

Item 3.	Defaults upon Senior Securities	~~CSX Q3 2017 Form 10-Q p.2~~45

Item 4.	Mine Safety Disclosures	45

Item 5.	Other Information	45

Item 6.	Exhibits	46

Signature		47

CSX Q3 2021 Form 10-Q p.2

CSX CORPORATION

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENTS (Unaudited)

(Dollars in millions, except per share amounts)


	Third Quarters				Nine Months
	2021		2020		2021		2020

Revenue	$	3,292	$	2,648	$	9,095	$	7,758
Expense
Labor and Fringe	631		574		1,847		1,687
Purchased Services and Other	577		382		1,490		1,272
Depreciation	367		348		1,060		1,036
Fuel	247		119		631		402
Equipment and Other Rents	94		88		269		247
Gains on Property Dispositions	(60)		(4)		(430)		(33)
Total Expense	1,856		1,507		4,867		4,611

Operating Income	1,436		1,141		4,228		3,147

Interest Expense	(177)		(187)		(542)		(565)
Other Income - Net	20		14		60		51
Earnings Before Income Taxes	1,279		968		3,746		2,633

Income Tax Expense	(311)		(232)		(899)		(628)
Net Earnings	$	968	$	736	$	2,847	$	2,005

Per Common Share (Note 2)
Net Earnings Per Share, Basic	$	0.43	$	0.32	$	1.26	$	0.87
Net Earnings Per Share, Assuming Dilution	$	0.43	$	0.32	$	1.26	$	0.87


Average Shares Outstanding (In millions)	2,237		2,295		2,263		2,302
Average Shares Outstanding, Assuming Dilution (In millions)	2,242		2,300		2,268		2,307

Third Quarters Nine Months
2017 2016 2017 2016

Revenue $ 2,743
$ 2,710
$ 8,545
$ 8,032
Expense
Labor and Fringe 717
762
2,249
2,307
Materials, Supplies and Other 516
507
1,573
1,576
Depreciation 331
321
978
953
Fuel 205
174
621
496
Equipment and Other Rents 97
105
282
315
Restructuring Charge (Note 1) 1
—
296
—
Total Expense 1,867
1,869
5,999
5,647

Operating Income 876
841
2,546
2,385

Interest Expense (132 ) (139 ) (406 ) (423 )
Other Income - Net 6
13
19
28
Earnings Before Income Taxes 750
715
2,159
1,990

Income Tax Expense (291 ) (260 ) (828 ) (734 )
Net Earnings $ 459
$ 455
$ 1,331
$ 1,256

Per Common Share (Note 2)
Net Earnings Per Share, Basic $ 0.51
$ 0.48
$ 1.45
$ 1.32
Net Earnings Per Share, Assuming Dilution $ 0.51
$ 0.48
$ 1.45
$ 1.32

Average Shares Outstanding (In millions)
902
942
916
952
Average Shares Outstanding, Assuming Dilution (In millions)
906
943
919
953

Cash Dividends Paid Per Common Share $ 0.20
$ 0.18
$ 0.58
$ 0.54

Beginning third quarter 2021, the Company changed the name of Materials, Supplies and Other expense to Purchased Services and Other, which better describes the composition of this expense amount. This change in naming convention does not impact previously reported results.

All prior period share and per share data has been retroactively adjusted to reflect the stock split effective June 28, 2021. Certain prior year data has been reclassified to conform to the current presentation.

CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS (Unaudited)

(Dollars in ~~millions, except per share amounts)~~millions)


	Third Quarters				Nine Months
	2021		2020		2021		2020
Total Comprehensive Earnings (Note 11)	$	985	$	770	$	2,911	$	2,062

Third Quarters Nine Months
2017 2016 2017 2016
Total Comprehensive Earnings (Note 10) $ 467
$ 465
$ 1,410
$ 1,282

See accompanying notes to consolidated financial statements.

CSX Q3 2021 Form 10-Q p.3



	~~CSX Q3 2017 Form 10-Q p.3~~

Table of Contents

CSX CORPORATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(Dollars in millions)


	(Unaudited)
	September 30, 2021		December 31, 2020
ASSETS
Current Assets:
Cash and Cash Equivalents	$	2,179	$	3,129

Accounts Receivable - Net (Note 8)	1,326		912
Materials and Supplies	303		302

Other Current Assets	89		98
Total Current Assets	3,897		4,441

Properties	46,226		45,530
Accumulated Depreciation	(13,412)		(13,086)
Properties - Net	32,814		32,444

Investment in Affiliates and Other Companies	2,059		1,985
Right-of-Use Lease Asset	508		472
Goodwill and Other Intangible Assets - Net	451		63
Other Long-term Assets	400		388
Total Assets	$	40,129	$	39,793

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable	$	972	$	809
Labor and Fringe Benefits Payable	548		482
Casualty, Environmental and Other Reserves (Note 4)	117		90

Current Maturities of Long-term Debt (Note 7)	211		401
Income and Other Taxes Payable	238		73
Other Current Liabilities	182		164
Total Current Liabilities	2,268		2,019

Casualty, Environmental and Other Reserves (Note 4)	252		224
Long-term Debt (Note 7)	16,182		16,304
Deferred Income Taxes - Net	7,298		7,168
Long-term Lease Liability	482		455
Other Long-term Liabilities	475		513
Total Liabilities	26,957		26,683

Shareholders' Equity:
Common Stock, $1 Par Value	2,218		2,288
Other Capital	24		152
Retained Earnings	11,455		11,259
Accumulated Other Comprehensive Loss (Note 11)	(534)		(598)
Non-controlling Minority Interest	9		9
Total Shareholders' Equity	13,172		13,110
Total Liabilities and Shareholders' Equity	$	40,129	$	39,793

Certain prior year data has been retroactively adjusted to reflect the stock split effective June 28, 2021 or reclassified to conform to the current presentation. See accompanying notes to consolidated financial statements.

CSX Q3 2021 Form 10-Q p.4

(Unaudited)
September 30,
2017 December 30,
2016
ASSETS
Current Assets:
Cash and Cash Equivalents $ 591
$ 603
Short-term Investments 113
417
Accounts Receivable - Net (Note 1) 981
938
Materials and Supplies 392
407
Other Current Assets 95
122
  Total Current Assets 2,172
2,487

Properties 44,105
43,227
Accumulated Depreciation (12,526 ) (12,077 )
  Properties - Net 31,579
31,150

Investment in Conrail 864
840
Affiliates and Other Companies 642
619
Other Long-term Assets 316
318
  Total Assets $ 35,573
$ 35,414

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 905
$ 806
Labor and Fringe Benefits Payable 601
545
Casualty, Environmental and Other Reserves (Note 4) 122
115
Current Maturities of Long-term Debt (Note 7) 19
331
Income and Other Taxes Payable 322
129
Other Current Liabilities 106
114
  Total Current Liabilities 2,075
2,040

Casualty, Environmental and Other Reserves (Note 4) 253
259
Long-term Debt (Note 7) 11,788
10,962
Deferred Income Taxes - Net 9,789
9,596
Other Long-term Liabilities 766
863
  Total Liabilities 24,671
23,720

Shareholders' Equity:
Common Stock, $1 Par Value 894
928
Other Capital 227
138
Retained Earnings 10,327
11,253
Accumulated Other Comprehensive Loss (Note 10) (561 ) (640 )
Noncontrolling Interest 15
15
Total Shareholders' Equity 10,902
11,694
Total Liabilities and Shareholders' Equity $ 35,573
$ 35,414

Table of Contents

CSX CORPORATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED CASH FLOW STATEMENTS (Unaudited)

(Dollars in millions)


	Nine Months
	2021		2020

OPERATING ACTIVITIES
Net Earnings	$	2,847	$	2,005
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities:
Depreciation	1,060		1,036
Deferred Income Taxes	109		117
Gains on Property Dispositions	(430)		(33)




Other Operating Activities	10		(30)
Changes in Operating Assets and Liabilities:
Accounts Receivable	(153)		12
Other Current Assets	(4)		(37)
Accounts Payable	132		(6)
Income and Other Taxes Payable	174		98
Other Current Liabilities	74		(34)
Net Cash Provided by Operating Activities	3,819		3,128

INVESTING ACTIVITIES
Property Additions	(1,220)		(1,209)
Proceeds from Property Dispositions	297		51
Purchases of Short-term Investments	—		(426)
Proceeds from Sales of Short-term Investments	3		1,423
Business Acquisition, Net of Cash Acquired	(543)		—
Other Investing Activities	—		(32)
Net Cash Used In Investing Activities	(1,463)		(193)

FINANCING ACTIVITIES

Shares Repurchased	(2,316)		(664)
Dividends Paid	(633)		(599)
Long-term Debt Repaid (Note 7)	(390)		(245)

Long-term Debt Issued (Note 7)	—		500

Other Financing Activities	33		13
Net Cash Used in Financing Activities	(3,306)		(995)

Net (Decrease)/Increase in Cash and Cash Equivalents	(950)		1,940

CASH AND CASH EQUIVALENTS
Cash and Cash Equivalents at Beginning of Period	3,129		958
Cash and Cash Equivalents at End of Period	$	2,179	$	2,898

See accompanying notes to consolidated financial statements.

CSX Q3 2021 Form 10-Q p.5



	~~CSX Q3 2017 Form 10-Q p.4~~

Table of Contents

CSX CORPORATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CHANGES

~~CONSOLIDATED CASH FLOW STATEMENTS~~ IN SHAREHOLDERS' EQUITY (Unaudited)

(Dollars in millions)


Nine Months 2021	Common Shares Outstanding (Thousands)	Common Stock and Other Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)(a)		Non-controlling Minority Interest		Total Shareholders' Equity

Balance December 31, 2020	2,287,587	$	2,440	$	11,259	$	(598)	$	9	$	13,110
Comprehensive Earnings:
Net Earnings	—	—		706		—		—		706
Other Comprehensive Income	—	—		—		68		—		68
Total Comprehensive Earnings										774

Common stock dividends, $0.093 per share	—	—		(213)		—		—		(213)
Share Repurchases	(18,389)	(18)		(533)		—		—		(551)

Stock Option Exercises and Other	3,003	37		3		—		—		40
Balance March 31, 2021	2,272,201	$	2,459	$	11,222	$	(530)	$	9	$	13,160
Comprehensive Earnings:
Net Earnings		—		1,173		—		—		1,173
Other Comprehensive Loss		—		—		(21)		—		(21)
Total Comprehensive Earnings										1,152

Common stock dividends, $0.093 per share		—		(212)		—		—		(212)
Share Repurchases	(18,345)	(19)		(682)		—		—		(701)
Bond Conversions		—		—		—		—		—
Stock Option Exercises and Other	640	(186)		222		—		(1)		35
Balance June 30, 2021	2,254,496	$	2,254	$	11,723	$	(551)	$	8	$	13,434
Comprehensive Earnings:
Net Earnings	—	—		968		—		—		968
Other Comprehensive Income (Note 11)	—	—		—		17		—		17
Total Comprehensive Earnings										985

Common stock dividends, $0.093 per share	—	—		(209)		—		—		(209)
Share Repurchases	(37,217)	(37)		(1,027)		—		—		(1,064)
Bond Conversions	—	—		—		—		—		—
Stock Option Exercises and Other	704	25		—		—		1		26
Balance September 30, 2021	2,217,983	$	2,242	$	11,455	$	(534)	$	9	$	13,172

Nine Months
2017 2016

OPERATING ACTIVITIES
Net Earnings $ 1,331
$ 1,256
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities:
Depreciation 978
953
Restructuring Charge 296
—
Cash Payments for Restructuring Charge (147 ) —
Deferred Income Taxes 161
312
Other Operating Activities (13 ) (51 )
Changes in Operating Assets and Liabilities:
Accounts Receivable (78 ) 68
Other Current Assets 47
(58 )
Accounts Payable 102
94
Income and Other Taxes Payable 180
(25 )
Other Current Liabilities 4
(61 )
Net Cash Provided by Operating Activities 2,861
2,488

INVESTING ACTIVITIES
Property Additions (1,462 ) (1,590 )
Purchase of Short-term Investments (645 ) (410 )
Proceeds from Sales of Short-term Investments 957
1,070
Other Investing Activities 71
37
Net Cash Used In Investing Activities (1,079 ) (893 )

FINANCING ACTIVITIES
Long-term Debt Issued (Note 7) 850
—
Long-term Debt Repaid (Note 7) (332 ) (19 )
Dividends Paid (530 ) (513 )
Shares Repurchased (1,763 ) (778 )
Other Financing Activities (19 ) (310 )
Net Cash Used in Financing Activities (1,794 ) (1,620 )

Net Decrease in Cash and Cash Equivalents (12 ) (25 )

CASH AND CASH EQUIVALENTS
Cash and Cash Equivalents at Beginning of Period 603
628
Cash and Cash Equivalents at End of Period $ 591
$ 603

a) Accumulated Other Comprehensive Loss balances shown above are net of tax. The associated taxes were $137 million, $142 million, and $136 million as of first, second, and third quarters 2021, respectively. For additional information, see Note 11, Other Comprehensive Income.

All prior period share and per share data along with certain other prior period data has been retroactively adjusted to reflect the stock split effective June 28, 2021. See accompanying notes to consolidated financial statements.

CSX Q3 2021 Form 10-Q p.6



	~~CSX Q3 2017 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 2020	Common Shares Outstanding (Thousands)	Common Stock and Other Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)(a)		Non-controlling Minority Interest		Total Shareholders' Equity

Balance December 31, 2019	2,320,414	$	2,412	$	10,111	$	(675)	$	15	11,863
Comprehensive Earnings:
Net Earnings	—	—		770		—		—		770
Other Comprehensive Income	—	—		—		3		—		3
Total Comprehensive Earnings										773

Common stock dividends, $0.087 per share	—	—		(201)		—		—		(201)
Share Repurchases	(26,718)	(27)		(550)		—		—		(577)

Stock Option Exercises and Other	2,680	21		7		—		2		30
Balance March 31, 2020	2,296,376	2,406		10,137		(672)		17		11,888
Comprehensive Earnings:
Net Earnings	—	—		499		—		—		499
Other Comprehensive Income	—	—		—		20		—		20
Total Comprehensive Earnings										519

Common stock dividends, $0.087 per share	—	—		(199)		—		—		(199)
Share Repurchases	(1,739)	(2)		(37)		—		—		(39)
Bond Conversions	—	—		—		—		—		—
Stock Option Exercises and Other	522	(4)		2		—		(4)		(6)
Balance June 30, 2020	2,295,159	2,400		10,402		(652)		13		12,163
Comprehensive Earnings:
Net Earnings	—	—		736		—		—		736
Other Comprehensive Income (Note 11)	—	—		—		34		—		34
Total Comprehensive Earnings										770

Common stock dividends, $0.087 per share	—	—		(199)		—		—		(199)
Share Repurchases	(2,115)	(2)		(46)		—		—		(48)
Bond Conversions	—	—		—		—		—		—
Stock Option Exercises and Other	1,281	40		—		—		1		41
Balance September 30, 2020	2,294,325	$	2,438	$	10,893	$	(618)	$	14	$	12,727

a) Accumulated Other Comprehensive Loss balances shown above are net of tax. The associated taxes were $183 million, $178 million, and $165 million as of first, second, and third quarters 2020, respectively. For additional information, see Note 11, Other Comprehensive Income.

CSX Q3 2021 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~~

NOTE 1. Nature of Operations and Significant Accounting Policies

Background

CSX Corporation ~~(“CSX”),~~ together with its subsidiaries ~~(the~~("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, ~~and~~ the transport of intermodal containers and ~~trailers.~~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 ~~21,000~~19,500 route mile rail network, which serves major population centers in 23 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.

~~After a merger on July 1, 2017 with CSX Real Property, Inc., a former wholly-owned CSX subsidiary,~~ CSXT is ~~now~~also responsible for the Company's real estate sales, leasing, acquisition and management and development activities. ~~In addition, as substantially~~Substantially all ~~real estate sales, leasing, acquisition and management and development~~of these activities are focused on supporting railroad operations, all results of these activities are included in operating income beginning in 2017. Previously, the results of these activities were classified as operating or non-operating based on the nature of the activity and were not material for any periods presented.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, from Quality Distribution, Inc. For further details, refer to Note 12, Business Combinations. 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 and trucking dispatch operations.~~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~~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 3 CSX-owned line segments to the Commonwealth of Virginia (“Commonwealth”) over 3 phases for a total of $525 million.

In April 2021, in the first phase of the transaction, the Company closed on the conveyance of a permanent land easement for passenger rail operations, resulting in a $349 million gain recognized in gains on property dispositions on the consolidated income statement. Upon closing of the first phase, cash proceeds of $200 million were received and a receivable was recorded in the amount of $168 million. The Company expects to collect proceeds of $200 million in fourth quarter 2021, partly attributable to the first phase with the remainder towards the next phase. Additional future proceeds and related gains attributable to this conveyance are subject to state funding.

The Company anticipates closing on the remaining conveyances by the end of 2022, which will result in future cash proceeds and gains. The timing of future gain recognition is dependent upon the timing of future conveyances as well as collectability. As of September 30, 2021, the carrying values of the remaining assets subject to this transaction were not material.

CSX Q3 2021 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 ~~following:~~

~~Consolidated income~~consolidated financial statements ~~for~~and accompanying notes. Where applicable, prior year information has been reclassified to conform to the ~~nine months ended September 30, 2017 and September 23, 2016;~~

~~Consolidated comprehensive income statements for the nine months ended September 30, 2017 and September 23, 2016;~~

~~Consolidated balance sheets at September 30, 2017 and December 30, 2016; and~~

~~Consolidated cash flow statements for the nine months ended September 30, 2017 and September 23, 2016.~~

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.

Common Stock Split

On June 4, 2021, CSX announced a 3-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 2 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 presented herein have been 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.



	~~CSX Q3 2017 Form 10-Q p.6~~

Other Capital

~~Table~~As a result of ~~Contents~~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.

~~CSX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~NOTE 1. Nature of Operations and Significant Accounting Policies,~~ ~~continued~~

Fiscal Year

~~Through~~The Company's fiscal periods are based upon the ~~second quarter 2017, CSX followed a 52/53 week fiscal reporting~~ calendar with the last day of each reporting period ending on a Friday. On July 7, 2017 the Board of Directors of CSX approved a change in the fiscal reporting calendar from a 52/53 week year ending on the last Friday of December to a calendar year ending on December 31 each year, effective beginning with fiscal third quarter 2017. Related to the change in the fiscal calendar:

~~Fiscal year 2017 commenced on December 31, 2016, as the fiscal year 2016 ended on December 30, 2016 under the 52/53 week fiscal calendar.~~

The third quarter 2017 commenced on July 1, 2017, as the second quarter 2017 ended on June 30, 2017 under the 52/53 week fiscal calendar, and ended on September 30, 2017. Third quarter 2017 includes one more day of business results than third quarter 2016.

The fourth quarter 2017 will commence on October 1, 2017 and end on December 31, 2017. Fourth quarter 2017 will include six fewer days of business results than fourth quarter 2016, which contained an extra week under the 52/53 week fiscal calendar.

~~Fiscal year 2017 will include 366 days of activity, five fewer days than fiscal year 2016, which was a 53 week fiscal year that began on December 26, 2015 and ended December 30, 2016.~~

The Company does not expect that this change will materially impact comparability of the Company’s financial results for fiscal year 2016 and fiscal year 2017. Accordingly, the change to a calendar fiscal year will be made on a prospective basis and operating results for prior periods will not be adjusted. The Company will not be required to file a transition report because this change is not deemed a change in fiscal year for purposes of reporting subject to Rule 13a-10 or Rule 15d-10 of the Securities Exchange Act of 1934 as the new fiscal year commences with the end of the prior fiscal year end and within seven days of the prior fiscal year end.

year. Except as otherwise specified, references to “third quarter(s)” or “nine months” indicate CSX's fiscal periods ending September 30, ~~2017~~2021 and September ~~23, 2016,~~30, 2020, and references to "year-end" indicate the fiscal year ended December ~~30, 2016.~~31, 2020.

~~Allowance~~New Accounting Pronouncements

In March 2020, the FASB issued ASU 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 ~~Doubtful Accounts~~

contract modifications made as part of the transition from LIBOR to alternative reference rates. CSX's revolving line of credit currently uses LIBOR as a reference rate. This standard update can be adopted prospectively through December 31, 2022. The Company ~~maintains an allowance for doubtful accounts~~continues to evaluate the impact of this standard update, but does not anticipate that adoption will have a material impact on ~~uncollectible amounts related to freight receivables, government reimbursement receivables, claims for damages and other various receivables. The allowance is based upon~~ the ~~creditworthiness~~Company's results of customers, historical experience, the age of the receivable and current market and economic conditions. Uncollectible amounts are charged against the allowance account. Allowance for doubtful accounts of $24 million and $33 million is included in the consolidated balance sheets as of September 30, 2017 and December 30, 2016, respectively.operations or financial position.

CSX Q3 2021 Form 10-Q p.9



	~~CSX Q3 2017 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,~~ ~~continued~~

~~New Accounting Pronouncements~~

~~In May 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")~~ ~~Compensation - Stock Compensation: Scope of Modification Accounting,~~ which provides clarity on what changes to share-based awards are considered substantive and require modification accounting to be applied. This update is required beginning with first quarter 2018 and should be applied prospectively to award modifications after the effective date. The Company early adopted this standard update in second quarter 2017 and will apply it prospectively to any award modifications after the adoption date. The Company does not regularly modify the terms and conditions of share-based awards and does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity.

~~In March 2017, the FASB issued ASU~~ ~~Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which~~requires that only the service cost component of net periodic benefit costs be recorded as compensation cost in the operating expense section of the income statement. All other components of net periodic benefit cost (interest cost, expected return on plan assets and amortization of net loss) will be presented in other income - net. This standard update is effective beginning with the first quarter 2018 and must be applied retrospectively. The Company does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity.

~~In March 2017, the FASB issued ASU~~ ~~Simplifying the Test for Goodwill Impairment,~~ which eliminates step two, the calculation of the implied fair value of goodwill, from the goodwill impairment test. Impairment will be quantified in step one of the test as the amount by which the carrying amount exceeds the fair value. This standard update is effective beginning first quarter 2020 and must be applied prospectively. The Company does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity.

~~In May 2014, the FASB issued ASU~~ ~~Revenue from Contracts with Customers~~, which supersedes previous revenue recognition guidance. The new standard requires that a company recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. Companies will need to use more judgment and estimates than under the guidance currently in effect, including estimating the amount of variable revenue to recognize over each identified performance obligation. Additional disclosures will be required to help users of financial statements understand the nature, amount and timing of revenue and cash flows arising from contracts. CSX will adopt this standard update in first quarter 2018 and plans to use a modified retrospective method of adoption.

The FASB has also issued several amendments to the revenue standard, including clarification on accounting for principal versus agent considerations (i.e., reporting gross versus net), licenses of intellectual property and identifying performance obligations. These amendments do not change the core principle of the standard, but provide clarity and implementation guidance.



	~~CSX Q3 2017 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~~

The Company is currently finalizing its review of the impact of adopting this new guidance and has developed a comprehensive implementation plan. In-depth reviews of commercial contracts have been completed and changes to processes and internal controls to meet the standard’s reporting and disclosure requirements have been identified and are being implemented. At this time, the Company does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity. Freight revenue will continue to be recognized ratably over transit time. Additionally, the disaggregated revenue information required to be disclosed under this standard update is similar to the information currently included in the Results of Operations section of Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

~~In February 2016, the FASB issued ASU,~~ ~~Leases~~, which will require lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease liability, and lessors to recognize a net lease investment. Additional qualitative and quantitative disclosures will also be required. This standard update is effective for CSX beginning with the first quarter 2019 and will be adopted using a modified retrospective method. Changes to processes and internal controls to meet the standard’s reporting and disclosure requirements have been identified and are being implemented. Software has been implemented that will assist in the recognition of additional assets and liabilities to be included on the balance sheet related to leases currently classified as operating leases with durations greater than twelve months, with certain allowable exceptions. The Company continues to evaluate the expected impact of this standard update on disclosures, but does not anticipate any material changes to operating results or liquidity.

~~Other Items~~

~~Management Workforce Reduction~~

~~Through an involuntary separation program with enhanced benefits to further its strategic objectives, CSX reduced its management workforce by approximately 950~~employees during 2017. The Company has been focused on driving efficiencies through process improvement and responding to business mix shifts. These management reductions were designed to further streamline general and administrative and operating support functions to speed decision making and further control costs. In April 2017, the involuntary separation program was essentially completed. This program extends separation benefits for certain members of management that could result in additional charges through first quarter 2018. The majority of separation benefits are paid from general corporate funds while certain benefits are paid through CSX’s qualified pension plans.

~~Reimbursement Arrangements~~

In June 2017, the Company and the Company's President and Chief Executive Officer, E. Hunter Harrison, executed a letter agreement providing for certain reimbursement arrangements. Pursuant to the letter agreement, the Company made a reimbursement payment to MR Argent Advisor LLC ("Mantle Ridge") of $55 million for funds previously paid to Mr. Harrison by Mantle Ridge. Further, the Company assumed Mantle Ridge’s obligation to pay Mr. Harrison, prior to March 15, 2018, a lump sum cash amount of $29 million in respect of other forfeited compensation from his previous employer, Canadian Pacific Railway Limited (“CP”). The Company also assumed Mantle Ridge’s tax indemnification obligations to Mr. Harrison, which enables him to remain in the same after-tax position as if he had not: (i) forfeited such compensation and benefits earned from CP; and (ii) received $55 million from Mantle Ridge.



	~~CSX Q3 2017 Form 10-Q p.9~~

~~Table of Contents~~

~~CSX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~NOTE 1. Nature of Operations and Significant Accounting Policies,~~ ~~continued~~

The ownership position of Mantle Ridge, a CSX shareholder, is detailed in the Company's Proxy Statement on Schedule 14A filed on April 20, 2017 and subsequent Form 4 filings with the SEC. The Vice-Chairman of CSX's Board of Directors, Paul C. Hilal, founded and controls Mantle Ridge and each of its related entities. At the Company's 2017 annual meeting of shareholders held on June 5, 2017, the Company's shareholders approved, on an advisory basis, with approximately 93 percent of the vote, the Company undertaking such reimbursement arrangements.

~~Restructuring Charge~~

In first quarter 2017, the former CEO and President of the Company announced their retirements, and the terms of their unvested equity awards were modified to permit prorated vesting through May 31, 2018. The total restructuring charge includes costs related to the management workforce reduction, reimbursement arrangements, the proration of equity awards and other advisory costs related to the leadership transition. Future charges related to this restructuring are not expected to be material. Expenses related to the management workforce reduction and other costs are shown in the following table.

2017
(Dollars in millions)
First
Quarter
Second Quarter Third Quarter Year-to-Date
Severance $ 81
$ 10
$ —
$ 91
Pension, Other Post-retirement Benefit and Other Non-cash Charges 68
10
—
78
Relocation 6
2
—
8
Subtotal Management Workforce Reduction $ 155
$ 22
$ —
$ 177
Reimbursement Arrangements —
84
—
84
Non-cash Executive Equity Awards Proration 8
16
—
24
Other Charges Including Fees Related to Shareholder Matters 10
—
1
11
Total Restructuring Charge $ 173
$ 122
$ 1
$ 296

~~Charges and payments related to the management workforce reduction and other costs are shown in the following table.~~

(Dollars in millions) 2017 Charges
2017
Payments
Non-cash
Items
Liability
9/30/2017
Severance $ 91
$ (77 ) —
$ 14
Pension, Other Post-retirement Benefit and Other Non-cash Charges ^(a)
78
—
(78 ) —
Relocation 8
(4 ) —
4
Subtotal Management Workforce Reduction $ 177
$ (81 ) $ (78 ) $ 18
Reimbursement Arrangements 84
(55 ) —
29
Non-cash Executive Equity Awards Proration 24
—
(24 ) —
Other Charges Including Fees Related to Shareholder Matters 11
(11 ) —
—
Total Restructuring Charge $ 296
$ (147 ) $ (102 ) $ 47

^(a)~~The majority of non-cash items are related to certain benefits paid through CSX's qualified pension plans.~~



	~~CSX Q3 2017 Form 10-Q p.10~~

~~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:~~dilution.


	Third Quarters				Nine Months
	2021		2020		2021		2020
Numerator (Dollars in millions):
Net Earnings	$	968	$	736	$	2,847	$	2,005



Denominator (Units in millions):
Average Common Shares Outstanding	2,237		2,295		2,263		2,302
Other Potentially Dilutive Common Shares	5		5		5		5
Average Common Shares Outstanding, Assuming Dilution	2,242		2,300		2,268		2,307

Net Earnings Per Share, Basic	$	0.43	$	0.32	$	1.26	$	0.87
Net Earnings Per Share, Assuming Dilution	$	0.43	$	0.32	$	1.26	$	0.87

Third Quarters Nine Months
2017 2016 2017 2016
Numerator (Dollars in millions):

Net Earnings $ 459
$ 455
$ 1,331
$ 1,256
Dividend Equivalents on Restricted Stock —
—
(1 ) (1 )
Net Earnings, Attributable to Common Shareholders $ 459
455
$ 1,330
1,255

Denominator (Units in millions):

Average Common Shares Outstanding 902
942
916
952
Other Potentially Dilutive Common Shares 4
1
3
1
Average Common Shares Outstanding, Assuming Dilution 906
943
919
953

Net Earnings Per Share, Basic $ 0.51
$ 0.48
$ 1.45
$ 1.32
Net Earnings Per Share, Assuming Dilution $ 0.51
$ 0.48
$ 1.45
$ 1.32

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 ~~outstanding~~ 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 ~~which include long-term incentive awards,~~including performance units and employee stock options.

~~The~~ ~~Earnings Per Share Topic~~ in the FASB's ASC requires CSX to include additional shares in the computation of earnings per share, assuming dilution. The additional shares included in diluted earnings per share represent the number of shares that would be issued if all of the above potentially dilutive instruments were converted into CSX common stock.

When calculating diluted earnings per share, ~~this rule requires CSX to include~~ the potential shares that would be outstanding if all outstanding stock options were ~~exercised.~~exercised are included. This number is different from outstanding stock options ~~which is included in Note 3, 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. ~~Approximately 10 millionand2.4 million of~~The total average outstanding stock options ~~for the third quarters ended September 30, 2017 and September 23, 2016, respectively,~~that were excluded from the diluted earnings per share calculation because their effect was ~~antidilutive.~~antidilutive is in the table below.

~~Share Repurchases~~

In July 2017, the Board of Directors approved an additional $500 million of share repurchase authority under the share repurchase program announced in April 2017, bringing the total program size to $1.5 billion. As of October 2, 2017, the Company had completed all share repurchases under this program.

~~During the third quarters~~of 2017 and 2016, the Company repurchased approximately $1 billion, or 20 million shares, and $263 million, or 10 million shares, respectively. During the nine months of 2017 and 2016, the Company repurchased $1.8 billion, or 35 million shares, and $778 million, or 30 million shares, respectively.


	Third Quarters		Nine Months
	2021	2020	2021	2020
Antidilutive Stock Options Excluded from Diluted EPS (Millions)	2	6	2	6

CSX Q3 2021 Form 10-Q p.10



	~~CSX Q3 2017 Form 10-Q p.11~~

Table of Contents

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 2. Earnings Per Share, continued

~~Management's~~Share Repurchases

In January 2019, the Company announced a $5 billion share repurchase program. During June 2021, this program was completed, and the Company began repurchasing shares under the $5 billion share repurchase program announced on October 21, 2020. Total repurchase authority remaining was $3.6 billion as of September 30, 2021. During third quarters and nine months ended 2021 and 2020, the Company engaged in the following repurchase activities:


	Third Quarters				Nine Months
	2021		2020		2021		2020
Shares Repurchased (Millions)	34		2		74		31
Cost of Shares (Dollars in millions)	$	1,064	$	48	$	2,316	$	664

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 ~~market~~marketplace conditions and other factors, ~~guides~~and the ~~timing and volume~~program remains subject to the discretion of ~~repurchases.~~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,~~Accounting Standards Codification ("ASC"), the excess of repurchase price over par value is recorded in retained earnings. ~~Generally,~~

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. Premiums received were not material. As a result of entering into and settling structured share repurchase agreements, the Company paid a net total of approximately $150 million and received approximately 5 million shares during the third quarter 2021 and paid a net total of approximately $378 million and received approximately 12 million shares during the nine months ended 2021. As of September 30, 2021, no such agreements were outstanding.

Dividend Increase

In February 2021, the Company's Board of Directors authorized an 8% increase in the quarterly cash dividend effective March 2021. The current split-adjusted quarterly dividend on the Company's common stock is ~~only impacted by net earnings and dividends.~~$0.093 per common share. The dividend will be carried out to six decimal places to most closely approximate the $0.28 per share dividend amount prior to the 3-for-one stock split that occurred on June 28, 2021.

CSX Q3 2021 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, ~~restricted~~ stock ~~awards,~~options, restricted stock units and restricted stock ~~options~~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 or, in certain circumstances, by~~Directors. Awards to the Chief Executive Officer ~~for~~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 ~~the Company's~~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.~~award 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 ~~and its related income tax benefit is~~are shown in the table below. ~~The year over year increase in expense related to performance units~~Income tax benefits include impacts from option exercises and ~~stock options is primarily due to modifications to~~ the ~~terms~~vesting of ~~awards (see Equity Award Modificationsbelow) and higher expected award payouts.~~other equity awards.


	Third Quarters				Nine Months
(Dollars in millions)	2021		2020		2021		2020
Share-Based Compensation Expense:
Performance Units	$	6	$	14	44		$	6
Stock Options	3		3		13		16
Restricted Stock Units and Awards	3		2		10		5
Employee Stock Purchase Plan	1		1		3		3
Stock Awards for Directors	—		—		2		2
Total Share-Based Compensation Expense	$	13	$	20	$	72	$	32
Income Tax Benefit	$	4	$	6	$	19	$	17

CSX Q3 2021 Form 10-Q p.12

Table of Contents

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Third Quarters Nine Months
(Dollars in millions) 2017 2016 2017 2016

Share-Based Compensation Expense
Performance Units $ 3
$ 5
$ 41
$ 9
Stock Options 14
2
47
5
Restricted Stock Units and Awards 2
2
11
8
Stock Awards for Directors —
—
2
2
Total Share-Based Compensation Expense $ 19
$ 9
$ 101
$ 24
Income Tax Benefit $ 7
$ 3
$ 32
$ 9
NOTE 3. Stock Plans and Share-Based Compensation, continued

Long-term Incentive Plan

In February ~~2017,~~2021, the Company granted ~~approximately 600~~566 thousand (split-adjusted) performance units to certain employees under a new long-term incentive plan ("LTIP") for the years ~~2017~~2021 through ~~2019,~~2023, which was adopted under the CSX 2019 Stock and Incentive Award Plan.

Payouts of performance units for the cycle ending with fiscal year ~~2019~~2023 will be based on the achievement of goals related to both operating ~~ratio~~income and ~~return on assets~~free cash flow, in each case excluding non-recurring items as disclosed in the Company's financial statements. The average annual operating income growth percentage and cumulative ~~operating ratio and average return on assets~~free cash flow measures over the plan period will each comprise 50% of the payout and will be measured independently of the other.

Grants were made in performance units, with each unit representing the right to receive ~~one~~1 share of CSX common stock, and payouts will be made in CSX common stock. The payout range for participants will be 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 ~~30%~~25%, capped at an overall payout of 250%, based upon the Company's total shareholder return relative to specified comparable ~~groups.~~groups over the performance period. Participants will receive stock dividend equivalents declared over the performance period based on the number of performance units paid upon vesting. Other immaterial grants of performance units were made during third quarter 2021. No grants were made during third quarter 2020. The fair values of the performance units awarded during the nine months ended 2021 and 2020 were primarily calculated using a Monte-Carlo simulation model with the following weighted-average assumptions:


	Nine Months
		2021		2020


Weighted-Average Assumptions Used:
Annual Dividend Yield		N/A		N/A
Risk-free Interest Rate		0.2	%	1.4	%
Annualized Volatility		33.6	%	24.5	%
Expected Life (in years)		2.9		2.9



	~~CSX Q3 2017 Form 10-Q p.12~~

~~Table of Contents~~

~~CSX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~NOTE 3. Share-Based Compensation,~~ ~~continued~~

Stock Options

~~Also, in~~ In February ~~2017,~~2021, the Company granted approximately ~~1.3 million~~1,831 thousand (split-adjusted) stock options along with the corresponding LTIP. The fair value of stock options ~~on the date of grant was $12.54 per option which~~ was calculated using the Black-Scholes valuation model. ~~Stock~~These stock options ~~have been~~were granted with ten-year terms and vest over three years ~~after~~in equal installments each year on the ~~date~~anniversary of ~~grant.~~the grant date. The exercise price for stock options granted equals the closing market price of the underlying stock on the date of grant. These awards are time-based and are not based upon attainment of performance goals. During third quarter 2021, there were additional immaterial grants of stock options. No options were granted during third quarter 2020.

CSX Q3 2021 Form 10-Q p.13

Table of Contents

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

The fair values of all stock option awards during the quarters and nine months ended September 30, 2021 and September 30, 2020 were estimated at the grant date with the following weighted average assumptions:


	Third Quarters				Nine Months
	2021			2020	2021			2020
Weighted-Average Grant Date Fair Value	$	8.86		N/A	$	7.94		$	6.29

Weighted-Average Assumptions Used:
Annual Dividend Yield	1.2		%	N/A	1.2		%	1.2		%
Risk-Free Interest Rate	1.0		%	N/A	0.7		%	1.4		%
Annualized Volatility	30.7		%	N/A	31.2		%	26.0		%
Expected Life (in years)	6.3			N/A	6.0			6.0

Other Pricing Model Inputs:
Weighted-Average Grant Date Market Price of CSX Stock (strike price)	$	32.18		N/A	$	29.65		$	26.49

Restricted Stock Units

~~Finally, in~~ In February ~~2017,~~2021, the Company granted ~~approximately 300~~490 thousand (split-adjusted) restricted stock units along with the corresponding LTIP. The restricted stock units vest three years after the date of grant. Participants will receive ~~cash~~stock dividend equivalents on the ~~unvested~~vested shares ~~during the restriction period.~~upon vesting. These awards are time-based and are not based upon CSX's attainment of ~~performance goals.~~operational targets. Restricted stock units are paid out in CSX common stock on a 1-for-one basis. During third quarter 2021, there were additional immaterial grants of restricted stock units. For information related to the Company's other outstanding long-term incentive compensation, see CSX's most recent annual report on Form 10-K.

~~CEO~~Employee Stock ~~Option Award~~Purchase Plan

In ~~March 2017,~~May 2018, shareholders approved the 2018 CSX Employee Stock Purchase Plan (“ESPP”) for the benefit of Company ~~granted 9~~employees. The Company registered 12 million (split-adjusted) shares of common stock ~~options~~that may be issued pursuant to this plan. Under the ~~incoming CEO~~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 ~~a fair value~~85% of ~~$12.88 per option calculated using the Black-Scholes valuation model. These options were granted with a ten-year term and an exercise price equal to~~ the closing market price on either the grant date or the last day of the ~~underlying stock on~~six-month offering period, whichever is lower. During the date of grant. Half of the options, or 4.5 million, will vest on the CEO's service anniversary in equal annual installments over four years. The other half will vest based on achievement of performance targets related to both operating ratiothird quarter and ~~earnings before interest, taxes, depreciation and amortization adjusted for certain items.~~

~~Fair Value of All Stock Option Awards~~

~~No stock option awards were granted during third quarters 2017 and 2016. The fair values of all stock option awards during the~~ nine months ended September 30, ~~2017, including those granted along with 2017 - 2019 LTIP~~2021 and September 30, 2020, the ~~CEO stock option award, were estimated at the grant date with~~Company issued the following ~~weighted average assumptions:~~shares under this program:


	Third Quarters				Nine Months
	2021		2020		2021		2020
Shares issued (in thousands)	334		360		730		726
Weighted average purchase price per share	$	24.93	$	19.76	$	21.90	$	20.13

CSX Q3 2021 Form 10-Q p.14

Nine Months
2017 2016
Weighted-average grant date fair value $ 12.83
$ 4.68

Stock options valuation assumptions:
Annual dividend yield 1.5 % 3.0 %
Risk-free interest rate 2.2 % 1.4 %
Annualized volatility 27.1 % 27.3 %
Expected life (in years) 6.3
6.5

Other pricing model inputs:
Weighted-average grant-date market price of CSX stock (strike price) $ 49.60
$ 24.13



	~~CSX Q3 2017 Form 10-Q p.13~~

Table of Contents

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~NOTE 3. Share-Based Compensation,~~ ~~continued~~

~~Equity Award Modifications~~

The terms of performance units, restricted stock units and stock options granted as part of the Company's long-term share-based compensation plans typically require participants to be employed through the final day of the respective performance or vesting period as applicable, except in the case of death, disability or retirement. As part of an enhanced severance benefit under the management streamlining and realignment initiative discussed in Note 1, unvested performance units, restricted stock units and stock options for separated employees not eligible for retirement were permitted to vest on a pro-rata basis.

Additionally, the terms of unvested equity awards for the former CEO and President were modified prior to their retirements on March 6, 2017 to permit prorated vesting through May 31, 2018. The terms were modified in exchange for each agreeing to serve in an advisory capacity upon request until May 31, 2017, and waiving various rights and claims, including the cancellation of their respective change of control agreements with the Company.

Award modifications impacted approximately 70 employees and resulted in an increase to share-based compensation expense for revaluation of the affected awards of $31 million for the nine months ended September 30, 2017. No significant award modifications took place in third quarter 2017.

NOTE 4. Casualty, Environmental and Other Reserves

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

September 30,
2017 December 30,
2016
(Dollars in millions) Current Long-term Total Current Long-term Total

Casualty:
Personal Injury $ 45
$ 120
$ 165
$ 46
$ 124
$ 170
Occupational^(a)
4
55
59
7
52
59
Total Casualty 49
175
224
53
176
229
Environmental 43
46
89
42
53
95
Other 30
32
62
20
30
50
Total $ 122
$ 253
$ 375
$ 115
$ 259
$ 374


^(a)	~~Occupational reserves include asbestos-related diseases and occupational injuries.~~


	September 30, 2021						December 31, 2020
(Dollars in millions)	Current		Long-term		Total		Current		Long-term		Total

Casualty:
Personal Injury	$	44	$	82	$	126	$	38	$	93	$	131
Occupational	7		57		64		11		54		65
Total Casualty	51		139		190		49		147		196
Environmental (a)	36		72		108		23		53		76
Other (a)	30		41		71		18		24		42
Total	$	117	$	252	$	369	$	90	$	224	$	314

(a) The fair values of liabilities assumed as a result of the Company's acquisition of Quality Carriers on July 1, 2021, are included in environmental and other reserves as of September 30, 2021. See Note 12, Business Combinations.

These liabilities are accrued when probable and reasonably estimable ~~and probable~~ 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.



	~~CSX Q3 2017 Form 10-Q p.14~~

~~Table of Contents~~

~~CSX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~NOTE 4. Casualty, Environmental and Other Reserves,~~ ~~continued~~

Casualty

Casualty reserves of ~~$224~~$190 million and ~~$229~~$196 million as of September 30, ~~2017~~2021 and December ~~30, 2016,~~31, 2020, respectively, represent accruals for personal injury, occupational disease and occupational injury claims. ~~The~~Beginning June 1, 2021, the Company's self-insured retention amount for these claims ~~is $50~~increased to $100 million per occurrence. Currently, no individual claim is expected to exceed the self-insured retention amount. 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. Most of the Company's casualty claims relate to ~~CSXT unless otherwise noted below.~~CSXT. 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.

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”). In addition to FELA liabilities, employees of other current or former CSX subsidiaries are covered by various state workers’ compensation laws, the Federal Longshore and Harbor Workers’ Compensation Program or the Maritime Jones Act.

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 ~~for the quarter resulted~~did not result in ~~an immaterial~~a material adjustment to the personal injury ~~reserve.~~reserve in the quarter ended September 30, 2021 or September 30, 2020. 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~~claims based largely on CSXT's historical claims and settlement experience.

~~Occupational~~

Occupational reserves represent liabilities for occupational disease and injury claims. Occupational disease claims arise primarily from allegations of exposure to asbestos in the workplace. Occupational injury claims arise from allegations of exposure to certain other materials in the workplace, such as solvents, soaps, chemicals (collectively referred to as “irritants”) and diesel fuels (like exhaust fumes) or allegations of chronic physical injuries resulting from work conditions, such as repetitive stress injuries.

The greatest possible exposure to asbestos for employees resulted from work conducted in and around steam locomotive engines that were largely phased out beginning around the 1950s. Other types of exposures, however, including exposure from locomotive component parts and building materials, continued until these exposures were substantially eliminated by 1985. Diseases associated with asbestos typically have long latency periods (amount of time between exposure to asbestos and the onset of the disease) which can range from 10 to 40 years after exposure.

Management reviews asserted asbestos claims quarterly. Unasserted or incurred but not reported ("IBNR") asbestos claims are analyzed by a third-party specialist and reviewed by management annually. CSXT’s historical claim filings, settlement amounts, and dismissal rates are analyzed to determine future anticipated claim filing rates and average settlement values for asbestos claims reserves. The potentially exposed population is estimated by using CSXT’s employment records and industry data. From this analysis, the specialist estimates the IBNR claims liabilities.



	~~CSX Q3 2017~~CSX Q3 2021 Form 10-Q p.15

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). Beginning in second quarter 2020, 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. Previously, the quarterly analysis was performed by management. There were no material adjustments to the occupational reserve in the quarter ended September 30, 2021 or September 30, 2020.

Environmental

Environmental reserves were ~~$89~~$108 million and ~~$95~~$76 million as of September 30, ~~2017~~2021 and December ~~30, 2016,~~31, 2020, 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 ~~219~~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.

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.

CSX Q3 2021 Form 10-Q p.16

Table of Contents

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 4. Casualty, Environmental and Other Reserves, continued

Based on ~~the~~management's review process, ~~the Company has~~amounts have been recorded ~~amounts~~ 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 ~~materials, supplies~~purchased services and other on the consolidated income ~~statement.~~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.



	~~CSX Q3 2017 Form 10-Q p.16~~

~~Table of Contents~~

~~CSX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~NOTE 4. Casualty, Environmental and Other Reserves,~~ ~~continued~~

Other

Other reserves ~~of $62~~were $71 million and ~~$50~~$42 million as of September 30, ~~2017~~2021 and December ~~30, 2016, respectively,~~31, 2020, respectively. These reserves include liabilities for various claims, such as property, automobile and general liability. Also included in other reserves are longshoremen disability claims related to a previously owned international shipping business (these claims are in runoff) as well as claims for current port employees.

NOTE 5. Commitments and Contingencies

~~Purchase Commitments~~

CSXT has a commitment under a long-term maintenance program agreement that covers a portion of CSXT’s fleet of locomotives. The 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 2031. On August 9, 2017, the Company exercised certain rights under the agreement, which resulted in a reduction of the locomotive fleet covered from 50% as of December 30, 2016 to an estimated 34% of locomotives beginning August 2018. As a result, the total remaining payments decreased from approximately $5.0 billion at December 30, 2016 to an estimated $1.7 billion at September 30, 2017.

Insurance

The Company maintains ~~numerous~~ insurance programs with substantial limits for property damage, ~~(which includes~~including resulting business ~~interruption)~~interruption, and third-party liability. A certain amount of risk is retained by the Company on each ofinsurance program. Under its property insurance program, the ~~property and liability programs. The~~ Company ~~has a $25~~retains all risk up to $100 million ~~retention~~ per occurrence for ~~the non-catastrophic property program (such as a derailment)~~losses from floods and ~~a $50~~named windstorms and $75 million ~~retention~~ per occurrence for other property losses. For third-party liability claims, the ~~liability and catastrophic property programs (such as hurricanes and floods).~~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.

CSX Q3 2021 Form 10-Q p.17

Table of Contents

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 5. Commitments and Contingencies, continued

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 ~~reasonably determined,~~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 legal proceedings for which a loss is reasonably possible in excess of reserves established. The Company has estimated this range to be $2$3 million to ~~$116~~$27 million in aggregate at September 30, ~~2017.~~2021. 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.



	~~CSX Q3 2017 Form 10-Q p.17~~

~~Table of Contents~~

~~CSX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~NOTE 5. Commitments and Contingencies,~~ ~~continued~~

Fuel Surcharge Antitrust Litigation

In May 2007, class action lawsuits were filed against CSXT and ~~three~~3 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. ~~In November 2007, the~~The class action lawsuits were consolidated into 1 case in federal court in the District of Columbia, where they are now pending. The suit seeks treble damages allegedly sustained by purported class members as well as attorneys' fees and other relief. Plaintiffs are expected to allege damages at least equal to the fuel surcharges at issue.

Columbia. In ~~June 2012,~~2017, the District Court ~~certified the case as a~~issued its decision denying class ~~action. The decision was not a ruling on the merits of plaintiffs' claims, but rather a decision to allow the plaintiffs to seek to prove the case as a class. The defendant railroads petitioned~~certification. On August 16, 2019, the U.S. Court of Appeals for the D.C. Circuit ~~for permission to appeal~~affirmed the District ~~Court's class certification decision. In August 2013, the D.C. Circuit issued a decision vacating the class certification decision and remanded the~~Court’s ruling.

The consolidated case ~~to the District Court to reconsider its class certification decision. On October 10, 2017, the District Court issued an order denying~~is now moving forward without class certification. ~~The District Court had delayed proceedings on~~Although a class was not certified, shippers other than those who brought the ~~merits of the case pending the outcome of the class certification remand proceedings, and has not yet issued~~original lawsuit in 2007 must decide whether to bring their own individual claim against one or more railroads. Individual shipper claims filed to date have been consolidated into a ~~further schedule in light of the order denying class certification.~~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 ~~this matter~~these matters individually or ~~an unexpected adverse decision on the merits~~when aggregated could have a material adverse effect on the Company's financial condition, results of operations or liquidity in that particular period.

CSX Q3 2021 Form 10-Q p.18

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CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 5. Commitments and Contingencies, continued

Environmental

CSXT is indemnifying Pharmacia LLC, ~~(formerly~~formerly known as Monsanto ~~Company)~~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 ~~cleanup~~the investigation and ~~removal costs and other damages associated with the presence~~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.

In March 2016, EPA issued its Record of Decision detailing the agency’s mandated remedial process for the lower 8 miles of the Study ~~Area, which was based~~Area. 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 ~~a Focused Feasibility Study. EPA has estimated that it will take the potentially responsible parties approximately ten years to complete the work.~~behalf of Pharmacia. At a later date, EPA will select a remedy for the remainder of the Study Area and is expected to again seek the participation of private parties to implement the selected remedy using EPA’s CERCLA authority to compel such participation, if necessary.

CSXT is also defending and indemnifying Pharmacia with regard to the Property in litigation filed by Occidental Chemical Corporation ("Occidental"), 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 lower 8 miles of the Study Area and potentially 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 any indemnification or remediation costs potentially allocable to CSXT 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 2021 Form 10-Q p.19



	~~CSX Q3 2017 Form 10-Q p.18~~

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. ~~For employees hired prior~~Beginning in 2020, the CSX Pension Plan was closed to January 1, 2003, the plans provide eligible employees with retirement benefits based predominantly on years of service and compensation rates near retirement. For employees hired in 2003 or thereafter, benefits are determined based on a cash balance formula, which provides benefits by utilizing interest and pay credits based upon age, service and compensation.new participants.

~~In addition to these plans, the Company~~CSX also sponsors a post-retirement medical plan and a life insurance plan that provide certain benefits to ~~full-time, salaried, management~~eligible employees hired prior to January 1, ~~2003, upon their retirement if certain eligibility requirements are met. Eligible~~2003. Beginning in 2019, both the life insurance benefit and health savings account contributions made by the Company to eligible retirees ~~who are age~~younger than 65 were eliminated for those retiring on or after January 1, 2019. Beginning in 2020, the employer-funded health reimbursement arrangements and life insurance benefit for eligible retirees 65 years or older (Medicare-eligible) are covered by a health reimbursement arrangement, which is an employer-funded account that can be used for reimbursement of eligible medical expenses. Eligible retirees younger than 65 years (non-Medicare eligible) are covered by a self-insured program partially funded by participating retirees. The life insurance plan is non-contributory.

~~The Company engages independent~~were eliminated. 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. ~~The following table describes~~

Only the ~~components~~service cost component of ~~expense / (income) related to~~ net periodic benefit ~~expense recorded~~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
(Dollars in millions) Third Quarters Nine Months
2017 2016 2017 2016
Service Cost $ 8
$ 12
$ 28
$ 36
Interest Cost 23
29
69
89
Expected Return on Plan Assets (43 ) (39 ) (128 ) (118 )
Amortization of Net Loss 10
12
31
36
Net Periodic Benefit Cost $ (2 ) $ 14
$ —
$ 43
Special Termination Benefits - Management Workforce Reduction/Curtailment —
—
57
—
Total Expense $ (2 ) $ 14
$ 57
$ 43

Other Post-retirement Benefits
(Dollars in millions) Third Quarters Nine Months
2017 2016 2017 2016
Service Cost $ —
$ —
$ 1
$ 1
Interest Cost 2
3
6
9
Amortization of Net Loss —
1
—
2
Net Periodic Benefit Cost $ 2
$ 4
$ 7
$ 12
Special Termination Benefits - Management Workforce Reduction/Curtailment —
—
13
—
Total Expense $ 2
$ 4
$ 20
$ 12


	Pension Benefits Cost
	Third Quarters				Nine Months
(Dollars in millions)	2021		2020		2021		2020
Service Cost Included in Labor and Fringe	$	10	$	10	$	28	$	30

Interest Cost	13		20		40		61
Expected Return on Plan Assets	(46)		(43)		(139)		(130)
Amortization of Net Loss	18		15		55		43
Total Included in Other Income - Net	(15)		(8)		(44)		(26)

Net Periodic Benefit (Credit)/Cost	$	(5)	$	2	$	(16)	$	4


	Other Post-retirement Benefits Cost
	Third Quarters				Nine Months
(Dollars in millions)	2021		2020		2021		2020
Service Cost Included in Labor and Fringe	$	1	$	—	$	1	$	1

Interest Cost	—		1		1		2
Amortization of Prior Service Credits	(2)		(2)		(6)		(5)
Total Included in Other Income - Net	(2)		(1)		(5)		(3)

Net Periodic Benefit Credit	$	(1)	$	(1)	$	(4)	$	(2)



	~~CSX Q3 2017 Form 10-Q p.19~~

~~Table of Contents~~

~~CSX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~NOTE 6. Employee Benefit Plans,~~ ~~continued~~

As a result of the management workforce reductions in 2017, charges were incurred related to special termination benefits and curtailment costs. (For additional information regarding the management workforce reductions, see Note 1, Nature of Operations and Significant Accounting Policies.) In first quarter 2017, the Company remeasured the other post-retirement benefits obligation and recorded a curtailment loss of $13 million in restructuring charge on the income statement. The remeasurement did not have a material impact on the other post-retirement benefits obligation. In connection with this remeasurement, the effective discount rate assumption was updated to 3.59% from 3.71%.

In the second quarter of 2017, the Company remeasured the pension benefits obligation and pension plan assets and recorded a curtailment loss of $4 million in restructuring charge on the income statement. This remeasurement resulted in a decrease to the liabilities for pension benefits of approximately $86 million and a corresponding decrease to accumulated other comprehensive loss. In connection with this remeasurement, the effective discount rate assumption was updated to 3.94% from 4.08%. There were no other changes to assumptions used to value pension benefits obligation and expense.

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 ~~2017.~~2021.

CSX Q3 2021 Form 10-Q p.20

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 ~~2017~~2021 is shown in the table below. For fair value information related to the Company's long-term debt, see Note 9,10, Fair Value Measurements.


(Dollars in millions)	Current Portion		Long-term Portion		Total
Long-term Debt as of December 31, 2020	$	401	$	16,304	$	16,705
2021 Activity:

Long-term Debt Repaid	(390)		—		(390)
Reclassifications	175		(175)		—
Finance Lease Obligations and Debt Assumed (a)	25		43		68
Discount, Premium and Other Activity	—		10		10

Long-term Debt as of September 30, 2021	$	211	$	16,182	$	16,393

(Dollars in millions) Current Portion Long-term Portion Total
Long-term debt as of December 30, 2016 $ 331
$ 10,962
$ 11,293
2017 activity:
Long-term debt issued —
850
850
Long-term debt repaid (332 ) —
(332 )
Reclassifications 20
(20 ) —
Discount, premium and other activity
(4 ) (4 )
Long-term debt as of September 30, 2017 $ 19
$ 11,788
$ 11,807
(a) In third quarter 2021, finance lease obligations and debt were assumed related to the Company's acquisition of Quality Carriers on July 1, 2021. See Note 12, Business Combinations.

~~Debt Issuance~~Interest Rate Derivatives

~~In May 2017, CSX issued~~On both April 29, 2020, and July 9, 2020, the Company executed a forward starting interest rate swap 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 $850 million of 3.25% notes due in 2027. ~~These notes are included~~In accordance with the Derivatives and Hedging Topic in the ASC, the Company has designated these swaps as cash flow hedges. As of September 30, 2021 and December 31, 2020, the asset value of the forward starting interest rate swaps was $116 million and $80 million, respectively, and was recorded in other long-term assets on the consolidated balance ~~sheets under long-term debt~~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. Unless settled early, the swaps will expire in 2027 and ~~may be redeemed by~~ the ~~Company at any time. The net proceeds~~unrealized gain or loss in AOCI will be ~~used~~recognized in earnings as an adjustment to interest expense over the same period during which the hedged transaction affects earnings. Unrealized amounts, recorded net of tax in other comprehensive income, related to the hedge were gains of$7 million and $25 million for ~~general corporate purposes, which may include repurchases~~third quarters ended 2021 and 2020 and gains of ~~CSX's common stock, capital investment, working capital requirements, improvement in productivity~~$28 million and ~~other cost reductions at CSX’s major transportation units.~~$34 million for the nine months 2021 and 2020, respectively.



	~~CSX Q3 2017 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

CSX has a $1$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 ~~May 2020,~~March 2024, and ~~as of the date of this filing,~~at September 30, 2021, the Company ~~has~~had no outstanding balances under this facility. The facility allows borrowings at floating (LIBOR-based) interest rates, plus a spread, depending upon CSX's senior unsecured debt ratings. LIBOR is the London Interbank Offered Rate which is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds.

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 ~~2017,~~2021, CSX was in compliance with all covenant requirements under this facility.

~~Receivables Securitization Facility~~

CSX Q3 2021 Form 10-Q p.21

Table of Contents

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 7. Debt and Credit Agreements, continued

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, 2021, the Company had no outstanding debt under the commercial paper program.

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 Quarters				Nine Months
(Dollars in millions)	2021		2020		2021		2020

Chemicals	$	624	$	566	$	1,810	$	1,723
Agricultural and Food Products	343		335		1,062		1,011
Forest Products(a)	231		209		684		625
Automotive	209		271		661		645
Metals and Equipment	206		159		596		500
Minerals	162		144		439		405
Fertilizers(a)	106		93		350		303
Total Merchandise	1,881		1,777		5,602		5,212

Intermodal	509		445		1,488		1,226

Coal	460		330		1,267		1,022

Trucking(b)	200		—		200		—

Other	242		96		538		298

Total	$	3,292	$	2,648	$	9,095	$	7,758

(a) Effective first quarter 2021, changes were made in the categorization of certain lines of business, impacting Forest Products and Fertilizers. The impacts were not material and prior periods have been reclassified to conform to the current presentation.

(b) 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 ~~has~~generates revenue from 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.

CSX Q3 2021 Form 10-Q p.22

Table of Contents

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 8. 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 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. This revenue is mostly comprised of truck shipments of chemicals and is recorded 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 demurrage, switching, and intermodal storage and equipment usage. Revenue from regional subsidiary railroads includes shipments by railroads that the Company does not directly operate. 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. Intermodal storage represents charges for customer storage of containers at an intermodal terminal or ramp facility beyond a specified period of time.

During the third quarters and nine months ended 2021 and 2020, revenue recognized from performance obligations related to prior periods (for example, due to changes in transaction price) was not material.

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 September 30, 2021, remaining performance obligations were not material.

CSX Q3 2021 Form 10-Q p.23

Table of Contents

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 8. Revenues, continued

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 September 30, 2021, were not material.

The Company’s accounts receivable - net consists of freight and non-freight receivables, ~~securitization facility with~~reduced by an allowance for credit losses.


(Dollars in millions)	September 30, 2021		December 31, 2020

Freight Receivables	$	950	$	716
Freight Allowance for Credit Losses	(14)		(16)
Freight Receivables, net	936		700

Non-Freight Receivables	402		224
Non-Freight Allowance for Credit Losses	(12)		(12)
Non-Freight Receivables, net	390		212
Total Accounts Receivable, net	$	1,326	$	912

Freight receivables include amounts earned, billed and unbilled, and currently due from customersfor transportation-related services. Non-freight receivables include amounts billed and unbilled and currently due related to government reimbursement receivables and other non-revenue receivables. At September 30, 2021, non-freight receivables include a ~~three-year term scheduled~~$168 million receivable related to ~~expire in September 2019.~~the conveyance of an easement to the Commonwealth of Virginia. See Note 1, Nature of Operations and Significant Accounting Policies, for more details about this transaction. The ~~purpose of this facility is~~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 ~~alternative to commercial paper~~assessment of risk characteristics, historical payment experience, and ~~a low cost source~~the age of ~~short-term liquidity of up to $200 million, depending~~outstanding receivables adjusted for forward-looking economic conditions as necessary.Credit losses recognized on ~~eligible receivables balances. As of~~ the ~~date of this filing,~~Company’s accounts receivable were not material in the ~~Company has no outstanding balances under this facility.~~third quarters or nine months ended 2021 and 2020.

NOTE 8.9. Income Taxes

There have been no material changes to the balance of unrecognized tax benefits reported at December ~~30, 2016.~~31, 2020.

CSX Q3 2021 Form 10-Q p.24

Table of Contents

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 9.10. Fair Value Measurements

The Financial Instruments Topic in the ASC requiresdisclosures about fair value of financial instruments in annual reports as well as in quarterly reports. For CSX, this statement applies to certain investments, long-term debt and ~~long-term debt.~~interest rate derivatives. Disclosure of the fair value of pension plan assets is only required annually. Also, this rule 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 ~~long-term debt.~~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).



	~~CSX Q3 2017 Form 10-Q p.21~~

~~Table of Contents~~

~~CSX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~NOTE 9. Fair Value Measurements,~~ ~~continued~~

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, valued with assistance from a third-party trustee, consist of ~~certificates of deposits, commercial paper,~~ corporate bonds and government securities and are carried at fair value on the consolidated balance sheet per the Fair Value Measurements and Disclosures Topic in theASC. ~~There~~These assets are ~~several valuation methodologies used for those assets as described below.~~

~~Certificates of Deposit and Commercial Paper (Level 2): Valued at amortized cost, which approximates fair value; and~~

~~Corporate Bonds and Government Securities (Level 2): Valued~~valued using broker quotes that utilize observable market inputs.

~~The Company's investment assets are carried at fair value on the consolidated balance sheets as summarized in the following table.~~ All of the inputs used to determine the fair value of the Company's investments are Level 2 inputs.

The ~~amortized cost basis of these investments was $186 million and $500 million as of September 30, 2017 and December 30, 2016, respectively.~~

(Dollars in Millions) September 30,
2017 December 30,
2016
Certificates of Deposit and Commercial Paper $ 100
$ 415
Corporate Bonds 60
63
Government Securities 29
22
Total investments at fair value $ 189
$ 500

~~These investments have~~Company's investment assets are summarized in the following ~~maturities:~~table.


(Dollars in Millions)	September 30, 2021		December 31, 2020


Corporate Bonds	$	65	$	68
Government Securities	28		33

Total investments at fair value	$	93	$	101

Total investments at amortized cost	$	84	$	89

CSX Q3 2021 Form 10-Q p.25

(Dollars in millions) September 30,
2017 December 30,
2016
Less than 1 year $ 113
$ 417
1 - 2 years 5
12
2 - 5 years 10
4
Greater than 5 years 61
67
Total investments at fair value $ 189
$ 500



	~~CSX Q3 2017 Form 10-Q p.22~~

Table of Contents

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 9.10. Fair Value Measurements, continued

These investments have the following maturities:


(Dollars in millions)	September 30, 2021		December 31, 2020
Less than 1 year	$	3	$	2
1 - 5 years	28		22
5 - 10 years	14		23
Greater than 10 years	48		54
Total investments at fair value	$	93	$	101

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 majority of the Company's long-term debt is valued with assistance from ~~an independent~~a third party ~~adviser~~ that utilizes closing transactions, market quotes or market values of comparable debt. For those instruments not valued by the ~~independent adviser,~~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 ~~independent adviser.~~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.

The fair value and carrying value of the Company's long-term debt is as follows:


(Dollars in millions)	September 30, 2021		December 31, 2020
Long-term Debt (Including Current Maturities):
Fair Value	$	19,654	$	21,076
Carrying Value	16,393		16,705

Interest Rate Derivatives

The Company’s forward starting interest rate swaps are carried at fair value and valued 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 forward starting interest rate swap asset was $116 million and $80 million as of September 30, 2021 and December 31, 2020, respectively. See Note 7, Debt and Credit Agreements, for further information.

CSX Q3 2021 Form 10-Q p.26

(Dollars in millions) September 30,
2017 December 30, 2016
Long-term Debt (Including Current Maturities):
Fair Value $ 13,082
$ 12,096
Carrying Value 11,807
11,293

Table of Contents

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE ~~10.~~11. 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 (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.~~liabilities as well as other adjustments. Total comprehensive earnings represent the activity for a period net of tax and were ~~$467~~$985 million and ~~$465~~$770 million for third quarters 2021 and ~~$1.4~~2020 and $2.9 billion and ~~$1.3~~$2.1 billion for the nine months ~~2017~~2021 and ~~2016,~~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.



	~~CSX Q3 2017 Form 10-Q p.23~~

~~Table of Contents~~

~~CSX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~NOTE 10. Other Comprehensive Income (Loss),~~ ~~continued~~

Changes in the AOCI balance by component are shown in the ~~table below.~~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 ~~labor and fringe~~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 ~~materials, supplies~~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, 2020, Net of Tax	$	(598)	$	62	$	(62)	$	(598)
Other Comprehensive Income (Loss)
Income Before Reclassifications	—		36		—		36
Amounts Reclassified to Net Earnings	50		—		(2)		48
Tax Expense	(12)		(8)		—		(20)
Total Other Comprehensive Income	38		28		(2)		64
Balance September 30, 2021, Net of Tax	$	(560)	$	90	$	(64)	$	(534)

CSX Q3 2021 Form 10-Q p.27

Pension and Other Post-Employment Benefits Other Accumulated Other Comprehensive Income (Loss)
(Dollars in millions)
Balance December 30, 2016, Net of Tax $ (580 ) $ (60 ) $ (640 )
Other Comprehensive Income (Loss)
Income Before Reclassifications 86
2
88
Amounts Reclassified to Net Earnings 33
2
35
Tax Expense (43 ) (1 ) (44 )
Total Other Comprehensive Income 76
3
79
Balance September 30, 2017, Net of Tax $ (504 ) $ (57 ) $ (561 )

~~NOTE 11. Summarized Consolidating Financial Data~~

In 2007, CSXT, a wholly-owned subsidiary of CSX Corporation, sold secured equipment notes maturing in 2023 in a registered public offering. CSX has fully and unconditionally guaranteed the notes. In connection with the notes, the Company is providing the following condensed consolidating financial information in accordance with SEC disclosure requirements. Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements, except for the use of the equity method of accounting to reflect ownership interests in subsidiaries which are eliminated upon consolidation and the allocation of certain expenses of CSX incurred for the benefit of its subsidiaries. Condensed consolidating financial information for the obligor, CSXT, and parent guarantor, CSX, is shown in the following tables.



	~~CSX Q3 2017 Form 10-Q p.24~~

Table of Contents

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 12. Business Combinations

~~NOTE 11.Summarized Consolidating Financial Data,~~ ~~continued~~

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 $546 million in cash, subject to certain customary purchase price adjustments. 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.

Consolidating Income Statements
(Dollars in millions)
Third Quarter 2017 CSX Corporation CSX Transportation Eliminations and Other Consolidated
Revenue $ —
$ 2,725
$ 18
$ 2,743
Expense (129 ) 2,025
(29 ) 1,867
Operating Income 129
700
47
876

Equity in Earnings of Subsidiaries 472
—
(472 ) —
Interest (Expense) / Benefit (147 ) (3 ) 18
(132 )
Other Income / (Expense) - Net 1
13
(8 ) 6

Earnings Before Income Taxes 455
710
(415 ) 750
Income Tax Benefit / (Expense) 4
(277 ) (18 ) (291 )
Net Earnings $ 459
$ 433
$ (433 ) $ 459

Total Comprehensive Earnings $ 467
$ 433
$ (433 ) $ 467

Third Quarter 2016 CSX Corporation CSX Transportation Eliminations and Other Consolidated
Revenue $ —
$ 2,691
$ 19
$ 2,710
Expense (63 ) 1,960
(28 ) 1,869
Operating Income 63
731
47
841

Equity in Earnings of Subsidiaries 505
1
(506 ) —
Interest (Expense) / Benefit (141 ) (7 ) 9
(139 )
Other Income / (Expense) - Net —
9
4
13

Earnings Before Income Taxes 427
734
(446 ) 715
Income Tax (Expense) / Benefit 28
(268 ) (20 ) (260 )
Net Earnings $ 455
$ 466
$ (466 ) $ 455

Total Comprehensive Earnings $ 465
$ 467
$ (467 ) $ 465

The Company accounted for the transaction using the acquisition method in accordance with ASC Topic 805, Business Combinations. The allocation of the purchase price to assets acquired and liabilities assumed is based upon preliminary information and is subject to change as additional information becomes available and as certain tax returns are filed. Any adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the date of acquisition. The preliminary 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)	~~CSX Q3 2017 Form 10-Q p.25~~ July 1, 2021
Assets Acquired:
Cash and Cash Equivalents	$	3
Accounts Receivable, net	113
Properties and Equipment, net	225
Goodwill	200
Intangible Assets	190
Other Assets	11
Total Assets Acquired	$	742
Liabilities Assumed:
Accounts Payable and Accrued Liabilities	48
Finance Lease Obligations and Notes Payable	68
Casualty, Environmental and Other Reserves	60
Other Long-term Liabilities	20
Total Liabilities Assumed	196
Fair Value of Assets Acquired, Net of Liabilities Assumed:	$	546

The goodwill of $200 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.

CSX Q3 2021 Form 10-Q p.28

Table of Contents

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 12. Business Combinations, continued

~~NOTE 11.Summarized Consolidating Financial Data,~~ ~~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 of $225 million include tractors and trailers, equipment, land, buildings and other assets. Intangible assets of $190 million consist of $160 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.

The Company incurred costs related to this acquisition of approximately $16 million, $12 million of which was incurred during the three months ended September 30, 2021. 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 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, CSX has not provided pro forma information relating to the pre-acquisition period.

Proposed Acquisition of Pan Am Systems, Inc.

On November 30, 2020, CSX signed a definitive agreement to acquire 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, if approved, will expand CSX’s reach in the Northeastern United States. Assets and facilities to be acquired as part of the proposed transaction include road and track assets, work equipment, land, buildings and other assets. On February 25, 2021, the Company began the process of seeking approval from the Surface Transportation Board ("STB"), with a decision expected by April 1, 2022. This proposed acquisition is not expected to be material 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.

CSX Q3 2021 Form 10-Q p.29

Consolidating Income Statements
(Dollars in millions)
Nine Months 2017 CSX Corporation CSX Transportation Eliminations and Other Consolidated
Revenue $ —
$ 8,490
$ 55
$ 8,545
Expense (171 ) 6,278
(108 ) 5,999
Operating Income 171
2,212
163
2,546

Equity in Earnings of Subsidiaries 1,506
—
(1,506 ) —
Interest (Expense) / Benefit (432 ) (21 ) 47
(406 )
Other Income / (Expense) - Net 6
32
(19 ) 19

Earnings Before Income Taxes 1,251
2,223
(1,315 ) 2,159
Income Tax (Expense) / Benefit 80
(844 ) (64 ) (828 )
Net Earnings $ 1,331
$ 1,379
$ (1,379 ) $ 1,331

Total Comprehensive Earnings $ 1,410
$ 1,378
$ (1,378 ) $ 1,410

Nine Months 2016 CSX Corporation CSX Transportation Eliminations and Other Consolidated
Revenue $ —
$ 7,974
$ 58
$ 8,032
Expense (202 ) 5,985
(136 ) 5,647
Operating Income 202
1,989
194
2,385

Equity in Earnings of Subsidiaries 1,399
1
(1,400 ) —
Interest (Expense) / Benefit (425 ) (27 ) 29
(423 )
Other Income / (Expense) - Net 1
24
3
28

Earnings Before Income Taxes 1,177
1,987
(1,174 ) 1,990
Income Tax (Expense) / Benefit 79
(735 ) (78 ) (734 )
Net Earnings $ 1,256
$ 1,252
$ (1,252 ) $ 1,256

Total Comprehensive Earnings $ 1,282
$ 1,253
$ (1,253 ) $ 1,282



	~~CSX Q3 2017 Form 10-Q p.26~~

Table of Contents

CSX CORPORATION

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~NOTE 11.Summarized Consolidating Financial Data,~~ ~~continued~~

Consolidating Balance Sheet
(Dollars in millions)
September 30, 2017 CSX Corporation CSX Transportation Eliminations and Other Consolidated

ASSETS
Current Assets
Cash and Cash Equivalents $ 433
$ 147
$ 11
$ 591
Short-term Investments 100
—
13
113
Accounts Receivable - Net (1 ) 277
705
981
Receivable from Affiliates 1,012
3,004
(4,016 ) —
Materials and Supplies —
392
—
392
Other Current Assets 2
76
17
95
   Total Current Assets 1,546
3,896
(3,270 ) 2,172

Properties 1
41,292
2,812
44,105
Accumulated Depreciation (1 ) (11,014 ) (1,511 ) (12,526 )
Properties - Net —
30,278
1,301
31,579

Investments in Conrail —
—
864
864
Affiliates and Other Companies (39 ) 667
14
642
Investments in Consolidated Subsidiaries 25,221
—
(25,221 ) —
Other Long-term Assets 9
592
(285 ) 316
   Total Assets $ 26,737
$ 35,433
$ (26,597 ) $ 35,573

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 178
$ 695
$ 32
$ 905
Labor and Fringe Benefits Payable 76
483
42
601
Payable to Affiliates 4,148
382
(4,530 ) —
Casualty, Environmental and Other Reserves —
109
13
122
Current Maturities of Long-term Debt —
19
—
19
Income and Other Taxes Payable (115 ) 418
19
322
Other Current Liabilities —
103
3
106
   Total Current Liabilities 4,287
2,209
(4,421 ) 2,075

Casualty, Environmental and Other Reserves —
207
46
253
Long-term Debt 11,053
735
—
11,788
Deferred Income Taxes - Net (198 ) 9,697
290
9,789
Other Long-term Liabilities 708
375
(317 ) 766
   Total Liabilities $ 15,850
$ 13,223
$ (4,402 ) $ 24,671

Shareholders' Equity
Common Stock, $1 Par Value $ 894
$ 181
$ (181 ) $ 894
Other Capital 227
5,096
(5,096 ) 227
Retained Earnings 10,327
16,938
(16,938 ) 10,327
Accumulated Other Comprehensive Loss (561 ) (20 ) 20
(561 )
Noncontrolling Interest —
15
—
15
Total Shareholders' Equity $ 10,887
$ 22,210
$ (22,195 ) $ 10,902
Total Liabilities and Shareholders' Equity $ 26,737
$ 35,433
$ (26,597 ) $ 35,573



	~~CSX Q3 2017 Form 10-Q p.27~~

~~Table of Contents~~

~~CSX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~NOTE 11.Summarized Consolidating Financial Data,~~ ~~continued~~

Consolidating Balance Sheet
(Dollars in millions)
December 30, 2016 CSX Corporation CSX Transportation Eliminations and Other Consolidated
ASSETS
Current Assets
Cash and Cash Equivalents $ 305
$ 281
$ 17
$ 603
Short-term Investments 415
—
2
417
Accounts Receivable - Net 2
215
721
938
Receivable from Affiliates 1,157
2,351
(3,508 ) —
Materials and Supplies —
407
—
407
Other Current Assets —
106
16
122
   Total Current Assets 1,879
3,360
(2,752 ) 2,487

Properties 1
40,518
2,708
43,227
Accumulated Depreciation (1 ) (10,634 ) (1,442 ) (12,077 )
Properties - Net —
29,884
1,266
31,150

Investments in Conrail —
—
840
840
Affiliates and Other Companies (39 ) 643
15
619
Investment in Consolidated Subsidiaries 24,179
—
(24,179 ) —
Other Long-term Assets 2
607
(291 ) 318
   Total Assets $ 26,021
$ 34,494
$ (25,101 ) $ 35,414

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 95
$ 678
$ 33
$ 806
Labor and Fringe Benefits Payable 40
440
65
545
Payable to Affiliates 3,457
500
(3,957 ) —
Casualty, Environmental and Other Reserves —
102
13
115
Current Maturities of Long-term Debt 313
19
(1 ) 331
Income and Other Taxes Payable (346 ) 459
16
129
Other Current Liabilities —
112
2
114
   Total Current Liabilities 3,559
2,310
(3,829 ) 2,040

Casualty, Environmental and Other Reserves —
208
51
259
Long-term Debt 10,203
759
—
10,962
Deferred Income Taxes - Net (203 ) 9,541
258
9,596
Other Long-term Liabilities 783
410
(330 ) 863
   Total Liabilities $ 14,342
$ 13,228
$ (3,850 ) $ 23,720

Shareholders' Equity
Common Stock, $1 Par Value $ 928
$ 181
$ (181 ) $ 928
Other Capital 138
5,095
(5,095 ) 138
Retained Earnings 11,253
15,994
(15,994 ) 11,253
Accumulated Other Comprehensive Loss (640 ) (19 ) 19
(640 )
Noncontrolling Minority Interest —
15
—
15
   Total Shareholders' Equity $ 11,679
$ 21,266
$ (21,251 ) $ 11,694
   Total Liabilities and Shareholders' Equity $ 26,021
$ 34,494
$ (25,101 ) $ 35,414



	~~CSX Q3 2017 Form 10-Q p.28~~

~~Table of Contents~~

~~CSX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~NOTE 11.Summarized Consolidating Financial Data,~~ ~~continued~~

Consolidating Cash Flow Statements
(Dollars in millions)
Nine Months 2017
CSX
Corporation
CSX
Transportation
Eliminations and Other Consolidated
Operating Activities
Net Cash Provided by (Used in) Operating Activities $ 1,590
$ 1,544
$ (273 ) $ 2,861
Investing Activities

Property Additions —
(1,311 ) (151 ) (1,462 )
Purchases of Short-term Investments (639 ) —
(6 ) (645 )
Proceeds from Sales of Short-term Investments 955
—
2
957
Other Investing Activities (2 ) 98
(25 ) 71
Net Cash Provided by (Used in) Investing Activities 314
(1,213 ) (180 ) (1,079 )
Financing Activities
Long-term Debt Issued 850
—
—
850
Long-term Debt Repaid (312 ) (20 ) —
(332 )
Dividends Paid (530 ) (450 ) 450
(530 )
Shares Repurchased (1,763 ) —
—
(1,763 )
Other Financing Activities (21 ) 5
(3 ) (19 )
Net Cash Provided by (Used in) Financing Activities (1,776 ) (465 ) 447
(1,794 )
Net Increase (Decrease) in Cash and Cash Equivalents 128
(134 ) (6 ) (12 )
Cash and Cash Equivalents at Beginning of Period 305
281
17
603
Cash and Cash Equivalents at End of Period $ 433
$ 147
$ 11
$ 591



	~~CSX Q3 2017 Form 10-Q p.29~~

~~Table of Contents~~

~~CSX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~NOTE 11.Summarized Consolidating Financial Data,~~ ~~continued~~

Consolidating Cash Flow Statements
(Dollars in millions)
Nine Months 2016
CSX
Corporation
CSX
Transportation
Eliminations and Other Consolidated
Operating Activities
Net Cash Provided by (Used in) Operating Activities $ 644
$ 2,089
$ (245 ) $ 2,488
Investing Activities
Property Additions —
(1,469 ) (121 ) (1,590 )
Purchases of Short-term Investments (410 ) —
—
(410 )
Proceeds from Sales of Short-term Investments 1,070
—
—
1,070
Other Investing Activities (3 ) 107
(67 ) 37
Net Cash Provided by (Used in) Investing Activities 657
(1,362 ) (188 ) (893 )
Financing Activities
Long-term Debt Issued —
—
—
—
Long-term Debt Repaid —
(18 ) (1 ) (19 )
Dividends Paid (513 ) (450 ) 450
(513 )
Shares Repurchased (778 ) —
—
(778 )
Other Financing Activities (6 ) (304 ) —
(310 )
Net Cash Provided by (Used in) Financing Activities (1,297 ) (772 ) 449
(1,620 )
Net Increase (Decrease) in Cash and Cash Equivalents 4
(45 ) 16
(25 )
Cash and Cash Equivalents at Beginning of Period 444
175
9
628
Cash and Cash Equivalents at End of Period $ 448
$ 130
$ 25
$ 603



	~~CSX Q3 2017 Form 10-Q p.30~~

~~Table of Contents~~

~~CSX CORPORATION~~

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THIRD QUARTER ~~2017~~2021 HIGHLIGHTS

•Revenue increased ~~$33~~$644 million, ~~to $2.7 billion,~~ or ~~1 percent~~24% year over year.

•Expenses ~~decreased~~increased$2349 million, ~~to $1.9 billion.~~

or 23% year over year.

•Operating income of ~~$876 million~~$1.4 billion increased ~~$35~~$295 million, or ~~4 percent~~26%, year over year.

•Operating ratio of ~~68.1%~~56.4% improved 9050 basis points versus last year's quarter.

•Earnings per diluted share of ~~$0.51~~$0.43 increased$~~0.03,~~0.11, or ~~6 percent~~34% year over year.


	Third Quarters									Nine Months											Third Quarters									Nine Months
	2017			2016			Fav / (Unfav)		% Change	2017			2016			Fav / (Unfav)			% Change		2021			2020			Fav / (Unfav)		% Change	2021			2020			Fav / (Unfav)		% Change
Volume (in thousands)	1,587			1,574			13		1%	4,799			4,720			79			2%	Volume (in thousands)	1,563			1,522			41		3%	4,683			4,293			390		9%

(in millions)																				(in millions)
Revenue	$	2,743		$	2,710		$	33	1%	$	8,545		$	8,032		$	513		6%	Revenue	$	3,292		$	2,648		$	644	24	$	9,095		$	7,758		$	1,337	17
Expense	1,867			1,869			2		—%	5,999			5,647			(352		)	(6)%	Expense	1,856			1,507			(349)		(23)	4,867			4,611			(256)		(6)
Operating Income	$	876		$	841		$	35	4%	$	2,546		$	2,385		$	161		7%	Operating Income	$	1,436		$	1,141		$	295	26%	$	4,228		$	3,147		$	1,081	34%

Operating Ratio	68.1		%	69.0		%	90		bps	70.2		%	70.3		%	10			bps	Operating Ratio	56.4		%	56.9		%	50		bps	53.5		%	59.4		%	590		bps

Earnings Per Diluted Share	$	0.51		$	0.48		$	0.03	6%	$	1.45		$	1.32		$	0.13		10%	Earnings Per Diluted Share	$	0.43		$	0.32		$	0.11	34%	$	1.26		$	0.87		$	0.39	45%

InAcquisition of Quality Carriers, Inc.

On July 1, 2021, CSX acquired Quality Carriers, Inc. ("Quality Carriers"). Accordingly, the consolidated third quarter ~~2017,~~and nine months 2021 results include the ~~Company continued implementation~~results of ~~Precision Scheduled Railroading. As~~Quality Carriers' operations after the acquisition date. For further details, refer to Note 12, Business Combinations.

COVID-19 Update

Demand for rail services has improved from steep declines in the first half of 2020, but the effects of the disruption of global manufacturing, supply chains and consumer spending as a result ~~CSX is adjusting~~of the COVID-19 global pandemic are ongoing. Future impacts of the pandemic on the Company’s financial and operating results will be determined by its ~~strategy to successfully execute this new plan, relentlessly focusing~~duration, effects on ~~improving customer service, controlling costs, optimizing asset utilization, operating safely,~~the demand for the Company’s transportation services and ~~developing~~the supply chain, as well as the effect of governmental regulations imposed and ~~valuing employees.~~

~~The restructuring charge was $1 million~~legislative stimulus packages passed in ~~third quarter 2017 and $296 million year-to-date, which includes costs related~~response to the ~~management workforce reduction program announced earlier~~pandemic. The duration of the pandemic is dependent on several factors, including the impacts of virus mutations and case resurgences across the country.

CSX employees that provide efficient and reliable rail service are essential to keeping supply chains fluid in response to this ~~year.~~challenge. Accordingly, business operations have been modified to ensure the safety of employees across the network while continuing to provide a high level of service to customers. The Company ~~expects estimated pre-tax savings on both future earnings~~is strongly encouraging employees to get vaccinated. A cross-functional task force continues to monitor and ~~cash flows resulting from this program~~coordinate the Company’s response to ~~be approximately $200 million per year~~.

COVID-19.

CSX Q3 2021 Form 10-Q p.30



	~~CSX Q3 2017 Form 10-Q p.31~~

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
	Volume				Revenue						Revenue Per Unit
	2021	2020	% Change		2021		2020		% Change		2021		2020		% Change
Chemicals	166	165	1	%	$	624	$	566	10	%	$	3,759	$	3,430	10	%
Agricultural and Food Products	109	115	(5)		343		335		2		3,147		2,913		8
Minerals	90	86	5		162		144		13		1,800		1,674		8
Automotive	75	102	(26)		209		271		(23)		2,787		2,657		5
Forest Products(a)	75	70	7		231		209		11		3,080		2,986		3
Metals and Equipment	70	58	21		206		159		30		2,943		2,741		7
Fertilizers(a)	54	54	—		106		93		14		1,963		1,722		14
Total Merchandise	639	650	(2)		1,881		1,777		6		2,944		2,734		8
Intermodal	744	717	4		509		445		14		684		621		10
Coal	180	155	16		460		330		39		2,556		2,129		20
Trucking(b)	—	—	—		200		—		NM		—		—		—
Other	—	—	—		242		96		152		—		—		—
Total	1,563	1,522	3	%	$	3,292	$	2,648	24	%	$	2,106	$	1,740	21	%

Nine Months
	Volume				Revenue						Revenue Per Unit
	2021	2020	% Change		2021		2020		% Change		2021		2020		% Change
Chemicals	496	495	—	%	$	1,810	$	1,723	5	%	$	3,649	$	3,481	5	%
Agricultural and Food Products	342	338	1		1,062		1,011		5		3,105		2,991		4
Minerals	244	243	—		439		405		8		1,799		1,667		8
Automotive	239	241	(1)		661		645		2		2,766		2,676		3
Forest Products(a)	223	209	7		684		625		9		3,067		2,990		3
Metals and Equipment	209	173	21		596		500		19		2,852		2,890		(1)
Fertilizers(a)	173	168	3		350		303		16		2,023		1,804		12
Total Merchandise	1,926	1,867	3		5,602		5,212		7		2,909		2,792		4
Intermodal	2,222	1,963	13		1,488		1,226		21		670		625		7
Coal	535	463	16		1,267		1,022		24		2,368		2,207		7
Trucking(b)	—	—	—		200		—		NM		—		—		—
Other	—	—	—		538		298		81		—		—		—
Total	4,683	4,293	9	%	$	9,095	$	7,758	17	%	$	1,942	$	1,807	7	%

NM - not meaningful

(b) 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.

CSX Q3 2021 Form 10-Q p.31

Volume and Revenue (Unaudited)
Volume (Thousands of units); Revenue (Dollars in Millions); Revenue Per Unit (Dollars)
Third Quarters
Volume Revenue Revenue Per Unit
2017 2016 % Change 2017 2016 % Change 2017 2016 % Change
Agricultural
Agricultural and Food Products 106
109
(3 )% $ 288
$ 295
(2 )% $ 2,717
$ 2,706
— %
Fertilizers 68
72
(6 ) 106
104
2
1,559
1,444
8
Industrial
Chemicals 164
173
(5 ) 546
542
1
3,329
3,133
6
Automotive 105
115
(9 ) 269
304
(12 ) 2,562
2,643
(3 )
Metals and Equipment 64
63
2
178
180
(1 ) 2,781
2,857
(3 )
Housing and Construction
Minerals 80
86
(7 ) 120
125
(4 ) 1,500
1,453
3
Forest Products 64
68
(6 ) 181
191
(5 ) 2,828
2,809
1
Total Merchandise 651
686
(5 ) 1,688
1,741
(3 ) 2,593
2,538
2
Coal 218
207
5
514
467
10
2,358
2,256
5
Intermodal 718
681
5
446
425
5
621
624
—
Other —
—
—
95
77
23
—
—
—
Total 1,587
1,574
1 % $ 2,743
$ 2,710
1 % $ 1,728
$ 1,722
— %

Nine Months
Volume Revenue Revenue Per Unit
2017 2016 % Change 2017 2016 % Change 2017 2016 % Change
Agricultural
Agricultural and Food Products 341
346
(1 )% $ 941
$ 925
2 % $ 2,760
$ 2,673
3 %
Fertilizers 223
220
1
353
345
2
1,583
1,568
1
Industrial
Chemicals 508
520
(2 ) 1,664
1,622
3
3,276
3,119
5
Automotive 340
349
(3 ) 892
907
(2 ) 2,624
2,599
1
Metals and Equipment 201
196
3
546
531
3
2,716
2,709
—
Housing and Construction
Minerals 233
230
1
362
345
5
1,554
1,500
4
Forest Products 198
204
(3 ) 567
572
(1 ) 2,864
2,804
2
Total Merchandise 2,044
2,065
(1 ) 5,325
5,247
1
2,605
2,541
3
Coal 631
602
5
1,566
1,282
22
2,482
2,130
17
Intermodal 2,124
2,053
3
1,328
1,249
6
625
608
3
Other —
—
—
326
254
28
—
—
—
Total 4,799
4,720
2 % $ 8,545
$ 8,032
6 % $ 1,781
$ 1,702
5 %



	~~CSX Q3 2017 Form 10-Q p.32~~

Table of Contents

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Third Quarter ~~2017~~2021

Revenue

~~Revenue for the~~Total revenue increased 24% in third quarter ~~increased $33 million or one percent~~2021 when compared to third quarter 2020 due to the ~~previous year. This~~inclusion of Quality Carriers' results, increases in other revenue, higher fuel recovery, pricing gains and volume growth.

Merchandise Volume

Chemicals - Increased due to higher shipments of plastics, sand, waste, and other core chemicals, partially offset by lower shipments of crude oil.

Agricultural and Food Products - Decreased as a result of lower shipments of export grain and ethanol.

Minerals - Increased as a result of higher shipments of aggregates, cement, lime and limestone.

Automotive - Decreased due to lower North American vehicle production, which continues to be impacted by shortages of semi-conductors and other parts.

Forest Products - Increased primarily due to higher shipments of pulpboard, woodpulp and building products.

Metals and Equipment - Increased as growth across the metals markets was ~~primarily driven~~partially offset by ~~gains in coal and intermodal, partially~~reduced equipment shipments.

Fertilizers - Increased long-haul fertilizer shipments were offset by declines in ~~the majority of the merchandise markets.~~short-haul phosphate shipments.

~~Merchandise~~Intermodal Volume

~~Agricultural Sector~~

~~Agricultural and Food Products~~ ~~- Volume declined~~Increased due to ~~challenges~~higher international shipments as a result of strong demand, inventory replenishments and growth in ~~the export market~~rail volumes from east coast ports.

Coal Volume

Domestic coal increased due to higher shipments of utility coal as well as ~~a large southeastern grain crop leading to local truck sourcing to feed mills. These declines were partially offset by gains~~higher steel and industrial shipments. The increase in ~~ethanol~~export coal was driven by higher ~~production levels and new business wins.~~

~~Fertilizers~~ ~~- Volume declined predominantly due to Hurricane Irma's impact on Central Florida phosphate operations causing reduced production levels and supply chain disruptions.~~

~~Industrial Sector~~

~~Chemicals~~ ~~- Volume fell, primarily reflecting sustained challenges in the Eastern crude-by-rail market. This decline offset an increase in~~international shipments of ~~frac sand~~both thermal and ~~petroleum gases due to growth in drilling activity.~~metallurgical coal.

~~Automotive~~ ~~- Volume declined as North American vehicle production fell. Dealership inventory ended the quarter consistent with the~~Trucking Revenue

Trucking revenue increased $200 million versus prior ~~four-year average.~~

~~Metals and Equipment~~ ~~- Volume increased slightly as an increase in equipment moves more than offset declines in steel sheet and scrap.~~

~~Housing and Construction Sector~~

~~Minerals~~ ~~- Volume fell, reflecting short-term competitive losses to other modes as the Company transitions its customers to the new operating plan.~~

~~Forest Products~~ ~~- Volume declined as mill closures and truck competition negatively impacted shipments of paper products. Additionally, lumber shipments were challenged~~year due to the ~~enforcement~~inclusion of ~~duties on Canadian lumber.~~Quality Carriers' results.

~~Coal~~Other Revenue

~~Domestic Utility Coal~~ ~~- Volume declined reflecting the competitive loss of short-haul interchange traffic~~Other revenue increased $146 million versus prior year due to increases in revenue for intermodal storage and ~~challenges from Hurricane Irma, which caused outages at southeastern customer facilities.~~

~~Domestic Coke, Iron Ore~~equipment usage as well as higher demurrage and ~~Other~~ ~~- Volume was down, primarily driven by iron ore shipments, as a large customer continued to idle its production.~~

~~Export Coal~~ ~~- Volume increased as global supply levels and pricing conditions supported strong growth in U.S. coal exports.~~

affiliate revenue.

CSX Q3 2021 Form 10-Q p.32



	~~CSX Q3 2017 Form 10-Q p.33~~

Table of Contents

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Intermodal~~

~~Domestic~~ - Volume increased one percent as growth with existing customers and ongoing success of CSX’s highway-to-rail conversion initiative more than offset a prior year short-haul competitive loss which cycled mid-quarter and other competitive losses as the Company transitions its customers to the new operating plan.

~~International~~ ~~- Volume was up 11 percent driven by new customers and strong performance with existing customers as eastern port volumes increased.~~

~~Other~~

~~Other revenue increased $18 million versus the prior year primarily due to higher incidental charges and lower volume-based refunds.~~

Expenses

Expenses of ~~approximately~~ $1.9 billion ~~remained relatively consistent, decreasing $2~~increased $349 million, ~~year over year. This decrease was due~~or 23%, in third quarter 2021 when compared to efficiency savings of $95 million and lower volume related costs of $13 million due to a decrease in gross ton-miles, nearly offset by inflation of $53 million, fuel price increases of $32 million and other items.third quarter 2020.

Labor and Fringe expense ~~decreased $45~~increased $57 million due to the following:

•The acquisition of Quality Carriers resulted in increased costs of $30 million.

•Inflation and higher volume resulted in $23 million of ~~$43~~increased expenses.

•Other expenses increased $4 million ~~was driven~~ primarily ~~by increased health and welfare and wage increases.~~

~~Efficiency savings of $73 million were~~ driven by ~~reduced management headcount as a result of the 2017 restructuring initiative, as well as lower operating support costs.~~

~~Volume-related~~$16 million in costs ~~decreased by $4 million.~~

~~Other costs decreased by $11 million primarily due to a decrease in pension expense~~for hiring and retention programs, partially offset by other ~~items, none of which were individually significant.~~non-significant items.

~~Materials, Supplies~~Purchased Services and Other expense increased $9$195 million due to the following:

~~Additional expense~~•The inclusion of ~~$13 million resulted from train accidents during the quarter.~~

~~Inflation resulted in $8~~Quality Carriers' operations drove $126 million of additional ~~cost.~~costs.

~~Technology-related asset impairment charges were $5 million.~~

~~Efficiency savings of $30 million were~~•Higher operating support costs, primarily ~~related~~due to ~~lower maintenance costs from the reduction in the active~~an increased locomotive fleet, ~~and a reduction in contingent workers.~~as well as higher intermodal terminal costs drove an increase of $31 million.

~~Volume-related costs decreased by $4 million.~~

•Other costs increased ~~$17~~$38 million due to ~~relocation~~$14 million of acquisition-related costs, inflation and other ~~items, none of which were individually significant.~~non-significant items.

Depreciationexpense increased ~~$10~~$19 million primarily due to a larger asset ~~base.~~base, which includes Quality Carriers' assets.

Fuel expense increased ~~$31~~$128 million primarily resulting from a 77% increase in locomotive fuel prices and the inclusion of non-locomotive fuel used for trucking.

Equipment and Other Rents expense was $6 million higher primarily due to the ~~following:~~addition of Quality Carriers' costs as increased car hire was offset by other items.

~~A 19 percent price increase drove $32~~

Gains on Property Dispositions increased to $60 million in ~~additional fuel expense.~~2021 from $4 million in 2020.

~~Efficiency savings were $1 million.~~

Interest Expense

Interest expense decreased $10 million primarily due to lower average interest rates.

Other Income - Net

Other income - net increased $6 million primarily due to an increase in net pension benefit credits.

Income Tax Expense

Income tax expense increased $79 million primarily due to higher earnings before income taxes.

CSX Q3 2021 Form 10-Q p.33



	~~CSX Q3 2017 Form 10-Q p.34~~

Table of Contents

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Equipment and Other Rents~~ ~~expense decreased $8 million due to the following:~~

~~Efficiency losses of $9 million were due to increased days per load for automotive and merchandise markets.~~

~~Inflation resulted in $2 million of additional cost due to higher rates across most car types.~~

~~Volume-related costs were $5 million lower.~~

Other costs decreased $14 million primarily due to rental income that was previously classified as other income in the prior years being reclassified to operating expense in the current year as well as other items, none of which were individually significant.

~~Restructuring charge~~ ~~of $1 million was incurred during the quarter.~~

~~Interest expense~~ ~~decreased $7 million primarily due to lower average interest rates partially offset by higher average debt balances.~~

~~Other income - net~~ ~~decreased$7 million primarily due to prior quarter income from non-operating real estate transactions, which are now included in operating income.~~

~~Income tax expense~~ ~~increased $31 million primarily due to increased earnings before income taxes, state legislative changes and non-deductible executive compensation.~~

Nine Months Results of Operations

Revenue increased ~~$513 million reflecting pricing gains, volume growth, higher fuel recoveries and a $58 million settlement in 2017 related to a customer that did not meet historical volume commitments.~~

~~Expenses~~ were higher by $352 million driven primarily by a restructuring charge of $296 million, inflation of $153 million and fuel price increases of $127 million, partially offset by efficiency savings of $308 million.

~~Operating income~~ ~~increased $161 million~~$1.3 billion primarily due to volume growth, increases in other revenue driven by intermodal storage and equipment usage, trucking revenue from the acquisition of Quality Carriers, pricing gains ~~volume growth~~across all markets, and ~~efficiency savings, partially offset by restructuring charges, inflation and increases in~~higher fuel ~~price.~~recovery.

~~Interest~~Total expense ~~decreased $17~~ increased $256 million primarily ~~due to lower average interest rates~~driven by rising fuel prices, the inclusion of Quality Carriers' operations, higher volume-related costs and increased incentive compensation, partially offset by higher gains on property dispositions.

Interest expense decreased $23 million primarily as a result of lower average ~~debt balances.~~interest rates.

Other income - net ~~decreased~~ increased $9 million primarily due to ~~prior quarter income from non-operating real estate transactions, which are now included~~an increase in ~~operating income, and other non-operating items, none of which were individually significant.~~net pension benefit credits, partially offset by lower interest income.

Income tax expense increased ~~$94~~$271 million primarily due to ~~increased~~higher earnings before income ~~taxes, non-deductible executive compensation, and state legislative changes.~~taxes.

CSX Q3 2021 Form 10-Q p.34



	~~CSX Q3 2017 Form 10-Q p.35~~

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 (U.S. 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 U.S. 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.

~~Adjusted Operating Results~~

Management believes that adjusted operating income, adjusted operating ratio, adjusted net earnings and adjusted net earnings per share, assuming dilution are important in evaluating the Company’s operating performance and for planning and forecasting future business operations and future profitability. These non-GAAP measures provide meaningful supplemental information regarding operating results because they exclude certain significant items that are not considered indicative of future financial trends. The restructuring charge was tax effected using rates reflective of the applicable tax amounts for each component of the restructuring charge, including an adjustment for the non-deductibility of executive compensation.

For the Quarter ended September 30, 2017
(in millions, except operating ratio and net earnings per share, assuming dilution) Operating Income Operating Ratio Net Earnings Net Earnings Per Share, Assuming Dilution

GAAP Operating Results $ 876
68.1 % $ 459
$ 0.51
Restructuring Charge ^(a)
1
(0.1 )% 4
—
Adjusted Operating Results (non-GAAP) $ 877
68.0 % $ 463
$ 0.51

For the Nine Months Ended September 30, 2017
(in millions, except operating ratio and net earnings per share, assuming dilution) Operating Income Operating Ratio Net Earnings Net Earnings Per Share, Assuming Dilution

GAAP Operating Results $ 2,546
70.2 % $ 1,331
$ 1.45
Restructuring Charge^(a)
296
(3.5 )% 193
0.21
Adjusted Operating Results (non-GAAP) $ 2,842
66.7 % $ 1,524
$ 1.66

~~(a) See Note 1, Nature of Operations and Significant Accounting Policies - Other Items - Restructuring Charge, for additional information.~~



	~~CSX Q3 2017 Form 10-Q p.36~~

~~Table of Contents~~

~~CSX CORPORATION~~

~~ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

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 ~~should be considered in addition to, rather than a substitute for, cash provided by operating activities. Free cash flow~~ is calculated by using net cash from operations and adjusting for property additions and certain other investing activities, which includes proceeds from property dispositions. Free cash flow should be considered in addition to, rather than a substitute for, cash provided by operating activities. The increase in free cash flow before dividends from the prior year of $958 million is primarily due to higher cash from operating activities and increased proceeds from property dispositions. For the nine months 2021, other investing activities include $200 million of proceeds related to the conveyance of a permanent land easement to the Commonwealth of Virginia.

The following table reconciles cash provided by operating activities (GAAP measure) to ~~adjusted~~ free cash flow, ~~after restructuring,~~ before dividends (non-GAAP measure). ~~The restructuring charge impact to free cash flow was tax effected using the applicable tax rate of the charge.~~


	Nine Months
(Dollars in millions)	2021		2020
Net cash provided by operating activities	$	3,819	$	3,128
Property Additions	(1,220)		(1,209)
Other Investing Activities	297		19
Free Cash Flow (before payment of dividends)	$	2,896	$	1,938

Nine Months
(Dollars in millions) 2017 2016
Net cash provided by operating activities $ 2,861
$ 2,488
Property additions (1,462 ) (1,590 )
Other investing activities 71
37
Free Cash Flow (before payment of dividends) 1,470
935
Add back: Cash Payments for Restructuring Charge (after-tax) ^(a)
96
—
Adjusted Free Cash Flow Before Dividends (non-GAAP) $ 1,566
$ 935

(a) During the nine months ended September 30, 2017, the Company made cash payments of $147 million related to the restructuring charge. The Company also made $7 million in payments to the former CEO and President for previously accrued non-qualified pension benefits that are not included in the restructuring charge.

Operating Statistics (Estimated)

The Company ~~measures and reports~~is committed to continuous improvement in safety and service ~~performance. The Company strives for continuous improvement in these measures~~performance through training, innovation and investment. ~~Investment in training~~Training and ~~technology also is designed to allow CSX employees to have an additional layer of protection that can detect and avoid many types of human factor incidents. The Company's~~ 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 ~~order to more accurately represent the Company’s operating performance, CSX has revised the way it calculates train velocity and terminal dwell effective~~ third quarter ~~2017. These revisions are~~2021, velocity decreased by 10% and dwell increased by 8% versus prior year. Both metrics were consistent with ~~the principles~~second quarter 2021 levels. Intermodal trip plan performance remained strong at 88% and carload trip plan performance of ~~Precision Scheduled Railroading. Updated definitions for each key~~68% was consistent with second quarter 2021 levels. CSX expects both network fluidity and trip plan performance ~~measure are included beneath the Operating Statistics table. Prior periods have been restated~~ to ~~conform~~improve commensurate with ongoing hiring efforts and actions being taken to offset the current ~~methodology. Details of the changes are as follows:~~supply chain challenges.

~~Train velocity has been expanded to include intermediate dwell, now measuring end-to-end transit time.~~

~~Dwell has been expanded to include car dwell time at terminals on through trains, now measuring all car dwell time on an end-to-end trip.~~

These revisions differ from the methodology prescribed by the Surface Transportation Board ("STB") for reporting train velocity and dwell. CSX will continue to report train velocity and dwell, using the prescribed methodology, to the STB on a weekly basis. At the STB's request, CSX is providing additional operating measures on a weekly basis that are available on the Company's website. CSX participated in a public listening session on October 11, 2017 at the STB regarding CSX's rail service. Information related to this session is available at the STB under matter E.P. 742.

CSX Q3 2021 Form 10-Q p.35



	~~CSX Q3 2017 Form 10-Q p.37~~

Table of Contents

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~CSX’s operating performance declined~~The FRA train accident rate of 3.09 in ~~the~~ third quarter of 2017 compared to 2016 due to network fluidity challenges, train accidents and the impacts from Hurricane Irma. Network fluidity was unfavorably impacted early in the quarter as the Company's operations adjusted to the implementation of a new, balanced train plan.2021 improved 7% year over year. The ~~Company expects to improve its level of performance through increased efficiency within terminals and refinement of the operating plan.~~

~~CSX’s FRA reportable~~ personal injury frequency index of 1.41 for the third quarter of 2017 was 11 percent unfavorable to the prior year as a decline in overall injuries was offset by a significant decline in man-hours from fewer employees. The FRA train accident frequency rate of 3.82 for the quarter was 46 percent unfavorable to0.85 degraded 12% versus the prior year. Safety remains a top priority at CSX, ~~remains~~and the Company is committed to ~~ongoing~~reducing risk and enhancing the overall safety ~~improvement, with a focus on reducing injury severity~~of its employees, customers and ~~avoiding catastrophic events.~~communities in which the Company operates.


	Third Quarters						Nine Months							Third Quarters						Nine Months
	2017		2016		Improvement/ (Deterioration)		2017		2016		Improvement/ (Deterioration)			2021		2020		Improvement/ (Deterioration)		2021		2020		Improvement/ (Deterioration)
Operations Performance													Operations Performance

Train Velocity (Miles per hour)^(a)	14.0		14.9		(6	)%	14.7		15.2		(3	)%	Train Velocity (Miles per hour)(a)	17.7		19.6		(10)	%	18.1		20.7		(13)	%
Dwell (Hours)^(a)	12.1		11.2		(8	)%	11.5		11.2		(3	)%	Dwell (Hours)(a)	10.5		9.7		(8)	%	10.6		9.0		(18)	%

Cars Online(a)													Cars Online(a)	130,841		115,823		(13)	%	130,273		108,437		(20)	%
On-Time Originations	74	%	84	%	(12	)%	81	%	84	%	(4	)%	On-Time Originations	71	%	85	%	(16)	%	76	%	88	%	(14)	%
On-Time Arrivals	48	%	54	%	(11	)%	57	%	56	%	2	%	On-Time Arrivals	62	%	71	%	(13)	%	66	%	80	%	(18)	%
Carload Trip Plan Performance													Carload Trip Plan Performance	68	%	73	%	(7)	%	68	%	78	%	(13)	%
Intermodal Trip Plan Performance													Intermodal Trip Plan Performance	88	%	87	%	1	%	87	%	92	%	(5)	%
Fuel Efficiency													Fuel Efficiency	0.92		0.93		1	%	0.96		0.97		1	%

Revenue Ton-Miles (Billions)													Revenue Ton-Miles (Billions)
Merchandise													Merchandise	30.8		31.0		(1)	%	94.2		91.9		3	%
Coal													Coal	8.9		7.1		25	%	26.9		21.7		24	%
Intermodal													Intermodal	7.8		7.4		5	%	23.6		20.3		16	%
Total Revenue Ton-Miles													Total Revenue Ton-Miles	47.5		45.5		4	%	144.7		133.9		8	%

Total Gross Ton-Miles (Billions)													Total Gross Ton-Miles (Billions)	92.9		90.3		3	%	282.3		262.6		8	%

Safety													Safety
FRA Personal Injury Frequency Index	1.41		1.27		(11	)%	1.17		1.04		(13	)%	FRA Personal Injury Frequency Index	0.85		0.76		(12)	%	0.94		0.84		(12)	%
FRA Train Accident Rate	3.82		2.61		(46	)%	2.99		2.69		(11	)%	FRA Train Accident Rate	3.09		3.31		7	%	2.81		2.83		1	%

(a) The ~~methodology~~methodologies for calculating train velocity, dwell and ~~dwell~~cars online differ from ~~that~~those prescribed by the ~~STB. CSX~~STB as the Company believes these numbers more accurately reflect railroad performance. CSXT will continue to report ~~train velocity and dwell,~~these metrics, using the prescribed methodology, to the STB on a weekly basis.

See additional discussion on the Company's website.

Certain operating statistics are estimated and can continue to be updated as actuals settle.

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.~~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 Q3 2021 Form 10-Q p.36



	~~CSX Q3 2017 Form 10-Q p.38~~

Table of Contents

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

The following are material changes in the significant cash flows, sources of cash and liquidity, capital investments, consolidated balance sheets and ~~sources of liquidity and~~working capital, which provide an update to the discussion included in CSX's most recent annual report on Form 10-K.

Material Changes in ~~Consolidated Balance Sheets and~~ Significant Cash Flows

~~Consolidated Balance Sheets~~

Total assets increased $159 million from year end primarily due to an increase in net properties of $429 million, partially offset by a decrease in cash and short-term investment activity of $316 million. Total liabilities and shareholders' equity combined increased $159 million from year end primarily due to net earnings of $1.3 billion, an increase in net debt of $514 million and an increase in taxes payable of $193 million mostly due to a temporary tax payment extension for companies in areas affected by Hurricane Irma. These increases were partially offset by share repurchases of $1.8 billion.

Significant Cash Flows

The following chart highlights the operating, investing and financing components of the net decrease of $950 million and net increase of $1.9 billion in cash and cash equivalents ~~of $12 million as compared to a net decrease of $25 million for operating, investing and financing activities~~ for nine months ended ~~2017~~2021 and ~~2016,~~2020, respectively.

•Cash provided by operating activities increased ~~$373~~$691 million primarily driven by ~~a temporary tax payment extension for companies in areas affected by Hurricane Irma,~~ higher ~~working capital and other activities,~~cash-generating income and higher net ~~earnings. These increases were partially offset by payments related to restructuring activities.~~favorable working capital.

•Cash used in investing activities increased ~~$186 million~~$1.3 billion primarily ~~driven by higher~~as a result of decreased net ~~purchases~~sales of short-term investments and net cash paid to acquire Quality Carriers, partially offset by ~~lower~~higher proceeds from property ~~additions.~~dispositions.

•Cash used in financing activities increased ~~$174 million primarily due to~~$2.3 billion driven by higher share repurchases, ~~partially offset by higher net~~lower proceeds from debt ~~issued~~issuances and increased long-term debt repayments.

Sources of Cash and Liquidity and Uses of Cash

As of the end of third quarter 2021, CSX had nearly $2.2 billion of cash, cash equivalents and short-term investments. 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. See Note 7, Debt and Credit Agreements.

The Company has multiple sources of liquidity, including cash generated from operations and financing sources. The Company filed a ~~prior year repayment of seller-financed assets that did not repeat in~~shelf registration statement with the ~~current year.~~

~~Projected capital investments for 2017 are expected~~SEC on February 12, 2019, which is unlimited as to ~~be $2.1 billion, including approximately $270 million for Positive Train Control ("PTC"). Of the 2017 investment, over half will~~amount and may be used to ~~sustain~~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. During the ~~core infrastructure. The remaining amounts will be allocated to projects supporting productivity initiatives, service enhancements and profitable growth.~~nine months ended 2021, CSX ~~intends to fund capital investments through cash generated from operations.~~did not issue any new long-term debt.

CSX Q3 2021 Form 10-Q p.37



	~~CSX Q3 2017 Form 10-Q p.39~~

Table of Contents

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company has incurred significant capital costs in connection with the implementation of PTC and has substantial work ahead. CSX estimates that the total multi-year cost of PTC implementation will be approximately $2.4 billion. This estimate includes costs for installing the new system along tracks, upgrading locomotives, adding communication equipment and developing new technologies. Total PTC spending through September 2017 was $2.0 billion.

~~Liquidity and Working Capital~~

~~As of the end of third quarter 2017, CSX had $704 million of cash, cash equivalents and short-term investments.~~ CSX has a ~~$1.0~~$1.2 billion unsecured, revolving credit facility backed by a diverse syndicate of ~~banks. This facility~~banks that expires in ~~May 2020 and as of the date of this filing,~~March 2024. At September 30, 2021, the Company ~~has~~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. At September 30, 2021, the Company had no outstanding debt under the commercial paper program.

Planned capital investments for 2021 are expected to be between $1.7 billion and $1.8 billion. Of the total 2021 investment, the majority will be used to sustain the core infrastructure and the remaining amounts will be allocated to projects supporting service enhancements, productivity initiatives and profitable growth. CSX ~~uses current~~intends to fund capital investments through cash ~~balances for general corporate purposes, which may include reduction or refinancing~~generated from operations.

Material Changes in the Consolidated Balance Sheets and Working Capital

Consolidated Balance Sheets

Total assets increased $336 million from year end primarily due to a $414 million increase in accounts receivable, the recognition of ~~outstanding indebtedness, capital expenditures, working capital requirements, contributions~~$390 million of goodwill and intangible assets related to the ~~Company's qualified pension plan, redemptions~~acquisition of Quality Carriers and net property increases of $370 million, partially offset by the $950 million decrease in cash described above. The increase in accounts receivable was driven by the Virginia easement conveyance and increased trade accounts receivable commensurate with higher revenue, including trucking. Of the increase in net property, $225 million was the result of consolidating Quality Carriers' properties. See Note 12, Business Combinations, for more details on purchase accounting.

Total liabilities increased $274 million from year end primarily due to an increase in income and other taxes payable of $165 million driven by the timing of estimated income tax payments, an increase in accounts payable of $163 million and a $130 million increase in deferred tax liabilities primarily driven by accelerated tax depreciation. These increases were offset by debt repayments of $390 million. Total shareholders' equity increased $62 million from year end primarily driven by total comprehensive earnings of $2.9 billion, mostly offset by share repurchases of ~~CSX common stock~~$2.3 billion and dividends ~~to shareholders. See Note 7, Debt and Credit Agreements.~~paid of $633 million.

The Company has a receivables securitization facility with a three-year term scheduled to expire in September 2019. The purpose of this facility is to provide an alternative to commercial paper and a low cost source of short-term liquidity of up to $200 million, depending on eligible receivables balances. As of the date of this filing, the Company has no outstanding balances under this facility.

Working capital ~~can also be~~is considered a measure of a company's ability to meet its short-term needs. CSX had a working capital surplus of ~~$97 million and $447 million~~$1.6 billion as of September 30, ~~2017~~2021 and $2.4 billion as of December ~~30, 2016, respectively.~~31, 2020, a decrease of $793 million since year end. The decrease in ~~working capital since year end of $350 million is~~current assets was primarily due to ~~share repurchases of $1.8 billion, property additions of $1.5 billion and dividends paid of $530 million. These decreases were~~the $950 million decrease in cash, partially offset by ~~cash provided from operations~~a $414 million increase in accounts receivable described above. The increase in current liabilities was primarily the result of ~~$2.9 billion~~a $165 million increase in income and ~~net debt issued~~other taxes payable and a $163 million increase in accounts payable, partially offset by $190 million decrease in current maturities of ~~$518 million.~~

long term debt. 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 as discussed above. The Company continues to maintain adequate liquidity to satisfy current liabilities and maturing obligations when they come due. CSX has sufficient financial capacity, including its revolving credit facility, ~~trade receivable 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.

CSX ~~is currently reviewing its cash deployment strategy with respect to capital structure and shareholder distributions and~~ is committed to returning cash to shareholders and maintaining an ~~investment grade~~investment-grade credit profile.

~~Contractual Obligations~~ Capital structure, capital investments and ~~Commercial Commitments~~

~~CSXT has a commitment under a long-term maintenance program agreement that covers a portion of CSXT’s fleet of locomotives. The program costs~~cash distributions, including dividends and share repurchases, are ~~based on the maintenance cycle for each covered locomotive, which is determined~~reviewed at least annually by the ~~asset's age~~Board of Directors. Management's assessment of market conditions and ~~type. Expected future costs may change as required maintenance schedules~~other factors guides the timing and volume of repurchases. Future share repurchases are ~~revised~~expected to be funded by cash on hand, cash generated from operations and locomotives are placed into or removed from service. Under CSXT’s current obligations, the agreement will expire no earlier than 2031. On August 9, 2017, the Company exercised certain rights under the agreement, which resulted in a reduction of the locomotive fleet covered from 50% as of December 30, 2016 to an estimated 34% of locomotives beginning August 2018. As a result, the total remaining payments decreased from approximately $5.0 billion at December 30, 2016 to an estimated $1.7 billion at September 30, 2017.debt issuances.

CSX Q3 2021 Form 10-Q p.38



	~~CSX Q3 2017 Form 10-Q p.40~~

Table of Contents

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Completed and Pending Transactions

Acquisition of Quality Carriers, Inc.

On July 1, 2021, CSX acquired Quality Carriers, Inc. from Quality Distribution, Inc. for a purchase price of $546 million in cash, subject to certain customary purchase price adjustments. This transaction was funded by cash on hand. For further details, please refer to Note 12, Business Combinations.

Proposed Acquisition of Pan Am Systems, Inc.

On November 30, 2020, CSX signed a definitive agreement to acquire 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, if approved, will expand CSX’s reach in the Northeastern United States. Assets and facilities to be acquired as part of the proposed transaction include road and track assets, work equipment, land, buildings and other assets. On February 25, 2021, the Company began the process of seeking approval from the STB with a decision expected by April 1, 2022. This proposed acquisition is not expected to be material with respect to the Company's financial statements when reviewed under the quantitative and qualitative considerations of Regulation S-X Article 11 and ASC 805, 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.

CSX Q3 2021 Form 10-Q p.39

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CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 September 30, 2021, the principal balance of these secured equipment notes was $149 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.

LABOR AGREEMENTS

Approximately 15,500 of the Company's approximately 20,500 employees are members of a labor union. For the 13 rail unions that participate in national bargaining, a round of negotiations for benefits, wages and work rules is underway. Typically, these negotiations take several years. Current agreements remain in place until modified by new agreements.

CSX Q3 2021 Form 10-Q p.40

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CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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. Consistent with the prior year, significant estimates using management judgment are made for the areas below. For further discussion of CSX's critical accounting estimates, see the Company's most recent annual report on Form 10-K.

~~casualty,~~•personal injury, environmental and legal reserves;

•pension and post-retirement medical plan accounting; and

•depreciation policies for assets under the group-life ~~method; and~~method.

~~income taxes.~~

FORWARD-LOOKING STATEMENTS

Certain statements in this report and in other materials filed with the ~~SEC,~~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.



	~~CSX Q3 2017~~CSX Q3 2021 Form 10-Q p.41

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CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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,~~I, Item 1A ~~(Risk Factors)~~Risk Factors of CSX's most recent annual report on Form 10-K 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) and the level of demand for products carried by CSXT;

•natural events such as severe weather conditions, including floods, fire, hurricanes and earthquakes, a pandemic crisis, including the outbreak of COVID-19, 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 ~~equipment;~~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 ~~(including those associated with PTC implementation),~~ 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 CSXT's export coal market;

CSX Q3 2021 Form 10-Q p.42

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CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

•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;



	~~CSX Q3 2017 Form 10-Q p.42~~

~~Table of Contents~~

~~CSX CORPORATION~~

~~ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

•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 ~~Precision Scheduled Railroading;~~acquisitions;

•the impact of conditions in the real estate market on the Company's ability to sell assets;

•changes in operating conditions and costs or commodity concentrations;

•the continued and uncertain impact of the COVID-19 pandemic; 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 quarterly report on Form 10-Q.

CSX Q3 2021 Form 10-Q p.43

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CSX CORPORATION

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risk from the information provided under Part II, Item 7A (Quantitative and Qualitative Disclosures about Market Risk) of CSX's most recent annual report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

As of September 30, ~~2017~~,2021, under the supervision and with the participation of CSX's Chief Executive Officer (“CEO”) and Acting 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 September 30, ~~2017~~,2021, 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. There were no changes in the Company's internal controls over financial reporting during the third quarter of ~~2017~~2021 that have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting.

CSX Q3 2021 Form 10-Q p.44

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CSX CORPORATION

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Item 103 of SEC Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that the Company reasonably believes will exceed a specified threshold. Pursuant to SEC amendments to this Item, the Company will be using a threshold of $1 million for such proceedings. For further details, please refer to Note 5.5, Commitments and Contingencies of this quarterly report on Form 10-Q. Also refer to Part I, Item 3.3, Legal Proceedings in CSX's most recent annual report on Form 10-K.

Item 1A. Risk Factors

For information regarding factors that could affect the Company's results of operations, financial condition and liquidity, see the risk factors discussed under Part ~~II,~~I, Item ~~7 (Management's Discussion and Analysis of Financial Condition and Results of Operations)~~1A (Risk Factors) of CSX's most recent annual report on Form 10-K. See also Part I, Item 2 (Forward-Looking Statements) of this quarterly report on Form 10-Q.



	~~CSX Q3 2017 Form 10-Q p.43~~

~~Table of Contents~~

~~CSX CORPORATION~~

~~PART II~~

Item 2. CSX Purchases of Equity Securities

~~CSX purchases its own~~ The Company continues to repurchase shares for two primary reasons: (1) to further its goals under its share repurchase program and (2) to fund the Company’s contribution required to be paid in CSX common stock under a 401(k) plan that covers certain union employees.

~~In July 2017, the Board of Directors approved an additional $500 million of share repurchase authority~~ under the $5 billion share repurchase program announced in ~~April 2017, bringing the total program size to $1.5~~October 2020. Total repurchase authority remaining as of September 30, 2021, was $3.6 billion. ~~As of October 2, 2017, the Company had completed all~~For more information about share repurchases, ~~under this program. During the third quartersof 2017 and 2016, the Company repurchased approximately $1 billion, or 20 million shares, and $263 million, or 10 million shares, respectively.~~

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. 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. Generally, retained earnings is only impacted by net earnings and dividends.~~

see Note 2, Earnings Per Share. Share repurchase activity for the third quarter ~~2017~~2021 was as follows:


	CSX Purchases of Equity Securities for the Quarter
Third 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
Beginning Balance					$	4,637,085,325
July 1 - July 31, 2021	12,631,812	$	31.70	12,631,812	4,236,614,639
August 1 - August 31, 2021	4,250,947	32.90		4,250,947	4,096,758,338
September 1 - September 30, 2021	16,976,353	30.86		16,976,353	3,572,838,310
Ending Balance	33,859,112	$	31.43	33,859,112	$	3,572,838,310

CSX Purchases of Equity Securities
for the Quarter

Third Quarter Total Number of Shares Purchased Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ^(a)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Beginning Balance $ 512,661,389
July 1 - July 31, 2017 9,920,229
$ 52.24
9,805,644
500,360,263
August 1 - August 31, 2017 6,642,545
49.85
6,642,545
169,256,400
September 1 - September 30, 2017 3,129,053
51.64
3,128,708
7,696,097
Ending Balance 19,691,827
$ 51.34
19,576,897
$ 7,696,097

(a) The difference of 114,930 shares between the "Total Number of Shares Purchased" and the "Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs" for the quarter represents shares purchased to fund the Company's contribution to a 401(k) plan that covers certain union employees.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

None

CSX Q3 2021 Form 10-Q p.45



	~~CSX Q3 2017 Form 10-Q p.44~~

Table of Contents

CSX CORPORATION

PART II

Item 6. Exhibits


Exhibit designation		Nature of exhibit	Previously filed as exhibit to


~~Exhibit designation~~		~~Nature of exhibit~~	~~Previously filed as exhibit to~~
				Officer certifications:
~~Officer certifications:~~31*		Rule 13a-14(a) Certifications
3132		~~Rule13a-14(a) Certifications~~
32*	Section 1350 Certifications

Interactive data files:
101*		The following financial information from CSX Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2017~~2021 filed with the SEC on October ~~18, 2017,~~20, 2021, formatted in inline XBRL includes: (i) consolidated income statements for the ~~fiscal periods~~quarters and nine months ended September 30, ~~2017~~2021 and September ~~23, 2016,~~30, 2020, (ii) condensed consolidated comprehensive income statements for the ~~fiscal periods~~quarters and nine months ended September 30, ~~2017~~2021 and September ~~23, 2016~~30, 2020, (iii) consolidated balance sheets at September 30, ~~2017~~2021 and December ~~30, 2016,~~31, 2020, (iv) consolidated cash flow statements for the ~~fiscal periods~~nine months ended September 30, ~~2017~~2021 and September ~~23, 2016,~~30, 2020, (v) consolidated statement of changes in shareholders' equity for the quarters and ~~(v)~~nine months ended September 30, 2021 and September 30, 2020, and (vi) the notes to consolidated financial statements.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document contained in Exhibit 101)
* Filed herewith



			~~CSX Q3 2017 Form 10-Q p.45~~
* Filed herewith

CSX Q3 2021 Form 10-Q p.46

Table of Contents

CSX CORPORATION

PART II

SIGNATURE

Pursuant to the requirements 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/ ~~ANDREW L. GLASSMAN~~ANGELA C. WILLIAMS

~~Andrew L. Glassman~~Angela C. Williams

Vice President and ~~Controller~~

Chief Accounting Officer

(Principal Accounting Officer)

Dated: October ~~18, 2017~~20, 2021

CSX Q3 2021 Form 10-Q p.47



	~~CSX Q3 2017 Form 10-Q p.46~~



~~CSX CORPORATION~~
~~(Exact name of registrant as specified in its charter)~~
~~Virginia~~			~~62-1051971~~
~~(State or other jurisdiction of incorporation or organization)~~			~~(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)~~

	~~No Change~~
~~(Former name, former address and former fiscal year, if changed since last report.)~~


				Page
PART I.		FINANCIAL INFORMATION
Item 1.		Financial Statements		3

			~~Page~~
~~PART I.~~	~~FINANCIAL INFORMATION~~
~~Item 1.~~	~~Financial Statements~~		3

	Consolidated Income Statements (Unaudited) - Quarters and Nine Months Ended September 30, ~~2017~~2021 and September ~~23, 2016~~30, 2020		3

		Condensed Consolidated Comprehensive Income Statements (Unaudited) - Quarters and Nine Months Ended September 30, ~~2017~~2021 and September ~~23, 2016~~30, 2020		3

		Consolidated Balance Sheets - At September 30, ~~2017~~2021 (Unaudited) and December ~~30, 2016~~31, 2020		4

		Consolidated Cash Flow Statements (Unaudited) - Nine Months Ended September 30, ~~2017~~2021 and September ~~23, 2016~~30, 2020		5

		Consolidated Statement of Changes in Shareholders' Equity (Unaudited) - Quarters and Nine Months Ended September 30, 2021 and September 30, 2020		6

		Notes to Consolidated Financial Statements (Unaudited)		68

Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations		3130

Item 3.		Quantitative and Qualitative Disclosures about Market Risk		4344

Item 4.		Controls and Procedures		4344

PART II.		OTHER INFORMATION
Item 1.		Legal Proceedings		4345

Item 1A.		Risk Factors		4345

Item 2.		CSX Purchases of Equity Securities		44

~~Item 3.~~	~~Defaults upon Senior Securities~~	44

~~Item 4.~~	~~Mine Safety Disclosures~~	44

~~Item 5.~~	~~Other Information~~	44

~~Item 6.~~	~~Exhibits~~	45

~~Signature~~		46


~~(X)~~	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~



	(Unaudited)
	September 30, 2017			December 30, 2016
ASSETS
Current Assets:
Cash and Cash Equivalents	$	591		$	603
Short-term Investments	113			417
Accounts Receivable - Net (Note 1)	981			938
Materials and Supplies	392			407
Other Current Assets	95			122
Total Current Assets	2,172			2,487

Properties	44,105			43,227
Accumulated Depreciation	(12,526		)	(12,077		)
Properties - Net	31,579			31,150

Investment in Conrail	864			840
Affiliates and Other Companies	642			619
Other Long-term Assets	316			318
Total Assets	$	35,573		$	35,414

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable	$	905		$	806
Labor and Fringe Benefits Payable	601			545
Casualty, Environmental and Other Reserves (Note 4)	122			115
Current Maturities of Long-term Debt (Note 7)	19			331
Income and Other Taxes Payable	322			129
Other Current Liabilities	106			114
Total Current Liabilities	2,075			2,040

Casualty, Environmental and Other Reserves (Note 4)	253			259
Long-term Debt (Note 7)	11,788			10,962
Deferred Income Taxes - Net	9,789			9,596
Other Long-term Liabilities	766			863
Total Liabilities	24,671			23,720

Shareholders' Equity:
Common Stock, $1 Par Value	894			928
Other Capital	227			138
Retained Earnings	10,327			11,253
Accumulated Other Comprehensive Loss (Note 10)	(561		)	(640		)
Noncontrolling Interest	15			15
Total Shareholders' Equity	10,902			11,694
Total Liabilities and Shareholders' Equity	$	35,573		$	35,414



	2017
(Dollars in millions)	First Quarter		Second Quarter		Third Quarter		Year-to-Date
Severance	$	81	$	10	$	—	$	91
Pension, Other Post-retirement Benefit and Other Non-cash Charges	68		10		—		78
Relocation	6		2		—		8
Subtotal Management Workforce Reduction	$	155	$	22	$	—	$	177
Reimbursement Arrangements	—		84		—		84
Non-cash Executive Equity Awards Proration	8		16		—		24
Other Charges Including Fees Related to Shareholder Matters	10		—		1		11
Total Restructuring Charge	$	173	$	122	$	1	$	296



(Dollars in millions)	2017 Charges		2017 Payments			Non-cash Items			Liability 9/30/2017
Severance	$	91	$	(77	)	—			$	14
Pension, Other Post-retirement Benefit and Other Non-cash Charges ^(a)	78		—			(78		)	—
Relocation	8		(4		)	—			4
Subtotal Management Workforce Reduction	$	177	$	(81	)	$	(78	)	$	18
Reimbursement Arrangements	84		(55		)	—			29
Non-cash Executive Equity Awards Proration	24		—			(24		)	—
Other Charges Including Fees Related to Shareholder Matters	11		(11		)	—			—
Total Restructuring Charge	$	296	$	(147	)	$	(102	)	$	47



	Pension Benefits
(Dollars in millions)	Third Quarters						Nine Months
	2017			2016			2017			2016
Service Cost	$	8		$	12		$	28		$	36
Interest Cost	23			29			69			89
Expected Return on Plan Assets	(43		)	(39		)	(128		)	(118		)
Amortization of Net Loss	10			12			31			36
Net Periodic Benefit Cost	$	(2	)	$	14		$	—		$	43
Special Termination Benefits - Management Workforce Reduction/Curtailment	—			—			57			—
Total Expense	$	(2	)	$	14		$	57		$	43

	Other Post-retirement Benefits
(Dollars in millions)	Third Quarters						Nine Months
	2017			2016			2017			2016
Service Cost	$	—		$	—		$	1		$	1
Interest Cost	2			3			6			9
Amortization of Net Loss	—			1			—			2
Net Periodic Benefit Cost	$	2		$	4		$	7		$	12
Special Termination Benefits - Management Workforce Reduction/Curtailment	—			—			13			—
Total Expense	$	2		$	4		$	20		$	12



(Dollars in millions)	September 30, 2017		December 30, 2016
Long-term Debt (Including Current Maturities):
Fair Value	$	13,082	$	12,096
Carrying Value	11,807		11,293



Consolidating Income Statements
(Dollars in millions)
Third Quarter 2017	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Revenue	$	—		$	2,725		$	18		$	2,743
Expense	(129		)	2,025			(29		)	1,867
Operating Income	129			700			47			876

Equity in Earnings of Subsidiaries	472			—			(472		)	—
Interest (Expense) / Benefit	(147		)	(3		)	18			(132		)
Other Income / (Expense) - Net	1			13			(8		)	6

Earnings Before Income Taxes	455			710			(415		)	750
Income Tax Benefit / (Expense)	4			(277		)	(18		)	(291		)
Net Earnings	$	459		$	433		$	(433	)	$	459

Total Comprehensive Earnings	$	467		$	433		$	(433	)	$	467

Third Quarter 2016	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Revenue	$	—		$	2,691		$	19		$	2,710
Expense	(63		)	1,960			(28		)	1,869
Operating Income	63			731			47			841

Equity in Earnings of Subsidiaries	505			1			(506		)	—
Interest (Expense) / Benefit	(141		)	(7		)	9			(139		)
Other Income / (Expense) - Net	—			9			4			13

Earnings Before Income Taxes	427			734			(446		)	715
Income Tax (Expense) / Benefit	28			(268		)	(20		)	(260		)
Net Earnings	$	455		$	466		$	(466	)	$	455

Total Comprehensive Earnings	$	465		$	467		$	(467	)	$	465



Consolidating Income Statements
(Dollars in millions)
Nine Months 2017	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Revenue	$	—		$	8,490		$	55		$	8,545
Expense	(171		)	6,278			(108		)	5,999
Operating Income	171			2,212			163			2,546

Equity in Earnings of Subsidiaries	1,506			—			(1,506		)	—
Interest (Expense) / Benefit	(432		)	(21		)	47			(406		)
Other Income / (Expense) - Net	6			32			(19		)	19

Earnings Before Income Taxes	1,251			2,223			(1,315		)	2,159
Income Tax (Expense) / Benefit	80			(844		)	(64		)	(828		)
Net Earnings	$	1,331		$	1,379		$	(1,379	)	$	1,331

Total Comprehensive Earnings	$	1,410		$	1,378		$	(1,378	)	$	1,410

Nine Months 2016	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Revenue	$	—		$	7,974		$	58		$	8,032
Expense	(202		)	5,985			(136		)	5,647
Operating Income	202			1,989			194			2,385

Equity in Earnings of Subsidiaries	1,399			1			(1,400		)	—
Interest (Expense) / Benefit	(425		)	(27		)	29			(423		)
Other Income / (Expense) - Net	1			24			3			28

Earnings Before Income Taxes	1,177			1,987			(1,174		)	1,990
Income Tax (Expense) / Benefit	79			(735		)	(78		)	(734		)
Net Earnings	$	1,256		$	1,252		$	(1,252	)	$	1,256

Total Comprehensive Earnings	$	1,282		$	1,253		$	(1,253	)	$	1,282



Consolidating Balance Sheet
(Dollars in millions)
September 30, 2017	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated

ASSETS
Current Assets
Cash and Cash Equivalents	$	433		$	147		$	11		$	591
Short-term Investments	100			—			13			113
Accounts Receivable - Net	(1		)	277			705			981
Receivable from Affiliates	1,012			3,004			(4,016		)	—
Materials and Supplies	—			392			—			392
Other Current Assets	2			76			17			95
Total Current Assets	1,546			3,896			(3,270		)	2,172

Properties	1			41,292			2,812			44,105
Accumulated Depreciation	(1		)	(11,014		)	(1,511		)	(12,526		)
Properties - Net	—			30,278			1,301			31,579

Investments in Conrail	—			—			864			864
Affiliates and Other Companies	(39		)	667			14			642
Investments in Consolidated Subsidiaries	25,221			—			(25,221		)	—
Other Long-term Assets	9			592			(285		)	316
Total Assets	$	26,737		$	35,433		$	(26,597	)	$	35,573

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable	$	178		$	695		$	32		$	905
Labor and Fringe Benefits Payable	76			483			42			601
Payable to Affiliates	4,148			382			(4,530		)	—
Casualty, Environmental and Other Reserves	—			109			13			122
Current Maturities of Long-term Debt	—			19			—			19
Income and Other Taxes Payable	(115		)	418			19			322
Other Current Liabilities	—			103			3			106
Total Current Liabilities	4,287			2,209			(4,421		)	2,075

Casualty, Environmental and Other Reserves	—			207			46			253
Long-term Debt	11,053			735			—			11,788
Deferred Income Taxes - Net	(198		)	9,697			290			9,789
Other Long-term Liabilities	708			375			(317		)	766
Total Liabilities	$	15,850		$	13,223		$	(4,402	)	$	24,671

Shareholders' Equity
Common Stock, $1 Par Value	$	894		$	181		$	(181	)	$	894
Other Capital	227			5,096			(5,096		)	227
Retained Earnings	10,327			16,938			(16,938		)	10,327
Accumulated Other Comprehensive Loss	(561		)	(20		)	20			(561		)
Noncontrolling Interest	—			15			—			15
Total Shareholders' Equity	$	10,887		$	22,210		$	(22,195	)	$	10,902
Total Liabilities and Shareholders' Equity	$	26,737		$	35,433		$	(26,597	)	$	35,573



Consolidating Cash Flow Statements
(Dollars in millions)
Nine Months 2017	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Operating Activities
Net Cash Provided by (Used in) Operating Activities	$	1,590		$	1,544		$	(273	)	$	2,861
Investing Activities
Property Additions	—			(1,311		)	(151		)	(1,462		)
Purchases of Short-term Investments	(639		)	—			(6		)	(645		)
Proceeds from Sales of Short-term Investments	955			—			2			957
Other Investing Activities	(2		)	98			(25		)	71
Net Cash Provided by (Used in) Investing Activities	314			(1,213		)	(180		)	(1,079		)
Financing Activities
Long-term Debt Issued	850			—			—			850
Long-term Debt Repaid	(312		)	(20		)	—			(332		)
Dividends Paid	(530		)	(450		)	450			(530		)
Shares Repurchased	(1,763		)	—			—			(1,763		)
Other Financing Activities	(21		)	5			(3		)	(19		)
Net Cash Provided by (Used in) Financing Activities	(1,776		)	(465		)	447			(1,794		)
Net Increase (Decrease) in Cash and Cash Equivalents	128			(134		)	(6		)	(12		)
Cash and Cash Equivalents at Beginning of Period	305			281			17			603
Cash and Cash Equivalents at End of Period	$	433		$	147		$	11		$	591



~~Commission File Number 1-8022~~



	For the Quarter ended September 30, 2017
(in millions, except operating ratio and net earnings per share, assuming dilution)	Operating Income		Operating Ratio		Net Earnings		Net Earnings Per Share, Assuming Dilution

GAAP Operating Results	$	876	68.1	%	$	459	$	0.51
Restructuring Charge ^(a)	1		(0.1	)%	4		—
Adjusted Operating Results (non-GAAP)	$	877	68.0	%	$	463	$	0.51