CSX CORPORATION THIRD QUARTER 2022 HIGHLIGHTS
•Revenue increased$603 million , or 18% year over year. •Expenses increased$460 million , or 25% year over year. •Operating income of$1.6 billion increased$143 million , or 10%, year over year. •Operating ratio of 59.5% increased 310 basis points versus prior year. •Earnings per diluted share of$0.52 increased$0.09 , or 21% year over year. Third Quarters Nine Months Fav/ 2022 2021 Fav/ (Unfav) % Change 2022 2021 (Unfav) % Change Volume (in thousands) 1,587 1,563 24 2% 4,679 4,683 (4) -% (in millions) Revenue$ 3,895 $ 3,292 $ 603 18$ 11,123 $ 9,095 $ 2,028 22 Expense 2,316 1,856 (460) (25) 6,559 4,867 (1,692) (35) Operating Income$ 1,579 $ 1,436 $ 143 10%$ 4,564 $ 4,228 $ 336 8% Operating Ratio 59.5 % 56.4 % (310) bps 59.0 % 53.5 % (550) bps Earnings Per Diluted Share$ 0.52 $ 0.43 $ 0.09 21%$ 1.46 $ 1.26 $ 0.20 16% Appointment of New Chief Executive Officer OnSeptember 15, 2022 , CSX announced that, as part of a planned succession process, its Board of Directors appointedJoseph R. Hinrichs as the Company's new President and Chief Executive Officer, and as a member of the Board of Directors, effectiveSeptember 26, 2022 . Acquisition ofPan Am Systems, Inc. OnJune 1, 2022 , CSX acquired Pan Am for a purchase price of$601 million funded through a combination of common stock valued at$422 million and cash totaling$179 million . Accordingly, the consolidated third quarter and nine months 2022 results include the results of Pan Am's operations after the acquisition date. For further details, refer to Note 11, Business Combinations. CSX Q3 2022 Form 10-Q p.31
--------------------------------------------------------------------------------
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONSVolume and Revenue (Unaudited)
Volume (Thousands of units); Revenue (Dollars in Millions); Revenue Per Unit (Dollars)
Third Quarters
Volume Revenue Revenue Per Unit
2022 2021 % Change 2022 2021 % Change 2022 2021 % Change
Chemicals 162 166 (2) % $ 678 $ 624 9 % $ 4,185 $ 3,759 11 %
Agricultural and Food Products 120 109 10 428 343 25 3,567 3,147 13
Minerals 91 90 1 180 162 11 1,978 1,800 10
Automotive 85 75 13 274 209 31 3,224 2,787 16
Forest Products 75 75 - 264 231 14 3,520 3,080 14
Metals and Equipment 67 70 (4) 211 206 2 3,149 2,943 7
Fertilizers 48 54 (11) 108 106 2 2,250 1,963 15
Total Merchandise 648 639 1 2,143 1,881 14 3,307 2,944 12
Intermodal 762 744 2 604 509 19 793 684 16
Coal 177 180 (2) 624 460 36 3,525 2,556 38
Trucking - - - 251 200 26 - - -
Other - - - 273 242 13 - - -
Total 1,587 1,563 2 % $ 3,895 $ 3,292 18 % $ 2,454 $ 2,106 17 %
Nine Months
Volume Revenue Revenue Per Unit
2022 2021 % Change 2022 2021 % Change 2022 2021 % Change
Chemicals 488 496 (2) % $ 1,962 $ 1,810 8 % $ 4,020 $ 3,649 10 %
Agricultural and Food Products 358 342 5 1,227 1,062 16 3,427 3,105 10
Minerals 253 244 4 494 439 13 1,953 1,799 9
Automotive 248 239 4 769 661 16 3,101 2,766 12
Forest Products 219 223 (2) 743 684 9 3,393 3,067 11
Metals and Equipment 202 209 (3) 624 596 5 3,089 2,852 8
Fertilizers 158 173 (9) 346 350 (1) 2,190 2,023 8
Total Merchandise 1,926 1,926 - 6,165 5,602 10 3,201 2,909 10
Intermodal 2,243 2,222 1 1,733 1,488 16 773 670 15
Coal 510 535 (5) 1,808 1,267 43 3,545 2,368 50
Trucking (a) - - - 740 200 NM - - -
Other - - - 677 538 26 - - -
Total 4,679 4,683 - % $ 11,123 $ 9,095 22 % $ 2,377 $ 1,942 22 %
NM - not meaningful
(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 .
CSX Q3 2022 Form 10-Q p.32--------------------------------------------------------------------------------
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Third Quarter 2022
Revenue
Total revenue increased 18% in third quarter 2022 when compared to third quarter
2021 due to higher fuel recovery, pricing gains that include the benefit of
higher export coal benchmark rates, increases in trucking revenue, volume growth
and increases in other revenue.
Merchandise Volume
Chemicals - Decreased due to lower shipments of waste and other energy-related
commodities, including crude oil.
Agricultural and Food Products - Increased as a result of higher shipments of grain, ethanol, sweeteners and vegetable oils.
Minerals - Increased due to higher shipments of aggregates driven by construction demand.
Automotive - Increased due to higher North American vehicle production as semiconductor availability has improved.
Forest Products - Higher shipments of paper products and lumber were offset by lower shipments of pulpboard.
Metals and Equipment - Decreased primarily due to lower steel shipments, partially offset by higher scrap shipments.
Fertilizers - Decreased due to declines in short-haul and long-haul phosphate shipments.
Intermodal Volume Increased international shipments were partially offset by lower domestic shipments due to continued supply-side constraints and a more typical seasonal slowdown than prior year. Coal Volume Export coal increased due to higher shipments of metallurgical coal. Domestic coal decreased due to lower shipments of utility coal including the impacts of limited coal availability during mine disruptions. Trucking Revenue Trucking revenue increased$51 million versus prior year primarily due to price gains and higher fuel surcharge.
Other Revenue
Other revenue was
CSX Q3 2022 Form 10-Q p.33--------------------------------------------------------------------------------
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONSExpenses
Expenses of
Labor and Fringe expense increased$128 million due to the following: •The impacts of tentative agreements reached with labor unions inSeptember 2022 as well as inflation totaled$97 million . Of the total,$42 million relates to labor and benefits in prior periods. •Other costs increased$31 million , including the impacts of Pan Am's operations, higher volume and other non-significant items. Purchased Services and Other expense increased$87 million due to the following: •Operating support costs were$57 million higher primarily as a result of inflation, a larger active locomotive fleet, increased intermodal terminal costs and higher volume. •Other costs increased$30 million due to several items including higher legal costs associated with regulatory activity, the inclusion of Pan Am's operations and increased trucking-related expenses, partially offset by acquisition-related costs in the prior year.
Fuel expense increased
Depreciation and Amortization expense increased
Equipment and Other Rents expense was
Gains on Property Dispositions decreased to
Interest Expense
Interest expense increased
Other Income - Net
Other income - net increased
Income Tax Expense Income tax expense increased$1 million as higher earnings before income taxes were mostly offset by$37 million in tax benefits primarily due to a favorable state legislative change. CSX Q3 2022 Form 10-Q p.34
--------------------------------------------------------------------------------
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONSNine Months Results of Operations
Revenue increased
Total expense increased
Interest expense increased
Other income - net increased
Income tax expense increased$63 million primarily due to higher earnings before income taxes, partially offset by favorable impacts of state legislative changes in the current year. CSX Q3 2022 Form 10-Q p.35
--------------------------------------------------------------------------------
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONSNon-GAAP Measures - Unaudited
CSX reports its financial results in accordance with accounting principles generally accepted inthe United States of America (U.S. GAAP). CSX also uses certain non-GAAP measures that fall within the meaning of Securities and Exchange Commission Regulation G and Regulation S-K Item 10(e), which may provide users of the financial information with additional meaningful comparison to prior reported results. Non-GAAP measures do not have standardized definitions and are not defined byU.S. GAAP. Therefore, CSX's non-GAAP measures are unlikely to be comparable to similar measures presented by other companies. The presentation of these non-GAAP measures should not be considered in isolation from, as a substitute for, or as superior to the financial information presented in accordance with GAAP. Reconciliations of non-GAAP measures to corresponding GAAP measures are below.
Free Cash Flow
Management believes that free cash flow is supplemental information useful to investors as it is important in evaluating the Company's financial performance. More specifically, free cash flow measures cash generated by the business after reinvestment. This measure represents cash available for both equity and bond investors to be used for dividends, share repurchases or principal reduction on outstanding debt. Free cash flow is calculated by using net cash from operations and adjusting for property additions and proceeds and advances from property dispositions. Free cash flow should be considered in addition to, rather than a substitute for, cash provided by operating activities. The decrease in free cash flow before dividends from the prior year of$27 million is due to a decrease in proceeds from property dispositions and higher property additions, partially offset by an increase in cash from operating activities.
The following table reconciles cash provided by operating activities (GAAP measure) to free cash flow, before dividends (non-GAAP measure).
Nine Months
(Dollars in millions) 2022 2021
Net cash provided by operating activities $ 4,255 $ 3,819
Property Additions (1,437) (1,220)
Proceeds and Advances from Property Dispositions 51 297
Other Investing Activities (a) n/a -
Free Cash Flow (before payment of dividends) $ 2,869 $ 2,896
(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.
Operating Statistics (Estimated)
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.
In third quarter 2022, velocity decreased by 11% and dwell increased by 12% versus prior year. Carload trip plan performance decreased by 16% while intermodal trip plan performance improved by 2%. The Company continues to prioritize hiring and training, while remaining focused on executing the operating plan to deliver safe, reliable and efficient service to customers.
CSX Q3 2022 Form 10-Q p.36--------------------------------------------------------------------------------
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The FRA train accident rate improved 21% year over year. The personal injury
frequency index increased 9% versus the prior year. 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.
Third Quarters Nine Months
Improvement/ Improvement/
2022 2021 (Deterioration) 2022 2021 (Deterioration)
Operations Performance
Train Velocity (Miles per hour)
(a) 15.8 17.7 (11) % 15.7 18.1 (13) %
Dwell (Hours) (a) 11.8 10.5 (12) % 11.6 10.6 (9) %
Cars Online (a) 141,911 130,841 (8) % 140,461 130,273 (8) %
On-Time Originations (a) 58 % 71 % (18) % 62 % 76 % (18) %
On-Time Arrivals (a) 46 % 62 % (26) % 51 % 66 % (23) %
Carload Trip Plan Performance (a) 57 % 68 % (16) % 60 % 68 % (12) %
Intermodal Trip Plan Performance
(a) 90 % 88 % 2 % 89 % 87 % 2 %
Fuel Efficiency 0.99 0.92 (8) % 0.99 0.96 (3) %
Revenue Ton-Miles (Billions)
Merchandise 31.7 30.8 3 % 95.0 94.2 1 %
Coal 8.6 8.9 (3) % 24.6 26.9 (9) %
Intermodal 7.6 7.8 (3) % 22.9 23.6 (3) %
Total Revenue Ton-Miles 47.9 47.5 1 % 142.5 144.7 (2) %
Total Gross Ton-Miles (Billions) 95.3 92.9 3 % 281.7 282.3 - %
Safety
FRA Personal Injury Frequency
Index (a) 0.99 0.91 (9) % 0.95 0.97 2 %
FRA Train Accident Rate (a) 2.76 3.49 21 % 2.99 3.05 2 %
(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.
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 theSurface Transportation Board . The Company will continue to report these metrics to theSurface Transportation Board using the prescribed methodology. 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 Q3 2022 Form 10-Q p.37
--------------------------------------------------------------------------------
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The following are material changes in the significant cash flows, sources of
cash and liquidity, capital investments, consolidated balance sheets and working
capital, which provide an update to the discussion included in CSX's most recent
annual report on Form 10-K.
Material Changes in Significant Cash Flows
Significant Cash Flows
The following chart highlights the operating, investing and financing
components of the net increase of
[[Image Removed: csx-20220930_g2.jpg]] [[Image Removed: csx-20220930_g3.jpg]] [[Image Removed: csx-20220930_g4.jpg]]
•Cash provided by operating activities increased$436 million primarily driven by higher cash-generating income, partially offset by less favorable changes in working capital.
•Cash used in investing activities increased
•Cash used in financing activities decreased
Sources of Cash and Liquidity and Uses of Cash
As of the end of third quarter 2022, CSX had
The Company has multiple sources of liquidity, including cash generated from operations and financing sources. The Company filed a shelf registration statement with theSEC onFebruary 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. During the nine months ended 2022, CSX issued a total of$2.0 billion of long-term debt. CSX Q3 2022 Form 10-Q p.38
--------------------------------------------------------------------------------
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CSX has a $1.2 billion unsecured, revolving credit facility backed by a diverse
syndicate of banks that expires in March 2024 . At September 30, 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. At September 30,
2022 , the Company had no outstanding debt under the commercial paper program.
Planned capital investments for 2022 are expected to be approximately $2
billion . Of the 2022 investment, over 80% 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.
Material Changes in the
Consolidated Balance Sheets
Total assets increased$1.7 billion from year end primarily due to a$941 million increase in net properties, a$319 million increase in accounts receivable, a$190 million increase in investments in affiliates and other companies and an$86 million increase in goodwill and other intangible assets. The increase in net property was primarily attributable to$581 million in fixed assets acquired as part of the Pan Am transaction as well as capital expenditures. Of the increase in accounts receivables,$124 million relates to the sale of property rights to theCommonwealth of Virginia and the remainder was commensurate with the increase in revenue. In addition, higher investments in affiliates and other companies includes the impact of the acquired interest inPan Am Southern, LLC as well as increases in the values of several affiliates. See Note 11, Business Combinations, and Note 12,Goodwill and Other Intangibles, for more details. Total liabilities increased$2.3 billion from year end primarily due to the issuance of$2.0 billion in long-term debt, a$249 million increase in deferred taxes due to accelerated tax depreciation and the impact of the Pan Am acquisition, as well as an increase in accounts payable of$189 million . The increase in accounts payable was driven by higher debt interest payable and increased trade payables mostly due to the timing of payments. These increases were partially offset by debt repayments of$178 million . Total shareholders' equity decreased$617 million from year end primarily driven by share repurchases of$3.7 billion and dividends paid of$645 million , partially offset by net earnings of$3.1 billion and common stock issued to acquire Pan Am of$422 million . Working capital is considered a measure of a company's ability to meet its short-term needs. CSX had a working capital surplus of$1.8 billion as ofSeptember 30, 2022 and$1.6 billion as ofDecember 31, 2021 . This increase of$162 million since year end was primarily due to the$319 million increase in accounts receivable, partially offset by the$189 million increase in accounts payable. The Company's working capital balance varies due to factors such as the timing of scheduled debt payments and changes in cash and cash equivalent balances as discussed above. The Company continues to maintain adequate liquidity to satisfy current liabilities and maturing obligations when they come due. CSX has sufficient financial capacity, including its revolving credit facility, commercial paper program and shelf registration statement to manage its day-to-day cash requirements and any anticipated obligations. The Company from time to time accesses the credit markets for additional liquidity. CSX Q3 2022 Form 10-Q p.39
--------------------------------------------------------------------------------
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CSX is committed to returning cash to shareholders and maintaining an
investment-grade credit profile. Capital structure, capital investments and cash
distributions, including dividends and share repurchases, are reviewed at least
annually by the Board of Directors. 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.
Completed and Pending Transactions
Acquisition ofPan Am Systems, Inc. OnJune 1, 2022 , CSX acquired Pan Am for a purchase price of$601 million funded through a combination of common stock and cash, subject to certain customary purchase price adjustments. For further details, refer to Note 11, Business Combinations. Sale of Property Rights to theCommonwealth of Virginia OnMarch 26, 2021 , the Company entered into a comprehensive agreement to sell certain property rights in three CSX-owned line segments to theCommonwealth of Virginia ("Commonwealth") over three phases for a total of$525 million . The timing and amount of gains recognized are based on the allocation of fair value to each conveyance, the timing of future conveyances and collectability. InApril 2021 , upon closing of the first phase of the agreement, the Company collected$200 million in proceeds and recognized a$349 million gain. In fourth quarter 2021, the Company collected additional proceeds of$200 million , a portion of which was attributable to the first phase with the remainder attributable to the second phase. The second phase closed inJanuary 2022 , which resulted in a$20 million gain in first quarter 2022. DuringJune 2022 , the final$125 million of proceeds was approved by the Commonwealth, which resulted in a$122 million gain in second quarter 2022 related to property rights previously conveyed. To date, total proceeds of$400 million have been collected and total gains of$491 million have been recognized. The remaining proceeds are expected to be collected during fourth quarter 2022 upon closing of the third phase and future gains are not expected to be material. As ofSeptember 30, 2022 , the carrying values of the remaining assets subject to this transaction were not material. There were no proceeds or gains related to this agreement during third quarter 2022 or 2021. Amounts related to the nine months 2022 and 2021 are summarized in the following table. Nine Months (Dollars in millions) 2022 2021 Gains$ 142 $ 349 Proceeds - 200 CSX Q3 2022 Form 10-Q p.40
--------------------------------------------------------------------------------
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONSGuaranteed Notes Issued By CSXT
In 2007, CSXT, a wholly-owned subsidiary ofCSX 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 ofCSX Corporation and will be effectively subordinated to all future secured indebtedness ofCSX 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 ofSeptember 30, 2022 , the principal balance of these secured equipment notes was$139 million . In accordance withSEC rules, including amendments adopted in 2020, CSX is not required to present separate condensed consolidating financial information for wholly-owned subsidiaries who issued or guaranteed notes. Additionally, presentation of combined summary financial information regarding subsidiary issuers and guarantors is not required because the assets, liabilities and results of operations of the combined issuers and guarantors of the notes are not materially different from the corresponding amounts presented in the consolidated financial statements. LABOR AGREEMENTS Approximately 16,700 of the Company's employees are members of a labor union. TheU.S. Class I railroads and rail labor unions were engaged in direct negotiations fromJanuary 2020 throughJune 2022 . In accordance with the Railway Labor Act, a Presidential Emergency Board issued its report and recommendations to settle the bargaining disputes onAugust 16, 2022 . Tentative agreements based on these recommendations were reached with all labor unions inSeptember 2022 . As of the date of this filing, six unions representing approximately 17% of unionized rail employees have ratified those agreements. OnOctober 10, 2022 , one labor union voted against ratification of the tentative agreement. Ratification results for the remaining unions are scheduled to be announced throughNovember 2022 . CSX Q3 2022 Form 10-Q p.41
--------------------------------------------------------------------------------
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires that management make estimates
in reporting the amounts of certain assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
certain revenues and expenses during the reporting period. Actual results may
differ from those estimates. These estimates and assumptions are discussed with
the Audit Committee of the Board of Directors on a regular basis. Consistent
with the prior year, significant estimates using management judgment are made
for the areas below. For further discussion of CSX's critical accounting
estimates, see the Company's most recent annual report on Form 10-K.
•personal injury and environmental reserves;
•pension and post-retirement medical plan accounting;
•depreciation policies for assets under the group-life method; and
•goodwill and other intangible assets.
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.
CSX Q3 2022 Form 10-Q p.42--------------------------------------------------------------------------------
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-looking statements are subject to a number of risks and uncertainties
and actual performance or results could differ materially from those anticipated
by any forward-looking statements. The Company undertakes no obligation to
update or revise any forward-looking statement. If the Company does update any
forward-looking statement, no inference should be drawn that the Company will
make additional updates with respect to that statement or any other
forward-looking statements. The following important factors, in addition to
those discussed in Part I, Item 1A Risk Factors of CSX's most recent annual
report on Form 10-K and elsewhere in this report, may cause actual results to
differ materially from those contemplated by any forward-looking statements:
•legislative, regulatory or legal developments involving transportation, including rail or intermodal transportation, the environment, hazardous materials, taxation, international trade and initiatives to further regulate the rail industry;
•the outcome of litigation, claims and other contingent liabilities, including, but not limited to, those related to fuel surcharge, environmental matters, taxes, shipper and rate claims subject to adjudication, personal injuries and occupational illnesses; •changes in domestic or international economic, political or business conditions, including those affecting the transportation industry (such as the impact of industry competition, conditions, performance and consolidation) and the level of demand for products carried by CSXT; •natural events such as severe weather conditions, including floods, fire, hurricanes and earthquakes, a pandemic crisis, including the outbreak of COVID-19, affecting the health of the Company's employees, its shippers or the consumers of goods, or other unforeseen disruptions of the Company's operations, systems, property, equipment or 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 CSXT's export coal market;
CSX Q3 2022 Form 10-Q p.43
--------------------------------------------------------------------------------
Table of Contents
CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS•availability of insurance coverage at commercially reasonable rates or insufficient insurance coverage to cover claims or damages;
•the inherent business risks associated with safety and security, including the transportation of hazardous materials or a cybersecurity attack which would threaten the availability and vulnerability of information technology;
•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 continued and uncertain impact of the COVID-19 pandemic; and
•the inherent uncertainty associated with projecting economic and business conditions.
Other important assumptions and factors that could cause actual results to differ materially from those in the forward-looking statements are specified elsewhere in this report and in CSX's otherSEC reports, which are accessible on theSEC's website at www.sec.gov and the Company's website at www.csx.com. The information on the CSX website is not part of this quarterly report on Form 10-Q. CSX Q3 2022 Form 10-Q p.44
--------------------------------------------------------------------------------
Table of Contents
CSX CORPORATION
© Edgar Online, source
