# EDGAR Filing Document

**Accession Number:** 0000277948
**File Stem:** 0000277948-23-000019
**Filing Date:** 2023-3
**Character Count:** 256224
**Document Hash:** 3548cf1ecf15c515b0ad63eb8a4996f4
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000277948-23-000019.hdr.sgml**: 20230324

**ACCESSION NUMBER**: 0000277948-23-000019

**CONFORMED SUBMISSION TYPE**: ARS

**PUBLIC DOCUMENT COUNT**: 1

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230324

**DATE AS OF CHANGE**: 20230324

**EFFECTIVENESS DATE**: 20230324

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** CSX CORP
- **CENTRAL INDEX KEY:** 0000277948
- **STANDARD INDUSTRIAL CLASSIFICATION:** RAILROADS, LINE-HAUL OPERATING [4011]
- **IRS NUMBER:** 621051971
- **STATE OF INCORPORATION:** VA
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** ARS
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-08022
- **FILM NUMBER:** 23758872

**BUSINESS ADDRESS:**
- **STREET 1:** 500 WATER STREET
- **STREET 2:** 15TH FLOOR
- **CITY:** JACKSONVILLE
- **STATE:** FL
- **ZIP:** 32202
- **BUSINESS PHONE:** 9043593200

**MAIL ADDRESS:**
- **STREET 1:** 500 WATER STREET
- **STREET 2:** 15TH FLOOR
- **CITY:** JACKSONVILLE
- **STATE:** FL
- **ZIP:** 32202

### Attached PDF Documents

**Attachment 1:** `csx2022annualreport-filing.pdf`

# 2022

## Annual Report

![img-0.jpeg](img-0.jpeg)

# In this Report

| Message from the CEO | 02 |
| --- | --- |
| Powered to Perform | 04 |
| Financial Performance | 06 |
| Safety Performance | 07 |
| Service Performance | 08 |
| Growth Opportunities | 10 |
| Environmental, Social and Governance | 12 |
| Board of Directors | 18 |
| Executive Management | 19 |

![img-1.jpeg](img-1.jpeg)

Message from the CEO

# Driven to Deliver More

Dear Fellow Shareholders,

CSX produced excellent financial results in 2022 and finished the year in a strong position to leverage service improvement and build upon its momentum to grow the business. Across all stakeholder groups - customers, employees, investors and the public - we achieved important objectives and overcame significant challenges. For the first time since the pandemic disrupted supply chains and tightened labor markets, we re-established the momentum that will enable our company to fully realize the potential of our proven operating model centered on safety, service, efficiency and people.

For our shareholders, we increased earnings per share 16% on the strength of a 19% increase in revenue to $14.9 billion, an 8% increase in operating income to $6 billion and a 10% increase in net earnings to $4.2 billion. We finished 2022 with a full-year operating ratio of 59.5%, as we absorbed higher expenses related to inflation and labor.

For our customers, we worked with great urgency and resolve to hire train crew employees to handle their unmet demand for rail service. By the end of the year, we had nearly reached our target of 7,000 active train-and-engine employees and were on track to eclipse that goal in the first days of 2023. Our successful hiring campaign significantly increased our ability to handle customer business and supported service improvements that gained increasing momentum in the fourth quarter,

putting us on a path to re-attach - and surpass - the performance highs we reached prior to the pandemic. We also completed the acquisition of Pan Am Railways, significantly expanding our reach in New England markets, and we introduced innovative supply chain solutions offering dock-to-dock service.

For our employees, we took concrete actions to improve labor-management relations as our industry engaged in a difficult round of national bargaining. The national rail labor agreement signed in November provides a 24% wage increase during the five-year period from 2020 through 2024. Here at CSX, we introduced several provisions to ease punitive attendance policies as well as improve the work environment and quality of life for front-line employees. Perhaps most importantly, we advanced our ONE CSX workplace culture built on teamwork across all levels, all departments and all locations. ONE CSX emphasizes communication and the importance of every employee in delivering safe, reliable service. It begins with a strong safety culture and recognizes the contributions of employees who move freight, maintain our track and equipment and create value for our customers.

For the public, we continued to introduce innovative technologies that reduce emissions and offer the most sustainable mode of freight transportation on land. We worked with customers to help them achieve their carbon-reduction goals by switching from highway

![img-2.jpeg](img-2.jpeg)

to rail transportation, which also reduces highway congestion. We also strengthened our relationships with regulatory agencies and public officials through cooperative actions, which included a key agreement that will restore Amtrak passenger rail service in the Gulf Coast corridor. We continued to advance our Pride in Service community investment initiative, through which we have made significant financial and volunteerism contributions in support of our nation's military community and first responders.

On a personal note, I would like to thank all of our stakeholder groups - and especially CSX employees - for welcoming me as the leader of this proud and vital company. Since arriving in September, I have

been impressed by the quality of the leadership team and the tremendous commitment of our employees who serve our customers. Visiting more than 20 locations in my first 100 days, I met a workforce ready and eager to provide the best service product our industry has ever seen. With great optimism and as ONE CSX, we will deliver.

Joe Hinrichs

President and Chief Executive Officer

02

03

# Powered to Perform

CSX brings on-time delivery, first-class service, and a seamless shipping experience to customers across an extensive network that reaches nearly two-thirds of the U.S. population and a diverse set of consumers and industrial end markets. A leading supplier of rail-based freight transportation, CSX is powered to deliver comprehensive service solutions.

CSX Revenue Mix

![img-3.jpeg](img-3.jpeg)

A leading supplier of rail-based freight transportation, CSX is powered to deliver comprehensive service solutions.

04

## CSX Network

![img-4.jpeg](img-4.jpeg)

05

## Financial Performance

CSX delivered excellent financial results in 2022, overcoming staffing challenges, inflationary pressures and headwinds in several key markets to increase revenue 19%, operating income 8% and earnings per share 16%. Operating ratio increased to 59.5% from the previous year's 55.3%, primarily reflecting higher costs for fuel, labor and services and lower gains from property sales. Total volume decreased 1% for the year, with increases in automotive, agricultural and food products, and minerals offset by declines in fertilizers, chemicals, metals and equipment, coal and forest products. Intermodal volume was flat for the year.

### Revenue (million)

![img-5.jpeg](img-5.jpeg)

### Operating Income (million)

![img-6.jpeg](img-6.jpeg)

### Net Earnings

![img-7.jpeg](img-7.jpeg)

### Operating Ratio

![img-8.jpeg](img-8.jpeg)

06

## Safety

CSX employees demonstrated strong safety culture in 2022, holding the company's Federal Railroad Administration (FRA)-reportable personal injury rate at 0.96 per 100,000 employees and lowering its FRA-reportable train accident rate to 3.18, a 1% improvement. Strong training, engagement by front-line managers and a commitment by experienced employees

to help new hires enabled the company to achieve these results in a year when 2,000 new train-and-engine employees joined the railroad.

### FRA Personal Injury Frequency Index

![img-9.jpeg](img-9.jpeg)

### FRA Train Accident Rate

![img-10.jpeg](img-10.jpeg)

![img-11.jpeg](img-11.jpeg)

# Service Performance

Supported by a successful hiring campaign for train-and-engine employees, CSX service performance improved significantly in the second half of 2022 and began tracking toward a return to pre-pandemic highs. At year-end, key service metrics, including velocity, car dwell, cars online and merchandise and intermodal trip plan performance, were significantly improved from year-end 2021. Traffic fluidity improved across the network, which increased the railroad's capacity to handle more customer shipments.

## Train Velocity (miles per hour)

| Q4 2021 | Q4 2022 |  |
| --- | --- | --- |
| 17.4 | 17.5 | ↔ 1% |

## Terminal Car Dwell (hours per car)

| Q4 2021 | Q4 2022 |  |
| --- | --- | --- |
| 11.0 | 10.3 | ↔ 6% |

## Cars Online

| Q4 2021 | Q4 2022 |  |
| --- | --- | --- |
| 135,396 | 130,992 | ↔ 3% |

## Carload Trip Plan Performance

| Q4 2021 | Q4 2022 |  |
| --- | --- | --- |
| 71% | 77% | ↔ 8% |

## Intermodal Trip Plan Performance

| Q4 2021 | Q4 2022 |  |
| --- | --- | --- |
| 88% | 93% | ↔ 6% |

## Train Velocity (miles per hour)

| FY 2021 | FY 2022 |  |
| --- | --- | --- |
| 17.9 | 16.1 | ↔ -10% |

## Terminal Car Dwell (hours per car)

| FY 2021 | FY 2022 |  |
| --- | --- | --- |
| 10.7 | 11.3 | ↔ -6% |

## Cars Online

| FY 2021 | FY 2022 |  |
| --- | --- | --- |
| 131,564 | 138,074 | ↔ -5% |

## Carload Trip Plan Performance

| FY 2021 | FY 2022 |  |
| --- | --- | --- |
| 69% | 64% | ↔ -7% |

## Intermodal Trip Plan Performance

| FY 2021 | FY 2022 |  |
| --- | --- | --- |
| 87% | 90% | ↔ 3% |

![img-12.jpeg](img-12.jpeg)

08

09

## Growth Opportunities

Profitable growth is the primary objective of CSX's business strategy. The company laid the foundation for growth in 2022 through crew hiring, service improvement and capital investment that increased network capacity. These advances supported initiatives to pursue business growth through highway-to-rail conversions and encouraging development of new manufacturing and industrial facilities on CSX lines.

The company's Select Site program produced several signature business wins during the year by marketing sites that meet customer criteria for size, transportation access, utility infrastructure and other factors to streamline project development. New announcements included a major lithium hydroxide plant to support a growing electric vehicle industry, the first fully integrated aluminum mill to be built in the U.S. in 40 years, and several new automotive plants for manufacturing electric vehicles.

Also in 2022, the company introduced new service solutions for customers that support highway-to-rail conversion. The company completed the acquisition of Pan Am Railways, expanding CSX's reach into Northeast markets and creating new single-line service opportunities for shippers. In addition, CSX continued to pursue innovative service solutions that combine long- and medium-haul rail with short-haul trucking, enabling customers to increase their use of safe and environmentally advantaged rail transportation. The company invested in new technology to enhance the customer experience through its ShipCSX online customer service platform and through business systems that support more effective communication with customers and identification of business development opportunities.

![img-13.jpeg](img-13.jpeg)

![img-14.jpeg](img-14.jpeg)

# Environmental, Social and Governance

![img-15.jpeg](img-15.jpeg)

## Environmental Sustainability

Helping customers capture the environmental advantages of rail is an important component of CSX's highway-to-rail conversion strategy, and the company continued to pursue initiatives in 2022 to widen that advantage.

CSX's greenhouse gas emissions reduction goal is among the most aggressive in the transportation industry, targeting 37.3% reduction in GHG intensity by 2030, against a 2014 base year. In 2022, the company continued to innovate to reduce its Scope 1 and 2 emissions intensity to remain on target.

Fuel efficiency is the primary driver of GHG reduction, and in 2022 the company was able to move 1,000 gross ton-miles of freight on less than one gallon of fuel, making CSX as much as

four times more fuel efficient than trucks on average. The company also continued to expand its use of cutting-edge fuel-saving technologies in its locomotive fleet and began a pilot program for testing locomotives converted for using bio-fuels in revenue service.

Through initiatives like the company's Customer Environmental Excellence Awards, CSX is helping customers calculate how much progress they can make toward their carbon reduction goals by switching from truck to rail. In 2022, customers avoided 12.5 million metric tons of carbon dioxide emissions - the equivalent of taking 2.7 million passenger vehicles off the road - by choosing rail over trucking.

![img-16.jpeg](img-16.jpeg)

## Social Responsibility

From supporting workforce diversity to investing in communities, CSX advanced its commitment to social responsibility in 2022.

CSX recognizes the critical role of rail transportation in supporting industries that provide jobs to people in communities across the company's 20,000-route-mile network. But the company also believes its responsibility extends much further, to promoting rail safety and helping train first responders, and to supporting initiatives that improve the quality of life for communities and their residents.

In 2022, CSX impacted more than 1,600 communities through the company's financial contributions and its employees' volunteer activities. CSX Pride in Service, the company's signature community investment initiative, sponsored 751 events throughout the year in cooperation with five non-profit service partners to benefit the military community and first responders. More than 400 Pride in Service grants were distributed along with 192 student scholarships.

Through Pride in Service and other community initiatives, CSX employees donated more than 12,300 volunteer hours and donated more than $216,000 to charitable causes, including disaster relief aid to communities impacted by hurricanes and flooding.

The company also continued its commitment to diversity, equity and inclusion through diversity hiring, business resource groups and a Social Action Plan that funded social justice causes and promoted employee events. The company collaborated with City Year, a nationwide organization that promotes educational equity, on a 100,000 Steps Toward Social Justice initiative in support of systemically under-resourced schools in Jacksonville, Philadelphia and Washington, D.C. CSX also sponsored the Jacksonville Civil Rights Conference and Martin Luther King Jr. Day activities, in addition to providing funding for Congressional Black Caucus Foundation activities and the Florida Black Expo in Jacksonville, Florida.

![img-17.jpeg](img-17.jpeg)

The CSX Pride in Service initiative continues to mobilize CSX employees and partners to impact communities across the United States. In 2022, the initiative increased the volume of support it's delivered over the four-year span of its existence.

**1,600+**
Communities impacted

**400+**
Grants distributed to service members

**12,300 Hours**
Donated by employees

**192**
Scholarships granted to youth

**$216K**
Donated by employees

**751**
Events sponsored

14

15

## Governance

Good governance practices are essential for mitigating risk, protecting shareholder value and supporting long-term growth and business success. CSX continued to demonstrate its commitment to these principles in 2022 through the policies developed and implemented by its executive team in consultation with the company's Board of Directors.

The CSX Board of Directors and executive team are responsible for developing and communicating CSX's vision and purpose; overseeing the implementation of sound governance practices; upholding company policies, codes, procedures and values; and ensuring ongoing monitoring of and adherence to laws and regulations.

The company's practices are deemed essential for ensuring proper disclosure of information, auditing and compliance. The CSX governance program includes:

- Annual election of directors
- Majority voting standard for election of directors
- Independent chairman of the board
- Stock ownership guidelines for officers and directors
- Policy against hedging or pledging of CSX shares
- Proxy access
- Pay for performance alignment

![img-18.jpeg](img-18.jpeg)

![img-19.jpeg](img-19.jpeg)

16

17

## Board of Directors

![img-0.jpeg](img-0.jpeg)

## Executive Management

![img-1.jpeg](img-1.jpeg)

From left to right:

**Donna M. Alvarado**
Founder and President of Aguila International

**Joe Hinrichs**
President and Chief Executive Officer of CSX

**Thomas P. Bostick**
Retired U.S. Army Lieutenant General and former Chief Operating Officer at Intreeon

**David M. Moffett**
Retired Chief Executive Officer and Director of the Federal Home Loan Mortgage Corporation

**James L. Waincott**
Former Chairman, President and Chief Executive Officer of AK Steel Holding Corporation

**Steven T. Halverson**
Chairman and former Chief Executive Officer of The Haskell Company

**Linda H. Rieffer**
Director of MSCI and Former Chairman of Global Research for Morgan Stanley

**J. Steven Whistler**
Retired Chairman and Chief Executive Officer of Phelps Dodge Corporation

**Paul C. Hild**
Founder and Controller of MR Argent Advisor LLC

**Suzanne M. Vautrinet**
Founder and President of Abbott Consulting, Inc. and Retired U.S. Air Force Major General

**John J. Zilmer**
Chairman of the Board, President and Chief Executive Officer of Anerserk Corporation

From left to right:

**Joe Hinrichs**
President and Chief Executive Officer

**Kevin S. Boone**
Executive Vice President of Sales and Marketing

**Nathan D. Goldman**
Executive Vice President, Chief Legal Officer and Corporate Secretary

**Jernie J. Boychuk**
Executive Vice President of Operations

**Sean R. Polkey**
Executive Vice President and Chief Financial Officer

**Stephen Fortune**
Executive Vice President and Chief Digital and Technology Officer

**Diana B. Sorfleet**
Executive Vice President and Chief Administrative Officer

18

19

![img-2.jpeg](img-2.jpeg)

25

26

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

(ii) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

OR

(iii) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 1-8022

CSX 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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of exchange on which registered

Common Stock, $1 Par Value

CSX

Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes (X) No ( )

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ( ) No (X)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes (X) No ( )

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes (X) No ( )

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company (as defined in Exchange Act Rule 12b-2).

Large Accelerated Filer (X) Accelerated Filer ( ) Non-accelerated Filer ( ) Smaller reporting company (☐)

Emerging growth company (☐)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ( )

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report (iiii)

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. (☐)

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). (☐)

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

Yes (☐) No (X)

On June 30, 2022 (which is the last day of the second quarter and the required date to use), the aggregate market value of the Registrant's voting stock held by non-affiliates was approximately $62 billion (based on the close price as reported on the NASDAQ National Market System on such date).

There were 2,062,605,434 shares of Common Stock outstanding on January 31, 2023 (the latest practicable date that is closest to the filing date).

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Definitive Proxy Statement (the "Proxy Statement") to be filed no later than 120 days after the end of the fiscal year with respect to its 2023 annual meeting of shareholders.

22

CSX 2022 Form 10-K p.1

# **CSX CORPORATION**
**FORM 10-K**
**TABLE OF CONTENTS**

| Item No. | Page |
| --- | --- |
| PART I |  |
| 1. Business | 3 |
| 1A. Risk Factors | 7 |
| 1B. Unresolved Staff Comments | 12 |
| 2. Properties | 13 |
| 3. Legal Proceedings | 17 |
| 4. Mine Safety Disclosures | 17 |
| Executive Officers of the Registrant | 18 |
| PART II |  |
| 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 20 |
| 6. Reserved | 21 |
| 7. Management's Discussion and Analysis of Financial Condition and Results of Operations | 22 |
| · Terms Used by CSX | 22 |
| · 2022 Highlights | 24 |
| · Results of Operations | 24 |
| · Liquidity and Capital Resources | 31 |
| · Contractual Obligations, Other Commitments and Off-Balance Sheet Arrangements | 36 |
| · Labor Agreements | 36 |
| · Critical Accounting Estimates | 37 |
| · Forward-Looking Statements | 42 |
| 7A. Quantitative and Qualitative Disclosures about Market Risk | 44 |
| 8. Financial Statements and Supplementary Data | 45 |
| 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 111 |
| 9A. Controls and Procedures | 111 |
| 9B. Other Information | 114 |
| 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 114 |
| PART III |  |
| 10. Directors, Executive Officers of the Registrant and Corporate Governance | 114 |
| 11. Executive Compensation | 114 |
| 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 114 |
| 13. Certain Relationships and Related Transactions, and Director Independence | 114 |
| 14. Principal Accounting Fees and Services | 114 |
| PART IV |  |
| 15. Exhibits, Financial Statement Schedules | 115 |
| Signatures | 119 |

CSX 2022 Form 10-K p.2

23

# CSX CORPORATION

### Item 1. Business

CSX Corporation, together with its subsidiaries ('CSX' or the 'Company'), based in Jacksonville, Florida, is one of the nation's leading transportation companies. The Company provides rail-based freight transportation services including traditional rail service, the transport of intermodal containers and trailers, as well as other transportation services such as rail-to-truck transfers and bulk commodity operations. CSX and the rail industry provide customers with access to an expansive and interconnected transportation network that plays a key role in North American commerce and is critical to the long-term economic success and improved global competitiveness of the United States. In addition, freight railroads provide the most economical and environmentally efficient means to transport goods over land.

#### *CSX Transportation, Inc.*

CSX's principal operating subsidiary, CSX Transportation, Inc. ('CSXT'), provides an important link to the transportation supply chain through its approximately 20,000 route-mile rail network and serves major population centers in 26 states east of the Mississippi River, the District of Columbia and the Canadian provinces of Ontario and Quebec. It has access to over 70 ocean, river and lake port terminals along the Atlantic and Gulf Coasts, the Mississippi River, the Great Lakes and the St. Lawrence Seaway. This access allows the Company to meet the dynamic transportation needs of manufacturers, industrial producers, the automotive industry, construction companies, farmers and feed mills, wholesalers and retailers, and energy producers. The Company's intermodal business links customers to railroads via trucks and terminals. CSXT also serves thousands of production and distribution facilities through track connections with other Class I railroads and more than 240 short-line and regional railroads. On June 1, 2022, CSX completed its acquisition of Pan Am Systems, Inc. ('Pan Am') which is the parent company of Pan Am Railways, Inc. This acquisition expands CSXT's reach in the Northeastern United States. For further details, refer to Note 17, *Business Combinations*.

CSXT is also responsible for the Company's real estate sales, leasing, acquisition and management and development activities. Substantially all of these activities are focused on supporting railroad operations.

#### *Other Entities*

In addition to CSXT, the Company's subsidiaries include Quality Carriers, Inc. ('Quality Carriers'), CSX Intermodal Terminals, Inc. ('CSX Intermodal Terminals'), Total Distribution Services, Inc. ('TDSI'), Transflo Terminal Services, Inc. ('Transflo'), CSX Technology, Inc. ('CSX Technology') and other subsidiaries. Effective July 1, 2021, CSX acquired Quality Carriers, the largest provider of bulk liquid chemicals truck transportation in North America. For further details, refer to Note 17, *Business Combinations*. CSX Intermodal Terminals owns and operates a system of intermodal terminals, predominantly in the eastern United States, and also provides drayage services (the pickup and delivery of intermodal shipments) for certain customers. TDSI serves the automotive industry with distribution centers and storage locations. Transflo connects non-rail served customers to the many benefits of rail by transferring products from rail to trucks. The biggest Transflo markets are chemicals and agriculture, which includes shipments of plastics and ethanol. CSX Technology and other subsidiaries provide support services for the Company.

#### *Operating Model*

The Company is focused on developing and strictly maintaining a scheduled service plan with an emphasis on improving customer service, optimizing assets and increasing employee engagement. When this operating model is executed effectively, the Company competes for an increased share of the U.S. freight market. Further, this model leads to reduced costs and strong free cash flow generation.

24

CSX 2022 Form 10-K p.3

# CSX CORPORATION
PART I

# Lines of Business

During 2022, the Company's services generated $14.9 billion of revenue and served four primary lines of business: merchandise, intermodal, coal and trucking.

- The merchandise business shipped 2.6 million carloads (41% of volume) and generated $8.2 billion in revenue (55% of revenue) in 2022. The Company's merchandise business is comprised of shipments in the following diverse markets: chemicals, agricultural and food products, minerals, automotive, forest products, metals and equipment, and fertilizers.
- The intermodal business shipped 3.0 million units (48% of volume) and generated $2.3 billion in revenue (16% of revenue) in 2022. The intermodal business combines the superior economics of rail transportation with the flexibility of trucks and offers a cost and environmental advantage over long-haul trucking. Through a network of approximately 30 terminals, the intermodal business serves all major markets east of the Mississippi River and transports mainly manufactured consumer goods in containers, providing customers with truck-like service for longer shipments.
- The coal business shipped 697 thousand carloads (11% of volume) and generated $2.4 billion in revenue (16% of revenue) in 2022. The Company transports domestic coal, coke and iron ore to electricity-generating power plants, steel manufacturers and industrial plants as well as export coal to deep-water port facilities. Most of the export coal the Company transports is used for steelmaking, while the majority of domestic coal the Company ships is used for electricity generation.
- The trucking business generated $966 million, or 7%, of revenue in 2022. Trucking revenue includes revenue from the operations of Quality Carriers, which was acquired by CSX effective July 1, 2021.

Other revenue accounted for 6% of the Company's total revenue in 2022. This category includes revenue from regional subsidiary railroads and incidental charges, including intermodal storage and equipment usage, demurrage and switching. Revenue from regional subsidiary railroads includes shipments by railroads that the Company does not directly operate. Intermodal storage represents charges for customer storage of containers at an intermodal terminal, ramp facility or offsite location beyond a specified period of time. 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.

# CSX's Committed Workforce

Most of the Company's employees provide or support transportation services. The Company had more than 22,500 employees as of December 2022, which includes approximately 17,100 employees that are members of a rail labor union. As of December 2, 2022, all 12 rail unions at CSX that participated in national bargaining were covered by national agreements with the Class I railroads and CSX-specific agreements that will remain in effect through December 31, 2024. In the face of supply chain disruption and a tight labor market, CSX continues to focus on ensuring the hiring pipeline for frontline railroaders is adequate to meet customer needs and has implemented new recruiting and staffing measures.

CSX prioritizes workplace safety for employees and is committed to continued improvement through enhanced processes, training, technology, communication, and continuous collaboration with customers and peers across the railroad industry. Training programs and processes are focused on injury and accident prevention as well as emergency preparedness. The attainment of key safety targets is a component of management's annual incentive program. The FRA Personal Injury Frequency Index, a measure of the number of FRA-reportable injuries per 200,000 man-hours, was 0.96 in both 2022 and 2021, remaining flat year over year.

CSX 2022 Form 10-K p.4

25

# CSX CORPORATION

The Compensation and Talent Management Committee of the Board of Directors is charged with oversight of CSX's workforce. The Company is committed to developing a culture that promotes workforce diversity and inclusion and encourages ethical behavior. As of December 31, 2022, approximately 21% of CSX's overall workforce and 36% of management was diverse, calculated as the percentage of males of color and all females. In 2022, CSX was recognized as a 'Best Place to Work for Disability Inclusion' by Disability:IN and the American Association of People with Disabilities for a fourth consecutive year after receiving a top score on their disability equality index. The CSX Code of Ethics serves as a guiding standard for ethical behavior and covers many types of matters, including discrimination and harassment as well as safety. Annually, all management employees are required, and union employees are highly encouraged, to complete ethics training.

### Company History

A leader in freight rail transportation for nearly 200 years, the Company's heritage dates back to the early nineteenth century when The Baltimore and Ohio Railroad Company ('B&O'), the nation's first common carrier, was chartered in 1827. Since that time, the Company has built on this foundation to create a railroad that could safely and reliably service the ever-increasing demands of a growing nation. Since its founding, numerous railroads have combined with the former B&O through merger and consolidation to create what has become CSX. Each of the railroads that combined into the CSX family brought new geographical reach to valuable markets, gateways, cities, ports and transportation corridors.

CSX Corporation was incorporated in 1978 under Virginia law. In 1980, the Company completed the merger of the Chessie System and Seaboard Coast Line Industries into CSX. The merger allowed the Company to connect northern population centers and Appalachian coal fields to growing southeastern markets. Later, the Company's acquisition of key portions of Conrail, Inc. ('Conrail') allowed CSXT to link the northeast, including New England and the New York metropolitan area, with Chicago and midwestern markets as well as the growing areas in the Southeast already served by CSXT. This current rail network, which now includes the network acquired from Pan Am, allows the Company to directly serve every major market in the eastern United States with safe, dependable, environmentally responsible and fuel efficient freight transportation and intermodal service.

### Competition

The business environment in which the Company operates is highly competitive. Shippers typically select transportation providers that offer the most compelling combination of service and price. Service requirements, both in terms of transit time and reliability, vary by shipper and commodity. As a result, the Company's primary competition varies by commodity, geographic location and mode of available transportation and includes other railroads, motor carriers that operate similar routes across its service area and, to a less significant extent, barges, ships and pipelines.

CSXT's primary rail competitor is Norfolk Southern Railway, which operates throughout much of the Company's territory. Other railroads also operate in parts of the Company's territory. Depending on the specific market, competing railroads and deregulated motor carriers may exert pressure on price and service levels. For further discussion on the risk of competition to the Company, see Item 1A. Risk Factors.

26

CSX 2022 Form 10-K p.5

# CSX CORPORATION

### Regulatory Environment

The Company's operations are subject to various federal, state, provincial (Canada) and local laws and regulations generally applicable to businesses operating in the United States and Canada. In the U.S., the railroad operations conducted by the Company's subsidiaries, including CSXT, are subject to the regulatory jurisdiction of the Surface Transportation Board ('STB'), the Federal Railroad Administration ('FRA'), and its sister agency within the U.S. Department of Transportation ('DOT'), the Pipeline and Hazardous Materials Safety Administration ('PHMSA'). Together, FRA and PHMSA have broad jurisdiction over railroad operating standards and practices, including track, freight cars, locomotives and hazardous materials requirements. In addition, the U.S. Environmental Protection Agency ('EPA') has regulatory authority with respect to matters that impact the Company's properties and operations.

The Transportation Security Administration ('TSA'), a component of the Department of Homeland Security, has broad authority over railroad operating practices that may have homeland security implications. In Canada, the railroad operations conducted by the Company's subsidiaries, including CSXT, are subject to the regulatory jurisdiction of the Canadian Transportation Agency.

Although the Staggers Act of 1980 significantly deregulated the U.S. rail industry, the STB has broad jurisdiction over rail carriers. The STB regulates routes, fuel surcharges, conditions of service, rates for non-exempt traffic, acquisitions of control over rail common carriers and the transfer, extension or abandonment of rail lines, among other railroad activities. Any new rules from the STB regarding, among other things, competitive access or revenue adequacy could have a material adverse effect on the Company's financial condition, results of operations and liquidity as well as its ability to invest in enhancing and maintaining vital infrastructure. For further discussion on regulatory risks to the Company, see Item 1A. *Risk Factors*.

### Financial Information

Information regarding the Company's results of operations and financial position can be found in Item 7. Management's Discussion and Analysis of Financial Condition.

### Other Information

CSX makes available on its website www.csx.com, free of charge, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such reports are filed with or furnished to the Securities and Exchange Commission ('SEC'). The information on the CSX website is not part of this annual report on Form 10-K. Additionally, the Company has posted its code of ethics on its website, which is also available to any shareholder who requests it. This Form 10-K and other SEC filings made by CSX are also accessible through the SEC's website at www.sec.gov.

CSX has included the certifications of its Chief Executive Officer ('CEO') and the Chief Financial Officer ('CFO') required by Section 302 of the Sarbanes-Oxley Act of 2002 ('the Act') as Exhibit 31, as well as Section 906 of the Act as Exhibit 32 to this Form 10-K report.

For additional information concerning business conducted by the Company during 2022, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

CSX 2022 Form 10-K p.6

27

# CSX CORPORATION

### Item 1A. Risk Factors

The risks set forth in the following risk factors could have a material adverse effect on the Company's financial condition, results of operations or liquidity, and could cause those results to differ materially from those expressed or implied in the Company's forward-looking statements. Additional risks and uncertainties not currently known to the Company or that the Company currently does not deem to be material also may materially impact the Company's financial condition, results of operations or liquidity.

#### Regulatory, Legislative and Legal

##### ***New legislation or regulatory changes could impact the Company's earnings or restrict its ability to independently negotiate prices.***

Legislation passed by Congress, new regulations issued by federal agencies or executive orders issued by the President of the United States could significantly affect the revenues, costs, including income taxes, and profitability of the Company's business. In addition, statutes or regulations imposing price constraints or affecting rail-to-rail competition could adversely affect the Company's profitability.

##### ***Government regulation and compliance risks may adversely affect the Company's operations and financial results.***

The Company is subject to the jurisdiction of various regulatory agencies, including the STB, FRA, PHMSA, TSA, EPA and other state, provincial and federal regulatory agencies for a variety of economic, health, safety, labor, environmental, tax, legal and other matters. New or modified rules or regulations by these agencies could increase the Company's operating costs, adversely impact revenue or reduce operating efficiencies and affect service performance. Noncompliance with applicable laws or regulations could erode public confidence in the Company and can subject the Company to fines, penalties and other legal or regulatory sanctions.

##### ***CSXT, as a common carrier by rail, is required by law to transport hazardous materials, which could expose the Company to significant costs and claims.***

A train accident involving the transport of hazardous materials could result in significant claims arising from personal injury, property or natural resource damage, environmental penalties and remediation obligations. Such claims, if insured, could exceed existing insurance coverage or insurance may not continue to be available at commercially reasonable rates. Under federal regulations, CSXT is required to transport hazardous materials under the legal duty referred to as the common carrier mandate.

CSXT is also required to comply with regulations regarding the handling of hazardous materials. In November 2008, the TSA issued final rules placing significant new security and safety requirements on passenger and freight railroad carriers, rail transit systems and facilities that ship hazardous materials by rail. Noncompliance with these rules can subject the Company to significant penalties and could be a factor in litigation arising out of a train accident. Finally, legislation preventing the transport of hazardous materials through certain cities could result in network congestion and increase the length of haul for hazardous substances, which could increase operating costs, reduce operating efficiency or increase the risk of an accident involving the transport of hazardous materials.

28

CSX 2022 Form 10-K p.7

# CSX CORPORATION

### ***The Company may be subject to various claims and lawsuits that could result in significant expenditures.***

As part of its railroad and other operations, the Company is subject to various claims and lawsuits related to disputes over commercial practices, labor and unemployment matters, occupational and personal injury claims, property damage, environmental and other matters. The Company may experience material judgments or incur significant costs to defend existing and future lawsuits. Although the Company maintains insurance to cover some of these types of claims and establishes reserves when appropriate, final amounts determined to be due on any outstanding matters may exceed the Company's insurance coverage or differ materially from the recorded reserves. Additionally, the Company could be impacted by adverse developments not currently reflected in the Company's reserve estimates.

### **Operational, Safety and Business Disruption**

#### ***An epidemic or pandemic and the initiatives to reduce its transmission could adversely affect the Company's business.***

The Company could be materially and adversely affected by a public health crisis, including a widespread epidemic or pandemic. During a health crisis, policies and initiatives may be instituted by the public and private sector to reduce transmission, such as closures of businesses and manufacturing facilities, the promotion of social distancing, the adoption of working from home by companies and institutions, and travel restrictions. These policies or initiatives could adversely affect demand for the commodities and products that the Company transports, including import and export volume.

In addition, initiatives to reduce transmission could result in supply chain disruptions, which could impact volumes and make it more difficult for the Company to serve its customers. Moreover, operations are negatively affected when a significant number of employees are quarantined as the result of exposure to a contagious illness. To the extent a public health crisis adversely affects the Company's business and financial results, it may also have the effect of heightening many of the other risks described herein.

#### ***The Company relies on the security, stability and availability of its technology systems to operate its business.***

The Company relies on information technology in all aspects of its business. The security, stability and availability of the Company's and its key third-party vendors' technology systems are critical to its ability to operate safely and effectively and to compete within the transportation industry. A successful data breach, cyber-attack, or the occurrence of any similar incident that impacts the Company's or its key third-party vendors' information technology systems could result in a service interruption, train accident, misappropriation of confidential or proprietary information (including personal information), process failure, or other operational difficulties. A disruption or compromise of the Company's information technology systems, even for short periods of time, and any resulting theft or compromise of Company confidential or proprietary information (including personal information), could adversely affect the Company's business or reputation, create significant legal, regulatory or financial exposure and have a material adverse impact on CSX's business, financial condition or operations.

CSX 2022 Form 10-K p.8

29

# CSX CORPORATION

The Company, its third-party vendors and other companies in the rail and transportation industries have been subject to, and are likely to continue to be the target of, data breaches, cyber-attacks and other similar incidents. These incidents may include, among other things, malware, ransomware, distributed denial of service attacks, social engineering, phishing, theft, malfeasance or improper access by employees or third-party vendors, human error, fraud, or other modes of attack or disruption. Attacks of these nature are increasing in frequency, levels of persistence, intensity and sophistication. Further, the Company may be at increased risk of a cyber-attack as a result of being a component of the critical U.S. infrastructure. As cybersecurity threats continue to evolve, the Company may be required to expend significant additional resources to continue to modify or enhance its protective measures or to investigate and remediate any information security vulnerabilities, data breaches, cyber-attacks or other similar incidents. A public health crisis could also increase the risk that the Company or its third-party vendors may experience cybersecurity incidents as a result of employees, third-party vendors and other third parties with which they interact working remotely on less secure systems and environments.

Despite the Company's efforts to protect its information technology systems, it may not be able to prevent or anticipate all data breaches, cyber-attacks or other similar incidents, detect or react to such incidents in a timely manner or adequately remediate any such incident. While CSX's security protocols have detected attempts to gain unauthorized access to the Company's information technology systems, none of such attempts have resulted in any material breach of or disruption to the Company's systems. For example, CSX has experienced distributed denial of service attacks that have resulted in brief system disruptions, but none have resulted in access to CSX systems. Additionally, despite routine security assessment of the Company's key third-party vendors, some vendors have experienced cyber-attacks in the past, but none of such attacks have had a material adverse impact on CSX's business or operations. Due to applicable laws and regulations or contractual obligations, CSX may be held responsible for data breaches, cyber-attacks or other similar incidents attributed to its third-party vendors as they relate to the information CSX shares with them.

Additionally, if CSX is unable to acquire, develop or implement new technology, it may suffer a competitive disadvantage within the rail industry and with companies providing other modes of transportation service.

### ***Network or supply chain constraints could have a negative impact on service, operating efficiency or volume of shipments.***

CSXT could experience rail network difficulties related to: (i) locomotive or crew shortages; (ii) labor shortages or other service disruptions in the supply chain affecting trucking, ports, handling facilities, customer facilities or other railroads; (iii) unpredictable increases in demand; (iv) extreme weather conditions; (v) regulatory changes resulting in forced access or impacting where and how fast CSXT can transport freight or maintain routes; (vi) reductions in availability of pooled equipment, including chassis; (vii) impacts from changes in network capacity or structure; or (viii) increased passenger activities, which could impact CSXT's operational fluidity, leading to deterioration of service, asset utilization and overall efficiency.

### ***Future acts of terrorism, war or regulatory changes to combat the risk of terrorism may cause significant disruptions in the Company's operations.***

Terrorist attacks, along with any government response to those attacks, may adversely affect the Company's financial condition, results of operations or liquidity. CSXT's rail lines, other key infrastructure and information technology systems may be targets or indirect casualties of acts of terror or war. This risk could cause significant business interruption and result in increased costs and liabilities and decreased revenues. In addition, premiums charged for some or all of the insurance coverage currently maintained by the Company could increase dramatically, or the coverage may no longer be available.

30

CSX 2022 Form 10-K p.9

# CSX CORPORATION

Furthermore, in response to the heightened risk of terrorism, federal, state and local governmental bodies are proposing and, in some cases, have adopted legislation and regulations relating to security issues that impact the transportation industry. For example, the Department of Homeland Security adopted regulations that require freight railroads to implement additional security protocols when transporting hazardous materials. Complying with these or future regulations could continue to increase the Company's operating costs and reduce operating efficiencies.

### ***Severe weather or other natural occurrences could result in significant business interruptions and expenditures in excess of available insurance coverage.***

The Company's operations may be affected by external factors such as severe weather and other natural occurrences, including floods, hurricanes, fires and earthquakes. As a result, the Company's rail network may be damaged, its workforce may be unavailable, fuel costs may rise and significant business interruptions could occur. In addition, the performance of locomotives and railcars could be adversely affected by extreme weather conditions. Hurricanes as well as storm and flooding events have impacted the Company's network in the past, leading to interrupted service and damage to track and equipment. Changes in weather patterns caused by climate change are expected to increase the frequency, severity or duration of certain adverse weather conditions.

Insurance maintained by the Company to protect against loss of business and other related consequences resulting from these natural occurrences is subject to coverage limitations, depending on the nature of the risk insured. This insurance may not be sufficient to cover all of the Company's damages or damages to others, and this insurance may not continue to be available at commercially reasonable rates. Even with insurance, if any natural occurrence leads to a catastrophic interruption of service, the Company may not be able to restore service without a significant interruption in operations.

### **Competitive, Economic and Financial**

#### ***The Company faces competition from other transportation providers.***

The Company experiences competition in pricing, service, reliability and other factors from various transportation providers including railroads and motor carriers that operate similar routes across its service area and, to a less significant extent, barges, ships and pipelines. Other transportation providers generally use public rights-of-way that are built and maintained by governmental entities, while CSXT and other railroads must build and maintain rail networks largely using internal resources. Any future improvements or expenditures materially increasing the quality or reducing the cost of alternative modes of transportation such as through the use of automation, autonomy or electrification, or legislation providing for less stringent size or weight restrictions on trucks, could negatively impact the Company's competitive position. Additionally, any future consolidation in the rail industry could materially affect the regulatory and competitive environment in which the Company operates.

#### ***Global economic conditions could negatively affect demand for commodities and other freight.***

A decline or disruption in general domestic and global economic conditions that affects demand for the commodities and products the Company transports, including import and export volume, could reduce revenues or have other adverse effects on the Company's cost structure and profitability. For example, slower rates of economic growth in Asia, contraction of European economies, and changes in the global supply of seaborne coal or price of seaborne coal have adverse impacts on U.S. export coal volume and result in lower coal revenue for CSX. Additionally, changes to trade agreements or policies could result in reduced import and export volumes due to increased tariffs and lower consumer demand. If the Company experiences significant declines in demand for its transportation services with respect to one or more commodities and products or continues to experience the impacts of inflation, the Company may experience reduced revenue and increased operating costs, workforce adjustments, and other related activities, which could have a material adverse effect on the Company's financial condition, results of operations and liquidity.

CSX 2022 Form 10-K p.10

31

# CSX CORPORATION

### ***Changing dynamics in the U.S. and global energy markets could negatively impact profitability.***

Over time, changing dynamics in the U.S. and global energy markets, including the impacts of regulation and alternative fuel sources, have resulted in lower energy production from coal-fired power plants in CSX's service territory. Changes in natural gas prices, or other factors impacting demand for electricity, could impact future power generation at coal-fired plants, which would affect the Company's domestic coal volumes and revenues.

### ***Weaknesses in the capital and credit markets could negatively impact the Company's access to capital.***

The Company regularly relies on capital markets for the issuance of long-term debt instruments, commercial paper and bank financing from time to time. Instability or disruptions of the capital markets, including credit markets, or the deterioration of the Company's financial condition due to internal or external factors, could restrict or prohibit access and could increase financing costs. A significant deterioration of the Company's financial condition could also reduce credit ratings and could limit or affect its access to external sources of capital and increase the costs of short and long-term debt financing.

### **Availability of Critical Supplies and Labor**

#### ***The unavailability of critical resources could adversely affect the Company's operational efficiency and ability to meet demand.***

Marketplace conditions for resources like locomotives as well as the availability of qualified personnel, particularly engineers and conductors, could each have a negative impact on the Company's ability to meet demand for rail service. Although the Company strives to maintain adequate resources and personnel for the current business environment, unpredictable increases in demand for rail services or extreme weather conditions may exacerbate such risks, which could have a negative impact on the Company's operational efficiency and otherwise have a material adverse effect on the Company's financial condition, results of operations, or liquidity in a particular period.

#### ***Disruption to a key railroad industry supplier could negatively affect operating efficiency and increase costs.***

The capital intensive and unique nature of core rail equipment (including rail, ties, freight cars and locomotives) limits the number of railroad equipment suppliers. If any of the current manufacturers stops production or experiences a supply shortage, CSXT could experience a significant cost increase or material shortage. In addition, a few critical railroad suppliers are foreign and, as such, adverse developments in international relations, new trade regulations, disruptions in international shipping or increases in global demand could make procurement of these supplies more difficult or increase CSXT's costs. Additionally, if a fuel supply shortage were to arise, the Company would be negatively impacted.

#### ***Failure to complete negotiations on collective bargaining agreements could result in strikes and/or work stoppages.***

Most of CSX's employees are represented by labor unions and are covered by collective bargaining agreements. These agreements are either bargained for nationally by the National Carriers Conference Committee or locally between CSX and the union. Such agreements are negotiated over the course of several years and previously have not resulted in any extended work stoppages. Under the Railway Labor Act's procedures (which include mediation, cooling-off periods and the possibility of an intervention by the President of the United States), during negotiations neither party may take action until the procedures are exhausted. If, however, CSX is unable to negotiate acceptable agreements, the employees covered by the Railway Labor Act could strike, which could result in loss of business and increased operating costs as a result of higher wages or benefits paid to union members.

32

CSX 2022 Form 10-K p.11

# CSX CORPORATION

### Climate Change and Environmental

*The Company's operations and financial results could be negatively impacted by climate change and regulatory and legislative responses to climate change.*

There is potential for operational impacts from changing weather patterns or rising sea levels in the Company's operational territory, which could impact the Company's network or other assets.

Climate change and other emissions-related laws and regulations have been proposed and, in some cases adopted, on the federal, state, provincial and local levels. These final and proposed laws and regulations take the form of restrictions, caps, taxes or other controls on emissions. In particular, the EPA has issued various regulations and may issue additional regulations targeting emissions, including rules and standards governing emissions from certain stationary sources and from vehicles. Any of these pending or proposed laws or regulations, including any proposed or implemented under the Biden administration, could adversely affect the Company's operations and financial results by, among other things: (i) reducing coal-fired electricity generation due to mandated emission standards; (ii) reducing the consumption of coal as a viable energy resource in the United States and Canada; (iii) increasing the Company's fuel, capital and other operating costs and negatively affecting operating and fuel efficiencies; and (iv) making it difficult for the Company's customers in the U.S. and Canada to produce products in a cost competitive manner. Any of these factors could reduce the amount of shipments the Company handles and have a material adverse effect on the Company's financial condition, results of operations or liquidity.

*The Company is subject to environmental laws and regulations that may result in significant costs.*

The Company is subject to wide-ranging federal, state, provincial and local environmental laws and regulations concerning, among other things, emissions into the air, ground and water; the handling, storage, use, generation, transportation and disposal of waste and other materials; the clean-up of hazardous material and petroleum releases and the health and safety of our employees. If the Company violates or fails to comply with these laws and regulations, CSX could be fined or otherwise sanctioned by regulators. The Company can also be held liable for consequences arising out of human exposure to any hazardous substances for which CSX is responsible. In certain circumstances, environmental liability can extend to formerly owned or operated properties, leased properties, adjacent properties and properties owned by third parties or Company predecessors, as well as to properties currently owned, leased or used by the Company.

The Company has been, and may in the future be, subject to allegations or findings to the effect that it has violated, or is strictly liable under, environmental laws or regulations, and such violations can result in the Company's incurring fines, penalties or costs relating to the cleanup of environmental contamination. Although the Company believes it has appropriately recorded current and long-term liabilities for known and reasonably estimable future environmental costs, it could incur significant costs that exceed reserves or require unanticipated cash expenditures as a result of any of the foregoing. The Company also may be required to incur significant expenses to investigate and remediate known, unknown or future environmental contamination.

### Item 1B. Unresolved Staff Comments

None

CSX 2022 Form 10-K p.12

33

# **CSX CORPORATION**  
**PART I**

# **Item 2. Properties**

The Company's properties primarily consist of track and its related infrastructure, locomotives and freight cars and equipment. These categories and the geography of the network are described below.

# *Track and Infrastructure*

Serving 26 states, the District of Columbia, and the Canadian provinces of Ontario and Quebec, the CSXT rail network serves, among other markets, New York, Philadelphia and Boston in the Northeast and Mid-Atlantic, the southeast markets of Atlanta, Miami and New Orleans, and the midwestern markets of St. Louis, Memphis and Chicago.

CSXT's track structure includes mainline track, connecting terminals and yards, track within terminals and switching yards, sidings used for passing trains, track connecting CSXT's track to customer locations and turnouts that divert trains from one track to another. Total track miles, which reflect the size of CSXT's network that connects markets, customers and western railroads, are greater than CSXT's approximately 20,000 route miles. At December 2022, the breakdown of track miles was as follows:

|  | Track Miles |
| --- | --- |
| Single Mainline Track | 19,879 |
| Other Mainline Track | 5,662 |
| Terminals and Switching Yards | 9,308 |
| Passing Sidings and Turnouts | 901 |
| Total | 35,750 |

In addition to its physical track structure, the Company operates numerous yards and terminals for rail and intermodal service. These serve as points of connectivity between the Company and its local customers and as sorting facilities where railcars and intermodal containers are received, classed for destination and placed onto outbound trains, or arrive and are delivered to the customer. The Company's largest yards and terminals based on 2022 volume (number of railcars or intermodal containers processed) are listed below.

| Yards and Terminals | Annual Volume |
| --- | --- |
| Waycross, GA | 931,488 |
| Bedford Park Intermodal Terminal (Chicago) | 886,636 |
| Selkirk, NY | 636,750 |
| Nashville, TN | 627,868 |
| Cincinnati, OH | 622,906 |
| Avon, IN (Indianapolis) | 574,775 |
| Walbridge, OH (Toledo) | 372,880 |
| Fairburn, GA Intermodal Terminal (Atlanta) | 358,416 |
| Louisville, KY | 352,029 |
| Chicago 59th St. Intermodal Terminal | 308,421 |

34

CSX 2022 Form 10-K p.13

# CSX CORPORATION

### *Network Geography*

CSXT's operations are primarily focused on four major transportation networks and corridors that are defined geographically and by commodity flows below.

Interstate 90 (I-90) Corridor - This CSXT corridor links Chicago and the Midwest to metropolitan areas in New York and New England. This route, also known as the 'waterlevel route,' has minimal hills and grades and nearly all of it has two main tracks (referred to as double track). These engineering attributes permit the corridor to support high-speed service across intermodal, automotive and merchandise commodities. This corridor is a primary route for import traffic coming from the far east through western ports moving eastward across the country, through Chicago and into the population centers in the Northeast. The I-90 Corridor is also a critical link between ports in New York, New Jersey, and Pennsylvania and consumption markets in the Midwest. This route carries goods from all three of the Company's major rail markets - merchandise, intermodal and coal.

Interstate 95 (I-95) Corridor - The CSXT I-95 Corridor connects Charleston, Jacksonville, Miami and many other cities throughout the Southeast with the heavily populated mid-Atlantic and northeastern cities of Baltimore, Philadelphia and New York. CSXT primarily transports food and consumer products, as well as metals and chemicals along this line. It is the leading rail corridor along the eastern seaboard south of the District of Columbia and provides access to major eastern ports.

Southeastern Corridor - This critical part of the network runs between CSXT's western gateways of Chicago, St. Louis and Memphis through the cities of Nashville, Birmingham, and Atlanta and markets in the Southeast. The Southeastern Corridor is the premier rail route connecting these key cities, gateways, and markets and positions CSXT to efficiently handle projected traffic volumes of intermodal, automotive and general merchandise traffic. The corridor also provides direct rail service between the coal reserves of the southern Illinois basin and the demand for coal in the Southeast.

Coal Network - The CSXT coal network connects the coal mining operations in the Appalachian mountain region and Illinois basin with industrial areas in the Southeast, Northeast and Mid-Atlantic, as well as many river, lake, and deep water port facilities. The domestic coal market has declined significantly over the last decade and export coal remains subject to a high degree of volatility. CSXT's coal network remains well positioned to supply utility markets in both the Northeast and Southeast and to transport coal shipments for export outside of the U.S. Most of the export coal the Company transports is used for steelmaking, while the majority of domestic coal the Company ships is used for electricity generation.

See the following page for a map of the CSX Rail Network. Also included on the map, 'CSX Operating Agreement' indicates areas within which CSX can operate through trackage rights beyond the CSX network.

CSX 2022 Form 10-K p.14

35

# CSX CORPORATION
PART I

# CSX Rail Network

![img-0.jpeg](img-0.jpeg)

36

CSX 2022 Form 10-K p.15

# **CSX CORPORATION**  
**PART I**

# *Locomotives*

As of December 2022, CSXT owns or long-term leases more than 3,600 locomotives. From time to time, the Company also short-term leases locomotives based on business needs. Freight locomotives are used primarily to pull trains while switching locomotives are used in yards. Auxiliary units are typically used to provide extra traction for heavy trains in hilly terrain. Of owned locomotives, approximately 68% were in active service as of December 31, 2022, and the remainder were in storage to be utilized as needed. Storing locomotives and equipment allows the Company to quickly adjust its active fleet based on demand and other factors while avoiding delays due to supply limitations or excessive lead times to acquire additional equipment. As of December 2022, CSXT's fleet of owned or long-term leased locomotives consisted of the following types:

|  | Locomotives | % | Average Age (years) |
| --- | --- | --- | --- |
| Freight | 3,194 | 89% | 23 |
| Switching | 237 | 6% | 45 |
| Auxiliary Units | 177 | 5% | 29 |
| Total locomotives | 3,608 | 100% | 25 |

# *Equipment*

The Company owns or long-term leases rail equipment, including several types of freight cars and intermodal containers. Of total owned and long-term leased equipment, approximately 91% was in active service as of December 31, 2022, and the remainder were in storage to be utilized as needed. As of December 2022, the Company's owned and long-term leased equipment consisted of the following:

| Equipment | Number of Units | % |
| --- | --- | --- |
| Gondolas | 18,613 | 40% |
| Multi-level Flat Cars | 10,736 | 23% |
| Open-top Hoppers | 6,403 | 14% |
| Covered Hoppers | 6,366 | 13% |
| Box Cars | 3,745 | 8% |
| Flat Cars | 565 | 1% |
| Other Cars | 596 | 1% |
| Subtotal Freight Cars | 47,024 | 100% |
| Containers | 19,405 |  |
| Total Equipment | 66,429 |  |

At any time, approximately two-thirds of the railcars on the CSXT system are not owned or leased by the Company. Examples of these include railcars owned by other railroads (which are utilized by CSXT), shipper-furnished or private cars (which are generally used only in that shipper's service), multi-level railcars used to transport automobiles (which are shared between railroads) and double-stack railcars, or well cars (which are industry pooled), that allow for two intermodal containers to be loaded one above the other.

CSX 2022 Form 10-K p.16

37

# CSX CORPORATION

The Company's revenue-generating equipment, either owned or long-term leased, primarily consists of freight cars and containers as described below.

Gondolas - Support CSXT's metals markets and provide transport for woodchips and other bulk commodities. Some gondolas are equipped with special hoods for protecting products like coil and sheet steel.

Multi-level flat cars - Transport finished automobiles and are differentiated by the number of levels: bi-levels for large vehicles such as pickup trucks and SUVs and tri-levels for sedans and smaller automobiles.

Covered hoppers - Have a permanent roof and are segregated based upon commodity density. Lighter bulk commodities such as grain, fertilizer, flour, salt, sugar, clay and lime are shipped in large cars called jumbo covered hoppers. Heavier commodities like cement, ground limestone and industrial sand are shipped in small cube covered hoppers.

Open-top hoppers - Transport heavy dry bulk commodities such as coal, coke, stone, sand, ores and gravel that are resistant to weather conditions.

Box cars - Include a variety of tonnages, sizes, door configurations and heights to accommodate a wide range of finished products, including paper, auto parts, appliances and building materials. Insulated box cars deliver food products, canned goods, beer and wine.

Flat cars - Used for shipping intermodal containers and trailers or bulk and finished goods, such as lumber, pipe, plywood, drywall and pulpwood.

Other cars - Primarily leased refrigerator cars and slab steel cars.

Containers - Weather-proof boxes used for bulk shipment of freight, primarily in intermodal service.

### Item 3. Legal Proceedings

For further details, please refer to Note 8. *Commitments and Contingencies* of this annual report on Form 10-K.

### Item 4. Mine Safety Disclosure

Not Applicable

38

CSX 2022 Form 10-K p.17

# **CSX CORPORATION**  
**PART I**

# **Executive Officers of the Registrant**

Executive officers of the Company are elected by the CSX Board of Directors and generally hold office until the next annual election of officers. There are no family relationships or any arrangement or understanding between any officer and any other person pursuant to which such officer was elected. As of the date of this filing, the executive officers' names, ages and business experience are:

| Name and Age | Business Experience During Past Five Years |
| --- | --- |
| Joseph R. Hinrichs, 56 President and Chief Executive Officer | Hinrichs, a leader with more than 30 years of experience in the global automotive, manufacturing, and energy sectors, was named President and Chief Executive Officer in September 2022. Hinrichs previously worked at Ford Motor Company from 2000 to 2020, most recently serving as President of Ford's global automotive business. In that role, he led the company's automotive operations, overseeing Ford's global business units and the Ford and Lincoln brands. He also led Ford's automotive skill teams, overseeing product development, purchasing, manufacturing, labor affairs, marketing and sales, government affairs, information technology, sustainability, safety and environmental engineering. Other positions he held at Ford include President of Global Operations, President of the Americas, President of Asia Pacific and Africa, Chairman and CEO of Ford China, and Chairman & CEO of Ford Canada. Over the past four years, Hinrichs has also served in multiple advisory and board roles of various companies. |
| Sean R. Pelkey, 43 Executive Vice President and Chief Financial Officer | Pelkey was named Executive Vice President and Chief Financial Officer in January 2022 after serving as Vice President and Acting Chief Financial Officer since June 2021. Prior to these roles, Pelkey held the role of Vice President Finance & Treasury since 2017. In his current role, he is responsible for all financial aspects of the Company's business including financial and economic analysis, accounting, tax, treasury, real estate and purchasing activities. Prior to 2017, he has held the positions of AVP Capital Markets and Director Performance Analysis. During his 17 years with CSX, Mr. Pelkey has held a variety of other roles, including financial planning and technology finance. |
| Kevin S. Boone, 45 Executive Vice President and Chief Sales & Marketing Officer | Boone was named Executive Vice President and Chief Sales & Marketing Officer in June 2021 after serving as Chief Financial Officer since May 2019. In his current role, he is responsible for the commercial organization. Mr. Boone has more than 20 years of experience in finance, accounting, mergers and acquisitions, and transportation performance analysis. He joined CSX in September 2017 as Vice President of Corporate Affairs and Chief Investor Relations Officer and was later named Vice President, Marketing and Strategy leading research and data analysis to advance growth strategies for CSX. Before joining CSX in 2017, Mr. Boone worked as a Senior Equity Research Analyst at Janus Capital. He also served as a Vice President at Morgan Stanley in equity research and an associate at Merrill Lynch in the mergers and acquisitions group. |
| Jamie J. Boychuk, 45 Executive Vice President of Operations | Boychuk has served as CSXT's Executive Vice President of Operations since October 2019. In this role, he is responsible for transportation, network operations including terminals, mechanical, engineering and labor relations. Since joining CSXT in 2017, he has held the positions of Senior Vice President of Network, Engineering, Mechanical and Intermodal Operations; Vice President of Scheduled Railroading; and Assistant Vice President of Transportation Support. Mr. Boychuk previously worked at Canadian National Railway, where he served for 20 years in various operational roles of increasing responsibility, including sub-region General Manager. |

CSX 2022 Form 10-K p.18

39

# **CSX CORPORATION**  
**PART I**

| Name and Age | Business Experience During Past Five Years |
| --- | --- |
| Stephen Fortune, 53 Executive Vice President and Chief Digital and Technology Officer | Fortune was named CSX's Executive Vice President and Chief Digital and Technology Officer in April 2022. In this role, he is responsible for leading the Company's technology strategy development and all aspects of CSX's information technology systems operations, including cybersecurity. Prior to joining CSX with nearly 20 years of information technology experience, he spent 30 years at BP, most recently as Chief Information Officer of the global BP group. |
| Nathan D. Goldman, 65 Executive Vice President and Chief Legal Officer | Goldman has served as Executive Vice President and Chief Legal Officer, and Corporate Secretary of CSX since November 2017. In this role, he directs the Company's legal affairs, government relations, risk management, public safety, environmental, and audit functions. During his 19 years with the Company, Mr. Goldman has previously served as Vice President of Risk Compliance and General Counsel and has overseen work in compliance, risk management and safety programs. |
| Diana B. Sorfleet, 58 Executive Vice President and Chief Administrative Officer | Sorfleet was named Executive Vice President and Chief Administrative Officer in July 2018. In this role, her responsibilities include human resources, people systems and analytics, total rewards, facilities and aviation. During her 11 years with the Company, Ms. Sorfleet has previously served as Chief Human Resources Officer. Prior to joining CSX, she worked in human resources for 20 years. |
| Angela C. Williams, 48 Vice President and Chief Accounting Officer | Williams has served as Vice President and Chief Accounting Officer of CSX since March 2018. She is responsible for financial and regulatory reporting, freight billing and collections, payroll, accounts payable and various other accounting processes. During her 19 years with the Company, she previously served as Assistant Vice President - Assistant Controller and in other various accounting roles. With more than 25 years of experience, Williams held various accounting and auditing positions prior to joining CSX. Ms. Williams is a Certified Public Accountant in the state of Florida. |

40

CSX 2022 Form 10-K p.19

# **CSX CORPORATION**  
**PART II**

# **Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities**

# **Market Information**

CSX's common stock is listed on the Nasdaq Global Select Market, which is its principal trading market, and is traded over-the-counter and on exchanges nationwide. The official trading symbol is 'CSX.'

# **Description of Common and Preferred Stock**

A total of 5.4 billion shares of common stock are authorized, of which 2,066,350,050 shares were outstanding as of December 31, 2022. Each share is entitled to one vote in all matters requiring a vote of shareholders. There are no preemptive rights, which are privileges extended to select shareholders that would allow them to purchase additional shares before other members of the general public in the event of an offering. At January 31, 2023, the latest practicable date that is closest to the filing date, there were 22,453 common stock shareholders of record. The weighted average of common shares outstanding, which was used in the calculation of diluted earnings per share, was 2,141 million as of December 31, 2022. (See Note 2, *Earnings Per Share*.) A total of 25 million shares of preferred stock is authorized, none of which is currently outstanding.

The following table sets forth, for the quarters indicated, the dividends declared on CSX common stock.

|  | Quarter |  |  |  |  | Year |
| --- | --- | --- | --- | --- | --- | --- |
|  | 1st | 2nd | 3rd | 4th |  |  |
| 2022 | $0.100 | $0.100 | $0.100 | $0.100 | $0.400 |  |
| 2021 | $0.093 | $0.093 | $0.093 | $0.093 | $0.372 |  |

# **Stock Performance Graph**

The cumulative shareholder returns, assuming reinvestment of dividends, on $100 invested at December 31, 2017 are illustrated on the graph below. The Company references the Standard & Poor's 500 Stock Index ('S&P 500 ®'), and the Dow Jones U.S. Transportation Average Index, which provide comparisons to a broad-based market index and other companies in the transportation industry.

![img-0.jpeg](img-0.jpeg)

CSX 2022 Form 10-K p.20

41

# **CSX CORPORATION**  
**PART II**

# **CSX Purchases of Equity Securities**

The Company continues to repurchase shares under the $5 billion program announced in July 2022. Total repurchase authority remaining as of December 31, 2022 was $3.3 billion. For more information about share repurchases, see Note 2, *Earnings Per Share*. Share repurchase activity of $1.0 billion for the fourth quarter 2022 was as follows:

# **CSX Purchases of Equity Securities for the Quarter**

| Fourth 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 |  |  |  | $4,292,997,017 |
| October 1 - October 31, 2022 | 22,101,430 | $27.50 | 22,101,430 | 3,685,141,410 |
| November 1 - November 30, 2022 | 6,810,351 | 29.80 | 6,810,351 | 3,482,205,188 |
| December 1 - December 31, 2022 | 6,710,050 | 31.33 | 6,710,050 | 3,271,977,916 |
| Ending Balance | 35,621,831 | $28.66 | 35,621,831 | $3,271,977,916 |

# **Item 6. Reserved**

42

CSX 2022 Form 10-K p.21

# **CSX CORPORATION  
PART II**

# **Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations**

# **TERMS USED BY CSX**

When used in this report, unless otherwise indicated by the context, these terms are used to mean the following:

**Car hire** - A charge paid by one railroad for its use of cars belonging to another railroad or car owner.

**Class I freight railroad** - One of the largest line haul freight railroads as determined based on operating revenue; the exact revenue required to be in each class is periodically adjusted for inflation by the Surface Transportation Board. Smaller railroads are classified as Class II or Class III.

**Common carrier mandate** - A federal mandate that requires U.S. railroads to accommodate reasonable requests from shippers to carry any freight, including hazardous materials.

**Demurrage** - A charge assessed by railroads for the use of rail cars by shippers or receivers of freight beyond a specified free time.

**Department of Transportation ('DOT')** - A U.S. government agency with jurisdiction over matters of all modes of transportation.

**Depreciation study** - Conducted by a third-party specialist and analyzed by management, a periodic statistical analysis of fixed asset service lives, salvage values, accumulated depreciation, and other factors for group assets along with a comparison of similar asset groups at other companies.

**Double-stack** - Stacking containers two-high on specially equipped cars.

**Environmental Protection Agency ('EPA')** - A U.S. government agency that has regulatory authority with respect to environmental law.

**Federal Railroad Administration ('FRA')** - The branch of the DOT that is responsible for developing and enforcing railroad safety regulations, including safety standards for rail infrastructure and equipment.

**Free cash flow** - The calculation of a non-GAAP measure by using net cash provided by operating activities and adjusting for property additions and certain other investing activities. Free cash flow is a measure of cash available for paying dividends, share repurchases and principal reduction on outstanding debt.

**Group-life depreciation** - A type of depreciation in which assets with similar useful lives and characteristics are aggregated into groups. Instead of calculating depreciation for individual assets, depreciation is calculated as a whole for each group.

**Incidental charges** - Charges for switching, demurrage, storage, etc.

**Intermodal** - A flexible way of transporting freight over highway, rail and water without being removed from the original transportation equipment, namely a container or trailer.

**Mainline** - The main track thoroughfare, exclusive of terminals, yards, sidings and turnouts.

CSX 2022 Form 10-K p.22

43

# CSX CORPORATION

**Pipeline and Hazardous Materials Safety Administration ('PHMSA')** - An agency within the DOT that, together with the FRA, has broad jurisdiction over railroad operating standards and practices, including hazardous materials requirements.

**Positive Train Control ('PTC')** - An interoperable train control system designed to prevent train-to-train collisions, over-speed derailments, incursions into established work-zone limits, and train diversions onto another set of tracks.

**Revenue adequacy** - The achievement of a rate of return on investment at least equal to the industry cost of investment capital, as measured by the STB.

**Shipper** - A customer shipping freight via rail.

**Siding** - Track adjacent to the mainline used for passing trains.

**Staggers Act of 1980** - Congressional law that significantly deregulated the rail industry, replacing the regulatory structure in existence since the 1887 Interstate Commerce Act. Where previously rates were controlled by the Interstate Commerce Commission, the Staggers Act allowed railroads to establish their own rates for shipments, enhancing their ability to compete with other modes of transportation.

**Surface Transportation Board ('STB')** - An independent governmental adjudicatory body administratively housed within the DOT, responsible for the economic regulation of interstate surface transportation within the United States.

**Switching** - Putting cars in a specific order, placing cars for loading, retrieving empty cars or adding or removing cars from a train at an intermediate point.

**Terminal** - A facility, typically owned by a railroad, for the handling of freight and for the breaking up, making up, forwarding and servicing of trains.

**Transportation Security Administration ('TSA')** - A component of the Department of Homeland Security with broad authority over railroad operating practices that may have homeland security implications.

**TTX Company ('TTX')** - A company that provides its owner-railroads with standardized fleets of intermodal, automotive and general use railcars at time and mileage rates. CSX owns about 20 percent of TTX's common stock, and the remainder is owned by the other leading North American railroads and their affiliates.

**Turnout** - A track that diverts trains from one track to another.

**Yard** - A system of tracks, other than main tracks and sidings, used for making up trains, storing cars and other purposes.

44

CSX 2022 Form 10-K p.23

# **CSX CORPORATION**
**PART II**

# **2022 HIGHLIGHTS**

- • Revenue of $14.9 billion increased $2.3 billion or 19% versus the prior year.
- • Expenses of $8.8 billion increased $1.9 billion or 27% year over year.
- • Operating income of $6.0 billion increased $429 million or 8% year over year.
- • Operating ratio of 59.5% increased 420 basis points from 55.3%.
- • Earnings per diluted share of $1.95 increased $0.27 or 16% year over year.

# **RESULTS OF OPERATIONS**

The following section generally discusses the Company's results of operations and financial condition for the year ended December 31, 2022, compared to the year ended December 31, 2021. A discussion regarding results of operations and financial condition for the year ended December 31, 2021, compared to the year ended December 31, 2020, can be found in Part II, Item 7 of CSX's Annual Report on Form 10-K for the year ended 2021, filed with the Securities and Exchange Commission on February 16, 2022.

# **2022 vs. 2021 Results of Operations**

|  | Years Ended |  |  |  |
| --- | --- | --- | --- | --- |
|  | 2022 | 2021 | $ Change | % Change |
| (Dollars in Millions) |  |  |  |  |
| Revenue | $14,853 | $12,522 | $2,331 | 19% |
| Expense |  |  |  |  |
| Labor and Fringe | 2,861 | 2,550 | (311) | (12) |
| Purchased Services and Other | 2,685 | 2,135 | (550) | (26) |
| Fuel | 1,626 | 913 | (713) | (78) |
| Depreciation and Amortization | 1,500 | 1,420 | (80) | (6) |
| Equipment and Other Rents | 396 | 364 | (32) | (9) |
| Gains on Property Dispositions | (238) | (454) | (216) | (48) |
| Total Expense | 8,830 | 6,928 | (1,902) | (27) |
| Operating Income | 6,023 | 5,594 | 429 | 8 |
| Interest Expense | (742) | (722) | (20) | (3) |
| Other Income - Net | 133 | 79 | 54 | 68 |
| Income Tax Expense | (1,248) | (1,170) | (78) | (7) |
| Net Earnings | $4,166 | $3,781 | $385 | 10 |
| Earnings Per Diluted Share | $1.95 | $1.68 | $0.27 | 16% |
| Operating Ratio | 59.5% | 55.3% | (420) | bps |

# *Appointment of New Chief Executive Officer*

On September 15, 2022, CSX announced that, as part of a planned succession process, its Board of Directors appointed Joseph R. Hinrichs as the Company's new President and Chief Executive Officer and as a member of the Board of Directors, effective September 26, 2022.

# *Acquisition of Pan Am Systems, Inc.*

On June 1, 2022, CSX acquired Pan Am for a purchase price of $600 million funded through a combination of common stock valued at $422 million and cash totaling $178 million. Accordingly, the consolidated 2022 results include the results of Pan Am's operations after the acquisition date. For further details, refer to Note 17, *Business Combinations*.

CSX 2022 Form 10-K p.24

45

# **CSX CORPORATION**  
**PART II**

# **Volume and Revenue (Unaudited)**

Volume (Thousands of units); Revenue (Dollars in Millions); Revenue Per Unit (Dollars)

|  | Volume |  |  | Revenue |  |  | Revenue Per Unit |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | % Change |
| Chemicals | 641 | 659 | (3)% | $2,584 | $2,421 | 7% | $4,031 | $3,674 | 10% |
| Agricultural and Food Products | 481 | 467 | 3% | 1,664 | 1,461 | 14% | 3,459 | 3,128 | 11% |
| Automotive | 338 | 318 | 6% | 1,054 | 886 | 19% | 3,118 | 2,786 | 12% |
| Minerals | 337 | 325 | 4% | 658 | 587 | 12% | 1,953 | 1,806 | 8% |
| Forest Products | 291 | 296 | (2)% | 996 | 918 | 8% | 3,423 | 3,101 | 10% |
| Metals and Equipment | 267 | 277 | (4)% | 828 | 796 | 4% | 3,101 | 2,874 | 8% |
| Fertilizers | 203 | 229 | (11)% | 455 | 470 | (3)% | 2,241 | 2,052 | 9% |
| Total Merchandise | 2,558 | 2,571 | (1)% | 8,239 | 7,539 | 9% | 3,221 | 2,932 | 10% |
| Intermodal | 2,963 | 2,976 | - % | 2,306 | 2,039 | 13% | 778 | 685 | 14% |
| Coal | 697 | 706 | (1)% | 2,434 | 1,790 | 36% | 3,492 | 2,535 | 38% |
| Trucking (a) | - | - | - % | 966 | 410 | 136% | - | - | - % |
| Other | - | - | - % | 908 | 744 | 22% | - | - | - % |
| Total | 6,218 | 6,253 | (1)% | $14,853 | $12,522 | 19% | $2,389 | $2,003 | 19% |

(a) 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.

46

CSX 2022 Form 10-K p.25

# CSX CORPORATION

### Revenue

Total revenue increased by $2.3 billion in 2022, or 19%, when compared to the previous year primarily due to higher fuel recovery, pricing gains that include the benefit of higher export coal benchmark rates, and the inclusion of Quality Carriers' results.

### Merchandise Volume

Chemicals - Decreased due to lower shipments of crude oil and other energy-related commodities as well as waste.

Agricultural and Food Products - Increased as a result of higher shipments of ethanol, sweeteners and vegetable oils, and grain.

Automotive - Increased due to higher North American vehicle production as semiconductor availability has improved.

Minerals - Increased due to higher shipments of aggregates driven by construction demand.

Forest Products - Decreased due to lower shipments of pulpboard and building products.

Metals and Equipment - Decreased primarily due to lower steel shipments, partially offset by higher scrap shipments and equipment moves.

Fertilizers - Decreased due to declines in short-haul and long-haul phosphate shipments.

### Intermodal Volume

Lower domestic shipments due to continued supply-side constraints, more subdued seasonal demand than prior year and a softening truck market were mostly offset by increased international shipments.

### Coal Volume

Domestic coal decreased due to lower shipments of utility coal, including the impacts of limited coal availability during mine disruptions during the year, as well as lower steel and industrial shipments. Export coal decreased due to lower shipments of thermal coal, partially driven by reduced capacity at Curtis Bay coal pier due to an outage at a portion of the facility. The facility is now back at full capacity.

### Trucking Revenue

Trucking revenue increased $556 million versus prior year due to the inclusion of Quality Carriers' results and higher fuel surcharge.

### Other Revenue

Other revenue was $164 million higher than prior year driven by increases in revenue for intermodal storage and equipment usage, increases in demurrage and higher affiliate revenue.

CSX 2022 Form 10-K p.26

47

# CSX CORPORATION
PART II

# Expense

In 2022, total expenses increased $1.9 billion, or 27%, compared to prior year. Descriptions of each expense category as well as significant year-over-year changes are described below.

Labor and Fringe expenses include employee wages and related payroll taxes, health and welfare costs, pension, other post-retirement benefits and incentive compensation. These expenses increased $311 million due to the following items:

- The impacts of agreements reached with labor unions as well as inflation totaled $199 million. Of the total, $32 million relates to labor and benefits in prior years.
- The inclusion of Quality Carriers' operations for the full year in 2022 versus a portion of the year in 2021 resulted in increased costs of $74 million.
- Incentive compensation costs decreased $29 million primarily due to the impact of accelerated expense for eligible employees in the prior year.
- Other costs increased $67 million primarily due to hiring and retention costs, the inclusion of Pan Am's operations and other non-significant items.

Purchased Services and Other expenses consist primarily of contracted services to maintain infrastructure and equipment, terminal and pier services, purchased trucking and other transportation, and professional services. This category also includes costs related to materials, travel, casualty claims, environmental remediation, train accidents, property and sales tax, utilities and other items. Total purchased services and other expenses increased $550 million driven by the following:

- The inclusion of Quality Carriers' operations for the full year in 2022 versus a portion of the year in 2021 drove $280 million of additional costs.
- Higher operating support costs, primarily due to inflation, higher intermodal terminal costs and an increased active locomotive fleet, drove an increase of $182 million.
- Adjustments to environmental reserves resulted in $21 million higher expense.
- All other costs increased $67 million primarily due to several non-significant items including Pan Am's operations and acquisition-related costs.

Fuel expense includes locomotive diesel fuel as well as non-locomotive fuel. This expense is largely driven by the market price and locomotive consumption of diesel fuel. Fuel expense increased $713 million primarily due to a 66% price increase in locomotive fuel prices and the inclusion of non-locomotive fuel used for trucking.

Depreciation expense primarily relates to recognizing the costs of capital assets, such as locomotives, railcars and track structure, over their respective useful lives, which are reviewed periodically as part of depreciation studies. This expense is impacted primarily by the capital expenditures made each year. Depreciation expense increased $80 million primarily due to a larger net asset base, which includes Quality Carriers' assets, as well as the impacts of a 2022 equipment depreciation study.

Equipment and Other Rents expense includes rent paid for freight cars owned by other railroads or private companies, net of rents received by CSXT for use of its equipment. This category of expenses also includes expenses for short-term and long-term leases of locomotives, railcars, containers, tractors and trailers, offices and other rentals. These expenses increased $32 million primarily due to increased car hire costs as well as the addition of Quality Carriers' costs. Car hire costs increased due to higher days per load and inflation, partially offset by lower volume.

Gains on Property Dispositions decreased to $238 million in 2022 from $454 million in 2021 primarily due to lower gains from the sale of property rights to the Commonwealth of Virginia. Related to this transaction, CSX recognized gains of $144 million in 2022 and $349 million in 2021.

48

CSX 2022 Form 10-K p.27

# **CSX CORPORATION  
PART II**

# ***Interest Expense***

Interest Expense includes interest on long-term debt, equipment obligations and finance leases. Interest expense increased $20 million primarily as a result of higher average debt balances, partially offset by increased capitalized interest.

# ***Other Income - Net***

Other Income - Net includes investment gains, losses and interest income, as well as components of net periodic pension and post-retirement benefit cost and other non-operating activities. Other income increased $54 million primarily due to higher interest income, driven by increased rates, and an increase in net pension benefit credits during 2022.

# ***Income Tax Expense***

Income Tax Expense increased $78 million primarily due to higher earnings before income taxes, partially offset by favorable adjustments to deferred state taxes and favorable state legislative changes.

# ***Net Earnings and Earnings per Diluted Share***

Net Earnings increased $385 million to $4.2 billion, and earnings per diluted share increased $0.27 to $1.95, due to the factors mentioned above. Average shares outstanding was lower as a result of share repurchase activity during the year and had a favorable impact on earnings per diluted share.

CSX 2022 Form 10-K p.28

49

# **CSX CORPORATION**  
**PART II**

# **NON-GAAP MEASURES (Unaudited)**

CSX reports its financial results in accordance with United States generally accepted accounting principles ('GAAP'). CSX also uses certain non-GAAP measures that fall within the meaning of Securities and Exchange Commission Regulation G and Regulation S-K Item 10(e), which may provide users of the financial information with additional meaningful comparison to prior reported results. Non-GAAP measures do not have standardized definitions and are not defined by GAAP. Therefore, CSX's non-GAAP measures are unlikely to be comparable to similar measures presented by other companies. The presentation of these non-GAAP measures should not be considered in isolation from, as a substitute for, or as superior to the financial information presented in accordance with GAAP. Reconciliations of non-GAAP measures to corresponding GAAP measures are below.

# *Free Cash Flow*

Management believes that free cash flow is useful to investors as it is important in evaluating the Company's financial performance. More specifically, free cash flow measures cash generated by the business after reinvestment. This measure represents cash available for both equity and bond investors to be used for dividends, share repurchases or principal reduction on outstanding debt. Free cash flow is calculated by using net cash from operations and adjusting for property additions and proceeds from property dispositions. This measure should be considered in addition to, rather than a substitute for, cash provided by operating activities. Free cash flow before dividends decreased $101 million year-over-year to $3.7 billion primarily due to higher property additions and lower proceeds and advances from property dispositions, mostly attributable to the sale of property rights to the Commonwealth of Virginia. These decreases were partially offset by higher net cash provided by operating activities.

The following table reconciles cash provided by operating activities (GAAP measure) to free cash flow (non-GAAP measure).

|  | Years Ended |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| (Dollars in Millions) |  |  |
| Net Cash Provided by Operating Activities | $5,619 | $5,099 |
| Property Additions | (2,133) | (1,791) |
| Proceeds and Advances from Property Dispositions | 246 | 529 |
| Other Investing Activities (a) | n/a | (4) |
| Free Cash Flow, before Dividends (Non-GAAP) | $3,732 | $3,833 |

(a) Effective first quarter 2022, the results of other investing activities are no longer included in free cash flow. Prior year has not been restated as the change is immaterial.

50

CSX 2022 Form 10-K p.29

# **CSX CORPORATION**  
**PART II**

# **OPERATING STATISTICS (Estimated)**

Certain operating statistics are estimated and can continue to be updated as actuals settle. The methodology for calculating train velocity, dwell, cars online and trip plan performance differs from that used by the Surface Transportation Board. The Company will continue to report these metrics to the Surface Transportation Board using the prescribed methodology.

|  | Fiscal Years |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | Improvement/ (Deterioration) |
| Operations Performance |  |  |  |
| Train Velocity (Miles per hour) (a) | 16.1 | 17.9 | (10)% |
| Dwell (Hours) (a) | 11.3 | 10.7 | (6)% |
| Cars Online (a) | 138,074 | 131,564 | (5)% |
| On-Time Originations (a) | 60% | 75% | (20)% |
| On-Time Arrivals (a) | 52% | 66% | (21)% |
| Carload Trip Plan Performance (a) | 64% | 69% | (7)% |
| Intermodal Trip Plan Performance (a) | 90% | 87% | 3% |
| Fuel Efficiency | 0.99 | 0.96 | (3)% |
| Revenue Ton-Miles (Billions) |  |  |  |
| Merchandise | 126.0 | 126.3 | - % |
| Coal | 33.8 | 35.4 | (5)% |
| Intermodal | 30.0 | 31.5 | (5)% |
| Total Revenue Ton-Miles | 189.8 | 193.2 | (2)% |
| Total Gross Ton-Miles (Billions) | 375.5 | 376.0 | - % |
| Safety |  |  |  |
| FRA Personal Injury Frequency Index (a) | 0.96 | 0.96 | - % |
| FRA Train Accident Rate (a) | 3.18 | 3.22 | 1% |

(a) These metrics do not include results from the network acquired from Pan Am. These metrics will be updated to include the Pan Am network results as data becomes available.

# **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 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 2022 Form 10-K p.30

51

# CSX CORPORATION

The Company is committed to continuous improvement in safety and service performance through training, innovation and investment. Training and safety programs are designed to prevent incidents that can adversely impact employees, customers and communities. Technological innovations that can detect and avoid many types of human factor incidents are designed to serve as an additional layer of protection for the Company's employees. Continued capital investment in the Company's assets, including track, bridges, signals, equipment and detection technology also supports safety performance.

The Company remains focused on safety, service, and controlling costs. Train velocity declined 10% relative to 2021. Dwell increased by 6% and cars online increased 5% in 2022. Compared to 2021, intermodal trip plan performance improved 3%, while carload trip plan performance decreased 7%. CSX has seen an improvement in service metrics in the last quarter of 2022 and expects that trend to continue in 2023.

From a safety perspective, the FRA personal injury index was flat compared to prior year while the train-accident rate improved by 1%. Safety remains a top priority at CSX, and the Company is committed to reducing risk and enhancing the overall safety of its employees, customers and communities in which the Company operates.

## LIQUIDITY AND CAPITAL RESOURCES

Liquidity is a company's ability to generate adequate amounts of cash to meet both current and future needs for obligations as they mature and to provide for planned capital expenditures, including those to address regulatory and legislative requirements. To have a complete picture of a company's liquidity, its sources and uses of cash, balance sheet and external factors should be reviewed.

### Significant Cash Flows

The following charts highlight the operating, investing and financing components of the change in cash and cash equivalents for operating, investing and financing activities for full years 2022 and 2021.

![img-0.jpeg](img-0.jpeg)

In 2022, the Company generated $5.6 billion of cash from operating activities, which was $520 million more than prior year primarily driven by higher cash-generating income, partially offset by less favorable working capital activities. Net cash used in investing activities was $2.1 billion, an increase in net spend of $254 million from the prior year primarily as a result of higher property additions and lower proceeds and advances from property dispositions, partially offset by decreased costs for business acquisitions. Cash used in financing activities was $3.8 billion, which represents a decrease in net spend of $343 million from the prior year mostly driven by the issuance of long-term debt as well as lower repayments of debt, partially offset by higher share repurchases.

52

CSX 2022 Form 10-K p.31

# CSX CORPORATION

### *Sources of Cash and Liquidity*

The Company has multiple sources of liquidity, including cash generated from operations and financing sources. The Company filed a shelf registration statement with the SEC on February 16, 2022, which may be used to 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. In 2022, CSX issued $2.0 billion of long-term debt. See Note 10, *Debt and Credit Agreements* for more information.

CSX has access to a $1.2 billion five-year unsecured revolving credit facility backed by a diverse syndicate of banks that expires in March 2024. As of December 31, 2022, the Company 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. As of December 31, 2022, the Company had no outstanding debt under the commercial paper program.

### *Uses of Cash*

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.

In 2022, CSX continued to invest in its business to create long-term value for shareholders. The Company is committed to maintaining and improving its existing infrastructure and to positioning itself for long-term, profitable growth through optimizing network and terminal capacity. Funds used for property additions are further described below.

| Capital Expenditures (Dollars in Millions) | Years Ended |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| Track | $1,000 | $876 |
| Bridges, Signals and Other | 673 | 567 |
| Total Infrastructure | 1,673 | 1,443 |
| Strategic Projects and Commercial Facilities | 251 | 194 |
| Locomotives | 104 | 89 |
| Freight Cars | 75 | 29 |
| Regulatory (including PTC) | 30 | 36 |
| Total Capital Expenditures | $2,133 | 1,791 |

Planned capital investments for 2023 are expected to be approximately $2.3 billion. Of the 2023 investment, approximately 75% is expected to be used to sustain the core infrastructure and operating equipment. The remaining amounts will be used to promote profitable growth, including projects supporting service enhancements and productivity initiatives. CSX intends to fund capital investments primarily through cash generated from operations.

CSX is continually evaluating market and regulatory conditions that could affect the Company's ability to generate sufficient returns on capital investments. CSX may revise its future estimates for capital spending as a result of changes in business conditions, tax legislation or the enactment of new laws or regulations, which could have a material adverse effect on the Company's operations and financial performance in the future (see *Risk Factors* under Item 1A of this Form 10-K).

CSX 2022 Form 10-K p.32

53

# CSX CORPORATION

CSX is committed to returning cash to shareholders. Capital structure, capital investments and cash distributions, including dividends and share repurchases, are reviewed at least annually by the Board of Directors. On February 14, 2023, the Company's Board of Directors authorized a 10% increase in the quarterly cash dividend to $0.11 per common share effective March 2023. 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.

### *Material Changes in the Consolidated Balance Sheets and Working Capital*

CSX's balance sheet reflects its strong capital base and the impact of CSX's balanced approach in deploying capital for the benefit of its shareholders, which includes investments in infrastructure, dividend payments and share repurchases. Further, CSX is well positioned from a liquidity standpoint. The Company ended the year with $2.1 billion of cash, cash equivalents and short-term investments.

Total assets as well as total liabilities and shareholders' equity increased $1.4 billion from prior year end. The increase in total assets was primarily due to a $1.2 billion increase in net properties and a $193 million increase in investments in affiliates and other companies, partially offset by a reduction in cash of $281 million. The increase in net properties was primarily attributable to capital expenditures as well as fixed assets acquired as part of the Pan Am transaction. In addition, the increase in investments in affiliates and other companies includes the impact of the acquired interest in Pan Am Southern, LLC as well as higher values of several affiliates. See Note 17, *Business Combinations*, for more details on purchase accounting.

Total liabilities increased $2.3 billion from prior year end primarily due to the issuance of $2.0 billion in long-term debt and a $186 million increase in deferred taxes due to accelerated tax depreciation and the impact of the Pan Am acquisition. These increases were partially offset by debt repayments of $186 million. Total shareholders' equity decreased $875 million from prior year end primarily driven by share repurchases of $4.7 billion and dividends paid of $852 million, partially offset by net earnings of $4.2 billion and $422 million of common stock issued to acquire Pan Am.

Working capital is considered a measure of a company's ability to meet its short-term needs. CSX had a working capital surplus of $1.4 billion at December 2022 and $1.6 billion at December 2021, a decrease of $262 million. Current assets decreased primarily driven by the net decline in cash of $281 million described above, partially offset by the $165 million increase in accounts receivable. Current liabilities increased primarily due to the $167 million increase in accounts payable.

54

CSX 2022 Form 10-K p.33

# **CSX CORPORATION**  
**PART II**

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. Although the Company currently has a surplus, a working capital deficit is not unusual for CSX or other companies in the industry and does not indicate a lack of liquidity. The Company continues to maintain adequate current assets to satisfy current liabilities and maturing obligations when they come due. Furthermore, CSX has sufficient financial capacity, including its revolving credit 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.

# **Completed Transactions**

# *Acquisition of Pan Am Systems, Inc.*

On June 1, 2022, CSX completed its acquisition of Pan Am. The closing price of $600 million was funded through a combination of common stock valued at $422 million and cash totaling $178 million, subject to certain customary purchase price adjustments. Total cash consideration paid to acquire the business includes a $30 million deposit paid in fourth quarter 2020. For further details, refer to Note 17, *Business Combinations*.

# *Acquisition of Quality Carriers, Inc.*

On July 1, 2021, CSX acquired Quality Carriers, Inc. for a purchase price of $544 million in cash. This transaction was funded by cash on hand. For further details, refer to Note 17, *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. As of December 31, 2022, all three phases are closed. Gains and proceeds in 2022 and 2021 related to this transaction are summarized in the following table. For further details, refer to Note 6, *Properties*.

|  | Years Ended |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| (Dollars in millions) |  |  |
| Gains | $144 | $349 |
| Proceeds | 125 | 400 |

CSX 2022 Form 10-K p.34

55

# CSX CORPORATION

### Credit Ratings

Credit ratings reflect an independent agency's judgment on the likelihood that a borrower will repay a debt obligation at maturity. The ratings reflect many considerations, such as the nature of the borrower's industry and its competitive position, the size of the company, its liquidity and access to capital and the sensitivity of a company's cash flows to changes in the economy. The two largest rating agencies, Standard & Poor's Ratings Services ('S&P') and Moody's Investors Service ('Moody's'), use alphanumeric codes to designate their ratings. The highest quality rating for long-term credit obligations is AAA and Aaa for S&P and Moody's, respectively. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency.

The cost and availability of unsecured financing are materially affected by CSX's long-term credit ratings. CSX's credit ratings remained stable during 2022. As of both December 2022 and December 2021, S&P's long-term rating on CSX was BBB+ (Stable), and Moody's was Baa1 (Stable). Ratings of BBB- and Baa3 or better by S&P and Moody's, respectively, reflect ratings on debt obligations that fall within a band of credit quality considered to be investment grade. If CSX's credit ratings were to decline to below investment-grade levels, the Company could experience significant increases in its interest cost for new debt. In addition, a decline in CSX's credit ratings to below investment grade levels could adversely affect the market's demand, and thus the Company's ability to readily issue new debt. The Company is committed to maintaining an investment-grade credit profile.

### 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 December 31, 2022, the principal balance of these secured equipment notes was $139 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.

56

CSX 2022 Form 10-K p.35

CSX CORPORATION
PART II

# CONTRACTUAL OBLIGATIONS, OTHER COMMITMENTS AND OFF-BALANCE SHEET ARRANGEMENTS

# Contractual Obligations

CSX is party to contractual arrangements that obligate the Company to make future cash payments. These obligations impact the Company's liquidity and capital resource needs. The Company's contractual obligations primarily consist of long-term debt and related interest payments, purchase commitments, leases, other-post employment benefits and agreements with Conrail.

- As of December 31, 2022, the Company had outstanding fixed-rate notes with varying maturities. See Note 10, Debt and Credit Agreements, for additional information related to future debt payments. Future interest payments associated with outstanding debt total $14.8 billion, with $771 million payable in 2023.
- Purchase commitments consist of CSX's long-term locomotive maintenance program and other commitments to purchase technology, communications, railcar maintenance and other services. See Note 8, Commitments and Contingencies, for additional information about future payments related to purchase commitments.
- Capital expenditures include investments related to public-private partnerships. These partnership investments are typically for projects that are partially or wholly reimbursed to CSX through government awards or other funding sources. Project contribution commitments that are not reimbursable total $80 million as of December 31, 2022.
- The Company's leases include property, equipment, and line leases. See Note 7, Leases, for additional information about future payments related to leases.
- Other post-employment benefits include estimated other post-retirement medical and life insurance payments and payments under non-qualified pension plans that are unfunded. See Note 9, Employee Benefit Plans, for additional information about future payments under such plans.
- Conrail owns rail infrastructure and operates for the joint benefit of CSX and NS. This is known as the shared asset area. Conrail charges fees for right-of-way usage, equipment rentals and transportation, switching and terminal service charges in the shared asset area. See Note 15, Investment in Affiliates and Related-Party Transactions, for additional information about future payments related to agreements with Conrail.

# Other Commitments and Off-Balance Sheet Arrangements

Other commitments total $178 million and primarily consist of guarantees, letters of credit and surety bonds, none of which are individually significant. These off-balance sheet arrangements are not reasonably likely to have a material effect on the Company's financial condition, results of operations or liquidity.

# LABOR AGREEMENTS

Approximately 17,100 of the Company's approximately 22,500 employees are members of a rail labor union. As of December 2, 2022, all 12 rail unions at CSX that participated in national bargaining were covered by national agreements with the Class I railroads and CSX-specific agreements that will remain in effect through December 31, 2024.

CSX 2022 Form 10-K p.36

57

CSX CORPORATION
PART II

# 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. Significant estimates using management judgment are made for the following areas:

- personal injury and environmental reserves;
- pension plan accounting;
- depreciation policies for assets under the group-life method; and
- goodwill and other intangible assets.

# Personal Injury and Environmental Reserves

# *Personal Injury*

Personal Injury reserves of $126 million and $118 million for 2022 and 2021, respectively, represent liabilities for employee work-related and third-party injuries. CSXT retains an independent actuary to assist management in assessing the value of personal injury claims. 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 based largely on CSXT's historical claims and settlement experience. Actual results may vary from estimates due to the number, type and severity of the injury, costs of medical treatments and uncertainties in litigation. For additional details, including a description of our related accounting policies, see Note 5, *Casualty, Environmental and Other Reserves*, in the consolidated financial statements.

# *Environmental*

Environmental reserves were $161 million and $108 million for 2022 and 2021, 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 240 environmentally impaired sites. The Company reviews its potential liability with respect to each site identified, 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.

58

CSX 2022 Form 10-K p.37

# **CSX CORPORATION**
**PART II**

# **Critical Accounting Estimates, *continued***

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. For additional details, including a description of our related accounting policies, see Note 5, *Casualty, Environmental and Other Reserves*, in the consolidated financial statements.

# **Pension Plan Accounting**

The Company sponsors defined benefit pension plans principally for salaried, management personnel. For employees hired prior to 2003, the plans provide eligible employees with retirement benefits based predominantly on years of service and compensation rates near retirement. For employees hired between 2003 and 2019, benefits are determined based on a cash balance formula, which provides benefits by utilizing interest and pay credits based upon age, service and compensation. Beginning in 2020, the CSX Pension Plan was closed to new participants. As of December 2022, the projected benefit obligation for the Company's pension plans was $2.4 billion. For information related to the funded status of the Company's pension plans, see Note 9, *Employee Benefit Plans*.

The accounting for these plans is subject to the guidance provided in the *Compensation-Retirement Benefits Topic* in the ASC. This rule requires that management make certain assumptions relating to the following:

- discount rates used to measure future obligations and interest expense;
- long-term rate of return on plan assets; and
- other assumptions.

The Company engages 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.

CSX 2022 Form 10-K p.38

59

# CSX CORPORATION

### Critical Accounting Estimates, *continued*

#### *Discount Rates*

Discount rates affect the amount of liability recorded and the service and interest cost components of pension expense. Discount rates reflect the rates at which pension benefits could be effectively settled, or in other words, how much it would cost the Company to buy enough high quality bonds to generate cash flow equal to the Company's expected future benefit payments. The Company determines the discount rate based on the market yield as of year-end for high quality corporate bonds whose maturities match the plans' expected benefit payments.

The Company measures the service and interest cost components of the net pension benefits expense by using individual spot rates matched with separate cash flows for each future year. Under the spot rate approach, individual spot discount rates along the same high quality corporate bonds yield curve used to measure the pension benefit liabilities are applied to the relevant projected cash flows at the relevant maturity.

The weighted average discount rate used by the Company to value its pension obligations was 5.02% and 2.78% as of December 2022, and December 2021, respectively. As of December 2022, the estimated duration of pension benefits is approximately 10 years.

Each year, the discount rate is reevaluated and adjusted using the current market interest rates for high quality corporate bonds to reflect the best estimate of the current effective settlement rates. In general, if interest rates decline or rise, the assumed discount rate will change.

#### *Long-term Rate of Return on Plan Assets*

The expected long-term average rate of return on plan assets reflects the average rate of earnings expected on the funds invested, or to be invested, to provide for benefits included in the projected benefit obligation. In estimating that rate, the Company gives appropriate consideration to the returns being earned by the plan assets in the funds and the rates of return expected to be available for reinvestment as well as the current and projected asset mix of the funds. Management, with the assistance of an outsourced investment manager, balances market expectations obtained from various investment managers with both market and actual plan historical returns to develop a reasonable estimate of the expected long-term rate of return on assets. As this assumption is long term, the annual review may result in less frequent adjustment than other assumptions used in pension accounting. The long-term rate of return on plan assets used by the Company to value its benefit cost for the subsequent plan year was 6.75% in both 2022 and 2021.

#### *Other Assumptions*

The calculations made by the actuaries also include assumptions relating to mortality rates, turnover, retirement age and salary inflation rates. These assumptions are based upon historical data, recent plan experience and industry trends and are determined by management.

60

CSX 2022 Form 10-K p.39

# **CSX CORPORATION**
**PART II**

# **Critical Accounting Estimates, *continued***

# *2023 Estimated Pension Expense*

Net periodic pension benefit expense for 2023 is expected to be a credit of $1 million. Net periodic pension benefit expense for 2023 is expected to include service cost expense of $24 million. Service cost expense is included in labor and fringe on the consolidated income statement and all other components of net pension expense are included in other income - net. Net periodic pension expense in 2022 was a credit of $41 million. The net decrease in the expected credit is primarily due to impacts from recent unfavorable pension asset experience, partially offset by the increase in discount rates.

The following sensitivity analysis illustrates the effects of a 1% change in certain assumptions on the 2023 estimated pension expense:

| (Dollars in Millions) | Pension Expense |
| --- | --- |
| Discount Rate | $16 |
| Long-term Rate of Return | $24 |

# **Depreciation Policies for Assets Utilizing the Group-Life Method**

The depreciable assets of the Company are depreciated using either the group-life or straight-line method of accounting, which are both acceptable depreciation methods in accordance with GAAP. The Company depreciates its railroad assets, including main-line track, locomotives and freight cars, using the group-life method of accounting. Assets depreciated under the group-life method comprise 84% of total fixed assets of $48.1 billion on a gross basis at December 31, 2022. The remaining depreciable assets of the Company, including non-railroad assets and assets under finance leases, are depreciated using the straight-line method on a per asset basis. Land is not depreciated.

Management performs a review of depreciation expense and useful lives on a regular basis. Under the group-life method, the service lives and salvage values for each group of assets are determined by completing periodic depreciation studies and applying management's methods to determine the service lives of its properties. There are several factors taken into account during the depreciation study and they include:

- statistical analysis of historical life and salvage data for each group of property;
- statistical analysis of historical retirements for each group of property;
- evaluation of current operations;
- evaluation of technological advances and maintenance schedules;
- previous assessment of the condition of the assets;
- management's outlook on the future use of certain asset groups;
- expected net salvage to be received upon retirement; and
- comparison of assets to the same asset groups with other companies.

CSX 2022 Form 10-K p.40

61

# CSX CORPORATION

### Critical Accounting Estimates, *continued*

The STB requires depreciation studies be performed every three years for equipment assets (e.g., locomotives and freight cars) and every six years for road and track assets (e.g., bridges, signals, rail, ties, and ballast). The Company completed a depreciation study for its road and track assets in 2020 and for equipment assets in 2022, both of which resulted in changes to accumulated depreciation, service lives, salvage values, and other related factors for certain assets. The 2022 equipment study resulted in an expected increase in annual depreciation expense of approximately $80 million primarily due to deferred losses on assets depreciated using the group-life method. Recent experience with depreciation studies has resulted in changes to accumulated depreciation and depreciation rates that did not materially affect the Company's depreciation expense of $1.4 billion in both 2021 and 2020.

A 1% change in the average estimated useful life of all group-life assets would result in an approximate $12 million change to the Company's annual depreciation expense. There were no significant changes to the company's asset lives as a result of the 2022 and 2020 studies. For additional details, including a more detailed description of our related accounting policies, see Note 6, *Properties*, in the consolidated financial statements.

### Goodwill and Intangible Assets

As of December 2022, the Company had $502 million of Goodwill and Other Intangibles - Net. In applying the acquisition method of accounting for business combinations, management must determine the fair value of assets acquired and liabilities assumed in order to properly allocate purchase price consideration between depreciable and amortizable assets and goodwill. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management's estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. Estimates and assumptions include, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriate weighted-average cost of capital.

CSX evaluates goodwill and intangible assets for impairment on an annual basis, or sooner if indicators of impairment exist. In performing the qualitative impairment assessment, CSX considers relevant events and conditions, including but not limited to: macroeconomic trends, industry and market conditions, overall financial performance, company-specific events, and legal and regulatory factors. If the qualitative assessments indicate that it is more likely than not that the fair value of the reporting unit or intangible assets are less than their carrying amounts, the Company would perform a quantitative impairment test. If the carrying amount of the reporting unit's goodwill or intangible asset exceeded the fair value under the quantitative test, an impairment loss would be recorded. Measurement of the fair value of a reporting unit could be based on one or more of the following fair value measures: amounts at which the unit as a whole could be bought or sold in a current transaction between willing parties, present value techniques of estimated future cash flows, valuation techniques based on multiples of earnings or revenue, or a similar performance measure.

### New Accounting Pronouncements and Changes in Accounting Policy

See Note 1, *Nature of Operations and Significant Accounting Policies* under the caption 'New Accounting Pronouncements and Changes in Accounting Policy.'

62

CSX 2022 Form 10-K p.41

CSX CORPORATION
PART II

# FORWARD-LOOKING STATEMENTS

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

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, Item 1A. Risk Factors 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, as well as the impact of international trade agreements and tariffs) and the level of demand for products carried by CSXT;

CSX 2022 Form 10-K p.42

63

# **CSX CORPORATION**  
**PART II**

- • natural events such as severe weather conditions, including floods, fire, hurricanes and earthquakes, a pandemic crisis 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 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 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 CSX's export coal market;
- • 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;
- • 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 acquisitions;
- • the impact of conditions in the real estate market on the Company's ability to sell assets;
- • changes in operating conditions and costs, including the impacts of inflation, or commodity concentrations;
- • the impacts of a public health crisis and any policies or initiatives instituted in response; 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 annual report on Form 10-K.

64

CSX 2022 Form 10-K p.43

# CSX CORPORATION

### Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Changes in interest rates may impact the cost of future long-term debt issued by the Company, and as a result, represent interest rate risk to the Company. In an effort to manage this risk, CSX may use certain financial instruments such as interest rate forward contracts. The following information, together with information included in Note 10, *Debt and Credit Agreements*, describes the key aspects of such contracts and the related market risk to CSX.

Changes in interest rates could impact the fair value of the Company's forward starting interest rate swap. In 2020, the Company executed two forward starting interest rate swaps 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 notes due in 2027. The Company recognized an unrealized gain of $80 million and $8 million net of tax during the years ended December 31, 2022 and 2021, respectively, in the consolidated statements of comprehensive income with the related asset on the balance sheet as of December 31, 2022. In fourth quarter 2022, CSX settled a portion equal to $160 million notional value of the aggregate $500 million cash flow hedges, which resulted in CSX receiving a cash payment of $52 million. The gain associated with the settled portion of the hedges will continue to be classified in accumulated other comprehensive income ('AOCI') until the associated debt instrument is issued in the future. Upon final settlement of the swaps, which expire in 2027, the unrealized gain or loss in AOCI will be recognized in earnings as an adjustment to interest expense over the same period during which the hedged transaction affects earnings. As of December 31, 2022, the potential change in fair value resulting from a hypothetical 10% change in interest rates would not be material.

Changes in interest rates could impact the fair value of the Company's fixed-to-floating interest rate swaps. In 2022, CSX entered into five separate fixed-to-floating interest rate swaps classified as fair value hedges. The swaps are designed to hedge 10 years of interest rate risk associated with market fluctuations attributable to the Secured Overnight Financing Rate on a cumulative $800 million of fixed rate outstanding notes, which are due between 2036 and 2040. As of December 31, 2022, the cumulative fair value of these swaps was a $118 million liability, which is included in other long-term liabilities on the consolidated balance sheet. The associated cumulative adjustment to the hedged notes is included in long-term debt. Gains and losses resulting from changes in fair value of the interest rate swaps offset changes in the fair value of the hedged portion of the underlying debt with no gain or loss recognized due to hedge ineffectiveness. The difference in the net fixed-to-float interest settlement on the derivatives is recognized in interest expense and was not material for the year ending at December 31, 2022. The swaps will expire in 2032. If settled early, the remaining liability or asset will be amortized over the remaining life of the associated notes. As of December 31, 2022, the potential change in fair value resulting from a hypothetical 10% change in interest rates would not be material.

As of December 31, 2022, CSX has no floating rate notes outstanding. However, changes in interest rates could impact the fair value (but not the carrying value) of the Company's fixed rate long-term debt. The potential decrease in fair value of the Company's fixed rate long-term debt resulting from a hypothetical 10% increase in U.S. Treasury rates, or approximately 40 basis points, is estimated to be $709 million as of December 31, 2022, and $448 million as of December 31, 2021. The underlying fair values of the Company's long-term debt were estimated based on quoted market prices or on the current rates offered for debt with similar terms and maturities.

CSX 2022 Form 10-K p.44

65

# **CSX CORPORATION**

# **PART II**

# **Item 8. Financial Statements and Supplementary Data**

# **INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

|  | Page |
| --- | --- |
| Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) | 46 |
| CSX Corporation |  |
| Consolidated Financial Statements and Notes to Consolidated Financial Statements Herewith: |  |
| Consolidated Income Statements for the Years Ended: | 48 |
| December 31, 2022 |  |
| December 31, 2021 |  |
| December 31, 2020 |  |
| Consolidated Comprehensive Income Statements for the Years Ended: | 49 |
| December 31, 2022 |  |
| December 31, 2021 |  |
| December 31, 2020 |  |
| Consolidated Balance Sheets as of: | 50 |
| December 31, 2022 |  |
| December 31, 2021 |  |
| Consolidated Cash Flow Statements for Years Ended: | 51 |
| December 31, 2022 |  |
| December 31, 2021 |  |
| December 31, 2020 |  |
| Consolidated Statements of Changes in Shareholders' Equity: | 52 |
| December 31, 2022 |  |
| December 31, 2021 |  |
| December 31, 2020 |  |
| Notes to Consolidated Financial Statements | 53 |

66

CSX 2022 Form 10-K p.45

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of CSX Corporation

# **Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheets of CSX Corporation (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, cash flows, and changes in shareholders' equity for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the 'consolidated financial statements'). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 15, 2023 expressed an unqualified opinion thereon.

# **Basis for Opinion**

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

# **Critical Audit Matter**

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosure to which it relates.

CSX 2022 Form 10-K p.46

67

CSX CORPORATION

# PART II

# Item 8. Financial Statements and Supplementary Data

# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, continued

# Depreciation Policies for Assets Utilizing the Group-Life Method

# Description of the Matter

As of December 31, 2022, assets depreciated under the group-life method comprised 84% of total gross fixed assets of $48.1 billion. As discussed in Note 6 of the consolidated financial statements, the group-life method aggregates assets with similar lives and characteristics into groups and depreciates each of these groups as a whole. When using the group-life method, an underlying assumption is that each group of assets, as a whole, is used and depreciated to the end of the group's recoverable life. The Company utilizes different depreciable asset categories to account for depreciation expense for the railroad assets that are depreciated under the group-life method.

Under the group-life method, depreciation studies are conducted by a third-party specialist and analyzed by the Company's management to review asset service lives, salvage values, accumulated depreciation and other factors related to group assets. Depreciation studies are performed every three years for equipment assets and every six years for road and track assets. In years when depreciation studies are not performed, annual data reviews are conducted by a third-party specialist and analyzed by the Company's management to review the asset service lives. A depreciation study was performed in 2022 for equipment assets. For road and track assets, the most recent depreciation study was performed in 2020 and was evaluated in the current year through an annual data review.

Auditing depreciation expense for assets subject to the group-life method was complex and required the involvement of specialists due to the nature of the methods used in the depreciation studies to determine the useful service lives and salvage values of the Company's assets. These methods have a significant effect on depreciation expense.

# How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company's process related to the assessment of periodic depreciation studies and annual data reviews of its group-life assets. For example, we tested controls over management's review of the depreciation study for equipment assets and review of depreciation expense and estimated useful lives. We also tested controls over management's annual data review of asset activity and assumptions that could impact the estimated useful lives determined in the most recent depreciation study of road and track assets.

To test the estimated useful lives and salvage values of the Company's group-life assets, we performed audit procedures that included, among others: obtaining the periodic depreciation studies and annual data reviews performed by the Company's third-party specialist and reviewed by management; assessing the completeness and accuracy of the data provided by management to the third-party specialist; and including a specialist on our team to evaluate the methods used by the third-party specialist and reviewed by management in determining the estimated useful lives and salvage values of assets resulting from the depreciation studies and any changes to the estimated useful lives and salvage values, if any, resulting from the annual data reviews.

We compared the methods used by management to those used throughout the industry and within other depreciation studies. We assessed the historical accuracy of management's estimates via retrospective review and independently calculated the current year depreciation rates.

We have served as the Company's auditor since 1981.

/s/ Ernst & Young LLP

Jacksonville, Florida February 15, 2023

68

CSX 2022 Form 10-K p.47

# CSX CORPORATION

# PART II

# Item 8. Financial Statements and Supplementary Data

# CONSOLIDATED INCOME STATEMENTS

*(Dollars in Millions, Except Per Share Amounts)*

|  | Years Ended |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Revenue | $14,853 | $12,522 | $10,583 |
| Expense |  |  |  |
| Labor and Fringe | 2,861 | 2,550 | 2,275 |
| Purchased Services and Other | 2,685 | 2,135 | 1,719 |
| Fuel | 1,626 | 913 | 541 |
| Depreciation and Amortization | 1,500 | 1,420 | 1,383 |
| Equipment and Other Rents | 396 | 364 | 338 |
| Gains on Property Dispositions | (238) | (454) | (35) |
| Total Expense | 8,830 | 6,928 | 6,221 |
| Operating Income | 6,023 | 5,594 | 4,362 |
| Interest Expense | (742) | (722) | (754) |
| Other Income - Net (Note 14) | 133 | 79 | 19 |
| Earnings Before Income Taxes | 5,414 | 4,951 | 3,627 |
| Income Tax Expense (Note 12) | (1,248) | (1,170) | (862) |
| Net Earnings | $4,166 | $3,781 | $2,765 |

# **Per Common Share (Note 2)**

# Net Earnings Per Share

| Basic | $1.95 | $1.68 | $1.20 |
| --- | --- | --- | --- |
| Assuming Dilution | $1.95 | $1.68 | $1.20 |

# Average Common Shares Outstanding (Millions)

| Basic | 2,136 | 2,250 | 2,300 |
| --- | --- | --- | --- |
| Assuming Dilution | 2,141 | 2,255 | 2,305 |

See accompanying Notes to Consolidated Financial Statements.

CSX 2022 Form 10-K p.48

69

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

**NOTE 8. Commitments and Contingencies, *continued***

The total of annual payments under the agreement, including those related to locomotive rebuilds and the long-term locomotive maintenance program, are estimated in the table below.

Additionally, the Company has various other commitments to purchase technology, communications, track maintenance services and materials, and other services from various suppliers. Total annual payments under all of these purchase commitments are also estimated in the table below.

| (Dollars in Millions) | Locomotive Maintenance & Rebuild Payments | Other Commitments | Total |
| --- | --- | --- | --- |
| 2023 | $220 | $110 | $330 |
| 2024 | 308 | 39 | 347 |
| 2025 | 328 | 40 | 368 |
| 2026 | 241 | 15 | 256 |
| 2027 | 329 | 17 | 346 |
| Thereafter | 1,519 | 68 | 1,587 |
| Total | $2,945 | $289 | $3,234 |

**Insurance**

The Company maintains insurance programs with substantial limits for property damage, including resulting business interruption, and third-party liability. A certain amount of risk is retained by the Company on each insurance program. Under its property insurance program, the Company retains all risk up to $100 million per occurrence for losses from floods and named windstorms and up to $75 million per occurrence for other property losses. For third-party liability claims, the Company retains all risk up to $100 million per occurrence. As CSX negotiates insurance coverage above its full self-retention amounts, it retains a percentage of risk at various layers of coverage. While the Company believes its insurance coverage is adequate, future claims could exceed existing insurance coverage or insurance may not continue to be available at commercially reasonable rates.

**Legal**

The Company is involved in litigation incidental to its business and is a party to a number of legal actions and claims, various governmental proceedings and private civil lawsuits, including, but not limited to, those related to fuel surcharge practices, tax matters, environmental and hazardous material exposure matters, FELA and labor claims by current or former employees, other personal injury or property claims and disputes and complaints involving certain transportation rates and charges. Some of the legal proceedings include claims for compensatory as well as punitive damages and others are, or are purported to be, class actions. While the final outcome of these matters cannot be predicted with certainty, considering, among other things, the legal defenses available and liabilities that have been recorded along with applicable insurance, it is currently the opinion of management that none of these pending items will 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.

100

CSX 2022 Form 10-K p.79

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

**NOTE 8. Commitments and Contingencies, *continued***

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 $3 million to $21 million in aggregate as of December 31, 2022. This estimated aggregate range is based upon currently available information and is subject to significant judgment and a variety of assumptions. Accordingly, the Company's estimate will change from time to time, and actual losses may vary significantly from the current estimate.

*Fuel Surcharge Antitrust Litigation*

In May 2007, class action lawsuits were filed against CSXT and three other U.S.-based Class I railroads alleging that the defendants' fuel surcharge practices relating to contract and unregulated traffic resulted from an illegal conspiracy in violation of antitrust laws. The class action lawsuits were consolidated into one case in federal court in the District of Columbia. In 2017, the District Court issued its decision denying class certification. On August 16, 2019, the U.S. Court of Appeals for the D.C. Circuit affirmed the District Court's ruling.

The consolidated case is now moving forward without class certification. Although the class was not certified, individual shippers have since brought claims against the railroads, which have been consolidated into a separate case.

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

*Environmental*

CSXT is indemnifying Pharmacia LLC, formerly known as Monsanto Company, ("Pharmacia") for certain liabilities associated with real estate located in Kearny, New Jersey along the Lower Passaic River (the "Property"). The Property, which was formerly owned by Pharmacia, is now owned by CSXT. CSXT's indemnification and defense duties arise with respect to several matters. The U.S. Environmental Protection Agency ("EPA"), using its CERCLA authority, seeks the investigation and cleanup of hazardous substances in the 17-mile Lower Passaic River Study Area (the "Study Area"). CSXT, on behalf of Pharmacia, and a significant number of other potentially responsible parties are together conducting a Remedial Investigation and Feasibility Study of the Study Area pursuant to an Administrative Settlement Agreement and Order on Consent with the EPA. Pharmacia's share of responsibility, indemnified by CSXT, for the investigation and cleanup costs of the Study Area may be determined through various mechanisms including (a) an allocation and settlement with EPA; (b) litigation brought by EPA against non-settling parties; or (c) litigation among the responsible parties.

CSX 2022 Form 10-K p.80

101

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

**NOTE 8. Commitments and Contingencies, *continued***

For the lower 8 miles of the Study Area, EPA issued its Record of Decision detailing the agency's mandated remedial process in March 2016. 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 behalf of Pharmacia. For the remainder of the Study Area, EPA has selected an interim remedy in a Record of Decision dated September 28, 2021. Settlement discussions are also ongoing for the selected interim remedy.

On March 2, 2022, EPA issued a Notice Letter to Pharmacia, Occidental Chemical Corporation and eight other parties alleging they are liable under Section 107(a) of CERCLA for releases or threatened releases of hazardous substances and requesting each party, individually or collectively, submit good faith offers to EPA in connection with the Study Area. CSX, on behalf of Pharmacia, responded to the Notice Letter and submitted a good faith offer to EPA on June 27, 2022, following meetings with a mediator from EPA's Conflict Prevention and Resolution Center. Negotiations with EPA and other parties to resolve this matter continue.

CSXT is also defending and indemnifying Pharmacia with regard to the Property in litigation filed by Occidental Chemical Corporation, 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 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 its share of remediation costs as determined by the EPA-directed allocation with respect to the Property and the Study Area would be material to the Company's financial condition, results of operations or liquidity.

102

CSX 2022 Form 10-K p.81

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

NOTE 9. Employee Benefit Plans

The Company sponsors defined benefit pension plans principally for salaried, management personnel. For employees hired prior to 2003, the plans provide eligible employees with retirement benefits based predominantly on years of service and compensation rates near retirement. For employees hired between 2003 and 2019, benefits are determined based on a cash balance formula, which provides benefits by utilizing interest and pay credits based upon age, service and compensation. The CSX Pension Plan, the largest plan based on benefit obligation, was closed to new participants beginning in 2020.

The Company engages 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. In order to perform this valuation, the actuaries are provided with the details of the population covered at the beginning of the year, summarized in the table below, and projects that population forward to the end of the year.

| Pension Plan Participants: | As of January 1, 2022 |
| --- | --- |
| Active Employees | 2,767 |
| Retirees and Beneficiaries | 11,460 |
| Other (a) | 3,586 |
| Total | 17,813 |

(a) The Other category consists mostly of terminated but vested former employees.

CSX 2022 Form 10-K p.82

103

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

**NOTE 9. Employee Benefit Plans, *continued***

The benefit obligation for these plans represents the liability of the Company for current and retired employees and is affected primarily by the following:

- service cost (benefits attributed to employee service during the period);
- interest cost (interest on the liability due to the passage of time);
- actuarial gains/losses (experience during the year different from that assumed and changes in plan assumptions); and
- benefits paid to participants.

**Cash Flows**

Plan assets are amounts that have been segregated and restricted to provide qualified pension plan benefits and include amounts contributed by the Company and amounts earned from invested contributions, net of benefits paid. 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. The Company funds the cost of nonqualified pension benefits on a pay-as-you-go basis. No qualified pension plan contributions were made during 2022, 2021 and 2020. No contributions to the Company's qualified pension plans are expected in 2023.

Future expected benefit payments are as follows:

| Expected Cash Flows ( Dollars in Millions ): | Pension Benefits |
| --- | --- |
| 2023 | $193 |
| 2024 | 188 |
| 2025 | 185 |
| 2026 | 183 |
| 2027 | 181 |
| 2028-2032 | 879 |
| Total | $1,809 |

**Plan Assets**

The Company outsources investment management related to pension plan assets. The CSX Investment Committee (the "Investment Committee"), whose members are selected by the Executive Vice President and Chief Financial Officer, is responsible for setting policy and oversight of investment management. The Investment Committee and investment manager utilize an investment asset allocation strategy that is monitored on an ongoing basis and updated periodically in consideration of plan or employee changes, or changing market conditions. Periodic studies provide an extensive modeling of asset investment return in conjunction with projected plan liabilities and seek to evaluate how to maximize return within the constraints of acceptable risk.

104

CSX 2022 Form 10-K p.83

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

NOTE 9. Employee Benefit Plans, continued

The current asset allocation targets 60% growth-oriented investments and 40% immunizing investments. The growth-oriented portfolio consists of return-seeking investments that are diversified across geography, market capitalization, and asset class. The immunizing portfolio is comprised of a customized mix of fixed income and cash investments designed to reduce liability risk. Allocations are evaluated for levels within 5% of targeted allocations and are adjusted quarterly as necessary.

The distribution of pension plan assets as of the measurement date is shown in the table below, and these assets are reported net of pension liabilities on the balance sheet.

| (Dollars in Millions) | December 2022 |  | December 2021 |  |
| --- | --- | --- | --- | --- |
|  | Amount | Percent of Total Assets | Amount | Percent of Total Assets |
| Equity | $1,249 | 54% | $1,559 | 52% |
| Fixed Income | 144 | 6 | 204 | 7 |
| Cash and Cash Equivalents | 41 | 2 | 49 | 1 |
| Growth-Oriented | $1,434 | 62% | $1,812 | 60% |
| Fixed Income | 777 | 33 | 1,145 | 38 |
| Cash and Cash Equivalents | 116 | 5 | 59 | 2 |
| Immunizing | $893 | 38% | $1,204 | 40% |
| Total | $2,327 | 100% | $3,016 | 100% |

Under the supervision of the Investment Committee, the investment manager selects investments or fund managers in accordance with standards of prudence applicable to asset diversification and investment suitability. The Company also selects fund managers with differing investment styles and benchmarks their investment returns against appropriate indices. Fund investment performance is continuously monitored. Acceptable performance is determined in the context of the long-term return objectives of the fund and appropriate asset class benchmarks.

Within the Company's equity funds, domestic stock is diversified among large and small capitalization stocks. International stock is diversified in a similar manner as well as in developed versus emerging markets stocks. Guidelines established with individual managers limit investment by industry sectors, individual stock issuer concentration and the use of derivatives and CSX securities.

Fixed income securities guidelines established with individual managers specify the types of allowable investments, such as government, corporate and asset-backed bonds, target certain allocation ranges for domestic and foreign investments and limit the use of certain derivatives. Additionally, guidelines stipulate minimum credit quality constraints and any prohibited securities. For detailed information regarding the fair value of pension assets, see Note 13, Fair Value Measurements.

CSX 2022 Form 10-K p.84

105

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

NOTE 9. Employee Benefit Plans, continued

Benefit Obligation, Plan Assets and Funded Status

Changes in benefit obligation and the fair value of plan assets for the 2022 and 2021 plan years are as follows:

|  | Pension Benefits |  |
| --- | --- | --- |
|  | Plan Year 2022 | Plan Year 2021 |
| (Dollars in Millions) |  |  |
| Actuarial Present Value of Benefit Obligation |  |  |
| Accumulated Benefit Obligation | $2,285 | $2,909 |
| Projected Benefit Obligation | 2,368 | 3,022 |
| Change in Projected Benefit Obligation: |  |  |
| Projected Benefit Obligation at Beginning of Plan Year | $3,022 | $3,257 |
| Service Cost (a) | 36 | 45 |
| Interest Cost | 64 | 55 |
| Actuarial Gain | (570) | (142) |
| Benefits Paid | (184) | (193) |
| Benefit Obligation at End of Plan Year | $2,368 | $3,022 |
| Change in Plan Assets: |  |  |
| Fair Value of Plan Assets at Beginning of Plan Year | $3,016 | $3,000 |
| Actual (Loss) Return on Plan Assets | (523) | 187 |
| Non-qualified Employer Contributions | 18 | 22 |
| Benefits Paid | (184) | (193) |
| Fair Value of Plan Assets at End of Plan Year | $2,327 | $3,016 |
| Funded Status at End of Plan Year | $(41) | $(6) |

(a) Service cost for 2022 and 2021 includes capitalized service costs of $4 million each year.

In 2022, the $570 million net actuarial gain for pension benefits was driven by a 224 basis point increase in the weighted average discount rate. The $142 million net actuarial gain for pension benefits in 2021 was driven by a 35 basis points increase in the weighted average discount rate.

106

CSX 2022 Form 10-K p.85

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

NOTE 9. Employee Benefit Plans, continued

For qualified plan funding purposes, assets and discounted liabilities are measured in accordance with the Employee Retirement Income Security Act ("ERISA"), as well as other related provisions of the Internal Revenue Code and related regulations. Under these funding provisions and the alternative measurements available thereunder, the Company estimates its unfunded obligation for qualified plans on an annual basis.

In accordance with Compensation-Retirement Benefits Topic in the ASC, an employer must recognize the funded status of a pension plan by recording a liability (underfunded plan) or asset (overfunded plan) for the difference between the projected benefit obligation and the fair value of plan assets at the plan measurement date. Amounts related to pension benefits recorded in other long-term assets, labor and fringe benefits payable and other long-term liabilities on the balance sheet are as follows:

|  | Pension Benefits |  |
| --- | --- | --- |
|  | December 2022 | December 2021 |
| (Dollars in Millions) |  |  |
| Amounts Recorded in Consolidated Balance Sheets: |  |  |
| Long-term Assets | $164 | $255 |
| Current Liabilities | (17) | (17) |
| Long-term Liabilities | (188) | (244) |
| Net Amount Recognized in Consolidated Balance Sheets | $(41) | $(6) |

Long-term assets as of December 2022 and 2021 in the preceding table relate to qualified pension plans where assets exceed projected benefit obligations. Current and long-term liabilities relate to plans where projected benefits obligations exceed assets. The following table shows the value of plan assets for only those plans with a net liability status.

|  | Aggregate Fair Value of Plan Assets | Aggregate Benefit Obligation |
| --- | --- | --- |
| (Dollars in Millions) |  |  |
| Benefit Obligations in Excess of Plan Assets |  |  |
| Projected Benefit Obligation | $ - | $(205) |
| Accumulated Benefit Obligation | - | (195) |

CSX 2022 Form 10-K p.86

107

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

NOTE 9. Employee Benefit Plans, continued

Net Benefit Expense

Only the service cost component of net periodic benefit costs is included in labor and fringe expense on the consolidated income statement. All other components of net periodic benefit cost are included in other income - net. The following table describes the components of expense/(income) related to net benefit expense recorded on the income statement.

| (Dollars in Millions) | Pension Benefits Years Ended |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Service Cost Included in Labor and Fringe | $32 | $41 | $43 |
| Interest Cost | 64 | 55 | 82 |
| Expected Return on Plan Assets | (188) | (186) | (176) |
| Amortization of Net Loss | 50 | 73 | 54 |
| Total Income Included in Other Income - Net | $(74) | $(58) | $(40) |
| Net Periodic Benefit (Credit)/Cost | $(42) | $(17) | $3 |
| Settlement Loss (Gain) | 1 | - | (1) |
| Total Periodic Benefit (Credit)/Cost | $(41) | $(17) | $2 |

Pension Adjustments

The following table shows the pre-tax change in other comprehensive loss (income) attributable to certain components of net benefit expense and the change in benefit obligation for CSX for pension benefits.

| (Dollars in Millions) | Pension Benefits Years Ended |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| Components of Other Comprehensive Loss (Income) |  |  |
| Recognized in the Balance Sheet |  |  |
| Losses (Gains) | $141 | $(143) |
| Expense Recognized in the Income Statement |  |  |
| Amortization of Net Losses | $50 | $73 |
| Settlement Loss | 1 | - |

As of December 2022, the balance to be amortized related to the Company's pension obligations is a pre-tax loss of $727 million. This amount is included in accumulated other comprehensive loss, a component of shareholders' equity.

108

CSX 2022 Form 10-K p.87

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

NOTE 9. Employee Benefit Plans, continued

Assumptions

The expected long-term average rate of return on plan assets reflects the average rate of earnings expected on the funds invested, or to be invested, to provide for benefits included in the projected benefit obligation. In estimating that rate, the Company gives appropriate consideration to the returns being earned by the plan assets in the funds and the rates of return expected to be available for reinvestment as well as the current and projected asset mix of the funds. Management, with the assistance of the outsourced investment manager, balances market expectations obtained from various investment managers with both market and actual plan historical returns to develop a reasonable estimate of the expected long-term rate of return on assets. This assumption is reviewed annually and adjusted as deemed appropriate.

The Company measures the service cost and interest cost components of the net pension benefits expense by using individual spot rates matched with separate cash flows for each future year. The weighted averages of assumptions used by the Company to value its pension obligations were as follows:

|  | Pension Benefits |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| Expected Long-term Return on Plan Assets: |  |  |
| Benefit Cost for Current Plan Year | 6.75% | 6.75% |
| Benefit Cost for Subsequent Plan Year | 6.75% | 6.75% |
| Discount Rates: |  |  |
| Benefit Cost for Plan Year |  |  |
| Service Cost for Plan Year | 2.98% | 2.69% |
| Interest Cost for Plan Year | 2.18% | 1.70% |
| Benefit Obligation at End of Plan Year | 5.02% | 2.78% |
| Salary Scale Inflation | 4.80% | 4.60% |
| Cash Balance Plan Interest Credit Rate | 3.75% | 3.75% |

CSX 2022 Form 10-K p.88

109

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

**NOTE 9. Employee Benefit Plans, *continued***

***Post-retirement Medical Plan***

In addition to these plans, the Company sponsors a post-retirement medical plan and a life insurance plan that provide certain benefits to full-time, salaried, management employees hired prior to 2003 upon their retirement if certain eligibility requirements are met. The accumulated post-retirement benefit obligation related to this plan was $61 million and $81 million, respectively, as of December 31, 2022 and 2021. Through 2032, total future expected benefit payments related to this plan were $55 million. Expenses in 2022, 2021 and 2020 related to this plan were not material.

***Other Plans***

Under collective bargaining agreements, the Company participates in a multi-employer benefit plan, which provides certain post-retirement health care and life insurance benefits to eligible contract employees. Premiums under this plan are expensed as incurred and amounted to $13 million, $21 million and $20 million in 2022, 2021 and 2020, respectively.

The Company maintains savings plans for virtually all full-time salaried employees and certain employees covered by collective bargaining agreements. Expense associated with these plans was $28 million, $29 million and $39 million for 2022, 2021 and 2020, respectively, and is included in labor and fringe expense on the consolidated income statement.

Under the terms of collective bargaining agreements that cover union-represented employees, Quality Carriers contributes to three multi-employer pension plans. These plans provide defined benefits to retired participants. All three of these pension plans are in Pension Protection Act zone “red”, meaning they are at least 65% underfunded. Formal rehabilitation plans have been adopted. As of December 31, 2022, based on information provided to the Company from the administrators of these plans, Quality Carriers’ portion of the contingent liability in the case of a full withdrawal or termination from these plans is approximately $336 million, of which $328 million relates to the Central States Southeast and Southwest Areas Pension Plan. The Company has withdrawn from one of the plans, resulting in an immaterial withdrawal liability, but does not currently intend to withdraw from the remaining multi-employer pension plans. Required monthly contributions to these plans are not material.

110

CSX 2022 Form 10-K p.89

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

**NOTE 10. Debt and Credit Agreements**

Debt at December 2022 and December 2021 is shown in the table below. For information regarding the fair value of debt, see Note 13, *Fair Value Measurements*.

|  | Maturity at December 2022 | Average Interest Rates at December 2022 | December 2022 | December 2021 |
| --- | --- | --- | --- | --- |
| (Dollars in Millions) |  |  |  |  |
| Notes | 2023-2068 | 4.2% | $17,877 | $16,166 |
| Equipment Obligations (a) | 2023-2027 | 6.2% | 141 | 153 |
| Finance Leases | 2023-2032 | 6.0% | 29 | 47 |
| Subtotal Long-term Debt (Including Current Portion) |  |  | $18,047 | $16,366 |
| Less Debt Due within One Year |  |  | (151) | (181) |
| Long-term Debt (Excluding Current Portion) |  |  | $17,896 | $16,185 |

(a) Equipment obligations are secured by an interest in certain railroad equipment.

**Debt Issuance & Early Redemption of Long-term Debt**

On July 28, 2022, CSX issued $950 million aggregate principal amount of 4.100% notes due 2032, $900 million aggregate principal amount of 4.500% notes due 2052 and $150 million aggregate principal amount of 4.650% notes due 2068. The 2068 notes are a reopening of existing notes originally issued in February 2018. These notes are included in the consolidated balance sheets under long-term debt and may be redeemed by the Company at any time, subject to payment of certain make-whole premiums.

In July 2021, finance lease obligations and debt totaling $68 million were assumed related to the Company's acquisition of Quality Carriers on July 1, 2021. No debt was issued in 2021.

On December 1, 2020, CSX issued $500 million of 2.50% notes due 2051. On December 30, 2020, the proceeds of the offering were used to fully redeem CSX's outstanding $500 million of 3.70% notes that otherwise would have matured on November 1, 2023. These notes are included in the consolidated balance sheets under long-term debt and may be redeemed by the Company at any time, subject to payment of certain make-whole premiums.

The net proceeds from debt issuances will be used for general corporate purposes, which may include debt repayments, repurchases of CSX's common stock, capital investment and working capital requirements. For more information regarding a non-cash debt transaction with a related party, see Note 15, *Investment in Affiliates and Related-Party Transactions*.

CSX 2022 Form 10-K p.90

111

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

NOTE 10. Debt and Credit Agreements, continued

Long-term Debt Maturities (Net of Discounts, Premiums and Issuance Costs)

(Dollars in millions)

| Years Ending | Maturities at December 2022 |
| --- | --- |
| 2023 | $151 |
| 2024 | 558 |
| 2025 | 606 |
| 2026 | 704 |
| 2027 | 998 |
| Thereafter | 15,030 |
| Total Long-term Debt Maturities, including current portion | $18,047 |

Interest Rate Derivatives

Fair Value Hedges

In first quarter 2022, CSX entered into five separate fixed-to-floating interest rate swaps classified as fair value hedges. The swaps are designed to hedge 10 years of interest rate risk associated with market fluctuations attributable to the Secured Overnight Financing Rate on a cumulative $800 million of fixed rate outstanding notes which are due between 2036 and 2040. As of December 31, 2022, the cumulative fair value of these swaps was a $118 million liability, which is included in other long-term liabilities on the consolidated balance sheet. The associated cumulative adjustment to the hedged notes is included in long-term debt. Gains and losses resulting from changes in fair value of the interest rate swaps offset changes in the fair value of the hedged portion of the underlying debt with no gain or loss recognized due to hedge ineffectiveness. The difference in the net fixed-to-float interest settlement on the derivatives is recognized in interest expense and was not material for the year ending at December 31, 2022. The swaps will expire in 2032. If settled early, the remaining cumulative fair value adjustment to the hedged notes will be amortized over the remaining life of the associated notes. The amounts recorded in long-term debt on the consolidated balance sheet related to these fair value hedges is summarized in the table below.

(Dollars in Millions)

|  | December 31, 2022 |
| --- | --- |
| Notional Value of Hedged Notes | $800 |
| Cumulative Fair Value Adjustment to Hedged Notes | (118) |
| Carrying Amount of Hedged Notes | $682 |

112

CSX 2022 Form 10-K p.91

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

**NOTE 10. Debt and Credit Agreements, *continued***

*Cash Flow Hedges*

In 2020, the Company executed forward starting interest rate swaps, classified as cash flow hedges, with aggregate notional value of $500 million. These swaps were effected to hedge the benchmark interest rate associated with future interest payments related to the anticipated refinancing of $850 million of 3.25% notes due in 2027. In accordance with the *Derivatives and Hedging Topic* in the ASC, the Company has designated these swaps as cash flow hedges. As of December 31, 2022 and 2021, the asset value of the forward starting interest rate swaps was $127 million and $91 million, respectively, and was recorded in other long-term assets on the consolidated balance sheet.

Unrealized gains or losses associated with changes in the fair value of the hedge are recorded net of tax in accumulated other comprehensive income ("AOCI") on the consolidated balance sheet. In fourth quarter 2022, CSX settled a portion equal to $160 million notional value of the aggregate $500 million cash flow hedges, which resulted in CSX receiving a cash payment of $52 million included in other operating activities on the consolidated cash flow statement. The gain associated with the settled portion of the hedges will continue to be classified in AOCI until the associated debt instrument is issued in the future. Unless settled early, the remainder of the swaps will expire in 2027 and the unrealized gain or loss in AOCI will be recognized in earnings as an adjustment to interest expense over the same period during which the hedged transaction affects earnings. Unrealized gains, recorded net of tax in other comprehensive income, related to the hedges were $80 million, $8 million and $62 million for the years ended December 31, 2022, 2021 and 2020, respectively.

See Note 13, *Fair Value Measurements*, and Note 16, *Other Comprehensive Income (Loss)*, for other information about the Company's hedges.

**Credit Facilities**

CSX has a $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 March 2024, and as of December 31, 2022, the Company had no outstanding balances under this facility.

Commitment fees and interest rates payable under the facility were similar to fees and rates available to comparably rated investment-grade borrowers. As of December 31, 2022, CSX was in compliance with all covenant requirements under the facility.

**Commercial Paper**

Under its commercial paper program, which is backed by the revolving credit facility, the Company may issue unsecured commercial paper notes up to a maximum aggregate principal amount of $1.0 billion. Proceeds from issuances of the notes are expected to be used for general corporate purposes. At December 31, 2022, the Company had no commercial paper outstanding.

CSX 2022 Form 10-K p.92

113

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

NOTE 11. 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.

| (Dollars in Millions) | Years Ended |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Chemicals | $2,584 | $2,421 | $2,309 |
| Agricultural and Food Products | 1,664 | 1,461 | 1,386 |
| Automotive | 1,054 | 886 | 920 |
| Forest Products | 996 | 918 | 834 |
| Metals and Equipment | 828 | 796 | 675 |
| Minerals | 658 | 587 | 538 |
| Fertilizers | 455 | 470 | 414 |
| Total Merchandise | 8,239 | 7,539 | 7,076 |
| Intermodal | 2,306 | 2,039 | 1,702 |
| Coal | 2,434 | 1,790 | 1,397 |
| Trucking (a) | 966 | 410 | - |
| Other | 908 | 744 | 408 |
| Total | $14,853 | $12,522 | $10,583 |

(a) 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 generates revenue from rail 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.

114

CSX 2022 Form 10-K p.93

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

**NOTE 11. 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, which 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 and is mostly comprised of truck shipments of chemicals. A performance obligation arises when Quality Carriers receives a customer order to transport a commodity at a contracted rate. Revenue is recorded on a gross basis 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 intermodal storage and equipment usage, demurrage and switching. Revenue from regional subsidiary railroads includes shipments by railroads that the Company does not directly operate. Intermodal storage represents charges for customer storage of containers at an intermodal terminal, ramp facility or offsite location beyond a specified period of time. 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.

During 2022, 2021 and 2020, revenue recognized from performance obligations related to prior periods (for example, due to changes in transaction price) was not material.

CSX 2022 Form 10-K p.94

115

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

NOTE 11. Revenues, continued

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 December 31, 2022, remaining performance obligations were not material.

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 December 31, 2022 were not material.

The Company's accounts receivable - net consists of freight and non-freight receivables, reduced by an allowance for credit losses.

| (Dollars in Millions) | December 31, 2022 | December 31, 2021 |
| --- | --- | --- |
| Freight Receivables | $1,067 | $951 |
| Freight Allowance for Credit Losses | (16) | (14) |
| Freight Receivables, net | 1,051 | 937 |
| Non-Freight Receivables | 279 | 225 |
| Non-Freight Allowance for Credit Losses | (17) | (14) |
| Non-Freight Receivables, net | 262 | 211 |
| Total Accounts Receivable, net | $1,313 | $1,148 |

Freight receivables include amounts earned, billed and unbilled, and currently due from customers for transportation-related services. Non-freight receivables include amounts billed and unbilled and currently due related to government reimbursement receivables and other non-revenue receivables. The Company maintains an allowance for credit losses to provide for the estimated amount of receivables that will not be collected. The allowance is based upon an assessment of risk characteristics, historical payment experience, and the age of outstanding receivables adjusted for forward-looking economic conditions as necessary. Credit losses recognized on the Company's accounts receivable were not material in 2022 and 2021.

116

CSX 2022 Form 10-K p.95

# CSX CORPORATION

# PART II

# Item 8. Financial Statements and Supplementary Data

# NOTE 12. Income Taxes

Earnings before income taxes of $5.4 billion, $5.0 billion and $3.6 billion for years ended 2022, 2021 and 2020, respectively, represent earnings from domestic operations. The breakdown of income tax expense between current and deferred is as follows:

| (Dollars in Millions) | Years Ended |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Current: |  |  |  |
| Federal | $928 | $827 | $559 |
| State | 203 | 176 | 123 |
| Subtotal Current | $1,131 | $1,003 | $682 |
| Deferred: |  |  |  |
| Federal | 166 | 166 | 149 |
| State | (49) | 1 | 31 |
| Subtotal Deferred | $117 | $167 | $180 |
| Total Income Tax Expense | $1,248 | $1,170 | $862 |

The Company recorded a 2022 income tax benefit of $78 million primarily as a result of state legislative changes and a change in the valuation of deferred taxes as a result of filing the 2021 tax returns. In 2021, the Company recorded an income tax benefit of $48 million primarily as a result of favorable state legislative changes, additional tax benefits associated with the vesting of share-based awards and adjustments to deferred taxes as a result of filing the 2020 state tax returns. In 2020, the Company recorded an income tax benefit of $30 million primarily as a result of the additional tax benefit associated with vesting of share-based awards and the resolution of certain tax matters.

Income tax expense reconciled to the tax computed at statutory rates is presented in the following table.

| (Dollars In Millions) | Years Ended |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 |  | 2021 |  | 2020 |  |
| Federal Income Taxes | $1,137 | 21.0% | $1,040 | 21.0% | $762 | 21.0% |
| State Income Taxes | 121 | 2.2% | 139 | 2.8% | 117 | 3.2% |
| Other | (10) | (0.1)% | (9) | (0.2)% | (17) | (0.4)% |
| Income Tax Expense/ Rate | $1,248 | 23.1% | $1,170 | 23.6% | $862 | 23.8% |

CSX 2022 Form 10-K p.96

117

# CSX CORPORATION

# PART II

# Item 8. Financial Statements and Supplementary Data

# **NOTE 12. Income Taxes, *continued***

The primary factors in the change in year-end net deferred income tax liability balances include the annual provision for deferred income tax expense and accumulated other comprehensive income/loss. The significant components of deferred income tax assets and liabilities include:

| (Dollars in Millions) | 2022 |  | 2021 |  |
| --- | --- | --- | --- | --- |
|  | Assets | Liabilities | Assets | Liabilities |
| Other Employee Benefit Plans | $105 | $ - | $106 | $ - |
| Accelerated Depreciation | - | 7,600 | - | 7,366 |
| Other | 553 | 627 | 499 | 622 |
| Total | $658 | $8,227 | $605 | $7,988 |
| Net Deferred Income Tax Liabilities |  | $7,569 |  | $7,383 |

The Company files a consolidated federal income tax return, which includes its principal domestic subsidiaries. CSX and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. CSX participated in a contemporaneous IRS audit of tax years 2022 and 2021. Federal examinations of original federal income tax returns for all years through 2020 are resolved.

As of December 2022 and 2021, the Company had approximately $18 million and $18 million, respectively, of total unrecognized tax benefits as a result of uncertain tax positions. Net tax benefits of $14 million and $15 million as of December 2022 and 2021, respectively, could favorably impact the effective income tax rate in each year. The Company does not expect that unrecognized tax benefits as of December 2022 for various state and federal income tax matters will significantly change over the next 12 months. The final outcome of these uncertain tax positions is not yet determinable. There were no material changes to the total gross unrecognized tax benefits and prior year audit resolutions of the Company during the year ended December 2022.

CSX's continuing practice is to recognize net interest and penalties related to income tax matters in income tax expense. Accrued interest and penalties were not material as of December 2022 or 2021. Additionally, expenses from changes to the reserves for interest and penalties were not material in 2022, 2021 or 2020.

118

CSX 2022 Form 10-K p.97

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

**NOTE 13. Fair Value Measurements**

The *Financial Instruments Topic* in the ASC requires disclosures about fair value of financial instruments in annual reports as well as in quarterly reports. For CSX, this statement applies to certain investments, pension plan assets, long-term debt and interest rate derivatives. Also, the *Fair Value Measurements and Disclosures Topic* in the ASC 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 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).

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 are carried at fair value on the consolidated balance sheet in accordance with the Fair Value Measurements and Disclosures Topic in the ASC. They are valued with assistance from a third-party trustee and consist of fixed income mutual funds, corporate bonds and government securities. The fixed income mutual funds are valued at the net asset value of shares held based on quoted market prices determined in an active market, which are Level 1 inputs. The corporate bonds and government securities are valued using broker quotes that utilize observable market inputs, which are Level 2 inputs. Unrealized losses as of December 31, 2022, were not material. The Company believes any impairment of investments held with gross unrealized losses to be temporary and not the result of credit risk.

CSX 2022 Form 10-K p.98

119

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

NOTE 13. Fair Value Measurements, continued

The Company's investment assets are carried at fair value on the consolidated balance sheets as summarized in the following table.

| (Dollars in Millions) | December 2022 |  |  | December 2021 |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Level 1 | Level 2 | Total | Level 1 | Level 2 | Total |
| Fixed Income Mutual Funds | $89 | $ - | $89 | $75 | $ - | $75 |
| Corporate Bonds | - | 49 | 49 | - | 63 | 63 |
| Government Securities | - | 58 | 58 | - | 26 | 26 |
| Total Investments at Fair Value | $89 | $107 | $196 | $75 | $89 | $164 |
| Total Investments at Amortized Cost |  |  | $201 |  |  | $156 |

These investments have the following maturities and are represented on the consolidated balance sheet within short-term investments for investments with maturities of less than one year, and other long-term assets for investments with maturities of one year and greater.

| (Dollars in Millions) | December 2022 | December 2021 |
| --- | --- | --- |
| Less than 1 year | $129 | $77 |
| 1 - 5 years | 24 | 28 |
| 5 - 10 years | 10 | 12 |
| Greater than 10 years | 33 | 47 |
| Total investments at fair value | $196 | $164 |

Long-term Debt

Long-term debt, which includes finance leases, 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 a third party that utilizes closing transactions, market quotes or market values of comparable debt. For those instruments not valued by the third party, the fair value has been estimated by applying market rates of similar instruments to the scheduled contractual debt payments and maturities. These market rates are provided by the same third party. All of the inputs used to determine the fair value of the Company's long-term debt are Level 2 inputs.

The fair value 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.

120

CSX 2022 Form 10-K p.99

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

NOTE 13. Fair Value Measurements, continued

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

| (Dollars in Millions) | December 2022 | December 2021 |
| --- | --- | --- |
| Long-term Debt (Including Current Maturities): |  |  |
| Fair Value | $16,135 | $19,439 |
| Carrying Value | 18,047 | 16,366 |

Interest Rate Derivatives

The Company's fixed-to-floating and forward starting interest rate swaps are carried at their respective fair values, which are determined with assistance from a third party based upon pricing models using inputs observed from actively quoted markets. All of the inputs used to determine the fair value of the swaps are Level 2 inputs. The fair value of the Company's fixed-to-floating interest rate swaps was a liability of $118 million as of December 31, 2022. The fair value of the Company's forward starting interest rate swaps asset was $127 million and $91 million at December 31, 2022 and 2021, respectively. See Note 10, Debt and Credit Agreements, for further information.

Pension Plan Assets

Pension plan assets are reported at fair value, net of pension liabilities, on the consolidated balance sheet. The Investment Committee targets an allocation of pension assets to be generally 60% growth-oriented and 40% immunizing. See Note 9, Employee Benefit Plans, for further information. There are several valuation methodologies used for those assets as described below.

Investments in the Fair Value Hierarchy

- Common stock (Level 1): Valued at the closing price reported on the active market on which the individual securities are traded on the last day of the year and classified in Level 1 of the fair value hierarchy.
- Mutual funds (Level 1): Valued at the net asset value of shares held at year end based on quoted market prices determined in an active market. These assets are classified in Level 1 of the fair value hierarchy.
- Cash and cash equivalents (Level 1): Includes cash and short term investments with an original maturity of three months or less. The carrying value of cash and cash equivalents at year end approximates fair value. These assets are classified in Level 1 of the fair value hierarchy.
- Corporate bonds, government securities, asset-backed securities and derivatives (Level 2): Valued using price evaluations reflecting the bid and/or ask sides of the market for a similar investment at year end. Asset-backed securities include commercial mortgage-backed securities and collateralized mortgage obligations. These assets are classified in Level 2 of the fair value hierarchy.

CSX 2022 Form 10-K p.100

121

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

NOTE 13. Fair Value Measurements, continued

Investments Measured at Net Asset Value

- Partnerships: Net asset value of private equity is based on the fair market values associated with the underlying investments at year end. These funds have redemption restrictions that require advanced notice of 15 business days.
- Commingled and common collective trust funds: This class consists of private funds that invest in corporate equity and debt securities, government securities and various short-term debt instruments and are measured at net asset value to estimate the fair value of the investments. The net asset value of the investments is determined by reference to the fair value of the underlying securities, which are valued primarily through the use of directly or indirectly observable inputs. These funds have redemption restrictions that require advanced notice of up to 45 business days.

The pension plan assets at fair value by level, within the fair value hierarchy, as of calendar plan years 2022 and 2021 are shown in the table below. For additional information related to pension assets, see Note 9, Employee Benefit Plans.

| (Dollars in Millions) | December 2022 |  |  | December 2021 |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Level 1 | Level 2 | Total | Level 1 | Level 2 | Total |
| Common Stock | $335 | $ - | $335 | $487 | $ - | $487 |
| Mutual Funds | 29 | - | 29 | 14 | - | 14 |
| Cash and Cash Equivalents | 157 | - | 157 | 108 | - | 108 |
| Corporate Bonds | - | 647 | 647 | - | 1,013 | 1,013 |
| Government Securities | - | 88 | 88 | - | 173 | 173 |
| Asset-backed Securities, Derivatives and Other | - | 9 | 9 | - | 98 | 98 |
| Total Investments in the Fair Value Hierarchy | $521 | $744 | $1,265 | $609 | $1,284 | $1,893 |
| Investments Measured at Net Asset Value (a) | n/a | n/a | $1,062 | n/a | n/a | $1,123 |
| Investments at Fair Value | $521 | $744 | $2,327 | $609 | $1,284 | $3,016 |

(a) Investments measured at net asset value represent certain investments that have been measured at net asset value per share (or its equivalent) and thus are not classified in the fair value hierarchy. In accordance with ASC 820, Fair Value Measurements, the fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the pension assets disclosed in Note 9, Employee Benefit Plans.

122

CSX 2022 Form 10-K p.101

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

NOTE 14. Other Income - Net

The Company derives income from items that are not considered operating activities. Income from these items is reported net of related expense. All components of net periodic pension and post-retirement benefit costs, excluding service cost, are included in other income - net on the consolidated income statement. Miscellaneous income (expense) may fluctuate due to timing and includes investment gains, losses and interest income as well as other non-operating activities.

For discussion of the drivers of changes in net periodic pension and post-retirement benefit credit from 2021 to 2022 and from 2020 to 2021, refer to Note 9, Employee Benefit Plans. Interest income increased from 2021 to 2022 primarily as a result of higher average interest rates. Debt repurchase expense decreased from 2020 to 2021 primarily as a result of long-term debt being redeemed earlier relative to maturity date in 2020. Other income - net consisted of the following:

| (Dollars in Millions) | Years Ended |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Net Periodic Pension and Post-retirement Benefit Credit (a) | $79 | $64 | $42 |
| Interest Income | 42 | 7 | 17 |
| Debt Repurchase Expense | - | - | (48) |
| Miscellaneous Income | 12 | 8 | 8 |
| Total Other Income - Net | $133 | $79 | $19 |

(a) Excludes the service cost component of net periodic benefit cost.

CSX 2022 Form 10-K p.102

123

# CSX CORPORATION

# PART II

# Item 8. Financial Statements and Supplementary Data

# NOTE 15. Investment in Affiliates and Related-Party Transactions

CSX's investments in affiliates are included on the consolidated balance sheet as investments in affiliates and other companies.

| (Dollars in Millions) | December 2022 | December 2021 |
| --- | --- | --- |
| Equity-method Investments: |  |  |
| Conrail | $1,124 | $1,083 |
| TTX | 914 | 849 |
| Other (a) | 254 | 167 |
| Total | $2,292 | $2,099 |

(a) Other investments as of December 31, 2022, includes an interest in Pan Am Southern, LLC, which is jointly-owned with a subsidiary of Norfolk Southern Corporation, that was acquired as part of the purchase of Pan Am.

# Conrail

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

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

| (Dollars in Millions) | Conrail Shared Asset Agreement |
| --- | --- |
| Years |  |
| 2023 | $31 |
| 2024 | 31 |
| 2025 | 31 |
| 2026 | 31 |
| 2027 | 31 |
| Thereafter | 44 |
| Total | $199 |

Also, included in equity earnings of affiliates are CSX's 42% share of Conrail's income and its amortization of the fair value write-up arising from the acquisition of Conrail and certain other adjustments. The amortization primarily represents the additional after-tax depreciation expense related to the write-up of Conrail's fixed assets when the original purchase price, from the 1997 acquisition of Conrail, was allocated based on fair value. This write-up of fixed assets resulted in a difference between CSX's investment in Conrail and its share of Conrail's underlying net equity, which is $327 million as of December 2022.

124

CSX 2022 Form 10-K p.103

# CSX CORPORATION

# PART II

# Item 8. Financial Statements and Supplementary Data

# NOTE 15. Investment in Affiliates and Related-Party Transactions, continued

The following table discloses amounts related to Conrail. All amounts in the table below are included in purchased services and other expenses on the Company's consolidated income statements.

| (Dollars in Millions) | Years Ended |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Rents, Fees and Services | $130 | $128 | $126 |
| Purchase Price Amortization and Other | 4 | 4 | 4 |
| Equity Earnings of Conrail | (44) | (44) | (49) |
| Total Conrail Expense | $90 | $88 | $81 |

As required by the *Related Party Disclosures Topic* in the ASC, the Company has disclosed amounts below owed to Conrail, or its subsidiaries, representing liabilities under the operating, equipment and shared area agreements with Conrail. In 2014, the Company executed two promissory notes with a subsidiary of Conrail which were included in long-term debt on the consolidated balance sheets. In December 2020, the Company completed a non-cash conversion of its existing payable balance of approximately $217 million and $224 million, 2.89% notes due 2044 into new notes. The new notes for operation of the shared asset area are $441 million, 1.31% notes due 2050. Interest expense from these promissory notes was $6 million in each 2022, 2021 and 2020.

| (Dollars in Millions) | December 2022 | December 2021 |  |
| --- | --- | --- | --- |
|  | Balance Sheet Information: |  |  |
| CSX Accounts Payable to Conrail | $136 | $100 |  |
| Promissory Notes Payable to Conrail Subsidiary |  |  |  |
| 1.31% CSX Promissory Note due December 2050 | 73 | 73 |  |
| 1.31% CSXT Promissory Note due December 2050 | 368 | 368 |  |

# **TTX Company**

TTX Company ('TTX') is a privately-held corporation engaged in the business of providing its owner-railroads with standardized fleets of intermodal, automotive and general use railcars at time and mileage rates. CSX owns about 20 percent of TTX's common stock, and the remaining is owned by the other leading North American railroads and their affiliates. Pursuant to the Investments-Equity Method topic in the ASC, CSX applies the equity method of accounting to its investment in TTX. As part of the Pan Am acquisition in June 2022, CSX acquired an immaterial amount of TTX stock, which was subsequently repurchased by TTX in December 2022.

CSX 2022 Form 10-K p.104

125

# CSX CORPORATION

# PART II

# Item 8. Financial Statements and Supplementary Data

# NOTE 15. Investment in Affiliates and Related-Party Transactions, continued

As required by the Related Party Disclosures Topic in the ASC, the following table discloses amounts related to TTX. Car hire rents and equity earnings are included in equipment and other rents expense on the Company's consolidated income statement.

(Dollars in Millions)

# Income Statement Information:

|  | Years Ended |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Car Hire Rents | $241 | $221 | $219 |
| Equity Earnings of TTX | (51) | (52) | (51) |
| Total TTX Expense | $190 | $169 | $168 |

Also included below is balance sheet information related to CSX's payable to TTX, which represents car rental liabilities.

# Balance Sheet Information:

|  | December 2022 | December 2021 |
| --- | --- | --- |
| CSX Payable to TTX | $38 | $35 |

# NOTE 16. 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. Generally, for CSX, total comprehensive earnings equal net earnings plus or minus adjustments for pension and other post-retirement liabilities as well as derivative activity and other adjustments. Total comprehensive earnings represent the activity for a period net of tax and were $4.2 billion, $4.0 billion and $2.8 billion for 2022, 2021 and 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.

126

CSX 2022 Form 10-K p.105

# CSX CORPORATION

# PART II

# Item 8. Financial Statements and Supplementary Data

# NOTE 16. Other Comprehensive Income (Loss),*continued*

Changes in the AOCI balance by component are shown in the following table. Amounts reclassified in pension and other post-employment benefits to net earnings relate to the amortization of actuarial losses and are included in other income-net on the consolidated income statements. See Note 9, *Employee Benefit Plans*, for further information. Interest rate derivatives consist of forward starting interest rate swaps classified as cash flow hedges. See Note 10, *Debt and Credit Agreements*, for further information. Items classified as other primarily represent CSX's share of AOCI of equity method investees. Amounts reclassified in other to net earnings are included in purchased services and other or equipment and other rents on the consolidated income statements.

|  | Pension and Other Post- Employment Benefits | Interest Rate Derivatives | Other | Accumulated Other Comprehensive Income (Loss) |
| --- | --- | --- | --- | --- |
| (Dollars in Millions) |  |  |  |  |
| Balance December 31, 2019 - Net of Tax | $(619) | $ - | $(56) | $(675) |
| Other Comprehensive Income (Loss) |  |  |  |  |
| (Loss) Income Before Reclassifications | (17) | 80 | (10) | 53 |
| Amounts Reclassified to Net Earnings | 47 | - | 5 | 52 |
| Tax Expense | (9) | (18) | (1) | (28) |
| Total Other Comprehensive Income (Loss) | $21 | $62 | $(6) | $77 |
| Balance December 31, 2020 - Net of Tax | $(598) | $62 | $(62) | $(598) |
| Other Comprehensive Income (Loss) |  |  |  |  |
| Income Before Reclassifications | 147 | 11 | - | 158 |
| Amounts Reclassified to Net Earnings | 66 | - | 15 | 81 |
| Tax Expense | (46) | (3) | - | (49) |
| Total Other Comprehensive Income | $167 | $8 | $15 | $190 |
| Balance December 31, 2021 - Net of Tax | $(431) | $70 | $(47) | $(408) |
| Other Comprehensive Income (Loss) |  |  |  |  |
| (Loss) Income Before Reclassifications | (129) | 88 | - | (41) |
| Amounts Reclassified to Net Earnings | 44 | - | 2 | 46 |
| Tax Expense | 19 | (8) | 4 | 15 |
| Total Other Comprehensive (Loss) Income | $(66) | $80 | $6 | $20 |
| Balance December 31, 2022 - Net of Tax | $(497) | $150 | $(41) | $(388) |

CSX 2022 Form 10-K p.106

127

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

NOTE 17. Business Combinations

Acquisition of Pan Am Systems, Inc.

On June 1, 2022, CSX completed its acquisition of Pan Am Systems, Inc. ("Pan Am"), which is the parent company of Pan Am Railways, Inc. 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 expands CSX's reach in the Northeastern United States. The results of Pan Am's operations and its cash flows were consolidated prospectively.

The Company accounted for the transaction using the acquisition method in accordance with ASC Topic 805, Business Combinations. The purchase price allocation was finalized as of December 31, 2022, and total measurement period adjustments to the preliminary allocation were immaterial.

The closing price of $600 million was funded through a combination of common stock valued at $422 million and cash totaling $178 million. Cash payments are included in investing activities on the Company's consolidated cash flow statement. Total cash consideration paid to acquire the business includes a $30 million deposit paid in 2020.

The allocation of total consideration to the fair values of the acquired assets and liabilities of Pan Am is summarized in the table below.

| (Dollars in Millions) | June 1, 2022 |
| --- | --- |
| Assets Acquired: |  |
| Accounts Receivable, net | $46 |
| Properties and Equipment, net | 600 |
| Goodwill | 17 |
| Investments in Affiliates | 90 |
| Other Assets | 11 |
| Total Assets Acquired | $764 |
| Liabilities Assumed: |  |
| Accounts Payable and Accrued Liabilities | 32 |
| Deferred Tax Liabilities | 75 |
| Other Long-term Liabilities | 57 |
| Total Liabilities Assumed | $164 |
| Fair Value of Assets Acquired, Net of Liabilities Assumed: | $600 |

Properties and equipment of $600 million include road and track assets, work equipment, land, buildings and other assets. The investments in affiliates includes the interest in Pan Am Southern, LLC acquired as part of the purchase as well as other investments.

128

CSX 2022 Form 10-K p.107

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

NOTE 17. Business Combinations, continued

The Company has incurred costs related to this acquisition of approximately $32 million, of which $22 million was incurred in 2022 and $10 million was incurred in 2021. All acquisition-related costs were expensed as incurred and have been recorded in labor and fringe or purchased services and other in the accompanying consolidated income statements.

This acquisition is not material or significant 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 or significant, CSX has not provided pro forma information relating to the pre-acquisition period.

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 $544 million in cash, which is presented on the statement of cash flows net of $3 million cash acquired. 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.

The Company accounted for the transaction using the acquisition method in accordance with ASC Topic 805, Business Combinations. The purchase price allocation was finalized as of December 31, 2021, and total measurement period adjustments to the preliminary allocation were immaterial. The 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) | July 1, 2021 |
| --- | --- |
| Assets Acquired: |  |
| Cash and Cash Equivalents | $3 |
| Accounts Receivable, net | 113 |
| Properties and Equipment, net | 225 |
| Goodwill | 213 |
| Intangible Assets | 180 |
| Other Assets | 9 |
| Total Assets Acquired | $743 |
| Liabilities Assumed: |  |
| Accounts Payable and Accrued Liabilities | $48 |
| Finance Lease Obligations and Notes Payable | 68 |
| Casualty, Environmental and Other Reserves | 62 |
| Other Long-term Liabilities | 21 |
| Total Liabilities Assumed | $199 |
| Fair Value of Assets Acquired, Net of Liabilities Assumed: | $544 |

CSX 2022 Form 10-K p.108

129

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

**NOTE 17. Business Combinations, *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 and equipment of $225 million include tractors and trailers, equipment, land, buildings and other assets. For information about Goodwill and intangible assets, see Note 18, *Goodwill and Other Intangible Assets*.

In 2021, the Company incurred costs related to this acquisition of approximately $17 million. 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 or significant 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 or significant, CSX has not provided pro forma information relating to the pre-acquisition period.

*Other Acquisitions*

During 2022, Quality Carriers completed several acquisitions of previous independent affiliates that were immaterial individually and in the aggregate.

130

CSX 2022 Form 10-K p.109

CSX CORPORATION

PART II

Item 8. Financial Statements and Supplementary Data

NOTE 18. Goodwill and Other Intangible Assets

The following table presents goodwill and other intangible asset balances and adjustments to those balances for the years ended December 31, 2022 and 2021:

|  | Goodwill | Intangible Assets |  |  | Total Goodwill and Other Intangible Assets - Net |
| --- | --- | --- | --- | --- | --- |
|  | Net Carrying Amount | Cost | Accumulated Amortization | Net Carrying Amount |  |
| (Dollars in Millions) |  |  |  |  |  |
| Balance at December 31, 2020 | $63 | $ - | $ - | $ - | $63 |
| Additions | 213 | 180 | - | 180 | 393 |
| Amortization | - | - | (5) | (5) | (5) |
| Balance at December, 31, 2021 | $276 | $180 | $(5) | $175 | $451 |
| Additions | 43 | 18 | - | 18 | 61 |
| Amortization | - | - | (10) | (10) | (10) |
| Balance at December, 31, 2022 | $319 | $198 | $(15) | $183 | $502 |

Acquisition of Pan Am Systems, Inc.

Goodwill related to the Pan Am acquisition of $17 million was calculated as the excess of the consideration paid over the fair value of net assets assumed as of June 1, 2022 and relates primarily to the ability of CSX to extend the reach of its service to a wider customer base over an expanded territory, creating new market prospects and efficiencies. Goodwill recognized in this acquisition is not deductible for tax purposes.

Acquisition of Quality Carriers, Inc.

As a result of the acquisition of Quality Carriers, Inc. on July 1, 2021, CSX recognized goodwill and intangible assets. The goodwill of $213 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.

Intangible assets of $180 million consist of $150 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.

During 2022, Quality Carriers completed several acquisitions that were immaterial individually and in aggregate that resulted in the addition of $26 million of goodwill and $18 million other intangible assets.

Prior to 2021, the Company's goodwill balance related to affiliates of CSXT, primarily P&L Transportation, Inc. In fourth quarter 2022, CSX performed its annual evaluation of each reporting unit's goodwill and intangible assets for impairment. No impairment was recorded as a result of this evaluation.

CSX 2022 Form 10-K p.110

131

# **CSX CORPORATION**  
**PART II**

# **Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure**  
None

# **Item 9A. Controls and Procedures**

# ***Evaluation of Disclosure Controls and Procedures***

As of December 31, 2022, under the supervision and with the participation of CSX's Chief Executive Officer ('CEO') and 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 December 31, 2022, 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.

# ***Management's Report on Internal Control over Financial Reporting***

CSX's management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of the management of CSX, including CSX's CEO and CFO, CSX conducted an evaluation of the effectiveness of the Company's internal control over financial reporting as of December 31, 2022 based on the 2013 framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, which is also referred to as COSO. Based on that evaluation, management of CSX concluded that the Company's internal control over financial reporting was effective as of December 31, 2022. Management's assessment of the effectiveness of internal control over financial reporting is expressed at the level of reasonable assurance because a control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system's objectives will be met.

The Company's internal control over financial reporting as of December 31, 2022 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included elsewhere herein.

132

CSX 2022 Form 10-K p.111

# **CSX CORPORATION  
PART II**

# **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Shareholders and the Board of Directors of CSX Corporation

# **Opinion on Internal Control Over Financial Reporting**

We have audited CSX Corporation's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, CSX Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of CSX Corporation as of December 31, 2022 and 2021, and the related consolidated statements of income, comprehensive income, cash flows, and changes in shareholders' equity for each of the three years in the period ended December 31, 2022, and the related notes of the Company and our report dated February 15, 2023 expressed an unqualified opinion thereon.

# **Basis for Opinion**

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

CSX 2022 Form 10-K p.112

133

# **CSX CORPORATION  
PART II**

# **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, *continued***

# **Definition and Limitations of Internal Control over Financial Reporting**

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Jacksonville, Florida February 15, 2023

134

CSX 2022 Form 10-K p.113

# **CSX CORPORATION**  
**PART II**

# ***Changes in Internal Control over Financial Reporting***

There were no material changes in the Company's internal control over financial reporting.

# **Item 9B. Other Information**

None

# **Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections**

Not applicable.

# **PART III**

# **Item 10. Directors, Executive Officers of the Registrant and Corporate Governance**

In accordance with Instruction G(3) of Form 10-K, the information required by this item is incorporated herein by reference to the Proxy Statement. The Proxy Statement will be filed no later than May 1, 2023 with respect to the 2023 annual meeting of shareholders, except for the information regarding the executive officers of the Company. Information regarding executive officers is included in Part I of this report under the caption 'Executive Officers of the Registrant.'

# **Item 11. Executive Compensation**

In accordance with Instruction G(3) of Form 10-K, the information required by this Item is incorporated herein by reference to the Proxy Statement (see Item 10 above).

# **Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters**

In accordance with Instruction G(3) of Form 10-K, the information required by this Item is incorporated herein by reference to the Proxy Statement (see Item 10 above).

# **Item 13. Certain Relationships and Related Transactions, and Director Independence**

In accordance with Instruction G(3) of Form 10-K, the information required by this Item is incorporated herein by reference to the Proxy Statement (see Item 10 above).

# **Item 14. Principal Accounting Fees and Services**

In accordance with Instruction G(3) of Form 10-K, the information required by this Item is incorporated herein by reference to the Proxy Statement (see Item 10 above).

CSX 2022 Form 10-K p.114

135

# **CSX CORPORATION  
PART IV**

# **Item 15. Exhibits, Financial Statement Schedules**

# *(a)(1) Financial Statements*

See Index to Consolidated Financial Statements on page 45.

# *(2) Financial Statement Schedules*

The information required by Schedule II, *Valuation and Qualifying Accounts*, is included in Note 5 to the Consolidated Financial Statements, *Casualty, Environmental and Other Reserves*. All other financial statement schedules are not applicable.

# *(3) Exhibits*

See exhibits listed under part (b) below.

(b) The documents listed below are being filed or have previously been filed on behalf of CSX and are incorporated herein by reference from the documents indicated and made a part hereof. Exhibits not previously filed are filed herewith. Pursuant to Regulation S-K, Item 601(b)(4)(iii), instruments that define the rights of holders of the Registrant's long-term debt securities, where the long-term debt securities authorized under each such instrument do not exceed 10% of the Registrant's total assets, have been omitted and will be furnished to the Commission upon request.

| Exhibit designation | Nature of exhibit | Previously filed as exhibit to |
| --- | --- | --- |
| 2.1 | Distribution Agreement, dated as of July 26, 2004, by and among CSX Corporation, CSX Transportation, Inc., CSX Rail Holding Corporation, CSX Northeast Holding Corporation, Norfolk Southern Corporation, Norfolk Southern Railway Company, CRR Holdings LLC, Green Acquisition Corp., Conrail Inc., Consolidated Rail Corporation, New York Central Lines LLC, Pennsylvania Lines LLC, NYC Newco, Inc. and PRR Newco, Inc. | September 2, 2004, Exhibit 2.1, Form 8-K |
| 3.1 | Amended and Restated Articles of Incorporation of CSX Corporation, effective as of December 16, 2014 | February 11, 2015, Exhibit 3.1, Form 10-K |
| 3.2 | Articles of Amendment to CSX Corporation's Amended and Restated Articles of Incorporation, as amended | June 7, 2021, Exhibit 3.1, Form 8-K |
| 3.3 | Amended and Restated Bylaws of CSX Corporation, effective as of December 7, 2022 | December 13, 2022, Exhibit 3.1, Form 8-K |

# ***Instruments Defining the Rights of Security Holders, Including Debentures:***

| 4.1(a)(P) | Indenture, dated August 1, 1990, between the Registrant and The Chase Manhattan Bank, as Trustee | September 7, 1990, Form SE |
| --- | --- | --- |
| 4.1(b)(P) | First Supplemental Indenture, dated as of June 15, 1991, between the Registrant and The Chase Manhattan Bank, as Trustee | May 28, 1992, Exhibit 4(c), Form SE |
| 4.1(c) | Second Supplemental Indenture, dated as of May 6, 1997, between the Registrant and The Chase Manhattan Bank, as Trustee | June 5, 1997, Exhibit 4.3, Form S-4 (Registration No. 333-28523) |
| 4.1(d) | Third Supplemental Indenture, dated as of April 22, 1998, between the Registrant and The Chase Manhattan Bank, as Trustee | May 12, 1998, Exhibit 4.2, Form 8-K |
| 4.1(e) | Fourth Supplemental Indenture, dated as of October 30, 2001, between the Registrant and The Chase Manhattan Bank, as Trustee | November 7, 2001, Exhibit 4.1, Form 10-Q |
| 4.1(f) | Fifth Supplemental Indenture, dated as of October 27, 2003, between the Registrant and The Chase Manhattan Bank, as Trustee | October 27, 2003, Exhibit 4.1, Form 8-K |
| 4.1(g) | Sixth Supplemental Indenture, dated as of September 23, 2004, between the Registrant and JP Morgan Chase Bank, formerly The Chase Manhattan Bank, as Trustee | November 3, 2004, Exhibit 4.1, Form 10-Q |

136

CSX 2022 Form 10-K p.115

# **CSX CORPORATION  
PART IV**

| Exhibit designation | Nature of exhibit | Previously filed as exhibit to |
| --- | --- | --- |
| 4.1(h) | Seventh Supplemental Indenture, dated as of April 25, 2007, between the Registrant and The Bank of New York (as successor to JP Morgan Chase Bank), as Trustee | April 26, 2007, Exhibit 4.4, Form 8-K |
| 4.1(i) | Eighth Supplemental Indenture, dated as of March 24, 2010, between the Registrant and The Bank of New York Mellon (as successor to JP Morgan Chase Bank), as Trustee | April 19, 2010, Exhibit 4.1, Form 10-Q |
| 4.1(j) | Ninth Supplemental Indenture, dated as of February 12, 2019, between CSX and The Bank of New York Mellon Trust Company, N.A. (as successor to JPMorgan Chase Bank, N.A., formerly The Chase Manhattan Bank), as Trustee (b) | February 12, 2019, Exhibit 4.1.10, Form S-3ASR |
| 4.1(k) | Tenth Supplemental Indenture, dated as of December 10, 2020, between the Registrant and The Bank of New York Mellon Trust Company, N.A. (as successor to JPMorgan Chase Bank, N.A., formerly The Chase Manhattan Bank), as Trustee | December 10, 2020, Exhibit 4.3, Form 8-K |
| 4.1(l) | Eleventh Supplemental Indenture, dated as of July 28, 2022, between the Registrant and The Bank of New York Mellon Trust Company, N.A. (as successor to JPMorgan Chase Bank, N.A., formerly The Chase Manhattan Bank), as Trustee | July 28, 2022, Exhibit 4.3, Form 8-K |
| 4.2* | Description of Common Stock |  |
| Material Contracts: |  |  |
| 10.1 | Transaction Agreement, dated as of June 10, 1997, by and among CSX Corporation, CSX Transportation, Inc., Norfolk Southern Corporation, Norfolk Southern Railway Company, Conrail Inc., Consolidated Rail Corporation and CRR Holdings LLC, with certain schedules thereto | July 8, 1997, Exhibit 10, Form 8-K |
| 10.2 | Amendment No. 1, dated as of August 22, 1998, to the Transaction Agreement, dated as of June 10, 1997, by and among CSX Corporation, CSX Transportation, Inc., Norfolk Southern Corporation, Norfolk Southern Railway Company, Conrail Inc., Consolidated Rail Corporation and CRR Holdings, LLC | June 11, 1999, Exhibit 10.1, Form 8-K |
| 10.3 | Amendment No. 2, dated as of June 1, 1999, to the Transaction Agreement, dated as of June 10, 1997, by and among CSX Corporation, CSX Transportation, Inc., Norfolk Southern Corporation, Norfolk Southern Railway Company, Conrail Inc., Consolidated Rail Corporation and CRR Holdings, LLC | June 11, 1999, Exhibit 10.2, Form 8-K |
| 10.4 | Amendment No. 3, dated as of August 1, 2000, to the Transaction Agreement by and among CSX Corporation, CSX Transportation, Inc., Norfolk Southern Corporation, Norfolk Southern Railway Company, Conrail Inc., Consolidated Rail Corporation, and CRR Holdings, LLC. | March 1, 2001, Exhibit 10.34, Form 10-K |
| 10.5 | Amendment No. 4, dated and effective as of June 1, 1999, and executed in April 2004, to the Transaction Agreement, dated as of June 10, 1997, by and among CSX Corporation, CSX Transportation, Inc., Norfolk Southern Corporation, Norfolk Southern Railway Company, Conrail Inc., Consolidated Rail Corporation and CRR Holdings, LLC | August 6, 2004, Exhibit 99.1, Form 8-K |
| 10.6 | Amendment No. 5, dated as of August 27, 2004, to the Transaction Agreement, dated as of June 10, 1997, by and among CSX Corporation, CSX Transportation, Inc., Norfolk Southern Corporation, Norfolk Southern Railway Company, Conrail Inc., Consolidated Rail Corporation and CRR Holdings LLC | September 2, 2004, Exhibit 10.1, Form 8-K |
| 10.7 | Shared Assets Area Operating Agreement for Detroit, dated as of June 1, 1999, by and among Consolidated Rail Corporation, CSX Transportation, Inc. and Norfolk Southern Railway Corporation, with exhibit thereto | June 11, 1999, Exhibit 10.6, Form 8-K |

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137

# **CSX CORPORATION  
PART IV**

| Exhibit designation | Nature of exhibit | Previously filed as exhibit to |
| --- | --- | --- |
| 10.8 | Shared Assets Area Operating Agreement for North Jersey, dated as of June 1, 1999, by and among Consolidated Rail Corporation, CSX Transportation, Inc. and Norfolk Southern Railway Company, with exhibit thereto | June 11, 1999, Exhibit 10.4, Form 8-K |
| 10.9 | Shared Assets Area Operating Agreement for South Jersey/Philadelphia, dated as of June 1, 1999, by and among Consolidated Rail Corporation, CSX Transportation, Inc. and Norfolk Southern Railway Company, with exhibit thereto | June 11, 1999, Exhibit 10.5, Form 8-K |
| 10.10 | Monongahela Usage Agreement, dated as of June 1, 1999, by and among CSX Transportation, Inc., Norfolk Southern Railway Company, Pennsylvania Lines LLC and New York Central Lines LLC, with exhibit thereto | June 11, 1999, Exhibit 10.7, Form 8-K |
| 10.11 | Tax Allocation Agreement, dated as of August 27, 2004, by and among CSX Corporation, Norfolk Southern Corporation, Green Acquisition Corp., Conrail Inc., Consolidated Rail Corporation, New York Central Lines LLC and Pennsylvania Lines LLC | September 2, 2004, Exhibit 10.2, Form 8-K |
| 10.12** | CSX Directors' Deferred Compensation Plan effective January 1, 2005 | February 22, 2008, Exhibit 10.3, Form 10-K |
| 10.13** | CSX Directors' Matching Gift Plan (as amended through February 9, 2011) | March 4, 1994, Exhibit 10.5, Form 10-K |
| 10.14** | Special Retirement Plan of CSX Corporation and Affiliated Companies (as amended through February 14, 2001) | March 4, 2002, Exhibit 10.23, Form 10-K |
| 10.15** | Supplemental Retirement Benefit Plan of CSX Corporation and Affiliated Companies (as amended through February 14, 2001) | March 4, 2002, Exhibit 10.24, Form 10-K |
| 10.16** | CSX Stock and Incentive Award Plan | May 7, 2010, Exhibit 10.1, Form 8-K |
| 10.17** | CSX Executives' Deferred Compensation Plan (as amended and restated effective January 1, 2021) | December 21, 2020, Exhibit 99.1, Form S-8 |
| 10.18** | Employment Agreement, effective as of March 29, 2017, between CSX Corporation and Mark K. Wallace | February 7, 2018 Exhibit 10.41, Form 10-K |
| 10.19** | Employment Agreement, effective as of December 22, 2017, between CSX Corporation and James M. Foote | February 7, 2018 Exhibit 10.42, Form 10-K |
| 10.20** | Form of Change of Control Agreement, effective February 7, 2018 | February 7, 2018 Exhibit 10.43, Form 10-K |
| 10.21** | CSX 2019-2021 Long-Term Incentive Plan | February 12, 2019 Exhibit 10.1, Form 8-K |
| 10.22 | $1,200,000,000 Five-Year Revolving Credit Agreement, dated as of March 29, 2019, among CSX Corporation, as borrower, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent | April 3, 2019 Exhibit 10.1, Form 8-K |
| 10.23** | CSX 2019 Stock and Incentive Award Plan (incorporated by reference to Appendix A to the registrant's Definitive Proxy Statement on Schedule 14A filed March 22, 2019) | May 8, 2019 Exhibit 10.1, Form 8-K |
| 10.24** | Form of 2020-2022 LTIP Performance Unit Award Agreement | February 21, 2020 Exhibit 10.1, Form 8-K |
| 10.25** | Form of 2020 Stock Option Agreement | February 21, 2020 Exhibit 10.2, Form 8-K |
| 10.26** | Form of Restricted Stock Unit Agreement | February 26, 2016 Exhibit 10.2, Form 8-K |

138

CSX 2022 Form 10-K p.117

# **CSX CORPORATION  
PART IV**

| Exhibit designation | Nature of exhibit | Previously filed as exhibit to |
| --- | --- | --- |
| 10.27** | Amendment to Form of Change of Control Agreement | May 8, 2020 Exhibit 10.1, Form 8-K |
| 10.28** | Employment Agreement, dated August 29, 2022, between CSX Corporation and Joseph R. Hinrichs | October 21, 2022, Exhibit 10.1, Form 10-Q |
| 10.29** | Transition Agreement, dated September 14, 2022, between CSX Corporation and James M. Foote | October 21, 2022, Exhibit 10.2, Form 10-Q |
| 10.30** | CSX Corporation Executive Severance Plan, effective as of September 14, 2022 | October 21, 2022, Exhibit 10.3, Form 10-Q |
| Officer certifications: |  |  |
| 31* | Rule 13a-14(a) Certifications |  |
| 32* | Section 1350 Certifications |  |
| Interactive data files: |  |  |
| 101* | The following financial information from CSX Corporation's Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 15, 2023, formatted in XBRL includes: (i) Consolidated Income Statements for the years ended December 31, 2022, December 31, 2021, and December 31, 2020, (ii) Consolidated Comprehensive Income Statements for the years ended December 31, 2022, December 31, 2021, and December 31, 2020, (iii) Consolidated Balance Sheets at December 31, 2022 and December 31, 2021, (iv) Consolidated Cash Flow Statements for the years ended December 31, 2022, December 31, 2021 and December 31, 2020, (v) Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2022, December 31, 2021 and December 31, 2020, and (vi) the Notes to Consolidated Financial Statements. |  |
| 104* | The cover page from CSX Corporation's Annual Report on Form 10-K for the year ended December 31, 2022 formatted in iXBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101. |  |
| Other exhibits: |  |  |
| 21* | Subsidiaries of the Registrant |  |
| 22.1* | List of Subsidiary Issuers and Guarantors |  |
| 23* | Consent of Independent Registered Public Accounting Firm |  |
| 24* | Powers of Attorney |  |

* Filed herewith

** Management Contract or Compensatory Plan or Arrangement

(P) This Exhibit has been paper filed and is not subject to Item 601 of Reg S-K for hyperlinks.

Note: Items not filed herewith have been submitted in previous SEC filings.

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