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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
(☒)    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
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_BLUE_RGB_JPG.jpg
CSX CORPORATION
(Exact name of registrant as specified in its charter)
Virginia62-1051971
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
500 Water Street15th FloorJacksonvilleFL32202904359-3200
(Address of principal executive offices)(Zip Code)(Telephone number, including area code)
No Change
(Former name, former address and former fiscal year, if changed since last report.)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, $1 Par ValueCSXNasdaq Global Select Market
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 and posted 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 a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes (☐) No (X)
There were 1,976,131,035 shares of common stock outstanding on September 30, 2023 (the latest practicable date that is closest to the filing date).
CSX Q3 2023 Form 10-Q p.1
Table of Contents

CSX CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
INDEX
Page
PART I.FINANCIAL INFORMATION
Item 1.
Quarters and Nine Months Ended September 30, 2023 and September 30, 2022
Quarters and Nine Months Ended September 30, 2023 and September 30, 2022
At September 30, 2023 (Unaudited) and December 31, 2022
Nine Months Ended September 30, 2023 and September 30, 2022
Quarters and Nine Months Ended September 30, 2023 and September 30, 2022
Item 2.
Item 3.
Item 4.
PART II.OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
CSX Q3 2023 Form 10-Q p.2
Table of Contents
CSX CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENTS (Unaudited)
(Dollars in millions, except per share amounts)
Third QuartersNine Months
2023202220232022
Revenue$3,572 $3,895 $10,977 $11,123 
Expense
Labor and Fringe752 759 2,216 2,135 
Purchased Services and Other689 664 2,061 1,986 
Depreciation and Amortization399 378 1,194 1,107 
Fuel349 438 1,025 1,215 
Equipment and Other Rents94 104 266 299 
Gains on Property Dispositions(6)(27)(26)(183)
Total Expense2,277 2,316 6,736 6,559 
Operating Income1,295 1,579 4,241 4,564 
Interest Expense(203)(193)(605)(543)
Other Income - Net34 37 106 89 
Earnings Before Income Taxes1,126 1,423 3,742 4,110 
Income Tax Expense(280)(312)(913)(962)
Net Earnings$846 $1,111 $2,829 $3,148 
Per Common Share (Note 2)
Net Earnings Per Share, Basic$0.42 $0.52 $1.40 $1.46 
Net Earnings Per Share, Assuming Dilution$0.42 $0.52 $1.40 $1.46 
Average Shares Outstanding (In millions)
1,994 2,122 2,022 2,156 
Average Shares Outstanding, Assuming Dilution (In millions)
1,999 2,126 2,027 2,161 


CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS (Unaudited)
(Dollars in millions)
Third QuartersNine Months
2023202220232022
Total Comprehensive Earnings (Note 10)$864 $1,129 $2,845 $3,236 


See accompanying notes to consolidated financial statements.
CSX Q3 2023 Form 10-Q p.3
Table of Contents
CSX CORPORATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
(Unaudited)
September 30,
2023		December 31,
2022
ASSETS
Current Assets:
Cash and Cash Equivalents$1,360 $1,958 
Short-term Investments (Note 9)79 129 
Accounts Receivable - Net (Note 8)1,399 1,313 
Materials and Supplies427 341 
Other Current Assets94 108 
  Total Current Assets3,359 3,849 
Properties49,118 48,105 
Accumulated Depreciation(14,462)(13,863)
  Properties - Net34,656 34,242 
Investment in Affiliates and Other Companies2,364 2,292 
Right-of-Use Lease Asset 496 505 
Goodwill and Other Intangible Assets - Net509 502 
Other Long-term Assets466 522 
  Total Assets$41,850 $41,912 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable$1,201 $1,130 
Labor and Fringe Benefits Payable441 707 
Casualty, Environmental and Other Reserves (Note 4)133 144 
Current Maturities of Long-term Debt (Note 7)559 151 
Income and Other Taxes Payable361 111 
Other Current Liabilities239 228 
  Total Current Liabilities2,934 2,471 
Casualty, Environmental and Other Reserves (Note 4)302 292 
Long-term Debt (Note 7)17,903 17,896 
Deferred Income Taxes - Net7,700 7,569 
Long-term Lease Liability 487 488 
Other Long-term Liabilities 570 571 
  Total Liabilities29,896 29,287 
Shareholders' Equity:
Common Stock, $1 Par Value
1,976 2,066 
Other Capital657 574 
Retained Earnings9,689 10,363 
Accumulated Other Comprehensive Loss (Note 10)(372)(388)
Non-controlling Minority Interest4 10 
Total Shareholders' Equity11,954 12,625 
Total Liabilities and Shareholders' Equity$41,850 $41,912 
See accompanying notes to consolidated financial statements.
CSX Q3 2023 Form 10-Q p.4
Table of Contents
CSX CORPORATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CASH FLOW STATEMENTS (Unaudited)
(Dollars in millions)
Nine Months
20232022
OPERATING ACTIVITIES
Net Earnings$2,829 $3,148 
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities:
Depreciation and Amortization1,194 1,107 
Deferred Income Taxes111 125 
Gains on Property Dispositions(26)(183)
Other Operating Activities69 (52)
Changes in Operating Assets and Liabilities:
Accounts Receivable(65)(143)
Other Current Assets(86)(32)
Accounts Payable52 166 
Income and Other Taxes Payable267 22 
Other Current Liabilities(296)97 
Net Cash Provided by Operating Activities4,049 4,255 
INVESTING ACTIVITIES
Property Additions(1,590)(1,437)
Purchases of Short-term Investments(103)(19)
Proceeds from Sales of Short-term Investments153 9 
Proceeds and Advances from Property Dispositions35 51 
Business Acquisition, Net of Cash Acquired(31)(223)
Other Investing Activities(19)(25)
Net Cash Used In Investing Activities(1,555)(1,644)
FINANCING ACTIVITIES
Long-term Debt Issued (Note 7)600 2,000 
Long-term Debt Repaid (Note 7)(150)(178)
Dividends Paid(666)(645)
Shares Repurchased(2,901)(3,710)
Other Financing Activities25 (6)
Net Cash Used in Financing Activities(3,092)(2,539)
Net (Decrease) Increase in Cash and Cash Equivalents(598)72 
CASH AND CASH EQUIVALENTS
Cash and Cash Equivalents at Beginning of Period1,958 2,239 
Cash and Cash Equivalents at End of Period$1,360 $2,311 
SUPPLEMENTAL CASH FLOW INFORMATION
Issuance of Common Stock as Consideration for Acquisition$— $422 

See accompanying notes to consolidated financial statements.
CSX Q3 2023 Form 10-Q p.5
Table of Contents
CSX CORPORATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY (Unaudited)
(Dollars in millions)
Nine Months 2023
Common Shares Outstanding
(Thousands)
Common Stock and Other CapitalRetained Earnings
Accumulated Other Comprehensive (Loss) Income(a)
Non-controlling Minority InterestTotal Shareholders' Equity
Balance December 31, 20222,066,367 $2,640 $10,363 $(388)$10 $12,625 
Comprehensive Earnings:
Net Earnings— — 987 — — 987 
Other Comprehensive Income — — — 2 — 2 
Total Comprehensive Earnings989 
Common stock dividends, $0.11 per share
— — (226)— — (226)
Share Repurchases(35,157)(35)(1,032)— — (1,067)
Stock Option Exercises and Other1,865 15 — — (2)13 
Balance March 31, 20232,033,075 $2,620 $10,092 $(386)$8 $12,334 
Comprehensive Earnings:
Net Earnings— — 996 — — 996 
Other Comprehensive Income— — — (4)— (4)
Total Comprehensive Earnings992 
Common stock dividends, $0.11 per share
— — (222)— — (222)
Share Repurchases(27,434)(28)(835)— — (863)
Stock Option Exercises and Other712 38 (1)— (4)33 
Balance June 30, 20232,006,353 $2,630 $10,030 $(390)$4 $12,274 
Comprehensive Earnings:
Net Earnings— — 846 — — 846 
Other Comprehensive Income— — — 18 — 18 
Total Comprehensive Earnings864 
Common stock dividends, $0.11 per share
— — (218)— — (218)
Share Repurchases(31,018)(31)(940)— — (971)
Excise Tax on Net Share Repurchases— — (28)— — (28)
Stock Option Exercises and Other797 34 (1)— — 33 
Balance September 30, 20231,976,132 $2,633 $9,689 $(372)$4 $11,954 

(a) Accumulated Other Comprehensive Loss balances shown above are net of tax. The associated taxes were $122 million as of December 31, 2022, $121 million as of March 31, 2023, $107 million as of June 30, 2023, and $101 million as of September 30, 2023. For additional information, see Note 10, Other Comprehensive Income.


See accompanying notes to consolidated financial statements.
CSX Q3 2023 Form 10-Q p.6
Table of Contents
CSX CORPORATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY (Unaudited)
(Dollars in millions)
Nine Months 2022
Common Shares Outstanding (Thousands)
Common Stock and Other CapitalRetained Earnings
Accumulated Other Comprehensive (Loss) Income(a)
Non-controlling Minority InterestTotal Shareholders' Equity
Balance December 31, 20212,201,787 $2,268 $11,630 $(408)$10 $13,500 
Comprehensive Earnings:
Net Earnings— — 859 — — 859 
Other Comprehensive Income— — — 31 — 31 
Total Comprehensive Earnings890 
Common stock dividends, $0.10 per share
— — (218)— — (218)
Share Repurchases(29,365)(29)(987)— — (1,016)
Stock Option Exercises and Other1,831 38 — — 1 39 
Balance March 31, 20222,174,253 $2,277 $11,284 $(377)$11 $13,195 
Comprehensive Earnings:
Net Earnings— — 1,178 — — 1,178 
Other Comprehensive Income— — — 39 — 39 
Total Comprehensive Earnings1,217 
Common stock dividends, $0.10 per share
— — (215)— — (215)
Share Repurchases(46,508)(47)(1,452)— — (1,499)
Issuance of common stock for acquisition of Pan Am Systems, Inc.13,173 422 — — — 422 
Stock Option Exercises and Other314 23 (1)— (1)21 
Balance June 30, 20222,141,232 $2,675 $10,794 $(338)$10 $13,141 
Comprehensive Earnings:
Net Earnings— — 1,111 — — 1,111 
Other Comprehensive Income— — — 18 — 18 
Total Comprehensive Earnings1,129 
Common stock dividends, $0.10 per share
— — (212)— — (212)
Share Repurchases(39,924)(40)(1,155)— — (1,195)
Stock Option Exercises and Other514 22 (1)— (1)20 
Balance September 30, 20222,101,822 $2,657 $10,537 $(320)$9 $12,883 

(a) Accumulated Other Comprehensive Loss balances shown above are net of tax. The associated taxes were $107 million as of December 31, 2021, $99 million as of March 31, 2022, $88 million as of June 30, 2022, and $85 million as of September 30, 2022. For additional information, see Note 10, Other Comprehensive Income.

See accompanying notes to consolidated financial statements.
CSX Q3 2023 Form 10-Q p.7
Table of Contents
CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1.    Nature of Operations and Significant Accounting Policies

Background
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'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. The Company's intermodal business links customers to railroads via trucks and terminals. 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 expanded CSXT’s reach in the Northeastern United States. CSXT is also responsible for the Company's real estate sales, leasing, acquisition and management and development activities, substantially all of which 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. Quality Carriers is the largest provider of bulk liquid chemicals truck transportation in North America. CSX Intermodal Terminals owns and operates a system of intermodal terminals, predominantly in the eastern United States and also performs drayage services (the pickup and delivery of intermodal shipments) for certain customers. 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.

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. The timing and amount of gains recognized were based on the allocation of fair value to each conveyance, the timing of conveyances and collectability. Over the course of this transaction, which was completed in 2022, total proceeds of $525 million were collected and total gains of $493 million were recognized. A gain of $20 million was recognized in first quarter 2022 related to the closing of the second phase. During second quarter 2022, the final $125 million of proceeds was approved by the Commonwealth, which resulted in a $122 million gain related to property rights previously conveyed. These proceeds were collected during fourth quarter 2022 upon closing of the third phase. There were no proceeds or gains related to this agreement during third quarter 2022.
CSX Q3 2023 Form 10-Q p.8
Table of Contents
CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 consolidated financial statements and accompanying notes. Where applicable, prior year information has been reclassified to conform to the current presentation. Pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been omitted from these interim financial statements. CSX suggests that these financial statements be read in conjunction with the audited financial statements and the notes included in CSX's most recent annual report on Form 10-K and any subsequently filed current reports on Form 8-K.

Fiscal Year
The Company's fiscal periods are based upon the calendar year. Except as otherwise specified, references to “third quarter(s)” or “nine months” indicate CSX's fiscal periods ending September 30, 2023 and September 30, 2022, and references to "year-end" indicate the fiscal year ended December 31, 2022.

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") is no longer available as of 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 at present can generally be applied through December 31, 2024. The Company applied the practical expedient to its forward starting interest rate swaps effective June 30, 2023. See Note 7, Debt and Credit Agreements, for additional information. The Company does not have any other contracts that are affected by the transition from LIBOR.
CSX Q3 2023 Form 10-Q p.9
Table of Contents
CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2.    Earnings Per Share

The following table sets forth the computation of basic earnings per share and earnings per share, assuming dilution.
Third QuartersNine Months
2023202220232022
Numerator (Dollars in millions):
Net Earnings
$846 $1,111 $2,829 $3,148 
Denominator (Units in millions):
Average Common Shares Outstanding1,994 2,122 2,022 2,156 
Other Potentially Dilutive Common Shares5 4 5 5 
Average Common Shares Outstanding, Assuming Dilution
1,999 2,126 2,027 2,161 
Net Earnings Per Share, Basic
$0.42 $0.52 $1.40 $1.46 
Net Earnings Per Share, Assuming Dilution
$0.42 $0.52 $1.40 $1.46 
    
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. The total average outstanding stock options that were excluded from the diluted earnings per share calculation because their effect was antidilutive is in the table below.
Third QuartersNine Months
2023202220232022
Antidilutive Stock Options Excluded from Diluted EPS (Units in millions)
3343

CSX Q3 2023 Form 10-Q p.10
Table of Contents
CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2.    Earnings Per Share, continued

Share Repurchases    
In July 2022, the Company announced a $5 billion share repurchase program. At September 30, 2023, approximately $371 million of repurchase authority remained under this program. On October 17, 2023, a new incremental $5 billion share repurchase program was approved.

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.

During third quarters and nine months ended September 30, 2023, and September 30, 2022, the Company engaged in the following repurchase activities:

Third Quarters
Nine Months
2023202220232022
Shares Repurchased (Millions)
31 40 94 116 
Cost of Shares (Dollars in millions)
$971 $1,195 $2,901 $3,710 

The Inflation Reduction Act of 2022 imposes a nondeductible 1% excise tax on the net value of most share repurchases made after December 31, 2022. Excise tax commensurate with net share repurchases is reflected in equity and a corresponding liability for excise taxes payable is included in other current liabilities on the consolidated balance sheet. Amounts shown in the table above exclude the impact of this excise tax.

Dividend Increase
In February 2023, the Company's Board of Directors authorized a 10% increase in the quarterly cash dividend to $0.11 per common share.

CSX Q3 2023 Form 10-Q p.11
Table of Contents
CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3.     Stock Plans and Share-Based Compensation

Under CSX's share-based compensation plans, awards consist of performance units, stock options and restricted stock units for management and stock grants for directors. Share-based compensation expense for awards under share-based compensation plans 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 over an accelerated service period for 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.

Third QuartersNine Months
(Dollars in millions)2023202220232022
Share-Based Compensation Expense:
Performance Units$5 $1 $14 $27 
Restricted Stock Units5 2 14 11 
Stock Options3 3 9 13 
Employee Stock Purchase Plan2 2 6 4 
Stock Awards for Directors— — 2 2 
Total Share-Based Compensation Expense$15 $8 $45 $57 
Income Tax Benefit$3 $3 $10 $15 

Long-term Incentive Plan
In February 2023, the Company granted the following awards under a new long-term incentive plan ("LTIP") for the years 2023 through 2025, which was adopted under the CSX 2019 Stock and Incentive Award Plan.
Granted
(Thousands)
Weighted Avg. Fair Value
Performance Units680$32.77 
Restricted Stock Units64831.67 
Stock Options1,0679.86 


CSX Q3 2023 Form 10-Q p.12
Table of Contents
CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3.     Stock Plans and Share-Based Compensation, continued

Performance Units
Payouts will be made in CSX common stock with a payout range for most participants between 0% and 200% of the target awards depending on Company performance against predetermined goals. 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 performance units granted to certain executive officers were calculated using a Monte-Carlo simulation model.

Measurement against goals related to both average annual operating income growth and economic profit (CSX Cash Earnings or "CCE"), in each case excluding non-recurring items as defined in the plan, will each comprise 50% of the payout. As defined under the plan, CCE is a cash-flow based measure of economic profit that incentivizes strategic investments earning more than the required return and is calculated as CSX’s gross cash earnings (after-tax EBITDA) minus the required return on gross operating assets.

Stock Options
Stock options were granted with ten-year terms and vest over three years in equal installments each year on the anniversary of the grant date. These awards are time-based and are not based upon attainment of performance goals. The fair values of stock option awards were estimated at the grant date using the Black-Scholes valuation model.

Restricted Stock Units
The restricted stock units awarded vest over three years in equal installments each year on the anniversary of the grant date and are settled in CSX common stock on a one-for-one basis. These awards are time-based and are not based upon CSX's attainment of performance goals.

For more information related to the Company's outstanding long-term incentive compensation, see CSX's most recent annual report on Form 10-K.


CSX Q3 2023 Form 10-Q p.13
Table of Contents
CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4.    Casualty, Environmental and Other Reserves

Personal injury and environmental reserves are considered critical accounting estimates due to the need for management judgment. Casualty, environmental and other reserves are provided for in the consolidated balance sheets as shown in the table below.

September 30, 2023December 31, 2022
(Dollars in millions)CurrentLong-termTotalCurrentLong-termTotal
Casualty:
Personal Injury$40 $87 $127 $40 $86 $126 
Occupational7 60 67 10 58 68 
     Total Casualty47 147 194 50 144 194 
Environmental40 117 157 53 108 161 
Other46 38 84 41 40 81 
     Total$133 $302 $435 $144 $292 $436 

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 represent accruals for personal injury, occupational disease and occupational injury claims primarily related to railroad operations. The Company's self-insured retention amount for casualty claims is $100 million per occurrence. Currently, no individual claim is expected to exceed the self-insured retention amount.

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. This analysis did not result in a material adjustment to the personal injury reserve in the quarters and nine months ended September 30, 2023, or September 30, 2022.

CSX Q3 2023 Form 10-Q p.14
Table of Contents
CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4.    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 claim filings, 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. The analysis did not result in a material adjustment to the occupational reserve in the quarters and nine months ended September 30, 2023, or September 30, 2022.

Environmental
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 230 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.

The Company reviews its role with respect to each site identified at least quarterly. 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. 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 include liabilities for various claims, such as automobile, property, general liability, workers' compensation and longshoremen disability claims.

CSX Q3 2023 Form 10-Q p.15
Table of Contents
CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5.    Commitments and Contingencies

Insurance
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 outcomes 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 is likely to have a material adverse effect on the Company's financial condition, results of operations or liquidity. An unexpected adverse resolution of one or more of these items, however, could have a material adverse effect on the Company's financial condition, results of operations or liquidity in that particular period.

The Company is able to estimate a range of possible loss for certain matters for which a loss is reasonably possible in excess of reserves established. The Company has estimated this range to be $3 million to $16 million in the aggregate at September 30, 2023. 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.
CSX Q3 2023 Form 10-Q p.16
Table of Contents
CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5.    Commitments and Contingencies, continued

CSXT believes that its fuel surcharge practices were arrived at and applied lawfully and that the case is without merit. Accordingly, the Company intends to defend itself vigorously. However, penalties for violating antitrust laws can be severe, and resolution of these matters individually or when aggregated could have a material adverse effect on the Company's financial condition, results of operations or liquidity in that particular period.

Environmental
CSXT is indemnifying Pharmacia LLC, formerly known as Monsanto Company, ("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.

For the lower eight miles of the Study Area, EPA issued its Record of Decision detailing the agency’s mandated remedial process in March 2016. Occidental Chemical Corporation ("Occidental") is performing the remedial design for the lower eight-mile portion of the Study Area pursuant to a consent order with EPA.

For the remaining upper nine miles of the Study Area, EPA selected an interim remedy in a Record of Decision dated September 28, 2021. On March 2, 2023, EPA issued an administrative order requiring Occidental to design the interim remedy for the upper nine miles of the Study Area.

Approximately 80 parties, including Pharmacia, participated in an EPA-directed allocation and settlement process to assign responsibility. CSXT participated in the EPA-directed allocation and settlement process on behalf of Pharmacia. On March 2, 2022, EPA issued a Notice Letter to Pharmacia, Occidental 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 entire Study Area. CSXT, 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, which is seeking to recover its past and future costs associated with the 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 a federal lawsuit filed by Occidental on June 30, 2018, and one of 37 defendants in a federal lawsuit filed by Occidental on March 24, 2023. 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.
CSX Q3 2023 Form 10-Q p.17
Table of Contents
CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6.    Employee Benefit Plans

The Company sponsors defined benefit pension plans principally for salaried, management personnel. The CSX Pension Plan, the largest plan based on benefit obligation, was closed to new participants beginning in 2020.

Independent actuaries 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. 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.

Pension Benefits Cost
Third QuartersNine Months
(Dollars in millions)2023202220232022
Service Cost Included in Labor and Fringe$6 $8 $18 $24 
Interest Cost28 16 84 48 
Expected Return on Plan Assets(41)(47)(123)(141)
Amortization of Net Loss7 12 21 37 
Total Included in Other Income - Net(6)(19)(18)(56)
Net Periodic Benefit Credit$— $(11)$— $(32)
    
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. No contributions to the Company's qualified pension plans are expected in 2023.

CSX Q3 2023 Form 10-Q p.18
Table of Contents
CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 7.    Debt and Credit Agreements

Total activity related to long-term debt as of the end of third quarter 2023 is shown in the table below. For fair value information related to the Company's long-term debt, see Note 9, Fair Value Measurements.

(Dollars in millions)Current PortionLong-term PortionTotal
Long-term Debt as of December 31, 2022
$151 $17,896 $18,047 
2023 Activity:
Long-term Debt Issued— 600 600 
Long-term Debt Repaid(150)— (150)
Reclassifications557 (557)— 
Hedging, Discount, Premium and Other Activity1 (36)(35)
Long-term Debt as of September 30, 2023
$559 $17,903 $18,462 

Debt Issuance
On September 7, 2023, CSX issued $600 million of 5.200% notes due 2033. 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 will be used for general corporate purposes, which may include debt repayments, repurchases of CSX's common stock, capital investment and working capital requirements.

Interest Rate Derivatives
Fair Value Hedges
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 ("SOFR") on a cumulative $800 million of fixed rate outstanding notes which are due between 2036 and 2040. The cumulative fair value of these swaps, which is included in other long-term liabilities on the consolidated balance sheet, was a liability of $159 million and $118 million as of September 30, 2023 and December 31, 2022, respectively. 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 is summarized as follows.

Third QuartersNine Months
(Dollars in millions)2023202220232022
Interest Expense Impact (Increase) Decrease$(7)$(1)$(19)$3 


CSX Q3 2023 Form 10-Q p.19
Table of Contents
CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 7.    Debt and Credit Agreements, continued

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 are summarized in the table below.
(Dollars in millions)September 30, 2023December 31, 2022
Notional Value of Hedged Notes$800 $800 
Cumulative Fair Value Adjustment to Hedged Notes(159)(118)
Carrying Amount of Hedged Notes$641 $682 

Cash Flow Hedges
In 2020, the Company executed forward starting interest rate swaps, classified as cash flow hedges, with 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 $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. Under the terms of the Adjustable Interest Rate (LIBOR) Act, the reference rate on the swaps were automatically replaced with daily compounded SOFR plus the fallback spread on July 1, 2023, the LIBOR replacement date. As of September 30, 2023, and December 31, 2022, the asset value of the forward starting interest rate swaps was $54 million and $127 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 second quarter 2023, CSX executed a partial settlement equal to $113 million notional value of the cash flow hedges, which resulted in CSX receiving a cash payment of $44 million. In third quarter 2023, CSX partially settled an additional $114 million notional value of the cash flow hedges and received a cash payment of $51 million included in other operating activities on the consolidated cash flow statement. The unsettled aggregate notional value of these swaps was $114 million as of September 30, 2023.

The unrealized 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 amounts related to the hedge, recorded net of tax in other comprehensive income, are summarized in the table below.
Third QuartersNine Months
(Dollars in millions)2023202220232022
Unrealized Gain - Net$14 $9 $4 $63 
See Note 9, Fair Value Measurements, and Note 10, Other Comprehensive Income (Loss), for additional information about the Company's hedges.

CSX Q3 2023 Form 10-Q p.20
Table of Contents
CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 7.    Debt and Credit Agreements, continued

Credit Facility
In February 2023, CSX replaced its existing $1.2 billion unsecured revolving credit facility with a new $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 SOFR or an agreed-upon replacement reference rate, plus a spread that depends upon CSX's senior unsecured debt ratings. This facility expires in February 2028. As of September 30, 2023, 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 third quarter 2023, CSX was in compliance with all covenant requirements under this 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 outstanding at any one time. Proceeds from issuances of the notes are expected to be used for general corporate purposes. At September 30, 2023, the Company had no outstanding debt under the commercial paper program.

CSX Q3 2023 Form 10-Q p.21
Table of Contents
CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8.     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:

Third QuartersNine Months
(Dollars in millions)2023202220232022
Chemicals$646 $678 $1,938 $1,962 
Agricultural and Food Products376 428 1,228 1,227 
Automotive308 274 905 769 
Forest Products243 264 761 743 
Metals and Equipment225 211 704 624 
Minerals190 180 554 494 
Fertilizers124 108 381 346 
Total Merchandise2,112 2,143 6,471 6,165 
Coal594 624 1,864 1,808 
Intermodal517 604 1,508 1,733 
Trucking218 251 678 740 
Other131 273 456 677 
Total$3,572 $3,895 $10,977 $11,123 

The Company’s accounts receivable - net consists of freight and non-freight receivables, reduced by an allowance for credit losses. 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.
(Dollars in millions)September 30,
2023		December 31,
2022
Freight Receivables $1,043 $1,067 
Freight Allowance for Credit Losses(16)(16)
Freight Receivables, net1,027 1,051 
Non-Freight Receivables 387 279 
Non-Freight Allowance for Credit Losses(15)(17)
Non-Freight Receivables, net 372 262 
Total Accounts Receivable, net$1,399 $1,313 

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 the third quarters or nine months ended September 30, 2023, and September 30, 2022.
CSX Q3 2023 Form 10-Q p.22
Table of Contents
CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9.    Fair Value Measurements

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 September 30, 2023, and September 30, 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.

The Company's investment assets are carried at fair value on the consolidated balance sheets as summarized in the following table.
September 30, 2023December 31, 2022
(Dollars in millions)Level 1Level 2TotalLevel 1Level 2Total
Fixed Income Mutual Funds$78 $— $78 $89 $— $89 
Corporate Bonds— 47 47 — 49 49 
Government Securities— 16 16 — 58 58 
Total investments at fair value$78 $63 $141 $89 $107 $196 
Total investments at amortized cost$147 $201 

These investments have the following maturities:
(Dollars in millions)September 30,
2023		December 31,
2022
Less than 1 year
$79 $129 
1 - 5 years
23 24 
5 - 10 years
10 10 
Greater than 10 years
29 33 
Total investments at fair value
$141 $196 
CSX Q3 2023 Form 10-Q p.23
Table of Contents
CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9.    Fair Value Measurements, continued

Long-term Debt
Long-term debt is reported at carrying amount on the consolidated balance sheets and is the Company's only financial instrument with fair values significantly different from their carrying amounts. The 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. 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 and carrying value of the Company's long-term debt is as follows:
(Dollars in millions)September 30,
2023		December 31,
2022
Long-term Debt (Including Current Maturities):
Fair Value$15,839 $16,135 
Carrying Value18,462 18,047 

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 $159 million and $118 million as of September 30, 2023, and December 31, 2022, respectively. The fair value of the Company’s forward starting interest rate swap asset was $54 million and $127 million as of September 30, 2023, and December 31, 2022, respectively. See Note 7, Debt and Credit Agreements, for further information.

CSX Q3 2023 Form 10-Q p.24
Table of Contents
CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 10.     Other Comprehensive Income (Loss)

Total comprehensive earnings are defined as all changes in shareholders' equity during a period, other than those resulting from investments by and distributions to shareholders (e.g. issuance of equity securities and dividends). Generally, for CSX, total comprehensive earnings equal net earnings plus or minus adjustments for pension and other post-retirement liabilities as well as derivative activity and other adjustments. Total comprehensive earnings represent the activity for a period net of tax and was $864 million and $1.1 billion for third quarters 2023 and 2022, respectively, and $2.8 billion and $3.2 billion for the nine months ended September 30, 2023, and September 30, 2022, respectively.

While total comprehensive earnings is the activity in a period and is largely driven by net earnings in that period, AOCI represents the cumulative balance of other comprehensive income, net of tax, as of the balance sheet date. 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 6, Employee Benefit Plans, for further information. Interest rate derivatives consist of forward starting interest rate swaps classified as cash flow hedges. See Note 7, Debt and Credit Agreements, for further information. Other primarily represents CSX's share of AOCI of equity method investees. Amounts reclassified in other to net earnings are included in purchased services and other or equipment and other rents on the consolidated income statements.

Pension and Other Post-Employment BenefitsInterest Rate DerivativesOtherAccumulated Other Comprehensive (Loss) Income
(Dollars in millions)
Balance December 31, 2022, Net of Tax
$(497)$150 $(41)$(388)
Other Comprehensive Income (Loss)
Income Before Reclassifications— 22 — 22 
Amounts Reclassified to Net Earnings15 — (1)14 
Tax Expense(3)(18)1 (20)
Total Other Comprehensive Income 12 4 — 16 
Balance September 30, 2023, Net of Tax
$(485)$154 $(41)$(372)
CSX Q3 2023 Form 10-Q p.25
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THIRD QUARTER 2023 HIGHLIGHTS

•Revenue decreased $323 million, or 8%, year over year.
•Expenses decreased $39 million, or 2%, year over year.
•Operating income of $1.3 billion decreased $284 million, or 18%, year over year.
•Operating ratio of 63.8% increased 430 basis points versus prior year.
•Earnings per diluted share of $0.42 decreased $0.10, or 19%, year over year.

Third QuartersNine Months
20232022Fav / (Unfav)% Change20232022Fav /
(Unfav)		% Change
Volume (in thousands)
1,550 1,587 (37)(2)%4,582 4,679(97)(2)%
(in millions)
Revenue$3,572 $3,895 $(323)(8)$10,977$11,123$(146)(1)
Expense2,277 2,316 392 6,7366,559(177)(3)
Operating Income$1,295 $1,579 $(284)(18)%$4,241$4,564$(323)(7)%
Operating Ratio63.8 %59.5 %(430) bps61.4 %59.0 %(240) bps
Earnings Per Diluted Share$0.42 $0.52 $(0.10)(19)%$1.40 $1.46 $(0.06)(4)%


CSX Q3 2023 Form 10-Q p.26
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Volume and Revenue (Unaudited)
Volume (Thousands of units); Revenue (Dollars in Millions); Revenue Per Unit (Dollars)
Third Quarters
 VolumeRevenueRevenue Per Unit
 20232022% Change20232022% Change20232022% Change
Chemicals161 162 (1)%$646 $678 (5)%$4,012 $4,185 (4)%
Agricultural and Food Products108 120 (10)376 428 (12)3,481 3,567 (2)
Automotive101 85 19 308 274 12 3,050 3,224 (5)
Minerals95 91 4 190 180 6 2,000 1,978 1 
Metals and Equipment70 67 4 225 211 7 3,214 3,149 2 
Forest Products67 75 (11)243 264 (8)3,627 3,520 3 
Fertilizers47 48 (2)124 108 15 2,638 2,250 17 
Total Merchandise649 648 — 2,112 2,143 (1)3,254 3,307 (2)
Intermodal708 762 (7)517 604 (14)730 793 (8)
Coal193 177 9 594 624 (5)3,078 3,525 (13)
Trucking— — — 218 251 (13)— — — 
Other— — — 131 273 (52)— — — 
Total1,550 1,587 (2)%$3,572 $3,895 (8)%$2,305 $2,454 (6)%
Nine Months
 VolumeRevenueRevenue Per Unit
 20232022% Change20232022% Change20232022% Change
Chemicals481 488 (1)%$1,938 $1,962 (1)%$4,029 $4,020 — %
Agricultural and Food Products348 358 (3)1,228 1,227 — 3,529 3,427 3 
Automotive290 248 17 905 769 18 3,121 3,101 1 
Minerals273 253 8 554 494 12 2,029 1,953 4 
Metals and Equipment217 202 7 704 624 13 3,244 3,089 5 
Forest Products212 219 (3)761 743 2 3,590 3,393 6 
Fertilizers152 158 (4)381 346 10 2,507 2,190 14 
Total Merchandise1,973 1,926 2 6,471 6,165 5 3,280 3,201 2 
Intermodal2,046 2,243 (9)1,508 1,733 (13)737 773 (5)
Coal563 510 10 1,864 1,808 3 3,311 3,545 (7)
Trucking— — — 678 740 (8)— — — 
Other— — — 456 677 (33)— — — 
Total4,582 4,679 (2)%$10,977 $11,123 (1)%$2,396 $2,377 1 %

CSX Q3 2023 Form 10-Q p.27
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Third Quarter 2023

Revenue
Total revenue decreased 8% in third quarter 2023 when compared to third quarter 2022 primarily due to lower fuel recovery, decreases in other revenue, pricing declines in export coal due to the impact of lower benchmark rates, lower trucking revenue and lower intermodal volume. These decreases were partially offset by pricing gains in merchandise and higher coal volumes.

Merchandise Volume
Chemicals - Decreased primarily due to lower shipments of materials used in making plastics, partially offset by higher shipments of export plastics and waste.

Agricultural and Food Products - Decreased primarily due to lower shipments of feed grain, including the temporary impacts of a strong southeastern crop that is short-haul and not rail-served, as well as lower shipments of ethanol and wheat.

Automotive - Increased due to higher North American vehicle production as well as new business wins.

Minerals - Increased due to higher shipments of cement and aggregates driven by increased road construction and other infrastructure-related activities.

Metals and Equipment - Increased due to higher steel shipments, as well as stronger equipment shipments.

Forest Products - Decreased primarily due to lower shipments of pulpboard, paper and lumber, partially offset by higher shipments of other building products.

Fertilizers - Decreased due to declines in short-haul shipments, which were partially offset by increases in long-haul phosphate shipments.

Intermodal Volume
Lower volume was due to decreased international shipments driven by high inventory levels and lower imports. Domestic shipments increased due to growth with key customers as well as the prior year impact of supply-side constraints.

Coal Volume
Export coal increased due to higher shipments of metallurgical and thermal coal. Domestic coal decreased due to lower shipments of coal to northern utility plants.

Trucking Revenue
Trucking revenue decreased $33 million versus the prior year due to lower fuel and capacity surcharges.

Other Revenue
Other revenue was $142 million lower, primarily resulting from lower intermodal storage and equipment usage.
CSX Q3 2023 Form 10-Q p.28
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Expenses
Expenses of $2.3 billion decreased $39 million, or 2%, in third quarter 2023 when compared to the third quarter 2022.

Labor and Fringe expense decreased $7 million due to the following:
•Prior year amounts included $42 million of out-of-period labor and benefit costs due to the agreement reached with labor unions.
•All other costs increased $35 million primarily due to inflation and increased headcount.

Purchased Services and Other expense increased $25 million due to the following:
•Operating support costs increased $15 million as the impacts of higher inflation, transportation support costs and maintenance were partially offset by lower intermodal expenses.
•Other costs were $10 million higher as a $16 million increase in casualty expense was partially offset by other non-significant items.

Depreciation and Amortization expense increased $21 million primarily as the result of a 2022 equipment depreciation study as well as a larger asset base.

Fuel costs decreased $89 million primarily resulting from a 24% decrease in locomotive fuel prices, partially offset by higher fuel consumption and $7 million of adjustments for prior periods.

Equipment and Other Rents expense decreased $10 million driven by lower net car hire costs, primarily resulting from improved days per load across all markets, partially offset by costs from higher automotive volumes.

Gains on Property Dispositions decreased to $6 million from $27 million in the prior year.

Interest Expense
Interest expense increased $10 million primarily due to higher interest rates and higher average debt balances.

Other Income - Net
Other income - net decreased $3 million primarily from a decrease in net pension benefit credits, partially offset by other non-significant items.

Income Tax Expense
Income tax expense decreased $32 million mostly due to lower earnings before income taxes. The prior year period included $37 million in tax benefits primarily due to a favorable state legislative change.
CSX Q3 2023 Form 10-Q p.29
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Nine Months Results of Operations

Revenue decreased $146 million primarily due to decreases in other revenue, lower fuel recovery, pricing declines in export coal due to the impact of lower benchmark rates and lower intermodal volumes. These declines were partially offset by pricing and volume gains in merchandise and higher coal volumes.

Total expense increased $177 million primarily due to lower gains on property dispositions, increased inflation and higher operating support costs, partially offset by lower fuel prices.

Interest expense increased $62 million primarily as a result of higher average debt balances and higher effective interest rates.

Other income - net increased $17 million largely due to higher interest income and other non-significant items, partially offset by a decrease in net pension benefit credits.

Income tax expense decreased $49 million primarily due to lower earnings before income taxes, partially offset by prior year favorable state legislative changes.
CSX Q3 2023 Form 10-Q p.30
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Non-GAAP Measures - Unaudited
CSX reports its financial results in accordance with accounting principles generally accepted in the United States of America ("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 supplemental information 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 and advances from property dispositions. Free cash flow should be considered in addition to, rather than a substitute for, cash provided by operating activities. The decrease in free cash flow before dividends from the prior year of $375 million is primarily due to less cash from operating activities and higher property additions. Cash from operating activities in the nine months of 2023 includes the payment of $238 million for retroactive wages and bonuses with associated taxes related to finalized labor agreements as well as the offsetting impact of postponed federal estimated tax payments, which were extended until February 15, 2024 under an Internal Revenue Service tax relief announcement for those impacted by Hurricane Idalia.

The following table reconciles cash provided by operating activities (GAAP measure) to free cash flow, before dividends (non-GAAP measure). 
Nine Months
(Dollars in millions)20232022
Net cash provided by operating activities$4,049 $4,255 
Property Additions(1,590)(1,437)
Proceeds and Advances from Property Dispositions35 51 
Free Cash Flow (before payment of dividends)$2,494 $2,869 

Operating Statistics (Estimated)
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.

In third quarter 2023, velocity and dwell improved by 11% and 19%, respectively, versus prior year. Carload trip plan performance improved to 82% compared to 57% in the prior year while intermodal trip plan performance improved to 94% compared to 90% in the prior year.
CSX Q3 2023 Form 10-Q p.31
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The personal injury frequency index of 0.98 increased 1% compared to prior year. The FRA train accident rate of 3.75 in third quarter 2023 increased by 19% compared to prior year. Safety is a guiding principle at CSX and the Company remains focused on our strong safety culture, including instilling the importance of safety in new hires. CSX is committed to reducing risk and enhancing the overall safety of its employees, customers and communities in which the Company operates.

Third QuartersNine Months
20232022Improvement /
(Deterioration)		20232022Improvement /
(Deterioration)
Operations Performance (a)
Train Velocity (Miles per hour)
17.6 15.8 11 %17.9 15.7 14 %
Dwell (Hours)
9.6 11.8 19 %9.3 11.6 20 %
Cars Online125,318 141,911 12 %126,195 140,461 10 %
On-Time Originations74 %58 %28 %79 %62 %27 %
On-Time Arrivals67 %46 %46 %72 %51 %41 %
Carload Trip Plan Performance82 %57 %44 %84 %60 %40 %
Intermodal Trip Plan Performance94 %90 %4 %95 %89 %7 %
Fuel Efficiency1.06 0.99 (7)%1.03