CSX CSX · USD

Segment Reporting and Significant ExpensesThe 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 "Rail" column in the table below includes the activities of all CSX entities other than the trucking company, Quality Carriers, and also includes the Company's equity in the net income of equity method investments. As the trucking segment is not material for separate disclosure as a reportable segment, the results of these operations are included as a reconciliation to the Company's consolidated results in the tables below. See additional information in Note 1, Nature of Operations and Significant Accounting Policies.The Company's chief operating decision maker ("CODM") is its Chief Executive Officer. The CODM reviews information presented on a consolidated basis, accompanied by supplemental information about the trucking segment separately, for purposes of allocating resources and evaluating financial performance. The Company has determined that operating income is the key measure of segment profit or loss as this measure is the focus of the CODM in developing financial plans, including resource allocation, and evaluating actual financial performance against plan. The CODM regularly reviews operating results broken out by significant expense. NOTE 17. Segment Reporting and Significant Expenses, continuedThe table below presents information about the Company's significant expenses and the required reportable segment reconciliations for the years ended 2025, 2024 and 2023.

RevenuesThe 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. Fuel surcharge revenue is included in the individual markets.Years Ended(Dollars in Millions)202520242023Chemicals$2,776 $2,850 $2,599 Agricultural and Food Products1,618 1,644 1,657 Automotive1,182 1,226 1,219 Forest Products975 1,047 1,012 Metals and Equipment869 859 917 Minerals832 772 733 Fertilizers521 505 516 Total Merchandise8,773 8,903 8,653 Intermodal2,073 2,047 2,060 Coal1,900 2,247 2,484 Trucking816 844 882 Other530 499 578 Total$14,092 $14,540 $14,657 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. NOTE 11. Revenues, continuedThe 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 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.

Commitments and ContingenciesPurchase CommitmentsIn 2025, CSXT revised and expanded its long-term locomotive agreement with a third party. The new agreement contains commitments related to a long-term maintenance program that covers a portion of CSXT's fleet of locomotives, specific locomotive rebuilds and an agreement to purchase additional locomotives. The maintenance program costs are based on the maintenance cycle for each covered locomotive, which is determined by the asset's utilization and type. Expected future costs may change as required maintenance schedules are revised and locomotives are placed into or removed from active service. The rebuild program costs are based on the condition of locomotive units and the Company's plan for rebuilding existing locomotives. Under CSXT’s current obligations, the maintenance agreement will expire no earlier than 2035 and CSXT is contractually committed to locomotive rebuilds through 2029. Additionally, CSXT is contractually obligated to purchase a total of 100 new locomotives between 2026 and 2028. The following table summarizes CSXT’s payments, including prepayments, for the long-term maintenance and rebuild program, which covers approximately 1,900 locomotives with payments based on active status during the period. The 2025 payment amount includes a $96 million prepayment for 2026 locomotive maintenance services, which is included in other current assets on the consolidated balance sheet, as well as $14 million for pre-owned locomotives received in 2025. Years Ended(Dollars in Millions)202520242023Amounts Paid$456 $311 $236 NOTE 8. Commitments and Contingencies, continuedTotal payments under the agreement are estimated in the table below and include payments related to locomotive rebuilds, the long-term locomotive maintenance program, and locomotive purchases.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.

Debt and Credit AgreementsDebt at December 2025 and December 2024 is shown in the table below. For information regarding the fair value of debt, see Note 13, Fair Value Measurements.Maturity at DecemberAverageInterestRates atDecemberDecemberDecember(Dollars in Millions)2025202520252024Notes2026-20684.4%$18,858 $18,492 Equipment Obligations(a)20274.3%— 1 Finance Leases2026-20324.7%15 10 Subtotal Long-term Debt (Including Current Portion) $18,873 $18,503 Less Debt Due within One Year (708)(606)Long-term Debt (Excluding Current Portion) $18,165 $17,897 (a) Equipment obligations are secured by an interest in certain railroad equipment.Total activity related to long-term debt during 2025 is as follows: (Dollars in Millions)Current PortionLong-term PortionTotalLong-term Debt as of December 31, 2024$606 $17,897 $18,503 2025 Activity:Long-term Debt Issued— 900 900 Long-term Debt Repaid(613)— (613)Reclassifications703 (703)— Hedging, Discount, Premium and Other Activity12 71 83 Long-term Debt as of December 31, 2025$708 $18,165 $18,873 Debt IssuanceOn March 10, 2025, CSX issued an initial $600 million of 5.05% notes due 2035. On October 23, 2025, CSX further issued $300 million of 5.05% notes due 2035, which was a reopening of the existing notes originally issued in March 2025. On September 18, 2024, CSX issued $550 million of 4.90% notes due 2055. In September 2023, CSX issued $600 million of 5.20% notes due 2033. These notes are included in the consolidated balance sheets under long-term debt and may be redeemed by the Company at any time, subject to payment of certain make-whole premiums. The net proceeds 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 debt payable to a related party, see Note 15, Investment in Affiliates and Related-Party Transactions.NOTE 10. Debt and Credit Agreements, continuedLong-term Debt Maturities (Net of Discounts, Premiums and Issuance Costs)(Dollars in Millions)Maturities atYears EndingDecember 20252026$708 20271,001 20281,002 2029951 2030400 Thereafter14,811 Total Long-term Debt Maturities, including current portion$18,873 Interest Rate DerivativesFair Value HedgesIn first quarter 2025, CSX entered into two fixed-to-floating interest rate swaps classified as fair value hedges.

Income TaxesEarnings before income taxes of $3.8 billion, $4.6 billion and $4.8 billion for the years ended 2025, 2024 and 2023, respectively, nearly all of which represents earnings from domestic operations. The breakdown of income tax expense between current and deferred is as follows:Years Ended(Dollars in Millions)202520242023Current:Federal$553 $873 $851 State133 200 184 Subtotal Current$686 $1,073 $1,035 Deferred: Federal195 26 110 State(1)(14)16 Subtotal Deferred$194 $12 $126 Total Income Tax Expense$880 $1,085 $1,161 The Company recorded a 2025 income tax benefit of $43 million primarily as a result of a change in the valuation of the state deferred tax liability as a result of filing the 2024 tax returns, other state tax planning, and a tax credit purchase benefit. In 2024, the Company recorded an income tax benefit of $31 million primarily as a result of state legislative changes and a change in the valuation of the state deferred tax liability as a result of filing the 2023 tax returns. In 2023, the Company recorded an income tax benefit of $22 million primarily from a change in the valuation of the state deferred tax liability.NOTE 12. Income Taxes, continued2025 Income Tax Expense Reconciliation and Cash Payments The tables in this section present information on income tax expenses and payments for 2025. Prior period values are not presented, as these disclosure requirements have been implemented on a prospective basis. The principal factors contributing to the difference between the effective income tax rate and the U.S. statutory federal income tax rate are as follows:(Dollars in Millions)2025AmountPercentageU.S. Federal Statutory Rate$792 21.0 %State and Local Income Taxes, Net of Federal Tax Effect (a)102 2.7 Foreign Tax Effects3 0.1 Tax Credits(17)(0.5)Nontaxable or Nondeductible Items(24)(0.6)Other Adjustments24 0.6 Effective Income Tax Rate$880 23.3 %(a) The states that contribute to the majority (greater than 50% combined) of the tax effect in this category include Indiana, Virginia, Pennsylvania, Florida, and Alabama, listed in descending order of tax effect.The amount of cash taxes paid by the Company are shown in the table below. Payments in 2025 include $429 million of previously postponed federal and state taxes related to the 2024 tax year, with no postponements available for 2025. There were no individual jurisdictions with cash taxes paid that equaled or exceeded 5% of income taxes paid in 2025.

Stock Plans and Share-Based CompensationUnder CSX's share-based compensation plans, awards consist of performance units, stock options, and restricted stock units for management and stock grants for directors. Awards granted under the various programs are determined and approved by the Compensation and Talent Management Committee of the Board of Directors. Awards to the Chief Executive Officer are approved by the full Board and awards to senior executives are approved by the Compensation and Talent Management Committee. In certain circumstances, the Chief Executive Officer or delegate approves awards to management employees other than senior executives. The Board of Directors approves awards granted to CSX's non-management directors upon recommendation of the Governance and Sustainability Committee. Share-based compensation expense for awards under share-based compensation plans and purchases made as part of the employee stock purchase plan is measured using the fair value of the award on the grant date and is recognized on a straight-line basis over the service period of the respective award. Alternatively, expense is recognized upon death or over an accelerated service period for employees whose agreements allow for continued vesting upon retirement or separation. Forfeitures are recognized as they occur. Total pre-tax expense and income tax benefits associated with share-based compensation are shown in the table below. Income tax benefits include impacts from option exercises and the vesting of other equity awards. Years Ended(Dollars in Millions)202520242023Share-Based Compensation ExpenseRestricted Stock Units$26 $28 $19 Stock Options14 12 12 Employee Stock Purchase Plans10 8 7 Stock Awards for Directors3 2 2 Performance Units1 (10)20 Total Share-based Compensation Expense$54 $40 $60 Income Tax Benefit$13 $13 $14 NOTE 4. Stock Plans and Share-Based Compensation, continuedLong-term Incentive PlansThe objective of the CSX Long-term Incentive Plans (“LTIP”) is to motivate and reward certain employees for achieving and exceeding certain financial goals. The 2025-2027, 2024-2026, and 2023-2025 LTIPs were adopted under the 2019 Stock and Incentive Award Plan.

LeasesAt inception, the Company determines if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. Some of the Company’s lease arrangements contain lease components (e.g., minimum rent payments) and non-lease components (e.g., maintenance, labor charges, etc.). The Company generally accounts for each component separately based on the estimated standalone price of each component. For certain equipment leases, such as freight car, vehicles and work equipment, the Company accounts for the lease and non-lease components as a single lease component. Certain of the Company’s lease agreements include rental payments that are adjusted periodically for an index or rate. The leases are initially measured using the projected payments adjusted for the index or rate in effect at the commencement date. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.Operating LeasesOperating leases are included in right-of-use lease assets, other current liabilities and long-term lease liabilities on the consolidated balance sheets. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term, discounted using the Company’s secured incremental borrowing rates or implicit rates, when readily determinable. Short-term operating leases, which have an initial term of 12 months or less, are not recorded on the balance sheet. The Company has various lease agreements with other parties with terms up to 50 years, including a significant operating lease with the State of Georgia for approximately 137 miles of right-of-way with integral track assets for a term of 50 years with an annual 2.5% increase. Non-cancelable, long-term leases may include provisions for maintenance, options to purchase and options to extend the terms. These options are included in the lease term when it is reasonably certain that the option will be exercised. Lease expense for operating leases, including leases with escalations over their terms, is recognized on a straight-line basis over the lease term. Variable lease expense is recognized in the period in which the obligation for those payments is incurred. Lease expense is included in equipment and other rents on the consolidated income statements and is reported net of lease income.

Strong performance and reliability of the Company's technology systems are critical to operating safely and effectively, and protecting personal and customer data is essential to maintaining stakeholder trust. The Company has implemented processes designed to assess, identify, and manage material cybersecurity risks, as described further below. CSX maintains a cybersecurity framework that is integrated across the organization through people, processes and technology to help protect the personal information of its customers, its contractors and its suppliers as well as protect the integrity of its own operations. Cybersecurity is also integrated into the Company’s Enterprise Risk Management (“ERM”) program. The Company equips CSX systems with various cybersecurity tools, conducts vulnerability scans and provides critical cybersecurity information to application users, as appropriate. The Company also takes proactive measures to advise CSX employees of how they can assist the Company in its cybersecurity practices. CSX informs employees on cybersecurity best practices, including how to identify cyber-related suspicious activity, how to report such activity and, as appropriate, proactive measures employees can take to safeguard company information and devices. The Company also provides cybersecurity awareness training to employees and conducts cybersecurity testing exercises to help maintain cybersecurity vigilance. With the assistance of third-party consultants, the Company conducts an annual cybersecurity exercise, which is often a "tabletop" scenario involving a cross-functional group responding to a hypothetical cybersecurity threat.The Company considers its material cybersecurity-related risks, as described in more detail below and at Item 1A. Risk Factors, and applies various frameworks to establish controls that are reasonably designed to identify, protect, detect, respond to, and recover from significant cybersecurity incidents. The Company also tests its cybersecurity program to assess whether enhancements to cybersecurity measures are appropriate, such as additional detection and prevention capabilities. These tests may include the use of internal or third-party external risk assessments, and penetration testing. The Company also conducts periodic cybersecurity assessments, as appropriate, pursuant to its annual risk assessment process. Third party resources may also be used for these assessments.