Earnings Per Share

9 Months Ended

Sep. 30, 2019

The following table sets forth the computation of basic earnings per share and earnings per share, assuming dilution:



	Third Quarters				Nine Months
	2019		2018		2019		2018
Numerator (Dollars in millions):
Net Earnings	$	856	$	894	$	2,560	$	2,466

Denominator (Units in millions):
Average Common Shares Outstanding	790		850		803		866
Other Potentially Dilutive Common Shares	2		4		2		4
Average Common Shares Outstanding, Assuming Dilution	792		854		805		870

Net Earnings Per Share, Basic	$	1.08	$	1.05	$	3.19	$	2.85
Net Earnings Per Share, Assuming Dilution	$	1.08	$	1.05	$	3.18	$	2.83

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 because it is offset by shares CSX could repurchase using the proceeds from these hypothetical exercises to obtain the common stock equivalent. Approximately 1 million and 7 thousand of total average outstanding stock options for the quarters ended September 30, 2019 and September 30, 2018, respectively, and 800 thousand and 600 thousand for the nine months ended September 30, 2019 and September 30, 2018, respectively, were excluded from the diluted earnings per share calculation because their effect was antidilutive.

Share Repurchases

In February 2018, the Company announced an increase to the $1.5 billion share repurchase program first announced in October 2017, bringing the total authorized amount to $5 billion. This program was completed on January 16, 2019. Also on January 16, 2019, the Company announced a new $5 billion share repurchase program. During third quarter and nine months ended 2019 and 2018, the Company engaged in the following repurchase activities:



	Third Quarters				Nine Months
	2019		2018		2019		2018
Shares Repurchased (Millions)	16		15		39		46
Cost of Shares (Dollars in millions)	$	1,111	$	1,006	$	2,767	$	2,816

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 ASC, the excess of repurchase price over par value is recorded in retained earnings.

On August 8, 2019, the Company entered into an agreement to repurchase shares of the Company’s common stock. Under this agreement, the Company made a prepayment of $250 million to a financial institution and settlement occurred September 10, 2019. At settlement, the Company received approximately 4 million shares, calculated based on the volume-weighted average price of the Company’s common stock over the term of the agreement, less a discount.

On July 19, 2018, the Company entered into an accelerated share repurchase agreement to repurchase shares of the Company’s common stock. Under this agreement, the Company made a prepayment of $500 million to a financial institution and received an initial delivery of 6 million shares valued at $400 million. The remaining balance of $100 million was settled through receipt of additional shares on October 11, 2018, with the final net number of shares calculated based on the volume-weighted average price of the Company's common stock over the term of the agreement, less a discount. Approximately 7 million total shares were repurchased under the agreement.

On April 20, 2018, the Company entered into an accelerated share repurchase agreement to repurchase shares of the Company’s common stock. Under this agreement, the Company made a prepayment of $450 million to a financial institution and received an initial delivery of shares valued at $360 million, or 6 million shares. The remaining balance of $90 million was settled through receipt of additional shares in July 2018, with the final net number of shares calculated based on the volume-weighted average price of the Company's common stock over the term of the agreement, less a discount. Approximately 7 million total shares were repurchased under this agreement. Under a separate accelerated share repurchase agreement in January 2018, the Company paid $150 million to a financial institution and received approximately 3 million total shares in first quarter 2018.