $161 million and $108 million for 2022 and 2021, respectively.
Environmental reserves include liabilities assumed as a result of the Company's acquisition of Pan Am in
2022 and Quality Carriers in 2021. 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
240 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 2022 Form 10-K p.68
89
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 management's review process, amounts have been recorded 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 liabilities for estimated 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 purchased services and other on the consolidated income statements.
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 $81 million and $80 million for 2022 and 2021, respectively. These reserves
include liabilities assumed as a result of the Company's acquisition of Pan Am in 2022 and Quality
Carriers in 2021. Other reserves include liabilities for various claims, such as automobile, property,
general liability, workers' compensation and longshoremen disability claims.
90
CSX 2022 Form 10-K p.69
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 6. Properties
Details of the Company’s net properties are as follows:
(Dollars in Millions)
December 2022
Road
Accumulated Net Book
Annual
Depreciation
Estimated
Useful Life
Depreciation
Cost
Depreciation
Value
Rate
( Avg. Years)
Method
Rail and Other Track Material $ 8,660 $
(1,405) $ 7,255
Ties
Grading
Ballast
Bridges, Trestles, and
Culverts
Signals and Interlockers
Buildings
Other
Equipment
Locomotive
Freight Cars
6,763
2,741
3,383
2,989
3,299
1,416
4,848
2,316
Work Equipment and Other
3,132
Total Equipment
10,296
Land
Construction In Progress
2,272
745
(2,010)
(637)
(1,130)
(454)
(1,210)
4,753
2,104
2,253
2,535
2,089
2.5%
3.5%
1.3%
2.6%
1.7%
4.1%
(558)
858
2.5%
(1,856)
(369)
(1,911)
(4,136)
—
—
2,992
1,947
1,221
6,160
2,272
745
3.8%
3.1%
8.9%
N/A
N/A
41
28
75
38
60
24
40
25
26
32
11
Group Life
Group Life
Group Life
Group Life
Group Life
Group Life
Group Life/
Straight Line (a)
Group Life/
Straight Line (a)
Group Life
Group Life
Group Life/
Straight Line (a)
N/A
N/A
N/A
N/A
5,541
(2,323)
3,218
4.1%
Total Road
34,792
(9,727)
25,065
Total Properties $ 48,105 $
(13,863) $ 34,242
(a) For depreciation method, certain asset categories contain intermodal terminals, trucking or technology-related assets, which are depreciated
using the straight-line method.
CSX 2022 Form 10-K p.70
91
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 6. Properties, continued
(Dollars in Millions)
December 2021
Road
Accumulated Net Book
Annual
Depreciation
Estimated
Useful Life
Depreciation
Cost
Depreciation
Value
Rate
(Avg. Years)
Method
Rail and Other Track Material $ 8,761 $
(1,835) $ 6,926
Ties
Grading
Ballast
Bridges, Trestles, and
Culverts
Signals and Interlockers
Buildings
Other
Equipment
Locomotive
Freight Cars
6,522
2,751
3,289
2,794
3,266
1,388
4,912
2,322
Work Equipment and Other
2,891
Total Equipment
10,125
Land
Construction In Progress
1,885
419
(1,923)
4,599
(624)
(1,094)
(411)
(1,086)
2,127
2,195
2,383
2,180
2.5%
3.5%
1.3%
2.6%
1.7%
4.1%
(514)
874
2.5%
(1,732)
(358)
(1,706)
(3,796)
—
—
3,180
1,964
1,185
6,329
1,885
419
3.6%
2.9%
8.2%
N/A
N/A
41
28
75
38
60
24
40
25
27
35
12
Group Life
Group Life
Group Life
Group Life
Group Life
Group Life
Group Life/
Straight Line (a)
Group Life/
Straight Line (a)
Group Life
Group Life
Group Life/
Straight Line (a)
N/A
N/A
N/A
N/A
5,305
(2,207)
3,098
4.1%
Total Road
34,076
(9,694)
24,382
Total Properties $ 46,505 $
(13,490) $ 33,015
(a) For depreciation method, certain asset categories contain intermodal terminals or technology-related assets, which are depreciated using the
straight-line method.
92
CSX 2022 Form 10-K p.71
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 2022 Form 10-K p.72
93
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 84% of total fixed assets
of $48.1 billion on a gross basis as of December 2022. 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.
Depreciation Studies
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.
The Company completed a depreciation study for its road and track assets in 2020 and for
equipment assets in 2022, both of which resulted in changes to accumulated depreciation, service lives,
salvage values, and other related factors for certain assets. The 2022 equipment study resulted in an
expected increase in annual depreciation expense of approximately $80 million primarily due to deferred
losses on assets depreciated using the group-life method. Recent experience with depreciation studies
has resulted in changes to accumulated depreciation and depreciation rates that did not materially affect
the Company's depreciation expense of $1.4 billion in both 2021 and 2020.
94
CSX 2022 Form 10-K p.73
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 2022, 2021 or 2020, 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 purchased services and other on the consolidated
statements of income. Primarily as a result of its initiative to monetize non-core properties, the Company
recognized gains on the sale of properties of $238 million, $454 million and $35 million in 2022, 2021 and
2020, respectively.
Sale of Property Rights to the Commonwealth of Virginia
On March 26, 2021, the Company entered into a comprehensive agreement to sell certain
property rights in three CSX-owned line segments to the Commonwealth of Virginia (“Commonwealth”)
over three phases for a total of $525 million. The timing and amount of gains recognized were based on
the allocation of fair value to each conveyance, the timing of future conveyances and collectability. In April
2021, upon closing of the first phase of the agreement, the Company collected $200 million in proceeds
and recognized a $349 million gain. In fourth quarter 2021, the Company collected additional proceeds of
$200 million, a portion of which was attributable to the first phase with the remainder attributable to the
second phase. The second phase closed in January 2022, which resulted in a $20 million gain in first
quarter 2022. During June 2022, the Commonwealth approved the remaining proceeds, which resulted in
a $122 million gain in second quarter 2022 related to property rights previously conveyed. Those
remaining proceeds of $125 million were collected during fourth quarter 2022 upon closing of the third
phase, resulting in a $2 million gain. Over the course of this transaction, which is now complete, total
proceeds of $525 million have been collected and total gains of $493 million have been recognized.
CSX 2022 Form 10-K p.74
95
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 6. Properties, continued
Gains and proceeds in 2022 and 2021 related to this transaction are summarized in the following
table.
(Dollars in Millions)
Gains
Proceeds
Impairment Review
Years Ended
2021
2022
$
144 $
125
349
400
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. Impairment expense of $4 million in 2022,
$2 million in 2021 and $8 million in 2020 was primarily due to the discontinuation of certain in-progress
projects. Impairment expense is recorded in purchased services and other expense on the consolidated
income statement.
Government Assistance
The Company is a party to contracts with recipients and subrecipients of awards from federal,
state and local governmental agencies. These contracts meet the disclosure requirements under ASU
2021-10, Disclosure by Business Entities about Government Assistance, which the Company adopted
effective year end 2022. These awards are typically in the form of cash for purposes of making
improvements to the rail network as part of public safety, corridor expansion or economic revitalization
initiatives. The awarding agency generally specifies how the awards are to be spent by the recipients and
may include limited conditions requiring return of the assistance.
Government funding received or receivable related to a property asset is netted with the cost of
the asset in properties on the consolidated balance sheet, and the net asset is subject to depreciation.
Any amounts owed by the government entity are recorded within accounts receivable until reimbursed.
For the years ended December 31, 2022, and December 31, 2021, the total amounts received under
contracts with government entities to improve the rail network was $49 million and $66 million,
respectively. Non-freight accounts receivable related to these government projects was $34 million and
$7 million as of December 31, 2022, and 2021, respectively.
96
CSX 2022 Form 10-K p.75
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 7. Leases
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. These options are included in the lease term when it is reasonably certain that the
option will be exercised. 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 2022, 2021 or 2020.
CSX 2022 Form 10-K p.76
97
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 7. Leases, continued
CSX has a significant operating lease with the State of Georgia for approximately 137 miles of
right-of-way with integral equipment for a 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 all of the
Company’s operating leases as of December 31, 2022.
(Dollars in Millions)
Maturity of Lease Liabilities
2023
2024
2025
2026
2027
Thereafter
Total Undiscounted Operating Lease Payments
Less: Imputed Interest
Present Value of Operating Lease Liabilities
(Dollars in Millions)
Balance Sheet Classification
Right of Use Asset
$
Current Lease Liabilities (Included 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 2022
Lease Payments
$
$
$
2022
2021
505
69
488
557
$
$
$
71
62
55
41
35
1,122
1,386
(829)
557
501
64
478
542
31 years
32 years
5.0 %
4.9 %
Cash Flows
As of December 2022 and 2021, the Company's right-of-use asset was valued at $505 million and
$501 million, respectively. In 2022, right-of-use assets of $74 million were recognized as non-cash asset
additions due to new operating lease liabilities. In 2021, right-of-use assets of $88 million were
recognized as non-cash asset additions that resulted from the inclusion of Quality Carriers’ leases and
new operating lease liabilities. Cash paid for amounts included in the present value of operating lease
liabilities was $76 million and $60 million during the years ended 2022 and 2021, respectively, and is
included in operating cash flows.
98
CSX 2022 Form 10-K p.77
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 7. Leases, continued
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
Finance Leases
Years Ended
2021
2020
2022
$
109 $
89 $
82
Finance leases are included in properties - net and long-term debt on the consolidated balance
sheets and were not material as of December 2022 or December 2021. 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 2022, 2021 or
2020.
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,
including prepayments, under the long-term maintenance program.
(Dollars in Millions)
Amounts Paid
Number of Locomotives
$
Years Ended
2021
2022
128 $
99 $
1,871
1,863
2020
158
1,874
CSX 2022 Form 10-K p.78
99
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 8. Commitments and Contingencies, continued
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
technology,
communications,
from various
suppliers. Total annual payments under all of these purchase commitments are also estimated in the
table below.
track maintenance services and materials, and other services
to purchase
(Dollars in Millions)
2023
2024
2025
2026
2027
Thereafter
Total
Insurance
Locomotive
Maintenance &
Rebuild
Payments
$
$
220
308
328
241
329
1,519
2,945
Other
Commitments
110
$
39
40
15
17
68
289
$
Total
330
347
368
256
346
1,587
3,234
$
$
The Company maintains insurance programs with substantial limits for property damage, including
resulting business interruption, and third-party liability. A certain amount of risk is retained by the
Company on each insurance program. Under its property insurance program, the Company retains all
risk up to $100 million per occurrence for losses from floods and named windstorms and up to $75 million
per occurrence for other property losses. For third-party liability claims, the Company retains all risk up to
$100 million per occurrence. As CSX negotiates insurance coverage above its full self-retention amounts,
it retains a percentage of risk at various layers of coverage. 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.
100
CSX 2022 Form 10-K p.79
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 8. Commitments and Contingencies, continued
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 $3 million to $21 million in aggregate as of December 31, 2022. 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 consolidated case is now moving forward without class certification. Although the class was
not certified, individual shippers have since brought claims against the railroads, which have been
consolidated into a separate case.
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, ("Pharmacia") 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.
CSX 2022 Form 10-K p.80
101
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 8. Commitments and Contingencies, continued
For the lower 8 miles of the Study Area, EPA issued its Record of Decision detailing the agency’s
mandated remedial process in March 2016. Approximately 80 parties, including Pharmacia, are
participating in an EPA-directed allocation and settlement process to assign responsibility for the remedy
selected for the lower 8 miles of the Study Area. CSXT is participating in the EPA-directed allocation and
settlement process on behalf of Pharmacia. For the remainder of the Study Area, EPA has selected an
interim remedy in a Record of Decision dated September 28, 2021. Settlement discussions are also
ongoing for the selected interim remedy.
On March 2, 2022, EPA issued a Notice Letter to Pharmacia, Occidental Chemical Corporation
and eight other parties alleging they are liable under Section 107(a) of CERCLA for releases or
threatened releases of hazardous substances and requesting each party, individually or collectively,
submit good faith offers to EPA in connection with the Study Area. CSX, on behalf of Pharmacia,
responded to the Notice Letter and submitted a good faith offer to EPA on June 27, 2022, following
meetings with a mediator from EPA’s Conflict Prevention and Resolution Center. Negotiations with EPA
and other parties to resolve this matter continue.
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 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 its share of remediation
costs as determined by the EPA-directed allocation with respect to the Property and the Study Area would
be material to the Company's financial condition, results of operations or liquidity.
102
CSX 2022 Form 10-K p.81
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 between 2003 and 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.
The CSX Pension Plan, the largest plan based on benefit obligation, was closed to new participants
beginning in 2020.
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.
Pension Plan Participants:
Active Employees
Retirees and Beneficiaries
Other(a)
Total
(a) The Other category consists mostly of terminated but vested former employees.
As of
January 1, 2022
2,767
11,460
3,586
17,813
CSX 2022 Form 10-K p.82
103
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 nonqualified pension benefits on a pay-as-you-go basis. No qualified pension plan
contributions were made during 2022, 2021 and 2020. No contributions to the Company's qualified
pension plans are expected in 2023.
Future expected benefit payments are as follows:
Expected Cash Flows (Dollars in Millions):
2023
2024
2025
2026
2027
2028-2032
Total
Plan Assets
Pension
Benefits
$
$
193
188
185
183
181
879
1,809
The Company outsources investment management related to pension plan assets. The CSX
Investment Committee (the “Investment Committee”), whose members are selected by the Executive
Vice President and Chief Financial Officer, is responsible for setting policy and oversight of investment
management. The Investment Committee and investment manager utilize 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.
104
CSX 2022 Form 10-K p.83
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 9. Employee Benefit Plans, continued
The current asset allocation targets 60% growth-oriented investments and 40% immunizing
investments. The growth-oriented portfolio consists of return-seeking investments that are diversified
across geography, market capitalization, and asset class. The immunizing portfolio is comprised of a
customized mix of fixed income and cash investments designed to reduce liability risk. Allocations are
evaluated for levels within 5% 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
Growth-Oriented
Fixed Income
Cash and Cash Equivalents
Immunizing
Total
December 2022
December 2021
Amount
Percent of
Total Assets
Amount
$
$
$
$
1,249
144
41
1,434
777
116
893
2,327
54 % $
6
2
62 % $
33
5
38 % $
100 % $
1,559
204
49
1,812
1,145
59
1,204
3,016
Percent of
Total Assets
52 %
7
1
60 %
38
2
40 %
100 %
Under the supervision of the Investment Committee, the investment manager selects investments
or fund managers 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 returns against appropriate indices. Fund investment performance is
continuously monitored. Acceptable performance is determined in the context of the long-term return
objectives of the fund and appropriate asset class benchmarks.
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 2022 Form 10-K p.84
105
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 2022 and 2021 plan years
are as follows:
(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
Actuarial 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 (Loss) Return on Plan Assets
Non-qualified Employer Contributions
Benefits Paid
Fair Value of Plan Assets at End of Plan Year
Funded Status at End of Plan Year
Pension Benefits
Plan Year
Plan Year
2022
2021
$
2,285 $
2,368
2,909
3,022
$
3,022 $
3,257
36
64
(570)
(184)
45
55
(142)
(193)
2,368 $
3,022
3,016 $
3,000
(523)
18
(184)
2,327 $
(41) $
187
22
(193)
3,016
(6)
$
$
$
$
(a) Service cost for 2022 and 2021 includes capitalized service costs of $4 million each year.
In 2022, the $570 million net actuarial gain for pension benefits was driven by a 224 basis point
increase in the weighted average discount rate. The $142 million net actuarial gain for pension benefits in
2021 was driven by a 35 basis points increase in the weighted average discount rate.
106
CSX 2022 Form 10-K p.85
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 plan by recording a liability (underfunded plan) or asset
(overfunded plan) for the difference between the projected benefit obligation and the fair value of plan
assets at the plan measurement date. Amounts related to pension 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
Current Liabilities
Long-term Liabilities
Net Amount Recognized in Consolidated Balance Sheets
Pension Benefits
December
2022
December
2021
$
$
164 $
(17)
(188)
(41) $
255
(17)
(244)
(6)
Long-term assets as of December 2022 and 2021 in the preceding table relate to qualified
pension plans where assets exceed projected benefit obligations. Current and long-term liabilities relate
to plans where projected benefits obligations exceed assets. The following table shows the value of plan
assets for only those plans with a net liability status.
(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
$
— $
—
(205)
(195)
CSX 2022 Form 10-K p.86
107
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. 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
Interest Cost
Expected Return on Plan Assets
Amortization of Net Loss
Total Income Included in Other Income - Net
Net Periodic Benefit (Credit)/Cost
Settlement Loss (Gain)
Total Periodic Benefit (Credit)/Cost
Pension Benefits
Years Ended
2021
2020
2022
$
32 $
41 $
43
64
(188)
50
(74) $
(42) $
1
(41) $
55
(186)
73
(58) $
(17) $
—
(17) $
82
(176)
54
(40)
3
(1)
2
$
$
$
Pension 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
benefits.
(Dollars in Millions)
Components of Other Comprehensive
Loss (Income)
Recognized in the Balance Sheet
Losses (Gains)
Expense Recognized in the Income Statement
Amortization of Net Losses
Settlement Loss
Pension Benefits
Years Ended
2022
2021
$
141 $
(143)
$
50 $
1
73
—
As of December 2022, the balance to be amortized related to the Company's pension obligations
is a pre-tax loss of $727 million. This amount is included in accumulated other comprehensive loss, a
component of shareholders’ equity.
108
CSX 2022 Form 10-K p.87
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 9. Employee Benefit Plans, continued
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, with the
assistance of the outsourced investment manager, balances market expectations obtained from various
investment managers 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
benefits expense by using individual spot rates matched with separate cash flows for each future year.
The weighted averages of assumptions used by the Company to value its pension obligations were as
follows:
Expected Long-term Return on Plan Assets:
Benefit Cost for Current Plan Year
Benefit Cost for Subsequent Plan Year
Discount Rates:
Benefit Cost for Plan Year
Service Cost for Plan Year
Interest Cost for Plan Year
Benefit Obligation at End of Plan Year
Salary Scale Inflation
Cash Balance Plan Interest Credit Rate
Pension Benefits
2021
2022
6.75 %
6.75 %
6.75 %
6.75 %
2.98 %
2.18 %
5.02 %
2.69 %
1.70 %
2.78 %
4.80 %
3.75 %
4.60 %
3.75 %
CSX 2022 Form 10-K p.88
109
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 9. Employee Benefit Plans, continued
Post-retirement Medical Plan
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. The accumulated post-retirement
benefit obligation related to this plan was $61 million and $81 million, respectively, as of December 31,
2022 and 2021. Through 2032, total future expected benefit payments related to this plan were
$55 million. Expenses in 2022, 2021 and 2020 related to this plan were not material.
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 $13 million, $21 million
and $20 million in 2022, 2021 and 2020, 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 $28
million, $29 million and $39 million for 2022, 2021 and 2020, respectively, and is included in labor and
fringe expense on the consolidated income statement.
Under the terms of collective bargaining agreements that cover union-represented employees,
Quality Carriers contributes to three multi-employer pension plans. These plans provide defined benefits
to retired participants. All three of these pension plans are in Pension Protection Act zone “red”, meaning
they are at least 65% underfunded. Formal rehabilitation plans have been adopted. As of December 31,
2022, based on information provided to the Company from the administrators of these plans, Quality
Carriers’ portion of the contingent liability in the case of a full withdrawal or termination from these plans
is approximately $336 million, of which $328 million relates to the Central States Southeast and
Southwest Areas Pension Plan. The Company has withdrawn from one of the plans, resulting in an
immaterial withdrawal liability, but does not currently intend to withdraw from the remaining multi-
employer pension plans. Required monthly contributions to these plans are not material.
110
CSX 2022 Form 10-K p.89
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 10. Debt and Credit Agreements
Debt at December 2022 and December 2021 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
2022
2023-2068
2023-2027
2023-2032
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.
Average
Interest
Rates at
December December December
2022
2021
2022
4.2%
6.2%
6.0%
$ 17,877 $ 16,166
153
47
141
29
$ 18,047 $ 16,366
(181)
(151)
$ 17,896 $ 16,185
Debt Issuance & Early Redemption of Long-term Debt
On July 28, 2022, CSX issued $950 million aggregate principal amount of 4.100% notes due
2032, $900 million aggregate principal amount of 4.500% notes due 2052 and $150 million aggregate
principal amount of 4.650% notes due 2068. The 2068 notes are a reopening of existing notes originally
issued in February 2018. These notes 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.
In July 2021, finance lease obligations and debt totaling $68 million were assumed related to the
Company's acquisition of Quality Carriers on July 1, 2021. No debt was issued in 2021.
On December 1, 2020, CSX issued $500 million of 2.50% notes due 2051. On December 30,
2020, the proceeds of the offering were used to fully redeem CSX’s outstanding $500 million of 3.70%
notes that otherwise would have matured on November 1, 2023. These notes 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.
The net proceeds from debt issuances will be used for general corporate purposes, which may
include debt repayments, repurchases of CSX’s common stock, capital investment and working capital
requirements. For more information regarding a non-cash debt transaction with a related party, see Note
15, Investment in Affiliates and Related-Party Transactions.
CSX 2022 Form 10-K p.90
111
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)
Years Ending
2023
2024
2025
2026
2027
Thereafter
Total Long-term Debt Maturities, including current portion
Interest Rate Derivatives
Fair Value Hedges
Maturities at
December 2022
151
558
606
704
998
15,030
18,047
$
$
In first quarter 2022, CSX entered into five separate fixed-to-floating interest rate swaps classified
as fair value hedges. The swaps are designed to hedge 10 years of interest rate risk associated with
market fluctuations attributable to the Secured Overnight Financing Rate on a cumulative $800 million of
fixed rate outstanding notes which are due between 2036 and 2040. As of December 31, 2022, the
cumulative fair value of these swaps was a $118 million liability, which is included in other long-term
liabilities on the consolidated balance sheet. The associated cumulative adjustment to the hedged notes
is included in long-term debt. Gains and losses resulting from changes in fair value of the interest rate
swaps offset changes in the fair value of the hedged portion of the underlying debt with no gain or loss
recognized due to hedge ineffectiveness. The difference in the net fixed-to-float interest settlement on the
derivatives is recognized in interest expense and was not material for the year ending at December 31,
2022. The swaps will expire in 2032. If settled early, the remaining cumulative fair value adjustment to the
hedged notes will be amortized over the remaining life of the associated notes. The amounts recorded in
long-term debt on the consolidated balance sheet related to these fair value hedges is summarized in the
table below.
(Dollars in Millions)
Notional Value of Hedged Notes
Cumulative Fair Value Adjustment to Hedged Notes
Carrying Amount of Hedged Notes
December 31, 2022
800
$
$
(118)
682
112
CSX 2022 Form 10-K p.91
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 10. Debt and Credit Agreements, continued
Cash Flow Hedges
In 2020, the Company executed forward starting interest rate swaps, classified as cash flow
hedges, with aggregate notional value of $500 million. These swaps were effected to hedge the
benchmark interest rate associated with future interest payments related to the anticipated refinancing of
$850 million of 3.25% notes due in 2027. In accordance with the Derivatives and Hedging Topic in the
ASC, the Company has designated these swaps as cash flow hedges. As of December 31, 2022 and
2021, the asset value of the forward starting interest rate swaps was $127 million and $91 million,
respectively, and was recorded in other long-term assets on the consolidated balance sheet.
Unrealized gains or losses associated with changes in the fair value of the hedge are recorded
net of tax in accumulated other comprehensive income (“AOCI”) on the consolidated balance sheet. In
fourth quarter 2022, CSX settled a portion equal to $160 million notional value of the aggregate
$500 million cash flow hedges, which resulted in CSX receiving a cash payment of $52 million included in
other operating activities on the consolidated cash flow statement. The gain associated with the settled
portion of the hedges will continue to be classified in AOCI until the associated debt instrument is issued
in the future. Unless settled early, the remainder of the swaps will expire in 2027 and the unrealized gain
or loss in AOCI will be recognized in earnings as an adjustment to interest expense over the same period
during which the hedged transaction affects earnings. Unrealized gains, recorded net of tax in other
comprehensive income, related to the hedges were $80 million, $8 million and $62 million for the years
ended December 31, 2022, 2021 and 2020, respectively.
See Note 13, Fair Value Measurements, and Note 16, Other Comprehensive Income (Loss), for
other information about the Company's hedges.
Credit Facilities
CSX has a $1.2 billion unsecured, revolving credit facility backed by a diverse syndicate of banks.
This facility allows same-day borrowings at floating interest rates, based on LIBOR or an agreed-upon
replacement reference rate, plus a spread that depends upon CSX's senior unsecured debt ratings. This
facility expires in March 2024, and as of December 31, 2022, 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, 2022, 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, 2022, the Company had no commercial paper outstanding.
CSX 2022 Form 10-K p.92
113
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
Intermodal
Coal
Trucking(a)
Other
Total
Years Ended
2021
2020
2022
$
2,584 $
1,664
1,054
996
828
658
455
8,239
2,306
2,434
966
908
2,421 $
1,461
886
918
796
587
470
7,539
2,039
1,790
410
744
$ 14,853 $ 12,522 $
2,309
1,386
920
834
675
538
414
7,076
1,702
1,397
—
408
10,583
(a) Effective third quarter 2021, Trucking revenue is comprised of revenue from the operations of Quality Carriers, which was acquired by CSX
effective July 1, 2021.
Revenue Recognition
The Company generates revenue from rail 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.
114
CSX 2022 Form 10-K p.93
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 11. Revenues, continued
The average transit time to complete a rail shipment is between 2 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.
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, which 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.
Effective third quarter 2021, trucking revenue includes revenue from the operations of Quality
Carriers and is mostly comprised of truck shipments of chemicals. A performance obligation arises when
Quality Carriers receives a customer order to transport a commodity at a contracted rate. Revenue is
recorded on a gross basis ratably over transit time.
Other revenue is recorded upon completion of the service and is comprised of revenue from
regional subsidiary railroads and incidental charges, including intermodal storage and equipment usage,
demurrage and switching. Revenue from regional subsidiary railroads includes shipments by railroads
that the Company does not directly operate. Intermodal storage represents charges for customer storage
of containers at an intermodal terminal, ramp facility or offsite location beyond a specified period of time.
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 2022, 2021 and 2020, revenue recognized from performance obligations related to prior
periods (for example, due to changes in transaction price) was not material.
CSX 2022 Form 10-K p.94
115
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 11. Revenues, continued
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, 2022, 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, 2022 were not material.
The Company’s accounts receivable - net consists of freight and non-freight receivables, reduced
by an allowance for credit losses.
(Dollars in Millions)
Freight Receivables
Freight Allowance for Credit Losses
Freight Receivables, net
Non-Freight Receivables
Non-Freight Allowance for Credit Losses
Non-Freight Receivables, net
Total Accounts Receivable, net
December 31,
2022
December 31,
2021
$
$
1,067 $
(16)
1,051
279
(17)
262
1,313 $
951
(14)
937
225
(14)
211
1,148
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 credit losses to provide for the estimated amount of receivables that
will not be collected. The allowance is based upon an assessment of risk characteristics, historical
payment experience, and the age of outstanding receivables adjusted for forward-looking economic
conditions as necessary. Credit losses recognized on the Company’s accounts receivable were not
material in 2022 and 2021.
116
CSX 2022 Form 10-K p.95
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 12. Income Taxes
Earnings before income taxes of $5.4 billion, $5.0 billion and $3.6 billion for years ended 2022,
2021 and 2020, 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 Income Tax Expense
Years Ended
2021
2022
2020
$
$
$
$
928 $
203
1,131 $
827 $
176
1,003 $
166
(49)
117 $
1,248 $
166
1
167 $
1,170 $
559
123
682
149
31
180
862
The Company recorded a 2022 income tax benefit of $78 million primarily as a result of state
legislative changes and a change in the valuation of deferred taxes as a result of filing the 2021 tax
returns. In 2021, the Company recorded an income tax benefit of $48 million primarily as a result of
favorable state legislative changes, additional tax benefits associated with the vesting of share-based
awards and adjustments to deferred taxes as a result of filing the 2020 state tax returns. In 2020, the
Company recorded an income tax benefit of $30 million primarily as a result of the additional tax benefit
associated with vesting of share-based awards and the resolution of certain tax matters.
Income tax expense reconciled to the tax computed at statutory rates is presented in the following
table.
(Dollars In Millions)
Federal Income Taxes
State Income Taxes
Other
2022
Years Ended
2021
$ 1,137
121
(10)
21.0 % $ 1,040
139
(9)
2.2 %
(0.1) %
21.0 % $
2.8 %
(0.2) %
Income Tax Expense/ Rate
$ 1,248
23.1 % $ 1,170
23.6 % $
2020
762
117
(17)
862
21.0 %
3.2 %
(0.4) %
23.8 %
CSX 2022 Form 10-K p.96
117
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)
Other Employee Benefit Plans
Accelerated Depreciation
Other
Total
Net Deferred Income Tax Liabilities
2022
2021
Assets
Liabilities
Assets
Liabilities
$
$
105 $
—
553
658 $
$
— $
7,600
627
8,227 $
7,569
106 $
—
499
605 $
$
—
7,366
622
7,988
7,383
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 2022 and
2021. Federal examinations of original federal income tax returns for all years through 2020 are resolved.
As of December 2022 and 2021, the Company had approximately $18 million and $18 million,
respectively, of total unrecognized tax benefits as a result of uncertain tax positions. Net tax benefits of
$14 million and $15 million as of December 2022 and 2021, respectively, could favorably impact the
effective income tax rate in each year. The Company does not expect that unrecognized tax benefits as
of December 2022 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 year ended December 2022.
CSX’s continuing practice is to recognize net interest and penalties related to income tax matters
in income tax expense. Accrued interest and penalties were not material as of December 2022 or 2021.
Additionally, expenses from changes to the reserves for interest and penalties were not material in 2022,
2021 or 2020.
118
CSX 2022 Form 10-K p.97
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, long-term debt and interest rate derivatives. 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, long-term debt and interest rate derivatives. 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 are carried at fair value on the consolidated balance sheet in
accordance with the Fair Value Measurements and Disclosures Topic in the ASC. They are valued with
assistance from a third-party trustee and consist of fixed income mutual funds, corporate bonds and
government securities. The fixed income mutual funds are valued at the net asset value of shares held
based on quoted market prices determined in an active market, which are Level 1 inputs. The corporate
bonds and government securities are valued using broker quotes that utilize observable market inputs,
which are Level 2 inputs. Unrealized losses as of December 31, 2022, were not material. The Company
believes any impairment of investments held with gross unrealized losses to be temporary and not the
result of credit risk.
CSX 2022 Form 10-K p.98
119
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.
(Dollars in Millions)
Fixed Income Mutual Funds
Corporate Bonds
Government Securities
Total Investments at Fair Value
$
December 2022
Level 2
December 2021
Level 2
Level 1
Total
Total
— $
49
58
107 $
89 $
49
58
196 $
75 $
—
—
75 $
— $
63
26
89 $
75
63
26
164
Level 1
$
89 $
—
—
89 $
Total Investments at Amortized Cost
$
201
$
156
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
2022
December
2021
$
$
129 $
24
10
33
196 $
77
28
12
47
164
Long-term debt, which includes finance leases, 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.
120
CSX 2022 Form 10-K p.99
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
2022
December
2021
$
16,135 $
18,047
19,439
16,366
Interest Rate Derivatives
The Company’s fixed-to-floating and forward starting interest rate swaps are carried at their
respective fair values, which are determined with assistance from a third party based upon pricing models
using inputs observed from actively quoted markets. All of the inputs used to determine the fair value of
the swaps are Level 2 inputs. The fair value of the Company’s fixed-to-floating interest rate swaps was a
liability of $118 million as of December 31, 2022. The fair value of the Company’s forward starting interest
rate swaps asset was $127 million and $91 million at December 31, 2022 and 2021, respectively. See
Note 10, Debt and Credit Agreements, for further information.
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%
growth-oriented and 40% immunizing. See Note 9, Employee Benefit Plans, for further information. 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.
CSX 2022 Form 10-K p.100
121
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 13. Fair Value Measurements, continued
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.
• Commingled and common collective trust funds: This class consists of private funds that invest in
corporate equity and debt securities, government 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
45 business days.
The pension plan assets at fair value by level, within the fair value hierarchy, as of calendar plan
years 2022 and 2021 are shown in the table below. For additional information related to pension assets,
see Note 9, Employee Benefit Plans.
December 2022
December 2021
(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
Total
Total
Level 1 Level 2
29
157
—
—
—
Level 1 Level 2
$ 335 $ — $ 335 $ 487 $ — $ 487
14
108
1,013
173
98
$ 521 $ 744 $ 1,265 $ 609 $ 1,284 $ 1,893
n/a $ 1,123
$ 521 $ 744 $ 2,327 $ 609 $ 1,284 $ 3,016
—
—
1,013
173
98
29
157
647
88
9
—
—
647
88
9
14
108
—
—
—
n/a $ 1,062
n/a
n/a
(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.
122
CSX 2022 Form 10-K p.101
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
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.
For discussion of the drivers of changes in net periodic pension and post-retirement benefit credit
from 2021 to 2022 and from 2020 to 2021, refer to Note 9, Employee Benefit Plans. Interest income
increased from 2021 to 2022 primarily as a result of higher average interest rates. Debt repurchase
expense decreased from 2020 to 2021 primarily as a result of long-term debt being redeemed earlier
relative to maturity date in 2020. Other income – net consisted of the following:
(Dollars in Millions)
Net Periodic Pension and Post-retirement Benefit Credit (a)
Interest Income
Debt Repurchase Expense
Miscellaneous Income
Total Other Income - Net
(a) Excludes the service cost component of net periodic benefit cost.
Years Ended
2021
2020
2022
$
$
79 $
42
—
12
133 $
64 $
7
—
8
79 $
42
17
(48)
8
19
CSX 2022 Form 10-K p.102
123
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 15. Investment in Affiliates and Related-Party Transactions
CSX's investments in affiliates are included on the consolidated balance sheet as investments in
affiliates and other companies.
(Dollars in Millions)
Equity-method Investments:
Conrail
TTX
Other (a)
Total
December
2022
December
2021
$
$
1,124 $
914
254
2,292 $
1,083
849
167
2,099
(a) Other investments as of December 31, 2022, includes an interest in Pan Am Southern, LLC, which is jointly-owned with a subsidiary of
Norfolk Southern Corporation, that was acquired as part of the purchase of Pan Am.
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. 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
purchased services 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
2023
2024
2025
2026
2027
Thereafter
Total
Conrail Shared
Asset Agreement
$
$
31
31
31
31
31
44
199
Also, included in equity earnings of affiliates are CSX’s 42% 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 $327 million as of
December 2022.
124
CSX 2022 Form 10-K p.103
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 15. Investment in Affiliates and Related-Party Transactions, continued
The following table discloses amounts related to Conrail. All amounts in the table below are
included in purchased services 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
Years Ended
2021
2022
2020
$
$
130 $
4
(44)
90 $
128 $
4
(44)
88 $
126
4
(49)
81
As required by the Related Party Disclosures Topic in the ASC, the Company has disclosed
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. In
December 2020, the Company completed a non-cash conversion of its existing payable balance of
approximately $217 million and $224 million, 2.89% notes due 2044 into new notes. The new notes for
operation of the shared asset area are $441 million, 1.31% notes due 2050. Interest expense from these
promissory notes was $6 million in each 2022, 2021 and 2020.
(Dollars in Millions)
Balance Sheet Information:
CSX Accounts Payable to Conrail
Promissory Notes Payable to Conrail Subsidiary
December
2022
December
2021
$
136 $
100
1.31% CSX Promissory Note due December 2050
1.31% CSXT Promissory Note due December 2050
73
368
73
368
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. Pursuant to the Investments-Equity Method
topic in the ASC, CSX applies the equity method of accounting to its investment in TTX. As part of the
Pan Am acquisition in June 2022, CSX acquired an immaterial amount of TTX stock, which was
subsequently repurchased by TTX in December 2022.
CSX 2022 Form 10-K p.104
125
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 15. Investment in Affiliates and Related-Party Transactions, continued
As required by the Related Party Disclosures Topic in the ASC, the following table discloses
amounts related to TTX. Car hire rents and equity earnings are included in equipment and other rents
expense on the Company’s consolidated income statement.
(Dollars in Millions)
Income Statement Information:
Car Hire Rents
Equity Earnings of TTX
Total TTX Expense
2022
Years Ended
2021
2020
$
$
241 $
(51)
190 $
221 $
(52)
169 $
219
(51)
168
Also included below is balance sheet information related to CSX's payable to TTX, which
represents car rental liabilities.
Balance Sheet Information:
CSX Payable to TTX
December
2022
December
2021
$
38 $
35
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. Generally, for CSX, total comprehensive earnings equal
net earnings plus or minus adjustments for pension and other post-retirement liabilities as well as
derivative activity and other adjustments. Total comprehensive earnings represent the activity for a period
net of tax and were $4.2 billion, $4.0 billion and $2.8 billion for 2022, 2021 and 2020, respectively.
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,
interest rate derivatives and CSX's share of AOCI of equity method investees.
126
CSX 2022 Form 10-K p.105
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 16. Other Comprehensive Income (Loss), continued
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. Interest rate derivatives consist of forward starting
interest rate swaps classified as cash flow hedges. See Note 10, Debt and Credit Agreements, for further
information. Items classified as other primarily represent CSX's share of AOCI of equity method
investees. Amounts reclassified in other to net earnings are included in purchased services and other or
equipment and other rents on the consolidated income statements.
Pension and
Other Post-
Employment
Benefits
Interest Rate
Derivatives
Other
Accumulated Other
Comprehensive
Income (Loss)
(Dollars in Millions)
Balance December 31, 2019 - Net of Tax
$
(619) $
— $
(56) $
Other Comprehensive Income (Loss)
(Loss) Income Before Reclassifications
Amounts Reclassified to Net Earnings
Tax Expense
Total Other Comprehensive Income (Loss) $
(17)
47
(9)
21 $
Balance December 31, 2020 - Net of Tax
$
(598) $
Other Comprehensive Income (Loss)
Income Before Reclassifications
Amounts Reclassified to Net Earnings
Tax Expense
Total Other Comprehensive Income
Balance December 31, 2021 - Net of Tax
Other Comprehensive Income (Loss)
$
$
(Loss) Income Before Reclassifications
Amounts Reclassified to Net Earnings
Tax Expense
Total Other Comprehensive (Loss) Income $
Balance December 31, 2022 - Net of Tax
$
147
66
(46)
167 $
(431) $
(129)
44
19
(66) $
(497) $
80
—
(18)
62 $
62 $
11
—
(3)
(10)
5
(1)
(6) $
(62) $
—
15
—
8 $
15 $
70 $
(47) $
88
—
(8)
—
2
4
80 $
6 $
150 $
(41) $
(675)
53
52
(28)
77
(598)
158
81
(49)
190
(408)
(41)
46
15
20
(388)
CSX 2022 Form 10-K p.106
127
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 17. Business Combinations
Acquisition of Pan Am Systems, Inc.
On June 1, 2022, CSX completed its acquisition of Pan Am Systems, Inc. (“Pan Am”), which is the
parent company of Pan Am Railways, Inc. who jointly owns Pan Am Southern, LLC with a subsidiary of
Norfolk Southern Corporation. Pan Am owns and operates a highly integrated, nearly 1,200-mile rail
network and has a joint interest in the more than 600-mile Pan Am Southern system. This acquisition
expands CSX’s reach in the Northeastern United States. The results of Pan Am's operations and its cash
flows were consolidated prospectively.
The Company accounted for the transaction using the acquisition method in accordance with ASC
Topic 805, Business Combinations. The purchase price allocation was finalized as of December 31, 2022,
and total measurement period adjustments to the preliminary allocation were immaterial.
The closing price of $600 million was funded through a combination of common stock valued at
$422 million and cash totaling $178 million. Cash payments are included in investing activities on the
Company's consolidated cash flow statement. Total cash consideration paid to acquire the business
includes a $30 million deposit paid in 2020.
The allocation of total consideration to the fair values of the acquired assets and liabilities of Pan
Am is summarized in the table below.
(Dollars in Millions)
Assets Acquired:
Accounts Receivable, net
Properties and Equipment, net
Goodwill
Investments in Affiliates
Other Assets
Total Assets Acquired
Liabilities Assumed:
Accounts Payable and Accrued Liabilities
Deferred Tax Liabilities
Other Long-term Liabilities
Total Liabilities Assumed
Fair Value of Assets Acquired, Net of Liabilities Assumed:
June 1, 2022
$
$
$
$
46
600
17
90
11
764
32
75
57
164
600
Properties and equipment of $600 million include road and track assets, work equipment, land,
buildings and other assets. The investments in affiliates includes the interest in Pan Am Southern, LLC
acquired as part of the purchase as well as other investments.
128
CSX 2022 Form 10-K p.107
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 17. Business Combinations, continued
The Company has incurred costs related to this acquisition of approximately $32 million, of which
$22 million was incurred in 2022 and $10 million was incurred in 2021. All acquisition-related costs were
expensed as incurred and have been recorded in labor and fringe or purchased services and other in the
accompanying consolidated income statements.
This acquisition is not material or significant with respect to the Company’s financial statements
when reviewed under the quantitative and qualitative considerations of Regulation S-X Article 11 and ASC
Topic 805. As the acquisition is not material or significant, CSX has not provided pro forma information
relating to the pre-acquisition period.
Acquisition of Quality Carriers, Inc.
On July 1, 2021, the Company completed its acquisition of Quality Carriers, the largest provider of
bulk liquid chemicals truck transportation in North America, for $544 million in cash, which is presented
on the statement of cash flows net of $3 million cash acquired. Through a network of over 100 company-
owned and affiliate terminals and facilities in key locations throughout the United States, Canada and
Mexico, Quality Carriers provides transportation services to many of the leading chemical producers and
shippers in North America. The results of Quality Carriers' operations and its cash flows were
consolidated prospectively.
The Company accounted for the transaction using the acquisition method in accordance with ASC
Topic 805, Business Combinations. The purchase price allocation was finalized as of December 31, 2021,
and total measurement period adjustments to the preliminary allocation were immaterial. The allocation of
total consideration to the fair values of the acquired assets and liabilities of Quality Carriers is
summarized in the table below.
(Dollars in Millions)
Assets Acquired:
Cash and Cash Equivalents
Accounts Receivable, net
Properties and Equipment, net
Goodwill
Intangible Assets
Other Assets
Total Assets Acquired
Liabilities Assumed:
Accounts Payable and Accrued Liabilities
Finance Lease Obligations and Notes Payable
Casualty, Environmental and Other Reserves
Other Long-term Liabilities
Total Liabilities Assumed
Fair Value of Assets Acquired, Net of Liabilities Assumed:
CSX 2022 Form 10-K p.108
$
$
$
$
$
July 1, 2021
3
113
225
213
180
9
743
48
68
62
21
199
544
129
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 17. Business Combinations, continued
Cash paid to acquire the business, net of acquired cash and cash equivalents of $3 million, is
included in investing activities on the Company's consolidated statement of cash flows. Properties and
equipment of $225 million include tractors and trailers, equipment, land, buildings and other assets. For
information about Goodwill and intangible assets, see Note 18, Goodwill and Other Intangible Assets.
In 2021, the Company incurred costs related to this acquisition of approximately $17 million. All
acquisition-related costs were expensed as incurred and have been recorded in purchased services and
other in the accompanying consolidated income statements.
This acquisition is not material or significant with respect to the Company’s financial statements
when reviewed under the quantitative and qualitative considerations of Regulation S-X Article 11 and ASC
Topic 805. As the acquisition is not material or significant, CSX has not provided pro forma information
relating to the pre-acquisition period.
Other Acquisitions
During 2022, Quality Carriers completed several acquisitions of previous independent affiliates
that were immaterial individually and in the aggregate.
130
CSX 2022 Form 10-K p.109
CSX CORPORATION
PART II
Item 8. Financial Statements and Supplementary Data
NOTE 18. Goodwill and Other Intangible Assets
The following table presents goodwill and other intangible asset balances and adjustments to
those balances for the years ended December 31, 2022 and 2021:
Goodwill
Intangible Assets
Net Carrying
Amount
Cost
Accumulated
Amortization
Net Carrying
Amount
Total Goodwill
and Other
Intangible Assets
- Net
(Dollars in Millions)
Balance at December 31, 2020
Additions
Amortization
$
63 $
— $
— $
— $
213
—
180
—
—
(5)
180
(5)
Balance at December, 31, 2021
$
276 $
180 $
(5) $
175 $
Additions
Amortization
43
—
18
—
—
(10)
18
(10)
Balance at December, 31, 2022 $
319 $
198 $
(15) $
183 $
63
393
(5)
451
61
(10)
502
Acquisition of Pan Am Systems, Inc.
Goodwill related to the Pan Am acquisition of $17 million was calculated as the excess of the
consideration paid over the fair value of net assets assumed as of June 1, 2022 and relates primarily to
the ability of CSX to extend the reach of its service to a wider customer base over an expanded territory,
creating new market prospects and efficiencies. Goodwill recognized in this acquisition is not deductible
for tax purposes.
Acquisition of Quality Carriers, Inc.
As a result of the acquisition of Quality Carriers, Inc. on July 1, 2021, CSX recognized goodwill
and intangible assets. The goodwill of $213 million was calculated as the excess of the consideration paid
over the fair value of net assets assumed as of July 1, 2021 and relates primarily to the ability of CSX to
extend the reach of its network and gain access to new products, markets, and regions through a unique
and competitive multimodal solution that leverages the reach of truck transportation with the cost
advantage of rail-based services. Goodwill recognized in the acquisition is deductible for tax purposes.
Intangible assets of $180 million consist of $150 million of customer relationships and $30 million
of trade names that will be amortized over a weighted-average period of 20 years and 15 years,
respectively.
During 2022, Quality Carriers completed several acquisitions that were immaterial individually and
in aggregate that resulted in the addition of $26 million of goodwill and $18 million other intangible assets.
Prior to 2021, the Company's goodwill balance related to affiliates of CSXT, primarily P&L
Transportation, Inc. In fourth quarter 2022, CSX performed its annual evaluation of each reporting unit's
goodwill and intangible assets for impairment. No impairment was recorded as a result of this evaluation.
CSX 2022 Form 10-K p.110
131
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, 2022, 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, 2022, 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, 2022 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, 2022. 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, 2022 has been
audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report
which is included elsewhere herein.
132
CSX 2022 Form 10-K p.111
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, 2022,
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, 2022, 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, 2022 and 2021, 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,
2022, and the related notes of the Company and our report dated February 15, 2023 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 2022 Form 10-K p.112
133
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 15, 2023
134
CSX 2022 Form 10-K p.113
CSX CORPORATION
PART II
Changes in Internal Control over Financial Reporting
There were no material changes in the Company’s internal control over financial reporting.
Item 9B. Other Information
None
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
Not applicable.
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 no later than
May 1, 2023 with respect to the 2023 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).
CSX 2022 Form 10-K p.114
135
CSX CORPORATION
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)(1) Financial Statements
See Index to Consolidated Financial Statements on page 45.
(2) Financial Statement Schedules
The information required by Schedule II, Valuation and Qualifying Accounts, is included in
the Consolidated Financial Statements, Casualty, Environmental and Other
Note 5
Reserves. All other financial statement schedules are not applicable.
to
(3) Exhibits
See exhibits listed under part (b) below.
(b) 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.
Exhibit
designation
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 December 16, 2014
February 11, 2015,
Exhibit 3.1, Form 10-K
Articles of Amendment to CSX Corporation's Amended and
Restated Articles of Incorporation, as amended
June 7, 2021
Exhibit 3.1, Form 8-K
Amended and Restated Bylaws of CSX Corporation, effective
as of December 7, 2022
December 13, 2022,
Exhibit 3.1, Form 8-K
2.1
3.1
3.2
3.3
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)
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
136
CSX 2022 Form 10-K p.115
CSX CORPORATION
PART IV
Exhibit
designation
Nature of exhibit
Previously filed
as exhibit to
4.1(h)
4.1(i)
4.1(j)
4.1(k)
4.1(l)
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
Ninth Supplemental Indenture, dated as of February 12, 2019,
between CSX and The Bank of New York Mellon Trust
Company, N.A. (as successor to JPMorgan Chase Bank, N.A.,
formerly The Chase Manhattan Bank), as Trustee (b)
Tenth Supplemental Indenture, dated as of December 10, 2020,
between the Registrant and The Bank of New York Mellon Trust
Company, N.A. (as successor to JPMorgan Chase Bank, N.A.,
formerly The Chase Manhattan Bank), as Trustee
Eleventh Supplemental Indenture, dated as of July 28, 2022,
between the Registrant and The Bank of New York Mellon Trust
Company, N.A. (as successor to JPMorgan Chase Bank, N.A.,
formerly The Chase Manhattan Bank), as Trustee
February 12, 2019,
Exhibit 4.1.10, Form S-3ASR
December 10, 2020
Exhibit 4.3, Form 8-K
July 28, 2022,
Exhibit 4.3, Form 8-K
4.2*
Description of Common Stock
Material Contracts:
10.1
10.2
10.3
10.4
10.5
10.6
10.7
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
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
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
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.
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
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
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
July 8, 1997,
Exhibit 10, Form 8-K
June 11, 1999,
Exhibit 10.1, Form 8-K
June 11, 1999,
Exhibit 10.2, Form 8-K
March 1, 2001,
Exhibit 10.34, Form 10-K
August 6, 2004,
Exhibit 99.1, Form 8-K
September 2, 2004,
Exhibit 10.1, Form 8-K
June 11, 1999,
Exhibit 10.6, Form 8-K
CSX 2022 Form 10-K p.116
137
CSX CORPORATION
PART IV
Exhibit
designation
Nature of exhibit
Previously filed
as exhibit to
10.8
10.9
10.10
10.11
10.12**
10.13**
10.14**
10.15**
10.16**
10.17**
10.18**
10.19**
10.20**
10.21**
10.22
10.23**
10.24**
10.25**
10.26**
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
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
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
June 11, 1999,
Exhibit 10.4, Form 8-K
June 11, 1999,
Exhibit 10.5, Form 8-K
June 11, 1999,
Exhibit 10.7, Form 8-K
September 2, 2004,
Exhibit 10.2, Form 8-K
CSX Directors’ Deferred Compensation Plan effective January
1, 2005
February 22, 2008,
Exhibit 10.3, Form 10-K
CSX Directors' Matching Gift Plan (as amended through
February 9, 2011)
March 4, 1994,
Exhibit 10.5, Form 10-K
Special Retirement Plan of CSX Corporation and Affiliated
Companies (as amended through February 14, 2001)
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
CSX Stock and Incentive Award Plan
May 7, 2010,
Exhibit 10.1, Form 8-K
CSX Executives' Deferred Compensation Plan (as amended
and restated effective January 1, 2021)
December 21, 2020,
Exhibit 99.1, Form S-8
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 2019-2021 Long-Term Incentive Plan
$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, 2019
Exhibit 10.1, 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
Form of 2020-2022 LTIP Performance Unit Award Agreement
Form of 2020 Stock Option Agreement
Form of Restricted Stock Unit Agreement
February 21, 2020
Exhibit 10.1, Form 8-K
February 21, 2020
Exhibit 10.2, Form 8-K
February 26, 2016
Exhibit 10.2, Form 8-K
138
CSX 2022 Form 10-K p.117
CSX CORPORATION
PART IV
Exhibit
designation
Nature of exhibit
Amendment to Form of Change of Control Agreement
Previously filed
as exhibit to
May 8, 2020
Exhibit 10.1, Form 8-K
Employment Agreement, dated August 29, 2022, between CSX
Corporation and Joseph R. Hinrichs
October 21, 2022,
Exhibit 10.1, Form 10-Q
Transition Agreement, dated September 14, 2022, between
CSX Corporation and James M. Foote
October 21, 2022,
Exhibit 10.2, Form 10-Q
CSX Corporation Executive Severance Plan, effective as of
September 14, 2022
October 21, 2022,
Exhibit 10.3, Form 10-Q
10.27**
10.28**
10.29**
10.30**
Officer certifications:
31*
32*
Rule 13a-14(a) Certifications
Section 1350 Certifications
Interactive data files:
101*
104*
Other exhibits:
21*
22.1*
23*
24*
The following financial information from CSX Corporation’s
Annual Report on Form 10-K for the year ended December 31,
2022 filed with the SEC on February 15, 2023, formatted in
XBRL includes: (i) Consolidated Income Statements for the
years ended December 31, 2022, December 31, 2021, and
December 31, 2020, (ii) Consolidated Comprehensive Income
Statements for the years ended December 31, 2022, December
31, 2021, and December 31, 2020, (iii) Consolidated Balance
Sheets at December 31, 2022 and December 31, 2021, (iv)
Consolidated Cash Flow Statements for the years ended
December 31, 2022, December 31, 2021 and December 31,
2020, (v) Consolidated Statements of Changes in Shareholders'
Equity for the years ended December 31, 2022, December 31,
2021 and December 31, 2020, and (vi)
to
Consolidated Financial Statements.
the Notes
The cover page from CSX Corporation’s Annual Report on Form
10-K for the year ended December 31, 2022 formatted in iXBRL
(Inline eXtensible Business Reporting Language) and contained
in Exhibit 101.
Subsidiaries of the Registrant
List of Subsidiary Issuers and Guarantors
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 2022 Form 10-K p.118
139
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 15, 2023
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 15,
2023.
Signature
Title
/s/ JOSEPH R. HINRICHS
Joseph R. Hinrichs
President, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ SEAN R. PELKEY
Sean R. Pelkey
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
140
CSX 2022 Form 10-K p.119
Signature
*
John J. Zillmer
*
Donna M. Alvarado
*
Thomas P. Bostick
*
Steven T. Halverson
*
Paul C. Hilal
*
David M. Moffett
*
Linda H. Riefler
*
Suzanne M. Vautrinot
*
James L. Wainscott
*
J. Steven Whisler
SIGNATURES
Title
Chairman of the Board and Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
CSX 2022 Form 10-K p.120
141
Exhibit 4.2
Description of CSX Corporation Common Stock
The following description of our common stock, which is registered under Section 12(b) of the Securities
Exchange Act of 1934, as amended, is a summary and is qualified in its entirety by reference to CSX’s
amended and restated articles of incorporation and bylaws, which are incorporated by reference as
exhibits to the Annual Report on Form 10-K of which this exhibit is a part, and by the applicable
provisions of the Virginia Stock Corporation Act (the “VSCA”). We encourage you to read CSX’s
amended and restated articles of incorporation and bylaws, as well as applicable provisions of the VSCA,
for more information.
Authorized Capital Stock
The authorized capital stock of CSX is (i) 5,400,000,000 shares of common stock, par value $1.00 per
share, and (ii) 25,000,000 shares of preferred stock, without par value, issuable in series.
Common Stock
Listing. Our common stock is listed on the Nasdaq Global Select Market under the symbol “CSX.”
Fully Paid and Non-Assessable. All outstanding shares of common stock are fully-paid and non-
assessable. Any additional shares of common stock we issue will also be fully-paid and non-assessable.
Voting Rights. Holders of common stock are entitled to one vote per share on all matters voted on by
shareholders, and, except as otherwise required by law or provided by the terms of any series of
preferred stock, the holders of those shares exclusively possess all voting power of CSX. No holder of
common stock is entitled as such, as a matter of right, to subscribe for or purchase any shares of
common stock or preferred stock. There is no cumulative voting in the election of directors, who are
elected annually by a vote of the majority of the votes cast with respect to a nominee’s election; provided,
that if there are more nominees for election than the number of directors to be elected, directors are
elected by a plurality of the votes cast in such an election.
Dividends. Subject to the preferential rights of any outstanding series of preferred stock, the holders of
common stock are entitled to receive ratably dividends as may be declared from time to time by our
Board of Directors from funds legally available for that purpose.
Right to Receive Liquidation Distributions. In the event of a liquidation, dissolution or winding up of CSX,
holders of common stock are entitled to share ratably in all assets remaining after payment or provision
for liabilities and amounts owing in respect of any outstanding preferred stock.
Transfer Agent. Broadridge Corporate Issuer Solutions, Inc., located in Edgewood, New York, is the
transfer agent for our common stock.
142
Preferred Stock
Subject to limitations prescribed by the VSCA and CSX’s amended and restated articles of incorporation,
our Board of Directors, without further action by our shareholders, is authorized to designate and issue in
series preferred stock and to fix as to any series:
•
•
•
•
the number of shares constituting that series;
the rate of dividend, the time of payment and, if cumulative, the dates from which dividends will be
cumulative, and the extent of participation rights, if any;
any right to vote with holders of shares of any other series or class and any right to vote as a
class, either generally or as a condition to specified corporate action;
the price at and the terms and conditions on which shares may be redeemed, including any
sinking fund provisions for the redemption or purchase of shares;
the amount payable upon shares in the event of a voluntary or involuntary liquidation; and
•
• whether shares will have the privilege of conversion, and if so, the terms and conditions on which
shares may be converted.
The issuance of preferred stock could, among other things, adversely affect the voting power of the
holders of common stock and, under certain circumstances, make it more difficult for a third party to gain
control of CSX or to remove present management and could have the effect of delaying or preventing a
merger, tender offer or other attempted takeover of CSX. No holder of preferred stock will be entitled, as
a matter of right, to subscribe for or purchase any shares of preferred stock or common stock.
Unless otherwise determined by our Board of Directors, any series of preferred stock will rank, with
respect to dividends and the distribution of assets, senior to common stock, and on a parity with shares of
any other then outstanding series of preferred stock. Therefore, any preferred stock that may
subsequently be issued may limit the rights of the holders of our common stock and preferred stock. In
addition, under certain circumstances, preferred stock could also restrict dividend payments to our
holders of common stock.
Virginia Stock Corporation Act; Anti-takeover Effects
The VSCA contains provisions governing “Affiliated Transactions.” These provisions, with several
exceptions discussed below, generally require approval of certain material transactions between a
Virginia corporation and any beneficial holder of more than 10% of any class of its outstanding voting
shares (an “Interested Shareholder”) by a majority of disinterested directors and by the holders of at least
two-thirds of the remaining voting shares. Affiliated Transactions subject to this approval requirement
include mergers, share exchanges, material dispositions of corporate assets not in the ordinary course of
business, any dissolution of the corporation proposed by or on behalf of an Interested Shareholder, or
any reclassification, including a reverse stock split, recapitalization or merger of the corporation with its
subsidiaries, which increases the percentage of voting shares owned beneficially by an Interested
Shareholder by more than 5%.
143
For three years following the time that a person becomes an Interested Shareholder, a Virginia
corporation cannot engage in an Affiliated Transaction with that Interested Shareholder without the
approval of two-thirds of the voting shares other than those shares beneficially owned by the Interested
Shareholder, and the approval of a majority of the Disinterested Directors. “Disinterested Director” means,
with respect to a particular Interested Shareholder, a member of our Board of Directors who was:
•
•
a member before the date on which an Interested Shareholder became an Interested
Shareholder, or
recommended for election by, or was elected to fill a vacancy and received the affirmative vote of,
a majority of the Disinterested Directors then on the Board of Directors.
After the expiration of the three-year period, the statute requires approval of Affiliated Transactions by
two-thirds of the voting shares other than those beneficially owned by the Interested Shareholder.
The principal exceptions to the special voting requirements apply to transactions proposed after the
three-year period has expired and require either that the transaction be approved by a majority of CSX’s
Disinterested Directors or that the transaction satisfy the fair-price requirements of the statute. In general,
the fair-price requirement provides that in a two-step acquisition transaction, the Interested Shareholder
must pay the shareholders in the second step either the same amount of cash or the same amount and
type of consideration paid to acquire CSX’s shares in the first step.
None of the limitations and special voting requirements described above applies to an Interested
Shareholder whose acquisition of shares making that person an Interested Shareholder was approved by
a majority of CSX’s Disinterested Directors.
These provisions are designed to deter certain types of takeovers of Virginia corporations. The statute
provides that, by affirmative vote of a majority of the voting shares other than shares owned by any
Interested Shareholder, a corporation can adopt an amendment to its articles of incorporation or bylaws
providing that the Affiliated Transactions provisions will not apply to the corporation. At the 2006 annual
meeting, the shareholders of CSX voted to “opt out” of the Affiliated Transactions provisions of the VSCA.
Under CSX’s amended and restated articles of incorporation, the following actions must be approved by
the affirmative vote of a majority of the voting shares entitled to vote: (1) any plan of merger or share
exchange for which the VSCA requires shareholder approval; (2) the sale of all or substantially all of
CSX’s property for which the VSCA requires shareholder approval; and (3) the dissolution of CSX.
Majority voting for these three types of actions became effective on November 3, 2007, 18 months after
the amendment was approved by the shareholders.
The VSCA also generally provides that shares of a Virginia corporation acquired in a transaction that
would cause the acquiring person’s voting strength to meet or exceed any of three thresholds (20%,
33-1/3% or 50%) have no voting rights with respect to those shares unless granted by a majority vote of
shares not owned by the acquiring person or any officer or employee-director of the corporation. This
provision empowers an acquiring person to require the Virginia corporation to hold a special meeting of
shareholders to consider the matter within 50 days of its request. CSX’s bylaws provide that this law does
not apply to acquisitions of CSX stock.
144
Subsidiaries of the Registrant
Exhibit 21
As of December 31, 2022, 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, 2022, none of the other subsidiaries included in the Registrant's consolidated
financial statements constitute a significant subsidiary.
145
List of Subsidiary Issuers and Guarantors
Exhibit 22.1
As of December 31, 2022, the following subsidiaries of CSX are issuers or guarantors of the Company’s
Secured Equipment Notes due 2023 issued in 2007:
Issuers:
CSX Transportation, Inc.
Guarantors:
CSX Corporation
146
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. 333-238807) pertaining to the CSX Corporation
401(k) Plan,
• 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 Statements (Form S-8 Nos. 333-201167 and 333-251550) pertaining to the
CSX Executives’ Deferred Compensation Plan,
• 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,
• Registration Statement (Form S-8 No. 333-160651) pertaining to the CSX Omnibus
Incentive Plan,
• Registration Statement (Form S-8 No. 033-57029) pertaining to the 1987 Long-Term
Performance Stock Plan,
• Registration Statement (Form S-3 No. 333-262788) pertaining to (i) CSX Corporation’s
Debt Securities, Warrants, Preferred Stock, Common Stock, Depositary Shares, Purchase
Contracts, Units, Guarantees Of Debt Securities Of CSX Transportation, Inc. and
Guarantees of Trust Preferred Securities Of CSX Capital Trust I, (ii) CSX Transportation,
Inc.’s Debt Securities and (iii) CSX Capital Trust I’s Trust Preferred Securities, and
of our reports dated February 15, 2023, 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, 2022.
/s/ Ernst & Young LLP
Jacksonville, Florida
February 15, 2023
147
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, 2022 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 15, 2023
/s/THOMAS P. BOSTICK
Thomas P. Bostick
February 15, 2023
/s/ STEVEN T. HALVERSON
Steven T. Halverson
February 15, 2023
/s/ PAUL C. HILAL
Paul C. Hilal
February 15, 2023
/s/ DAVID M. MOFFETT
David M. Moffett
February 15, 2023
/s/ LINDA H. RIEFLER
Linda H. Riefler
February 15, 2023
/s/ SUZANNE M. VAUTRINOT
Suzanne M. Vautrinot
February 15, 2023
/s/ JAMES L. WAINSCOTT
James L. Wainscott
February 15, 2023
/s/ J. STEVEN WHISLER
J. Steven Whisler
February 15, 2023
/s/ JOHN J. ZILLMER
John J. Zillmer
February 15, 2023
148
Exhibit 31
CERTIFICATION OF CEO AND CFO PURSUANT TO EXCHANGE ACT RULE
13a - 14(a) OR RULE 15d-14(a)
I, Joseph R. Hinrichs, 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 15, 2023
/s/ JOSEPH R. HINRICHS
Joseph R. Hinrichs
President and Chief Executive Officer
149
I, Sean R. Pelkey, 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 15, 2023
/s/ SEAN R. PELKEY
Sean R. Pelkey
Executive Vice President and Chief Financial Officer
150
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,
2022 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Joseph R. Hinrichs,
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 15, 2023
/s/ JOSEPH R. HINRICHS
Joseph R. Hinrichs
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,
2022 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Sean R. Pelkey,
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 15, 2023
/s/ SEAN R. PELKEY
Sean R. Pelkey
Executive Vice President and Chief Financial Officer
151
Corporate Headquarters
500 Water Street
Jacksonville, FL 32202
csx.com