Related Parties and Affiliates

Conrail

Through a limited liability company, CSX and Norfolk Southern Corporation (“NS”) jointly own Conrail. CSX has a 42% economic interest and 50% voting interest in the jointly-owned entity, and NS has the remainder of the economic and voting interests. Pursuant to the Investments-Equity Method and Joint Venture Topic in the ASC, CSX applies the equity method of accounting to its investment in Conrail.

Conrail owns rail infrastructure and operates for the joint benefit of CSX and NS. This is known as the shared asset area. Conrail charges fees for right-of-way usage, equipment rentals and transportation, switching and terminal service charges in the shared asset area. These expenses are included in materials, supplies and other on the consolidated income statements. Future minimum lease payments due to Conrail under the shared asset area agreements are shown in the table below.



(Dollars in Millions)	Conrail Shared
Years	Asset Agreement
2018	$	27
2019	27
2020	27
2021	27
2022	27
Thereafter	48
Total	$	183

Also, included in equity earnings of affiliates are CSX’s 42 percent share of Conrail’s income and its amortization of the fair value write-up arising from the acquisition of Conrail and certain other adjustments. The amortization primarily represents the additional after-tax depreciation expense related to the write-up of Conrail’s fixed assets when the original purchase price, from the 1997 acquisition of Conrail, was allocated based on fair value. This write-up of fixed assets resulted in a difference between CSX's investment in Conrail and its share of Conrail's underlying net equity, which is $347 million as of December 2017.

NOTE 12. Related Parties and Affiliates, continued

The following table discloses amounts related to Conrail. Purchase price amortization and equity earnings are included in equity earnings of affiliates and all other amounts in the table are included in materials, supplies and other expenses on the Company’s consolidated income statements.



	Fiscal Years
(Dollars in Millions)	2017			2016			2015
Rents, fees and services	$	120		$	114		$	123
Purchase price amortization and other	4			4			4
Equity earnings of Conrail	(58		)	(37		)	(33		)
Total Conrail Expense	$	66		$	81		$	94

As required by the Related Party Disclosures Topic in the ASC, the Company has identified amounts below owed to Conrail, or its subsidiaries, representing liabilities under the operating, equipment and shared area agreements with Conrail. In 2014, the Company also executed two promissory notes with a subsidiary of Conrail which were included in long-term debt on the consolidated balance sheets. Interest expense from these promissory notes was $6 million for 2017, 2016 and 2015, respectively.



	December		December
(Dollars in Millions)	2017		2016
Balance Sheet Information:
CSX payable to Conrail	$	123	$	91
Promissory notes payable to Conrail subsidiary
2.89% CSX promissory note due October 2044	73		73
2.89% CSXT promissory note due October 2044	151		151

TTX Company

TTX Company ("TTX") is a privately-held corporation engaged in the business of providing its owner-railroads with standardized fleets of intermodal, automotive and general use railcars at time and mileage rates. CSX owns about 20 percent of TTX's common stock, and the remaining is owned by the other leading North American railroads and their affiliates. CSX's investment in TTX is $626 million and is included in affiliates and other companies in the consolidated balance sheet. Pursuant to the Investments-Equity Method topic in the ASC, CSX applies the equity method of accounting to its investment in TTX.

NOTE 12. Related Parties and Affiliates, continued

As required by the Related Party Disclosures Topic in the ASC, the following table discloses amounts related to TTX. Car hire rents are included in equipment and other rents expense and equity earnings are included in equity earnings of affiliates in the Company’s consolidated income statements. Also included below is balance sheet information related to CSX's payable to TTX, which represents car rental liabilities.



	Fiscal Years
(Dollars in Millions)	2017			2016			2015
Income statement information:
Car hire rents	$	237		$	233		$	218
Equity earnings of TTX	(157		)	(26		)	(20		)
Total TTX expense	$	80		$	207		$	198



	December		December
Balance sheet information:	2017		2016
CSX payable to TTX	$	43	$	47

Tax Reform Effect on Equity Earnings of Affiliates

Due to the enactment of tax reform, the Company recognized a benefit of $142 million, or $0.10 per share after-tax, in its equity earnings of affiliates. This benefit was primarily the result of the Company's affiliates (primarily TTX and Conrail) revaluing their deferred tax liabilities to reflect the lower federal corporate tax rate, which favorably impacted their net earnings for 2017. (See additional discussion over tax reform in Note 11, Income Taxes.)