CSX CORP

CSX Corporation is one of the nation's leading transportation companies, providing 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. The Company'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. CSXT also serves thousands of production and distribution facilities through track connections with other Class I railroads and approximately 250 short-line and regional railroads. The Company's intermodal business links customers to railroads via trucks and terminals. The Company's subsidiaries also include Quality Carriers, Inc., the largest provider of bulk liquid chemicals truck transportation in North America, CSX Intermodal Terminals, Inc., Total Distribution Services, Inc., TRANSFLO Terminal Services, Inc., and CSX Technology, Inc.

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. 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. During 2025, Norfolk Southern Railway entered into an agreement to merge with Union Pacific Railroad to form the nation's only transcontinental rail network, which requires the approval of the Surface Transportation Board. Other railroads also operate in parts of the Company's territory. 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, which leads to reduced costs and strong free cash flow generation.

The Company generates revenue primarily from the transportation of freight as performance obligations that arise from its contracts with customers are satisfied. Revenue is generated 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 to transport a customer's commodities at a negotiated price contained in a transportation services agreement or a publicly disclosed tariff rate. The average transit time to complete a rail shipment is between 2 to 7 days depending on market. Payments for transportation services are normally billed once a bill of lading 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. Trucking revenue includes revenue from the operations of Quality Carriers and is mostly comprised of truck shipments of chemicals. Other revenue is recorded upon completion of the service and is comprised of revenue from regional subsidiary railroads and incidental charges, including demurrage, intermodal storage and equipment usage, and switching.

During 2025, the Company's services generated $14.1 billion ¹ of revenue and served four primary lines of business: merchandise, intermodal, coal and trucking. The merchandise business shipped 2.6 million carloads (41% ² of volume) and generated $8.8 billion ³ in revenue (62% ⁴ of revenue) in 2025. The Company's merchandise business is comprised of shipments in the following diverse markets: chemicals, agricultural and food products, automotive, minerals, forest products, metals and equipment, and fertilizers. The intermodal business shipped 3.0 million units (48% ⁵ of volume) and generated $2.1 billion ⁶ in revenue (15% ⁷ of revenue) in 2025. 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. The coal business shipped 718 thousand carloads (11% ⁸ of volume) and generated $1.9 billion ⁹ in revenue (13% ¹⁰ of revenue) in 2025. 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. The trucking business generated $816 million ¹¹, or 6% ¹², of revenue in 2025. Trucking revenue includes revenue from the operations of Quality Carriers. Other revenue accounted for 4% ¹³ of the Company's total revenue in 2025 and includes revenue from regional subsidiary railroads and incidental charges, including intermodal storage and equipment usage, demurrage and switching.

The Company has two operating segments: rail and trucking. Although the Company provides a breakdown of revenue by line of business, the overall financial and operational performance of the railroad is analyzed as one operating segment due to the integrated nature of the rail network. The trucking segment is not material for separate disclosure. The Company's merchandise business shipped 2.6 million carloads ¹⁴ and generated $8.8 billion ¹⁵ in revenue in 2025. The intermodal business shipped 3.0 million units ¹⁶ and generated $2.1 billion ¹⁷ in revenue in 2025. The coal business shipped 718 thousand carloads ¹⁸ and generated $1.9 billion ¹⁹ in revenue in 2025. The trucking business generated $816 million ²⁰ in revenue in 2025. Other revenue was $530 million ²¹ in 2025. Total merchandise revenue was $8.773 billion ²² in 2025, compared to $8.903 billion ²³ in 2024. Intermodal revenue was $2.073 billion ²⁴ in 2025, compared to $2.047 billion ²⁵ in 2024. Coal revenue was $1.900 billion ²⁶ in 2025, compared to $2.247 billion ²⁷ in 2024. Trucking revenue was $816 million ²⁸ in 2025, compared to $844 million ²⁹ in 2024. Other revenue was $530 million ³⁰ in 2025, compared to $499 million ³¹ in 2024.

During fourth quarter 2023, the Company began repurchasing shares under the $5 billion ³² share repurchase program approved in October 2023. Total repurchase authority remaining as of December 31, 2025 was $1.2 billion ³³. In 2025, CSX repurchased 44 million ³⁴ shares at a cost of $1.376 billion ³⁵ and an average price paid per share of $30.95 ³⁶. In 2025, CSX issued $900 million ³⁷ of long-term debt. On March 10, 2025, CSX issued an initial $600 million ³⁸ of 5.05% notes due 2035. On October 23, 2025, CSX further issued $300 million ³⁹ of 5.05% notes due 2035. On February 12, 2025, the Company's Board of Directors authorized an 8% increase in the quarterly cash dividend to $0.13 ⁴⁰ per common share effective March 2025. The 2025 dividend increase was the 21st consecutive increase in CSX's annual dividend. In 2025, CSXT revised and expanded its long-term locomotive agreement with a third party, which includes a $96 million ⁴¹ prepayment for 2026 locomotive maintenance services. CSXT is contractually obligated to purchase a total of 100 new locomotives between 2026 and 2028. Goodwill impairment for Quality Carriers was $164 million ⁴² in 2025 compared to $108 million ⁴³ in 2024.

Total revenue decreased by $448 million ⁴⁴ in 2025, or 3% ⁴⁵, when compared to the previous year primarily due to declines in export coal revenue, lower merchandise volume, and lower fuel recovery, partially offset by pricing gains in merchandise and higher intermodal volume. Total expenses increased $276 million ⁴⁶, or 3% ⁴⁷, compared to prior year. Operating income of $4.5 billion ⁴⁸ decreased $724 million ⁴⁹ or 14% ⁵⁰ year over year. Operating margin of 32.1% ⁵¹ decreased 400 basis points from 36.1% ⁵². Net earnings decreased $581 million ⁵³ to $2.9 billion ⁵⁴, and earnings per diluted share decreased $0.25 ⁵⁵ to $1.54 ⁵⁶. Net cash provided by operating activities was $4.613 billion ⁵⁷ in 2025, compared to $5.247 billion ⁵⁸ in 2024. Free cash flow before dividends decreased $995 million ⁵⁹ year-over-year to $1.8 billion ⁶⁰.

Planned capital investments for 2026 are expected to be less than $2.4 billion ⁶¹. Spending to sustain core infrastructure with a focus on safety and reliability will be a top priority. In addition, management is committed to investments that promote profitable growth, including projects supporting service enhancements and productivity initiatives, including investments in locomotives and freight cars. CSX intends to fund capital investments primarily through cash generated from operations. Net periodic pension benefit expense for 2026 is expected to be a credit of $5 million ⁶². Net periodic pension benefit expense for 2026 is expected to include service cost expense of $21 million ⁶³. No contributions to the Company's qualified pension plans are expected in 2026 ⁶⁴.

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. Capital expenditures in 2025 included approximately $470 million ⁶⁵ related to rebuilding the Blue Ridge subdivision as a result of impacts from Hurricane Helene. The Company expects a favorable change to depreciation expense of approximately $40 million ⁶⁶ per year primarily as a result of increases in the remaining service lives of certain equipment assets from the 2025 depreciation study. The Company plans to complete the next depreciation study for road and track assets in 2027 ⁶⁷. CSXT is contractually obligated to purchase a total of 100 new locomotives between 2026 and 2028 ⁶⁸.

Management believes that adjusted operating income, adjusted operating margin, adjusted net earnings, and adjusted net earnings per share, assuming dilution are important in evaluating the Company's performance. Adjusted operating results (non-GAAP) for 2025 show operating income of $4.685 billion ⁶⁹, operating margin of 33.2% ⁷⁰, net earnings of $3.013 billion ⁷¹, and net earnings per share, assuming dilution of $1.61 ⁷². Economic Profit (non-GAAP) for 2025 was $1.621 billion ⁷³, compared to $2.341 billion ⁷⁴ in 2024. The Company used a 15% ⁷⁵ tax rate and an 8% ⁷⁶ required return for both periods presented.

The Company ended the year with $675 million ⁷⁷ of cash, cash equivalents and short-term investments. Total assets as well as total liabilities and shareholders' equity increased $918 million ⁷⁸ from prior year end. The increase in total assets was primarily due to a $1.2 billion ⁷⁹ increase in net properties consistent with planned capital expenditures, including additions related to rebuilding the Blue Ridge subdivision. Total liabilities increased $265 million ⁸⁰ from prior year end primarily due to the issuance of $900 million ⁸¹ in long-term debt and a $189 million ⁸² increase in deferred income taxes primarily driven by bonus tax depreciation enacted into law on July 4, 2025. Total shareholders' equity increased $653 million ⁸³ from prior year end primarily driven by net earnings of $2.9 billion ⁸⁴, partially offset by share repurchases of $1.4 billion ⁸⁵ and dividends paid of $972 million ⁸⁶. CSX had a working capital deficit of $583 million ⁸⁷ at December 2025 and $456 million ⁸⁸ at December 2024.

CSX has access to a $1.2 billion ⁸⁹ five-year unsecured revolving credit facility backed by a diverse syndicate of banks that expires in February 2028. As of December 31, 2025, 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 ⁹⁰ outstanding at any one time. As of December 31, 2025, the Company had no outstanding debt under the commercial paper program. The Company filed a shelf registration statement with the SEC on February 27, 2025, which may be used to issue debt or equity securities at CSX's discretion. CSX's credit ratings as of December 31, 2025 are: Fitch A- ⁹¹ with Stable outlook, Moody's A3 ⁹² with Stable outlook, and S&P BBB+ ⁹³ with Stable outlook.

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 12, 2025, the Company's Board of Directors authorized an 8% increase in the quarterly cash dividend to $0.13 ⁹⁴ per common share effective March 2025. The 2025 dividend increase was the 21st consecutive increase in CSX's annual dividend. 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. Total repurchase authority remaining as of December 31, 2025 was $1.2 billion ⁹⁵ under the $5 billion ⁹⁶ share repurchase program approved in October 2023.

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. 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, embargoes or changes to trade agreements or policies, such as tariffs, could result in reduced import and export volumes. 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 coal volumes and revenues.

Network or supply chain constraints could have a negative impact on service, operating efficiency or volume of shipments. CSXT has experienced, and in the future could experience, rail network difficulties related to: locomotive or crew shortages; labor shortages or other service disruptions in the supply chain affecting trucking, ports, handling facilities, customer facilities or other railroads; unpredictable increases in demand; extreme weather conditions; regulatory changes resulting in forced access or impacting where and how fast CSXT can transport freight or maintain routes; reductions in availability of pooled equipment, including chassis; impacts from changes in network capacity or structure; increased passenger activities; or derailments and other accidents. The Company may be subject to various claims and lawsuits that could result in significant expenditures. The Company has estimated a range of possible loss for certain matters for which a loss is reasonably possible in excess of reserves established to be $2 million ⁹⁷ to $72 million ⁹⁸ in the aggregate as of December 31, 2025.

The Company faces significant risks from regulatory, legislative and legal developments. New legislation or regulations from the STB, FRA, PHMSA, TSA, EPA and other agencies could increase operating costs, adversely impact revenue, or reduce operating efficiencies. CSXT, as a common carrier by rail, is required by law to transport hazardous materials, and a train accident involving such materials could result in significant costs and claims. The Company retains all risk up to $100 million ⁹⁹ per occurrence for casualty claims and up to $200 million ¹⁰⁰ per occurrence for property losses from floods and named windstorms. The Company has estimated a range of possible loss for certain legal matters to be $2 million ¹⁰¹ to $72 million ¹⁰² in the aggregate as of December 31, 2025. Competition from other transportation providers, including Norfolk Southern Railway and motor carriers, exerts pressure on price and service levels. Global economic conditions, including slower growth in Asia and changes in seaborne coal prices, could reduce revenues. Changing dynamics in U.S. and global energy markets, including lower coal-fired electricity generation, could negatively impact coal volumes and revenues. The Company's operations may be affected by severe weather and other natural occurrences, including floods, hurricanes, fires and earthquakes, which could damage the rail network and cause significant business interruptions. The Company's approximately 16,900 ¹⁰³ unionized employees are covered by collective bargaining agreements, and failure to negotiate acceptable agreements could result in strikes or work stoppages.

Management's discussion emphasizes the Company's focus on developing and strictly maintaining a scheduled service plan with an emphasis on improving customer service, optimizing assets and increasing employee engagement, which leads to reduced costs and strong free cash flow generation. The Company is committed to continuous improvement in safety and service performance through training, innovation and investment. Safety is 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 it operates. The Company remains focused on safety, service, and controlling costs. Management highlights that the personal injury frequency index of 0.94 ¹⁰⁴ in 2025 improved 24% compared to prior year and the FRA train accident rate of 3.08 ¹⁰⁵ improved 13%. 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. Planned capital investments for 2026 are expected to be less than $2.4 billion ¹⁰⁶. Management believes that adjusted operating results and Economic Profit are important in evaluating the Company's performance. Adjusted operating results (non-GAAP) for 2025 show operating income of $4.685 billion ¹⁰⁷, operating margin of 33.2% ¹⁰⁸, net earnings of $3.013 billion ¹⁰⁹, and net earnings per share, assuming dilution of $1.61 ¹¹⁰. Economic Profit (non-GAAP) for 2025 was $1.621 billion ¹¹¹.