CSX(CSX) - 2025 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents CSX Corporation's unaudited consolidated financial statements, including income statements, balance sheets, cash flows, and detailed notes Item 1. Financial Statements This section details CSX Corporation's unaudited consolidated financial statements, including income statements, balance sheets, cash flows, and comprehensive explanatory notes Consolidated Income Statements (Unaudited) This section presents the unaudited consolidated income statements for the specified periods Consolidated Income Statements (Unaudited) Data | Metric | Q3 2025 (Millions) | Q3 2024 (Millions) | 9M 2025 (Millions) | 9M 2024 (Millions) | | :----------------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Revenue | $3,587 | $3,619 | $10,584 | $11,001 | | Total Expense | $2,500 | $2,265 | $7,173 | $6,862 | | Operating Income | $1,087 | $1,354 | $3,411 | $4,139 | | Net Earnings | $694 | $894 | $2,169 | $2,737 | | Net Earnings Per Share, Basic | $0.37 | $0.46 | $1.16 | $1.41 | | Net Earnings Per Share, Diluted | $0.37 | $0.46 | $1.16 | $1.40 | Condensed Consolidated Comprehensive Income Statements (Unaudited) This section provides the unaudited condensed consolidated comprehensive income statements Condensed Consolidated Comprehensive Income Statements (Unaudited) Data | Metric | Q3 2025 (Millions) | Q3 2024 (Millions) | 9M 2025 (Millions) | 9M 2024 (Millions) | | :-------------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Total Comprehensive Earnings | $698 | $895 | $2,181 | $2,747 | Consolidated Balance Sheets This section outlines the consolidated balance sheets as of September 30, 2025, and December 31, 2024 Consolidated Balance Sheets Data | Metric | September 30, 2025 (Millions) | December 31, 2024 (Millions) | | :---------------------------------- | :---------------------------- | :--------------------------- | | ASSETS | | | | Cash and Cash Equivalents | $612 | $933 | | Total Current Assets | $2,511 | $2,820 | | Properties - Net | $36,534 | $35,658 | | Goodwill and Other Intangible Assets - Net | $270 | $433 | | Total Assets | $43,279 | $42,764 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Total Current Liabilities | $2,966 | $3,276 | | Long-term Debt | $18,554 | $17,897 | | Total Liabilities | $30,521 | $30,257 | | Total Shareholders' Equity | $12,758 | $12,507 | | Total Liabilities and Shareholders' Equity | $43,279 | $42,764 | Consolidated Cash Flow Statements (Unaudited) This section presents the unaudited consolidated cash flow statements for the nine-month periods Consolidated Cash Flow Statements (Unaudited) Data | Cash Flow Activity | 9M 2025 (Millions) | 9M 2024 (Millions) | | :------------------------------------ | :----------------- | :----------------- | | Net Cash Provided by Operating Activities | $3,227 | $3,859 | | Net Cash Used In Investing Activities | $(2,145) | $(1,722) | | Net Cash Used in Financing Activities | $(1,403) | $(1,846) | | Net (Decrease) Increase in Cash and Cash Equivalents | $(321) | $291 | | Cash and Cash Equivalents at End of Period | $612 | $1,644 | Consolidated Statements of Changes in Shareholders' Equity (Unaudited) This section details the unaudited consolidated statements of changes in shareholders' equity Consolidated Statements of Changes in Shareholders' Equity (Unaudited) Data | Metric | Balance Dec 31, 2024 (Millions) | Net Earnings (Millions) | Dividends Paid (Millions) | Share Repurchases (Millions) | Balance Sep 30, 2025 (Millions) | | :-------------------------------- | :------------------------------ | :---------------------- | :------------------------ | :--------------------------- | :------------------------------ | | Total Shareholders' Equity (9M 2025) | $12,507 | $2,169 | $(730) | $(1,284) | $12,758 | Consolidated Statements of Changes in Shareholders' Equity (Unaudited) Data | Metric | Balance Dec 31, 2023 (Millions) | Net Earnings (Millions) | Dividends Paid (Millions) | Share Repurchases (Millions) | Balance Sep 30, 2024 (Millions) | | :-------------------------------- | :------------------------------ | :---------------------- | :------------------------ | :--------------------------- | :------------------------------ | | Total Shareholders' Equity (9M 2024) | $11,985 | $2,737 | $(700) | $(1,212) | $12,936 | Notes to Consolidated Financial Statements (Unaudited) This section provides detailed explanatory notes to the unaudited consolidated financial statements NOTE 1. Nature of Operations and Significant Accounting Policies This note describes CSX Corporation's primary operations and significant accounting policies - CSX Corporation is a leading US transportation company, primarily providing rail-based transportation services through its subsidiary CSX Transportation, Inc. (CSXT), which operates an approximately 20,000 route-mile rail network across 26 states, the District of Columbia, and parts of Canada[30][31] - Other key subsidiaries include Quality Carriers, Inc. (bulk liquid chemicals truck transportation), CSX Intermodal Terminals, Inc. (intermodal terminals and drayage), Total Distribution Services, Inc. (automotive distribution), and Transflo Terminal Services, Inc. (rail-to-truck transfers)[32] - The company is evaluating the impact of new FASB ASUs: 2023-09 (Income Tax Disclosures, effective 2025 annual report), 2024-03 (Disaggregation of Income Statement Expenses, effective 2027 annual report), and 2025-06 (Internal-Use Software, effective Q1 2028) None are anticipated to materially impact results of operations or financial position[37][38][39] NOTE 2. Earnings Per Share This note provides details on basic and diluted earnings per share, share repurchases, and dividend changes NOTE 2. Earnings Per Share Data | Metric | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :--------------------------------------- | :------ | :------ | :------ | :------ | | Net Earnings Per Share, Basic | $0.37 | $0.46 | $1.16 | $1.41 | | Net Earnings Per Share, Assuming Dilution | $0.37 | $0.46 | $1.16 | $1.40 | - The company has $1.3 billion remaining under its $5 billion share repurchase program approved in October 2023[47] NOTE 2. Earnings Per Share Data | Share Repurchase Activity | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :------------------------------------ | :------ | :------ | :------ | :------ | | Shares Repurchased (Millions) | 3 | 12 | 41 | 35 | | Cost of Shares (Dollars in Millions) | $112 | $402 | $1,264 | $1,212 | | Average Price Paid per Share | $33.07 | $33.66 | $30.61 | $34.60 | - In February 2025, the Board of Directors authorized an 8% increase in the quarterly cash dividend to $0.13 per common share, effective March 2025[50] NOTE 3. Stock Plans and Share-Based Compensation This note outlines share-based compensation expenses and new long-term incentive plan awards NOTE 3. Stock Plans and Share-Based Compensation Data | Share-Based Compensation Expense (Millions) | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :------------------------------------------ | :------ | :------ | :------ | :------ | | Restricted Stock Units | $7 | $7 | $20 | $21 | | Stock Options | $4 | $3 | $10 | $9 | | Employee Stock Purchase Plan | $3 | $2 | $8 | $6 | | Performance Units | $0 | $4 | $2 | $7 | | Stock Awards for Directors | $0 | $0 | $3 | $2 | | Total Share-Based Compensation Expense | $14 | $16 | $43 | $45 | | Income Tax Benefit | $4 | $4 | $10 | $12 | NOTE 3. Stock Plans and Share-Based Compensation Data | New Long-term Incentive Plan Awards (Feb 2025) | Granted (Thousands) | Weighted Avg. Fair Value | | :--------------------------------------------- | :------------------ | :----------------------- | | Performance Units | 668 | $33.74 | | Restricted Stock Units | 666 | $33.37 | | Stock Options | 1,100 | $10.16 | NOTE 4. Casualty, Environmental and Other Reserves This note details the company's reserves for personal injury, occupational, environmental, and other liabilities NOTE 4. Casualty, Environmental and Other Reserves Data | Reserve Type (Millions) | Sep 30, 2025 Current | Sep 30, 2025 Long-term | Sep 30, 2025 Total | Dec 31, 2024 Current | Dec 31, 2024 Long-term | Dec 31, 2024 Total | | :---------------------- | :------------------- | :--------------------- | :----------------- | :------------------- | :--------------------- | :----------------- | | Personal Injury | $54 | $94 | $148 | $51 | $91 | $142 | | Occupational | $7 | $53 | $60 | $7 | $59 | $66 | | Total Casualty | $61 | $147 | $208 | $58 | $150 | $208 | | Environmental | $39 | $110 | $149 | $37 | $114 | $151 | | Other | $59 | $54 | $113 | $54 | $49 | $103 | | Total Reserves | $159 | $311 | $470 | $149 | $313 | $462 | - The Company's self-insured retention amount for casualty claims is $100 million per occurrence[68] - The Company has been identified as a potentially responsible party at approximately 220 environmentally impaired sites, primarily related to railroad operations or hazardous substance disposal[73] NOTE 5. Commitments and Contingencies This note describes the company's insurance retentions, potential legal losses, and ongoing litigation updates - The Company retains risk up to $200 million per occurrence for floods and named windstorms, and $175 million for other property losses under its property insurance program For casualty claims, the retention is $100 million per occurrence[80] - The estimated range of possible loss for certain legal matters, where a loss is reasonably possible in excess of established reserves, is $2 million to $63 million in aggregate as of September 30, 2025[82] - In June 2025, the federal court granted summary judgment in favor of the railroads in the fuel surcharge antitrust litigation, ordering the cases closed Most individual shippers have appealed this ruling[86] - The SEC concluded its investigation into the Company's accounting restatement and non-financial performance metrics on July 10, 2025, and does not intend to recommend an enforcement action[97] NOTE 6. Employee Benefit Plans This note presents the net periodic benefit credit for pension plans and expected contributions NOTE 6. Employee Benefit Plans Data | Pension Benefits Cost (Millions) | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :------------------------------- | :------ | :------ | :------ | :------ | | Service Cost Included in Labor and Fringe | $5 | $6 | $15 | $18 | | Interest Cost | $27 | $27 | $82 | $80 | | Expected Return on Plan Assets | $(40) | $(42) | $(120) | $(127) |\n| Amortization of Net Loss | $6 | $5 | $17 | $14 | | Total Included in Other Income - Net | $(7) | $(10) | $(21) | $(33) |\n| Net Periodic Benefit Credit | $(2) | $(4) | $(6) | $(15) | - No contributions to the Company's qualified pension plans are expected in 2025[102] NOTE 7. Debt and Credit Agreements This note details long-term debt activity, new note issuances, interest rate swaps, and credit facilities NOTE 7. Debt and Credit Agreements Data | Long-term Debt Activity (Millions) | Current Portion | Long-term Portion | Total | | :--------------------------------- | :-------------- | :---------------- | :---- | | Long-term Debt as of Dec 31, 2024 | $606 | $17,897 | $18,503 | | 2025 Activity: | | | | | Long-term Debt Issued | $0 | $600 | $600 | | Long-term Debt Repaid | $(12) | $0 | $(12) | | Long-term Debt as of Sep 30, 2025 | $608 | $18,554 | $19,162 | - In March 2025, CSX issued $600 million of 5.05% notes due 2035 for general corporate purposes[107] - CSX entered into two new fixed-to-floating interest rate swaps in Q1 2025, hedging $250 million of fixed rate notes due 2055, with a cumulative fair value asset of $11 million as of September 30, 2025[108] - The Company has a $1.2 billion unsecured revolving credit facility expiring in February 2028, with no outstanding balances as of September 30, 2025 It also has a commercial paper program up to $1.0 billion, with no outstanding debt as of September 30, 2025[120][122] NOTE 8. Revenues This note provides a breakdown of revenue by market and accounts receivable balances NOTE 8. Revenues Data | Market (Millions) | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :------------------ | :------ | :------ | :------ | :------ | | Chemicals | $697 | $727 | $2,096 | $2,142 | | Agricultural and Food Products | $382 | $416 | $1,208 | $1,229 | | Automotive | $306 | $301 | $897 | $930 | | Forest Products | $247 | $259 | $746 | $790 | | Minerals | $226 | $202 | $625 | $583 | | Metals and Equipment | $224 | $208 | $657 | $658 | | Fertilizers | $126 | $118 | $388 | $380 | | Total Merchandise | $2,208 | $2,231 | $6,617 | $6,712 | | Intermodal | $527 | $509 | $1,511 | $1,521 | | Coal | $490 | $553 | $1,428 | $1,748 | | Trucking | $207 | $214 | $620 | $650 | | Other | $155 | $112 | $408 | $370 | | Total Revenue | $3,587 | $3,619 | $10,584 | $11,001 | NOTE 8. Revenues Data | Accounts Receivable - Net (Millions) | Sep 30, 2025 | Dec 31, 2024 | | :----------------------------------- | :----------- | :----------- | | Freight Receivables - Net | $1,005 | $996 | | Non-Freight Receivables - Net | $365 | $330 | | Total Accounts Receivable - Net | $1,370 | $1,326 | NOTE 9. Fair Value Measurements This note presents fair value measurements for investments, long-term debt, and interest rate swaps NOTE 9. Fair Value Measurements Data | Investments at Fair Value (Millions) | Sep 30, 2025 Total | Dec 31, 2024 Total | | :----------------------------------- | :----------------- | :----------------- | | Exchange-traded Funds | $5 | $2 | | Corporate Bonds | $78 | $71 | | Government Securities | $60 | $42 | | Asset-backed Securities | $34 | $35 | | Time Deposits | $0 | $66 | | Total Investments at Fair Value | $177 | $216 | NOTE 9. Fair Value Measurements Data | Long-term Debt (Millions) | Sep 30, 2025 | Dec 31, 2024 | | :------------------------ | :----------- | :----------- | | Fair Value | $17,716 | $16,481 | | Carrying Value | $19,162 | $18,503 | - The fair value of CSX's fixed-to-floating interest rate swaps was an asset of $27 million (for 2025 and 2023 swaps) and a liability of $93 million (for 2022 swaps) as of September 30, 2025[137] - A goodwill impairment was recorded in the current period, resulting from a re-measurement of fair value[139] NOTE 10. Other Comprehensive Income (Loss) This note details total comprehensive earnings and accumulated other comprehensive income components NOTE 10. Other Comprehensive Income (Loss) Data | Metric (Millions) | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :-------------------------- | :------ | :------ | :------ | :------ | | Total Comprehensive Earnings | $698 | $895 | $2,200 | $2,700 | NOTE 10. Other Comprehensive Income (Loss) Data | AOCI Component (Millions) | Balance Dec 31, 2024 | Total Other Comprehensive Income | Balance Sep 30, 2025 | | :------------------------ | :------------------- | :------------------------------- | :------------------- | | Pension and Other Post Employment Benefits | $(349) | $9 | $(340) | | Interest Rate Derivatives | $153 | $0 | $153 | | Other | $(36) | $3 | $(33) | | Total AOCI (Loss) Income | $(232) | $12 | $(220) | NOTE 11. Segment Reporting and Significant Expenses This note outlines operating segments, income, and capital expenditures, including a goodwill impairment - CSX has two operating segments: rail and trucking The rail segment includes all CSX entities except Quality Carriers (trucking) The trucking segment is not material for separate disclosure[146] NOTE 11. Segment Reporting and Significant Expenses Data | Operating Income (Millions) | Q3 2025 Rail | Q3 2025 Consolidated | Q3 2024 Rail | Q3 2024 Consolidated | | :-------------------------- | :----------- | :------------------- | :----------- | :------------------- | | Segment Operating Income | $1,256 | $1,087 | $1,351 | $1,354 | NOTE 11. Segment Reporting and Significant Expenses Data | Operating Income (Millions) | 9M 2025 Rail | 9M 2025 Consolidated | 9M 2024 Rail | 9M 2024 Consolidated | | :-------------------------- | :----------- | :------------------- | :----------- | :------------------- | | Segment Operating Income | $3,571 | $3,411 | $4,123 | $4,139 | - Trucking expenses for Q3 and 9M 2025 include a $164 million impairment charge of Quality Carrier's goodwill[155] NOTE 11. Segment Reporting and Significant Expenses Data | Capital Expenditures (Millions) | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :------------------------------ | :------ | :------ | :------ | :------ | | Rail Segment Capital Expenditures | $717 | $610 | $2,173 | $1,631 | - Capital expenditures for 9M 2025 include $440 million related to rebuilding the Blue Ridge subdivision due to Hurricane Helene[160] NOTE 12. Goodwill and Other Intangible Assets This note details changes in goodwill and intangible assets, including a significant impairment charge NOTE 12. Goodwill and Other Intangible Assets Data | Asset Type (Millions) | Balance Dec 31, 2024 | Additions | Amortization | Impairment | Balance Sep 30, 2025 | | :-------------------- | :------------------- | :-------- | :----------- | :--------- | :------------------- | | Goodwill | $239 | $5 | $0 | $(164) | $80 | | Intangible Assets | $194 | $5 | $(9) | $0 | $190 | | Total Assets - Net | $433 | $10 | $(9) | $(164) | $270 | - A $164 million goodwill impairment charge was recorded in Q3 2025 for Quality Carriers (trucking segment) due to an extended trucking market recession, ongoing economic uncertainty, and lower than expected financial performance[165] - There is no remaining goodwill attributed to the trucking operating segment as of September 30, 2025[163] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of the company's financial condition and operational results for the quarter and nine months THIRD QUARTER 2025 RESULTS This section summarizes the key financial results for the third quarter of 2025, including revenue, expenses, and EPS THIRD QUARTER 2025 RESULTS Data | Metric | Q3 2025 | Q3 2024 | Change (Millions) | % Change | | :--------------- | :------ | :------ | :---------------- | :------- | | Revenue | $3,587 | $3,619 | $(32) | (1)% | | Expense | $2,500 | $2,265 | $(235) | (10)% | | Operating Income | $1,087 | $1,354 | $(267) | (20)% | | Operating Margin | 30.3% | 37.4% | (710) bps | | | Diluted EPS | $0.37 | $0.46 | $(0.09) | (20)% | - Stephen F Angel was appointed as the new President and Chief Executive Officer, effective September 28, 2025[171] Volume and Revenue (Unaudited) This section presents unaudited volume and revenue data by market for the quarter and nine months Volume and Revenue (Unaudited) Data | Metric | Q3 2025 | Q3 2024 | % Change | 9M 2025 | 9M 2024 | % Change | | :-------------------- | :------ | :------ | :------- | :------ | :------ | :------- | | Total Volume (Thousands) | 1,612 | 1,590 | 1% | 4,710 | 4,702 | 0% | | Total Revenue (Millions) | $3,587 | $3,619 | (1)% | $10,584 | $11,001 | (4)% | | Revenue Per Unit | $2,225 | $2,276 | (2)% | $2,247 | $2,340 | (4)% | Volume and Revenue (Unaudited) Data | Market Revenue (Millions) | Q3 2025 | Q3 2024 | % Change | 9M 2025 | 9M 2024 | % Change | | :------------------------ | :------ | :------ | :------- | :------ | :------ | :------- | | Chemicals | $697 | $727 | (4)% | $2,096 | $2,142 | (2)% | | Agricultural and Food Products | $382 | $416 | (8)% | $1,208 | $1,229 | (2)% | | Minerals | $226 | $202 | 12% | $625 | $583 | 7% |\n| Automotive | $306 | $301 | 2% | $897 | $930 | (4)% | | Forest Products | $247 | $259 | (5)% | $746 | $790 | (6)% | | Metals and Equipment | $224 | $208 | 8% | $657 | $658 | 0% | | Fertilizers | $126 | $118 | 7% | $388 | $380 | 2% | | Total Merchandise | $2,208 | $2,231 | (1)% | $6,617 | $6,712 | (1)% | | Intermodal | $527 | $509 | 4% | $1,511 | $1,521 | (1)% | | Coal | $490 | $553 | (11)% | $1,428 | $1,748 | (18)% | | Trucking | $207 | $214 | (3)% | $620 | $650 | (5)% | | Other | $155 | $112 | 38% | $408 | $370 | 10% | Third Quarter 2025 Revenue Analysis This section analyzes the drivers behind revenue changes in the third quarter of 2025 by market segment - Total revenue decreased 1% YoY in Q3 2025, primarily due to lower export coal revenue (including lower benchmark rates) and declines in merchandise volume This was partially offset by increases in other revenue, higher merchandise pricing, and intermodal volume growth[174] - Merchandise volume decreased overall (1% YoY), with declines in Chemicals (-7%), Agricultural and Food Products (-7%), and Forest Products (-7%) Increases were seen in Minerals (+8%), Automotive (+1%), Metals and Equipment (+5%), and Fertilizers (+7%)[173][175][176][177] - Intermodal volume increased 5% YoY, driven by higher port volumes, growth with key customers, and new service offerings, despite a soft trucking environment[173][178] - Coal volume decreased 3% YoY, mainly due to reduced export coal production Domestic coal increased due to higher shipments to utility plants[173][179] - Other revenue increased $43 million, primarily from higher carload demurrage and payments for unmet volume commitments[181] Third Quarter 2025 Expense Analysis This section examines the factors contributing to changes in total expenses during the third quarter of 2025 - Total expenses increased $235 million (10%) in Q3 2025 compared to Q3 2024[183] - Key expense changes include: Labor and Fringe increased $9 million (due to severance, inflation, partially offset by lower incentive compensation and efficiency savings); Purchased Services and Other increased $54 million (due to inflation, technology contract restructuring, network disruptions, and higher claims); Depreciation and Amortization increased $8 million; Fuel costs increased $5 million; Goodwill Impairment was $164 million[183][184][188] - Interest expense increased $4 million due to higher average debt balances Other income - net decreased $15 million due to lower interest income Income tax expense decreased $86 million due to lower earnings before income taxes[185][186][187] Nine Months Results of Operations This section reviews the consolidated results of operations for the nine months ended September 30, 2025 - Revenue decreased $417 million for the nine months ended September 30, 2025, primarily due to lower coal revenue (including global benchmark rates), lower fuel recovery, and merchandise volume declines, partially offset by pricing gains[189] - Total expense increased $311 million, mainly driven by the Quality Carriers goodwill impairment, inflation, network disruption costs, and higher depreciation, partially offset by lower fuel prices and efficiency savings[190] - Interest expense increased $6 million, and other income - net decreased $36 million Income tax expense decreased $202 million due to lower earnings before income taxes[190][191] Non-GAAP Measures - Unaudited This section provides analysis using non-GAAP financial measures, including adjusted operating results, economic profit, and free cash flow Adjusted Operating Results This section presents operating results adjusted for the goodwill impairment to provide a clearer performance view - Management uses adjusted operating results (excluding the $164 million goodwill impairment) to evaluate performance and for planning, as the impairment is not indicative of future financial trends[194] Adjusted Operating Results Data | Metric | Q3 2025 GAAP | Q3 2025 Adjusted (Non-GAAP) | 9M 2025 GAAP | 9M 2025 Adjusted (Non-GAAP) | | :------------------------------------ | :----------- | :-------------------------- | :----------- | :-------------------------- | | Operating Income (Millions) | $1,087 | $1,251 | $3,411 | $3,575 | | Operating Margin | 30.3% | 34.9% | 32.2% | 33.8% | | Net Earnings (Millions) | $694 | $818 | $2,169 | $2,293 | | Net Earnings Per Share, Assuming Dilution | $0.37 | $0.44 | $1.16 | $1.22 | Economic Profit This section calculates economic profit to assess financial returns and strategic investment effectiveness - Economic Profit (GCE minus Capital Charge on GOA) is used to evaluate financial returns and incentivize strategic investments that exceed management's desired minimum required return[197][198] Economic Profit Data | Metric (Millions) | 9M 2025 | 9M 2024 | | :------------------ | :------ | :------ | | Operating Income | $3,411 | $4,139 | | Gross Cash Earnings | $4,194 | $4,643 | | Capital Charge | $(2,907) | $(2,778) | | Economic Profit | $1,287 | $1,865 | - The Company used a 15% tax rate and an 8% required return for both periods, consistent with rates used for investment decisions[199] Free Cash Flow This section analyzes free cash flow, representing cash available for investors after reinvestment - Free Cash Flow (FCF) measures cash generated after reinvestment, available for equity and bond investors[206] Free Cash Flow Data | Metric (Millions) | 9M 2025 | 9M 2024 | | :------------------------------------ | :------ | :------ | | Net cash provided by operating activities | $3,227 | $3,859 | | Property Additions | $(2,225) | $(1,691) | | Proceeds and Advances from Property Dispositions | $64 | $50 | | Free Cash Flow (before dividends) | $1,066 | $2,218 | - The $1.2 billion decrease in FCF before dividends from prior year is primarily due to higher property additions (including $440 million for Blue Ridge subdivision rebuild), $429 million in postponed federal and state tax payments from 2024, and lower cash-generating net earnings[207] Operating Statistics (Estimated) This section provides estimated key operating metrics, including train velocity, dwell, trip plan performance, and safety rates - In Q3 2025, train velocity increased by 2% YoY, and dwell improved 8% YoY Carload trip plan performance increased by 4% and intermodal trip plan performance increased by 1%[211] - Safety performance improved in Q3 2025: FRA personal injury frequency index improved 7% to 1.16, and FRA train accident rate improved 21% to 2.55[212] Operating Statistics (Estimated) Data | Operating Performance | Q3 2025 | Q3 2024 | % Change | 9M 2025 | 9M 2024 | % Change | | :-------------------- | :------ | :------ | :------- | :------ | :------ | :------- | | Train Velocity (MPH) | 18.9 | 18.6 | 2% | 18.0 | 18.3 | (2)% | | Dwell (Hours) | 9.5 | 10.3 | 8% | 10.5 | 10.0 | (5)% | | Carload Trip Plan Performance | 83% | 80% | 4% | 76% | 81% | (6)% | | Intermodal Trip Plan Performance | 93% | 92% | 1% | 91% | 94% | (3)% | | FRA Personal Injury Frequency Index | 1.16 | 1.25 | 7% | 1.05 | 1.27 | 17% | | FRA Train Accident Rate | 2.55 | 3.21 | 21% | 3.32 | 3.38 | 2% | LIQUIDITY AND CAPITAL RESOURCES This section discusses the company's liquidity position, cash flow changes, and capital investment plans Material Changes in Significant Cash Flows This section highlights significant changes in operating, investing, and financing cash flows - Net cash provided by operating activities decreased by $632 million, primarily due to $429 million in previously postponed tax payments and lower cash-generating net earnings[226] - Cash used in investing activities increased by $423 million, mainly due to higher property additions, including $440 million for the Blue Ridge subdivision rebuild, partially offset by lower acquisition spending[226] - Cash used in financing activities decreased by $443 million, driven by lower repayments of long-term debt, partially offset by higher share repurchases[226] Sources of Cash and Liquidity and Uses of Cash This section outlines the company's cash position, available credit, and planned capital expenditures - As of Q3 2025, CSX had $618 million in cash, cash equivalents, and short-term investments[227] - The Company has a $1.2 billion unsecured revolving credit facility and a $1.0 billion commercial paper program, both with no outstanding balances as of September 30, 2025[229] - Planned capital investments for 2025 are expected to be around $2.5 billion, plus over $500 million for the Blue Ridge subdivision rebuild (with $440 million spent in 9M 2025)[230] - Changes in bonus tax depreciation from the One Big Beautiful Bill Act are expected to result in favorable cash tax impacts of approximately $250 million for the 2025 tax year[231] Material Changes in the Consolidated Balance Sheets and Working Capital This section details significant changes in assets, liabilities, shareholders' equity, and working capital - Total assets increased $515 million from year-end, driven by an $876 million increase in net property and a $78 million increase in investments, partially offset by a $321 million decrease in cash and a $164 million goodwill impairment[233] - Total liabilities increased $264 million, primarily due to $600 million in long-term debt issuance, partially offset by a $344 million decrease in income and other taxes payable[234] - Total shareholders' equity increased $251 million, driven by $2.2 billion in net earnings, offset by $1.3 billion in share repurchases and $730 million in dividends paid[234] - The Company had a working capital deficit of $455 million as of September 30, 2025, similar to $456 million at December 31, 2024, maintaining adequate liquidity[235] LABOR AGREEMENTS This section provides an update on the status of labor agreements with unionized employees - Approximately 75% of CSX's unionized workforce (17,400 out of 23,200 employees) is covered by new agreements effective January 1, 2025, which have been fully ratified Negotiations are ongoing for the remaining unionized employees[239] CRITICAL ACCOUNTING ESTIMATES This section identifies key accounting estimates requiring significant management judgment and assumptions - Critical accounting estimates requiring significant management judgment include personal injury and environmental reserves, pension plan accounting, and depreciation policies for assets under the group-life method[242][246] FORWARD-LOOKING STATEMENTS This section cautions readers about forward-looking statements and associated risks and uncertainties - The report contains forward-looking statements regarding projections of financial items, operational initiatives, legal outcomes, management plans, and future economic conditions, which are subject to risks and uncertainties[244][247] - Key risk factors include legislative/regulatory developments, litigation outcomes, economic/political conditions, natural events, competition, compliance costs, financial market conditions, fuel prices, and labor difficulties[248][249][253] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section describes the company's exposure to market risks, particularly interest rate risk, and its hedging strategies - In Q1 2025, CSX entered into two fixed-to-floating interest rate swaps to hedge 10 years of interest rate risk on $250 million of fixed rate notes due 2055 As of September 30, 2025, these swaps had a fair value asset of $11 million[256] Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures and reports no material changes to internal controls - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2025[257] - There were no material changes in the Company's internal controls over financial reporting during the third quarter of 2025[257] PART II. OTHER INFORMATION This section contains additional information not covered in the financial statements, including legal, equity, and exhibit details Item 1. Legal Proceedings This section refers to Note 5 for details on legal proceedings and specifies disclosure thresholds for environmental matters - The Company will use a threshold of $1 million for disclosing environmental matters where a governmental authority is a party and potential monetary sanctions exceed this amount[260] Item 1A. Risk Factors This section directs readers to the annual report for comprehensive risk factors and references forward-looking statements Item 2. CSX Purchases of Equity Securities This section details CSX's share repurchase activities during the third quarter of 2025 under its existing program - Total repurchase authority remaining under the $5 billion program was $1.3 billion as of September 30, 2025[262] Item 2. CSX Purchases of Equity Securities Data | Share Repurchase Activity (Q3 2025) | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased | | :---------------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------- | | July 1 - July 31, 2025 | 1,018,047 | $33.76 | $1,399,702,506 | | August 1 - August 31, 2025 | — | — | $1,399,702,506 | | September 1 - September 30, 2025 | 2,369,420 | $32.77 | $1,322,060,537 | | Ending Balance | 3,387,467 | $33.07 | $1,322,060,537 | Item 3. Defaults Upon Senior Securities This section confirms that there were no defaults upon senior securities during the reporting period Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company's operations Item 5. Other Information This section reports no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements by directors or officers Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including employment agreements and certifications - Key exhibits include employment-related agreements for the new CEO Stephen Angel (Employment Agreement, Change of Control Agreement, Confidentiality Agreement, Employment Separation Agreement), Rule 13a-14(a) and Section 1350 Certifications, and Interactive Data Files (XBRL)[266][267] Signature This section contains the official signature block, confirming the due authorization and filing of the report - The report was signed by Angela C Williams, Vice President and Chief Accounting Officer, on October 16, 2025[269]