Stock Plans and Share-Based Compensation

3 Months Ended

Mar. 31, 2026

Share-Based Payment Arrangement [Abstract]

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 employees whose agreements allow for continued vesting upon retirement or separation. 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.


	First Quarters
(Dollars in Millions)	2026		2025
Share-Based Compensation Expense:
Restricted Stock Units	$	4	$	6
Stock Options	3		3
Stock Awards for Directors	2		3
Employee Stock Purchase Plan	2		2
Performance Units	2		—
Total Share-Based Compensation Expense	$	13	$	14
Income Tax Benefit	$	7	$	3

Long-term Incentive Plan

In February 2026, the Company granted the following awards under a new long-term incentive plan ("LTIP") for the years 2026 through 2028, which was adopted under the CSX 2019 Stock and Incentive Award Plan.


	Granted (Thousands)	Weighted Avg. Fair Value



Performance Units	637	$	50.18
Restricted Stock Units	255	42.65
Stock Options	1,271	12.83

NOTE 3. Stock Plans and Share-Based Compensation, continued

Performance Units

Units vest based on performance approximately three years after grant with payouts made in CSX common stock. The 2026-2028 plan's performance measures are Return on Invested Capital (“ROIC”) and relative Total Shareholder Return (“rTSR”). These measures are assessed independently of each other and weighted at 60% ROIC and 40% rTSR, respectively, for a total payout of 100% of the grant value. If the maximum ROIC and maximum rTSR are achieved, then the measures would generate a payout of 120% and 80%, respectively, for a total payout at 200%.

ROIC is calculated by dividing net operating profit after taxes, adjusting for certain items as defined in the Plan, by invested capital to measure how effectively the Company uses its capital to generate returns. Net operating profit after taxes is calculated as net income, adjusted to exclude the cost and tax impact of interest, including implied lease interest. Invested capital is composed of the average of the Company's debt, including financing and operating leases, and shareholders equity as of the end of the most recent five quarters.

The rTSR measure shows how the Company performed compared to its competitors by ranking the companies in the S&P 500 Industrials from highest to lowest according to their respective TSRs and calculating the percentile performance of CSX relative to the peer companies. The fair values of the rTSR component of performance units were calculated using a Monte-Carlo simulation model.

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 determined 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.

Other Awards

Awards are periodically granted outside of the annual LTIP program, subject to approval by the Board of Directors, Compensation and Talent Management Committee, or Chief Executive Officer ("CEO") as appropriate. Immaterial awards outside of the annual LTIP program were granted to certain management employees other than senior executives during the first quarters ended March 31, 2026, and March 31, 2025.

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