UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 8-K

Current Report

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 16, 2019
CSXLOGOQ42018.JPG
CSX CORPORATION
(Exact name of registrant as specified in its charter)

Virginia
(State or other jurisdiction of
incorporation or organization)
1-8022
 
62-1051971
(Commission File No.)
 
(I.R.S. Employer
 
 
Identification No.)

500 Water Street, C900, Jacksonville, FL 32202
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:
(904) 359-3200

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

__ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

__ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

__ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

__ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company __

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








Item 2.02.
Results of Operations and Financial Condition

On January 16, 2019, CSX Corporation issued a press release and its CSX Quarterly Financial Report on financial and operating results for the quarter ended December 31, 2018. A copy of the press release is attached as Exhibit 99.1 and a copy of the CSX Quarterly Financial Report is attached as Exhibit 99.2, each of which is incorporated by reference herein. These documents are available on the Company's website, www.csx.com.*

The information contained in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 hereto, has been “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section. The information in this Current Report shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.


Item 8.01.    Other Events

CSX Corporation has completed its prior $5 billion share repurchase program.  On January 15, 2019, the Board of Directors authorized a new $5 billion share repurchase program. 

The repurchases may be made through a variety of methods including, but not limited to, open market purchases, purchases pursuant to Rule 10b5-1 plans, accelerated share repurchases and negotiated block purchases. The timing of share repurchases depends upon marketplace conditions and other factors, and the program remains subject to the discretion of the Board of Directors.


Item 9.01.    Exhibits

(d)    The following exhibits are being furnished herewith:

99.1 Press Release dated January 16, 2019 from CSX Corporation
99.2 CSX Quarterly Financial Report


*
Internet addresses are provided for informational purposes only and are not intended to be hyperlinks.






Signature

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


CSX CORPORATION

By: /s/ ANGELA C. WILLIAMS
Angela C. Williams
Vice President and Controller
(Principal Accounting Officer)
                                            
Date: January 16, 2019



Exhibit 99.1


PRESSRELEASEBANNERQ42018.JPG

CSX Announces Fourth Quarter and Full Year 2018 Financial Results,
Authorizes $5 Billion Share Buyback

JACKSONVILLE, Fla. - January 16, 2019 - CSX Corporation (NASDAQ: CSX) today announced fourth quarter 2018 net earnings of $843 million, or $1.01 per share, versus $4,140 million, or $4.62 per share on a GAAP basis ($0.64 on an adjusted basis) in the same period last year. Fourth quarter 2017 net earnings included a tax reform benefit resulting from the Tax Cuts and Jobs Act of 2017 and a restructuring charge that accounted for $3.98 per share (see table below for details). CSX’s operating ratio set a company fourth quarter record of 60.3 percent from 60.7 percent in the prior year or 65.1 percent on an adjusted basis.
CSX’s full year 2018 operating ratio of 60.3% is a U.S. Class I railroad record.
Reconciliation of GAAP to Non-GAAP Measures
For the Quarter ended December 31, 2017
(in millions, except operating ratio and EPS)
Operating Income
Operating Ratio
Net Earnings
Net Earnings
Per Share, Assuming Dilution
GAAP Operating Results
$
1,126

60.7
 %
$
4,140

$
4.62

Restructuring Charge
 
14

(0.5
)%
 
10

0.01

Tax Reform Benefit (net)
 
(142
)
4.9
 %
 
(3,577
)
(3.99
)
Adjusted Operating Results (non-GAAP)
$
998

65.1
 %
$
573

$
0.64


CSX also announced the Board has authorized $5 billion in share repurchases following the early completion of the existing $5 billion authorization.
“As I reflect back on this past year, this team of railroaders has proven they are capable of accomplishing amazing things,” said James M. Foote, president and chief executive officer. “We are entering 2019 on a new trajectory with significant opportunity to improve across all aspects of our business. I expect CSX to deliver even better service to our customers and drive significant shareholder value.”
Revenue for the fourth quarter increased 10 percent over the prior year to $3.14 billion, supported by increases in fuel recovery, broad-based volume growth, pricing gains, higher supplemental revenue and favorable mix. Expenses increased 9 percent year over year to $1.89 billion, or 2 percent when 2017 results are adjusted for the impacts of restructuring and tax reform benefits. This combination yielded adjusted operating income growth of 25 percent for the quarter to $1.25 billion compared to $998 million in the same period last year.




CSX executives will conduct a conference call with the investment community this afternoon, January 16, at 4:30 p.m. Eastern Time. Investors, media and the public may listen to the conference call by dialing 1-888-327-6279 (1-888-EARN-CSX). For callers outside the U.S., dial 1-773-756-0199. Participants should dial in 10 minutes prior to the call and enter in 3276279 as the passcode.
In conjunction with the call, a live webcast will be accessible and presentation materials will be posted on the company's website at http://investors.csx.com . Following the earnings call, an internet replay of the presentation will be archived on the company website.
This earnings announcement, as well as additional detailed financial information, is contained in the CSX Quarterly Financial Report available through the company’s website at http://investors.csx.com and on Form 8-K with the Securities and Exchange Commission.
About CSX and its Disclosures
CSX, based in Jacksonville, Florida, is a premier transportation company. It provides rail, intermodal and rail-to-truck transload services and solutions to customers across a broad array of markets, including energy, industrial, construction, agricultural, and consumer products. For nearly 200 years, CSX has played a critical role in the nation's economic expansion and industrial development. Its network connects every major metropolitan area in the eastern United States, where nearly two-thirds of the nation's population resides. It also links more than 230 short-line railroads and more than 70 ocean, river and lake ports with major population centers and farming towns alike.
This announcement, as well as additional financial information, is available on the company's website at http://investors.csx.com . CSX also uses social media channels to communicate information about the company. Although social media channels are not intended to be the primary method of disclosure for material information, it is possible that certain information CSX posts on social media could be deemed to be material. Therefore, we encourage investors, the media, and others interested in the company to review the information we post on Twitter ( http://twitter.com/CSX ) and on Slideshare ( http://www.slideshare.net/HowTomorrowMoves ). The social media channels used by CSX may be updated from time to time.
More information about CSX Corporation and its subsidiaries is available at www.csx.com and on Facebook ( http://www.facebook.com/OfficialCSX ).
Non-GAAP Disclosure
CSX reports its financial results in accordance with accounting principles generally accepted in the 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 by U.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 above.
Forward-looking Statements
This information and other statements by the company may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to, among other items: projections and estimates of earnings, revenues, margins, volumes, rates, cost-savings, expenses, taxes, liquidity, capital expenditures, dividends, share repurchases or other financial items, statements of management's plans, strategies and objectives for future operations, and management's expectations as to future performance and operations and the time by which objectives will be achieved, statements concerning proposed new services, and statements regarding future economic, industry or market conditions or performance. Forward-looking statements are typically identified by words or phrases such as “will,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate,” “preliminary” and similar expressions. Forward-looking statements speak only as of the date they are made, and the company undertakes no obligation to update or revise any forward-looking statement. If the company updates 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.
Forward-looking statements are subject to a number of risks and uncertainties, and actual performance or results could differ materially from that anticipated by any forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by any forward- looking statements include, among others; (i) the company's success in implementing its financial and operational initiatives; (ii) 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); (iii) legislative or regulatory changes; (iv) the inherent business risks associated with safety and security; (v) the outcome of claims and litigation involving or affecting the company; (vi) natural events such as severe weather conditions or pandemic health crises; and (vii) 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 in the company's SEC reports, accessible on the SEC's website at www.sec.gov and the company's website at www.csx.com .

Contact:
Kevin Boone, Investor Relations
904-359-1090

Bryan Tucker, Corporate Communications
855-955-6397



Exhibit 99.2


CSXQ418QFRLTRV1.JPG


QFRBANNERQ42018.JPG
CSX Announces Fourth Quarter and Full Year 2018 Financial Results,
Authorizes $5 Billion Share Buyback

JACKSONVILLE, Fla. - January 16, 2019 - CSX Corporation (NASDAQ: CSX) today announced fourth quarter 2018 net earnings of $843 million, or $1.01 per share, versus $4,140 million, or $4.62 per share on a GAAP basis ($0.64 on an adjusted basis) in the same period last year. Fourth quarter 2017 net earnings included a tax reform benefit resulting from the Tax Cuts and Jobs Act of 2017 and a restructuring charge that accounted for $3.98 per share (see table below for details). CSX’s operating ratio set a company fourth quarter record of 60.3 percent from 60.7 percent in the prior year or 65.1 percent on an adjusted basis.
CSX’s full year 2018 operating ratio of 60.3% is a U.S. Class I railroad record.
Reconciliation of GAAP to Non-GAAP Measures
For the Quarter ended December 31, 2017
(in millions, except operating ratio and EPS)
Operating Income
Operating Ratio
Net Earnings
Net Earnings
Per Share, Assuming Dilution
GAAP Operating Results
$
1,126

60.7
 %
$
4,140

$
4.62

Restructuring Charge
 
14

(0.5
)%
 
10

0.01

Tax Reform Benefit (net)
 
(142
)
4.9
 %
 
(3,577
)
(3.99
)
Adjusted Operating Results (non-GAAP)
$
998

65.1
 %
$
573

$
0.64


CSX also announced the Board has authorized $5 billion in share repurchases following the early completion of the existing $5 billion authorization.
“As I reflect back on this past year, this team of railroaders has proven they are capable of accomplishing amazing things,” said James M. Foote, president and chief executive officer. “We are entering 2019 on a new trajectory with significant opportunity to improve across all aspects of our business. I expect CSX to deliver even better service to our customers and drive significant shareholder value.”
Revenue for the fourth quarter increased 10 percent over the prior year to $3.14 billion, supported by increases in fuel recovery, broad-based volume growth, pricing gains, higher supplemental revenue and favorable mix. Expenses increased 9 percent year over year to $1.89 billion, or 2 percent when 2017 results are adjusted for the impacts of restructuring and tax reform benefits. This combination yielded adjusted operating income growth of 25 percent for the quarter to $1.25 billion compared to $998 million in the same period last year.

Table of Contents
The accompanying unaudited
CSX CORPORATION
CONTACTS:
 
financial information should be
500 Water Street, C900
INVESTOR RELATIONS
read in conjunction with the
Jacksonville, FL 32202
Kevin Boone
Company’s most recent
www.csx.com
(904) 359-1090
Annual Report on Form 10-K,
 
MEDIA
 
Quarterly Reports on Form 10-Q, and
 
Bryan Tucker
 
any Current Reports on Form 8-K.
 
(855) 955-6397

1

QFRBANNERQ42018.JPG

CSX executives will conduct a conference call with the investment community this afternoon, January 16, at 4:30 p.m. Eastern Time. Investors, media and the public may listen to the conference call by dialing 1-888-327-6279 (1-888-EARN-CSX). For callers outside the U.S., dial 1-773-756-0199. Participants should dial in 10 minutes prior to the call and enter in 3276279 as the passcode.
In conjunction with the call, a live webcast will be accessible and presentation materials will be posted on the company's website at http://investors.csx.com . Following the earnings call, an internet replay of the presentation will be archived on the company website.
This earnings announcement, as well as additional detailed financial information, is contained in the CSX Quarterly Financial Report available through the company’s website at http://investors.csx.com and on Form 8-K with the Securities and Exchange Commission.
About CSX and its Disclosures
CSX, based in Jacksonville, Florida, is a premier transportation company. It provides rail, intermodal and rail-to-truck transload services and solutions to customers across a broad array of markets, including energy, industrial, construction, agricultural, and consumer products. For nearly 200 years, CSX has played a critical role in the nation's economic expansion and industrial development. Its network connects every major metropolitan area in the eastern United States, where nearly two-thirds of the nation's population resides. It also links more than 230 short-line railroads and more than 70 ocean, river and lake ports with major population centers and farming towns alike.
This announcement, as well as additional financial information, is available on the company's website at http://investors.csx.com . CSX also uses social media channels to communicate information about the company. Although social media channels are not intended to be the primary method of disclosure for material information, it is possible that certain information CSX posts on social media could be deemed to be material. Therefore, we encourage investors, the media, and others interested in the company to review the information we post on Twitter ( http://twitter.com/CSX ) and on Slideshare ( http://www.slideshare.net/HowTomorrowMoves ). The social media channels used by CSX may be updated from time to time.
More information about CSX Corporation and its subsidiaries is available at www.csx.com and on Facebook ( http://www.facebook.com/OfficialCSX ).
Non-GAAP Disclosure
CSX reports its financial results in accordance with accounting principles generally accepted in the 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 by U.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 above.
Forward-looking Statements
This information and other statements by the company may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to, among other items: projections and estimates of earnings, revenues, margins, volumes, rates, cost-savings, expenses, taxes, liquidity, capital expenditures, dividends, share repurchases or other financial items, statements of management's plans, strategies and objectives for future operations, and management's expectations as to future performance and operations and the time by which objectives will be achieved, statements concerning proposed new services, and statements regarding future economic, industry or market conditions or performance. Forward-looking statements are typically identified by words or phrases such as “will,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate,” “preliminary” and similar expressions. Forward-looking statements speak only as of the date they are made, and the company undertakes no obligation to update or revise any forward-looking statement. If the company updates 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.
Forward-looking statements are subject to a number of risks and uncertainties, and actual performance or results could differ materially from that anticipated by any forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by any forward- looking statements include, among others; (i) the company's success in implementing its financial and operational initiatives; (ii) 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); (iii) legislative or regulatory changes; (iv) the inherent business risks associated with safety and security; (v) the outcome of claims and litigation involving or affecting the company; (vi) natural events such as severe weather conditions or pandemic health crises; and (vii) 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 in the company's SEC reports, accessible on the SEC's website at www.sec.gov and the company's website at www.csx.com .

2

CSX Corporation


CONSOLIDATED INCOME STATEMENTS
(Dollars in millions, except per share amounts)


 
(Unaudited)
 
(Unaudited)
 
 
 
 
Quarters Ended (a)
 
Years Ended (a)
 
Dec. 31, 2018
Dec. 31, 2017
$ Change
% Change
 
Dec. 31, 2018
Dec. 31, 2017
$ Change
% Change
 
 
 
 
 
 
 
 
 
 
Revenue
$
3,143

$
2,863

$
280

10
 %
 
$
12,250

$
11,408

$
842

7
 %
Expense
 
 
 
 
 
 
 
 
 
Labor and Fringe (b)
678

675

(3
)
—

 
2,738

2,946

208

7

Materials, Supplies and Other
542

524

(18
)
(3
)
 
1,967

2,113

146

7

Depreciation
345

337

(8
)
(2
)
 
1,331

1,315

(16
)
(1
)
Fuel
253

243

(10
)
(4
)
 
1,046

864

(182
)
(21
)
Equipment and Other Rents
93

116

23

20

 
395

429

34

8

Restructuring Charge (b)(c)
—

14

14

100

 
—

240

240

100

Equity Earnings of Affiliates (d)
(17
)
(172
)
(155
)
(90
)
 
(96
)
(219
)
(123
)
(56
)
Total Expense
1,894

1,737

(157
)
(9
)
 
7,381

7,688

307

4

 
 
 
 
 
 
 
 
 
 
Operating Income
1,249

1,126

123

11

 
4,869

3,720

1,149

31

 
 
 
 
 
 
 
 
 
 
Interest Expense
(171
)
(140
)
(31
)
(22
)
 
(639
)
(546
)
(93
)
(17
)
Restructuring Charge - Non-Operating (b)(c)
—

(15
)
15

100

 
—

(85
)
85

100

Other Income - Net (b)
20

12

8

67

 
74

53

21

40

Earnings Before Income Taxes
1,098

983

115

12

 
4,304

3,142

1,162

37

 
 
 
 
 
 
 
 
 
 
Income Tax (Expense) Benefit (e)
(255
)
3,157

(3,412
)
(108
)
 
(995
)
2,329

(3,324
)
(143
)
Net Earnings
$
843

$
4,140

$
(3,297
)
(80
)%
 
$
3,309

$
5,471

$
(2,162
)
(40
)%
 
 
 
 
 
 
 
 
 
 
Operating Ratio
60.3
%
60.7
%
 
 
 
60.3
%
67.4
%
 
 
 
 
 
 
 
 
 
 
 
 
Per Common Share
 
 
 
 
 
 
 
 
 
Net Earnings Per Share, Assuming Dilution
$
1.01

$
4.62

$
(3.61
)
(78
)%
 
$
3.84

$
5.99

$
(2.15
)
(36
)%
 
 
 
 
 
 
 
 
 
 
Average Shares Outstanding, Assuming Dilution (Millions)
833

896

 
 
 
861

914

 
 
 
 
 
 
 
 
 
 
 
 
Cash Dividends Paid Per Common Share
$
0.22

$
0.20

 
 
 
$
0.88

$
0.78

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Certain prior year data has been reclassified to conform to the current presentation.

3
CSX Corporation

CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)


 
(Unaudited)
 
 
Dec. 31, 2018 (a)
Dec. 31, 2017 (a)
ASSETS
 
 
 
Cash and Cash Equivalents
$
858

$
401

Short-Term Investments
253

18

Other Current Assets
1,454

1,496

Properties - Net
31,998

31,764

Investment in Affiliates and Other Companies
1,779

1,686

Other Long-Term Assets
387

374

Total Assets
$
36,729

$
35,739

 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Current Maturities of Long-Term Debt
$
18

$
19

Other Current Liabilities
1,897

1,875

Long-Term Debt
14,739

11,790

Deferred Income Taxes - Net
6,690

6,418

Other Long-Term Liabilities
805

916

Total Liabilities
24,149

21,018

 
 
 
Total Shareholders' Equity
12,580

14,721

Total Liabilities and Shareholders' Equity
$
36,729

$
35,739




4
CSX Corporation

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
(Dollars in millions)


 
(Unaudited)
 
 
Years Ended (a)
 
Dec. 31, 2018
Dec. 31, 2017
OPERATING ACTIVITIES
 
 
Net Earnings
$
3,309

$
5,471

Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities:
 
 
     Depreciation
1,331

1,315

     Deferred Income Tax Expense (Benefit)
279

(3,233
)
     Gain on Property Dispositions
(154
)
(18
)
     Equity Earnings of Affiliates
(96
)
(219
)
     Restructuring Charge (c)
—

325

     Cash Payments for Restructuring Charge
(15
)
(187
)
     Other Operating Activities - Net
(13
)
18

Net Cash Provided by Operating Activities
4,641

3,472

 
 
 
INVESTING ACTIVITIES
 
 
Property Additions
(1,745
)
(2,040
)
Purchase of Short-Term Investments
(736
)
(782
)
Proceeds from Sales of Short-Term Investments
505

1,193

Proceeds from Property Dispositions
319

97

Other Investing Activities
(27
)
37

Net Cash Used in Investing Activities
(1,684
)
(1,495
)
 
 
 
FINANCING ACTIVITIES
 
 
Long-term Debt Issued
3,000

850

Long-term Debt Repaid
(19
)
(333
)
Dividends Paid
(751
)
(708
)
Shares Repurchased (f)
(4,671
)
(1,970
)
Other Financing Activities
(59
)
(18
)
Net Cash Used in Financing Activities
(2,500
)
(2,179
)
 
 
 
Net Increase (Decrease) in Cash and Cash Equivalents
457

(202
)
 
 
 
CASH AND CASH EQUIVALENTS
 
 
Cash and Cash Equivalents at Beginning of Period
401

603

Cash and Cash Equivalents at End of Period
$
858

$
401

 
 
 
Certain prior year data has been reclassified to conform to the current presentation.



5
CSX Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

a)
Fiscal Year: As previously announced, effective in third quarter 2017, CSX changed its fiscal reporting calendar from a 52/53 week year ending on the last Friday of December to a calendar year ending on December 31 of each year. The calendar year change was made on a prospective basis as it did not materially impact comparability of the Company’s financial results. As a result, the quarters and years ending December 31, 2018 and December 31, 2017 included the following number of days:
Quarters Ended
 
Years Ended
Dec. 31, 2018
Dec. 31, 2017
Change
 
Dec. 31, 2018
Dec. 31, 2017
Change
92 days
92 days
—
 
365 days
366 days
(1 day)

b)
Pension and Other Post-Retirement Benefit Charges: In March 2017, the FASB issued Accounting Standard Update "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-Retirement Benefit Cost," which requires that only the service cost component of net periodic benefit costs be recorded as compensation cost in operating expense on the consolidated income statement. All other components of net periodic benefit cost (interest cost, expected return on plan assets, amortization of net loss, special termination benefits and settlement and curtailment effects) should be presented as non-operating charges on the consolidated income statement. If these non-operating charges are related to prior year restructuring activities, they are presented as restructuring charge - non-operating as discussed in Footnote c) below. Other non-operating charges are presented as other income - net. The Company adopted the provisions of this standard during first quarter 2018 and applied them retrospectively. The retrospective impact of adoption for fourth quarter and year ended 2017 is shown in the following table.
 
Quarter Ended December 31, 2017
(Dollars in millions)
As Previously Reported
 
Reclassification of Net Benefit (Expense)
 
As Reclassified
Operating Expense:
 
 
 
 
 
Labor and Fringe
$
665

 
$
10

 
$
675

Restructuring Charge
29

 
(15
)
 
14

Non-Operating Income (Expense):

 

 

Restructuring Charge - Non-Operating
$
—

 
$
(15
)
 
$
(15
)
Other Income - Net
2

 
10

 
12

 
 
 
 
 
 
 
Year Ended December 31, 2017
(Dollars in millions)
As Previously Reported
 
Reclassification of Net Benefit (Expense)
 
As Reclassified
Operating Expense:
 
 
 
 
 
Labor and Fringe
$
2,914

 
$
32

 
$
2,946

Restructuring Charge
325

 
(85
)
 
240

Non-Operating Income (Expense):
 
 
 
 
 
Restructuring Charge - Non-Operating
$
—

 
$
(85
)
 
$
(85
)
Other Income - Net
21

 
32

 
53



6
CSX Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - continued

c)
Restructuring Charge: The prior year restructuring charge included costs related to the management workforce reduction program completed in 2017, reimbursement arrangements with MR Argent Advisor LLC (“Mantle Ridge”) and the Company’s former President and Chief Executive Officer, E. Hunter Harrison, the proration of equity awards and other advisory costs related to the leadership transition. Payments related to the 2017 restructuring charge were substantially complete as of March 31, 2018. Expenses related to the management workforce reduction and other costs during fourth quarter and year ended 2017 are shown in the following tables.
 
Quarter Ended December 31, 2017
(Dollars in millions)
As Previously Reported
 
Operating Restructuring Charge
 
Non-Operating Restructuring Charge
Severance and Pension
$
10

 
$
7

 
$
3

Employee Equity Awards Proration and Other
7

 
7

 
—

Subtotal Management Workforce Reduction
$
17

 
$
14

 
$
3

Pension Settlement Charge
12

 
—

 
12

Total Restructuring Charge
$
29

 
$
14

 
$
15


 
Year Ended December 31, 2017
(Dollars in millions)
As Previously Reported
 
Operating Restructuring Charge
 
Non-Operating Restructuring Charge
Severance and Pension
$
154

 
$
98

 
$
56

Other Post-Retirement Benefits Curtailment
17

 
—

 
17

Employee Equity Awards Proration and Other
23

 
23

 
—

Subtotal Management Workforce Reduction
$
194

 
$
121

 
$
73

Reimbursement Arrangements
84

 
84

 
—

Executive Equity Awards Proration
24

 
24

 
—

Pension Settlement Charge
12

 
—

 
12

Advisory Fees Related to Shareholder Matters
11

 
11

 
—

Total Restructuring Charge
$
325

 
$
240

 
$
85


d)
Equity Earnings of Affiliates: As a result of tax reform, the Company recognized a benefit in fourth quarter 2017 of $142 million, or $0.10 per share after-tax, in its equity earnings of affiliates. See additional discussion of tax reform in Footnote e) below.

7
CSX Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - continued

e)
Income Taxes: During the fourth quarter of 2018, the Company recorded favorable adjustments to income
tax expense totaling $14 million, or $0.02 cents per share, primarily due to a change in the valuation of state tax liabilities as a result of the 2017 filings and the settlement of state income tax matters.
With the enactment of the Tax Cuts and Jobs Act (the "Act" or "tax reform"), the Company's fourth quarter 2017 financial results included a $3.5 billion, or $3.89 per share, non-cash reduction in income tax expense, primarily resulting from revaluing the Company's net deferred tax liabilities to reflect the recently enacted 21% federal corporate tax rate. Also during fourth quarter 2017, the Company recorded $37 million of income tax benefits, or $0.04 per share. Of this amount, $8 million, or $0.01 per share, are tax benefits related to the change in tax implications of the restructuring charge in Q4. The remaining $29 million is primarily the combination of the reversal of share-based compensation of former President and Chief Executive Officer, E. Hunter Harrison, a change in the valuation of state tax liabilities as a result of the 2016 filings and the settlement of state income tax matters.

f)
Shares Repurchased: During fourth quarters and years ended 2018 and 2017, the Company engaged in the following repurchase activities:     
 
Quarters Ended
 
Years Ended
 
Dec. 31, 2018
Dec. 31, 2017
 
Dec. 31, 2018
Dec. 31, 2017
Shares Repurchased   (Millions)
26

4

 
72

39

Cost of Shares   (Dollars in millions)
$
1,855

$
207

 
$
4,671

$
1,970

Average Cost per Share Repurchased
$
69.80

$
53.36

 
$
64.64

$
50.80







8
CSX Corporation

VOLUME AND REVENUE   (Unaudited)
Volume (Thousands of units); Revenue (Dollars in millions); Revenue Per Unit (Dollars)
 
Quarters Ended December 31, 2018 (92 days) and December 31, 2017 (92 days)
 
 
 
 
 
 
 
 
Volume
 
Revenue
 
Revenue Per Unit
 
 
2018
2017
% Change
 
2018
2017
% Change
 
2018
2017
% Change
 
Chemicals
172

164

5
 %
 
$
598

$
546

10
 %
 
$
3,477

$
3,329

4
 %
 
Automotive
122

117

4

 
333

303

10

 
2,730

2,590

5

 
Agricultural and Food Products
116

113

3

 
347

321

8

 
2,991

2,841

5

 
Minerals
78

75

4

 
130

115

13

 
1,667

1,533

9

 
Forest Products
73

66

11

 
217

188

15

 
2,973

2,848

4

 
Metals and Equipment
65

55

18

 
180

157

15

 
2,769

2,855

(3
)
 
Fertilizers
60

68

(12
)
 
110

113

(3
)
 
1,833

1,662

10

 
Total Merchandise
686

658

4

 
1,915

1,743

10

 
2,792

2,649

5

 
Coal
230

224

3

 
586

541

8

 
2,548

2,415

6

 
Intermodal
732

719

2

 
492

471

4

 
672

655

3

 
Other
—

—

—

 
150

108

39

 
—

—

—

 
Total
1,648

1,601

3
 %
 
$
3,143

$
2,863

10
 %
 
$
1,907

$
1,788

7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Years Ended December 31, 2018 (365 days) and December 31, 2017 (366 days)
 
 
 
 
 
 
 
 
Volume
 
Revenue
 
Revenue Per Unit
 
 
2018
2017
% Change
 
2018
2017
% Change
 
2018
2017
% Change
 
Chemicals
675

672

—
 %
 
$
2,339

$
2,210

6
 %
 
$
3,465

$
3,289

5
 %
 
Automotive
463

457

1

 
1,267

1,195

6

 
2,737

2,615

5

 
Agricultural and Food Products
447

454

(2
)
 
1,306

1,262

3

 
2,922

2,780

5

 
Minerals
315

308

2

 
518

477

9

 
1,644

1,549

6

 
Forest Products
285

264

8

 
850

755

13

 
2,982

2,860

4

 
Metals and Equipment
267

256

4

 
769

703

9

 
2,880

2,746

5

 
Fertilizers
248

291

(15
)
 
442

466

(5
)
 
1,782

1,601

11

 
Total Merchandise
2,700

2,702

—

 
7,491

7,068

6

 
2,774

2,616

6

 
Coal
887

855

4

 
2,246

2,107

7

 
2,532

2,464

3

 
Intermodal
2,895

2,843

2

 
1,931

1,799

7

 
667

633

5

 
Other
—

—

—

 
582

434

34

 
—

—

—

 
Total
6,482

6,400

1
 %
 
$
12,250

$
11,408

7
 %
 
$
1,890

$
1,783

6
 %
 



9
CSX Corporation

VOLUME AND REVENUE
Total revenue increased ten percent for fourth quarter 2018 when compared to fourth quarter 2017, due to increases in fuel recovery, volume growth in most markets, price increases, higher other revenue and favorable mix.
 
Fuel Surcharge
Fuel surcharge revenue is included in the individual markets. Fuel lag is the estimated difference between highway diesel prices in the quarter and the prices used for fuel surcharge, which are generally on a two month lag.
 
Quarters Ended
 
Years Ended
(Dollars in millions)
Dec. 31, 2018 (92 days)
Dec. 31, 2017 (92 days)
 
Dec. 31, 2018 (365 days)
Dec. 31, 2017 (366 days)
Fuel Surcharge Revenue
$
189

$
111

 
$
665

$
367

Fuel Lag Benefit (Expense)
$
2

$
(12
)
 
$
(14
)
$
(24
)
Merchandise
Chemicals - Volume increased as stronger energy, waste and core chemicals shipments more than offset reduced fly ash and sand shipments.
Automotive - Volume increased due to higher North American vehicle production of trucks and SUVs.
Agricultural and Food Products - Volume increased due to gains in the domestic grain market, which were partially offset by losses in the ethanol market.
Minerals - Volume increased due to stronger shipments for construction and paving projects.
Forest Products - Volume increased due to e-commerce driven pulpboard demand, truck conversions to rail and increased export fiber demand.
Metals and Equipment - Volume increased due to stronger domestic steel production, including demand for construction and pipe, as well as truck conversions to rail.
Fertilizers -Volume declined due to the closure of a customer facility in fourth quarter 2017 that previously moved short-haul rail shipments as well as reduced exports.
Coal
Domestic - Coke, iron ore and other volume increased primarily driven by stronger domestic steel production. Utility coal volume declined reflecting strong competition from natural gas.
Export - Volume declined slightly as lower thermal coal exports were mostly offset by continued strength in metallurgical coal shipments.
 
Quarters Ended
 
Years Ended
(Millions of tons)
Dec. 31, 2018 (92 days)
Dec. 31, 2017 (92 days)
Change
 
Dec. 31, 2018 (365 days)
Dec. 31, 2017 (366 days)
Change
Coal Tonnage
 
 
 
 
 
 
 
Domestic
15.5

15.1

3
 %
 
57.3

61.1

(6
)%
Export
10.4

10.5

(1
)
 
43.1

36.2

19

Total Coal
25.9

25.6

1
 %
 
100.4

97.3

3
 %
Intermodal
Domestic - Volume increased as growth with existing customers was partially offset by the rationalization of low-density lanes.
International - Volume increased driven by strong performance with existing customers and new service offerings to inland ports, which more than offset losses from the rationalization of low-density lanes.
Other Revenue
Other revenue increased $42 million versus prior year primarily due to increases in incidental charges.


10
CSX Corporation

EXPENSE
Expenses of $1.9 billion increased $157 million , or nine percent, year over year, primarily driven by favorable items in the prior year that included a $142 million impact of tax reform (related to the Company's equity affiliates) and a reversal of share-based compensation expense, partially offset by efficiencies in labor and equipment rents in the current year.
Labor and Fringe expense increased $3 million primarily due to the following:
•
Incentive compensation increased $32 million primarily due to the prior year reversal of share-based compensation for former CEO, E. Hunter Harrison.
•
Other costs decreased $29 million primarily due to lower headcount and crew starts and the recognition of railroad retirement tax refunds related to past share-based compensation awards.
Materials, Supplies and Other expense increased $18 million primarily due to the following:
•
Asset impairments increased $10 million resulting from projects that were discontinued.
•
Other costs increased $27 million due to several items, none of which were individually significant. (Also see footnote (a) to fuel expense table below.)
•
Gains from real estate sales were $19 million higher than prior year.
Depreciation expense increased $8 million primarily due to a larger asset base.
Fuel expense increased $10 million due primarily to a 10 percent price increase that was partially offset by fuel efficiency initiatives.
Equipment and Other Rents decreased $23 million primarily due to reduced days per load, particularly for merchandise and automotive markets.
Equity Earnings of Affiliates decreased $155 million primarily due to a $142 million favorable impact of tax reform (primarily related to TTX and Conrail) on 2017 results and a real estate gain of $16 million recognized in 2017 on the sale of a property owned by one of the Company's equity affiliates.
Employee Counts (Estimated)
 
Quarters Ended
 
Years Ended
 
Dec. 31, 2018 (92 days)
Dec. 31, 2017 (92 days)
Change
 
Dec. 31, 2018 (365 days)
Dec. 31, 2017 (366 days)
Change
Average
22,484
24,025
(1,541)
 
22,901
25,230
(2,329)
Ending
22,475
24,006
(1,531)
 
22,475
24,006
(1,531)
Fuel Expense
 
Quarters Ended
 
Years Ended
(Dollars and gallons in millions, except price per gallon)
Dec. 31, 2018 (92 days)
Dec. 31, 2017 (92 days)
 
Dec. 31, 2018 (365 days)
Dec. 31, 2017 (366 days)
Estimated Locomotive Fuel Consumption (Gallons)
105.4

107.0

 
424.0

426.7

Price per Gallon (Dollars)
$
2.29

$
2.08

 
$
2.28

$
1.84

Total Locomotive Fuel Expense
$
241

$
223

 
$
967

$
785

Non-Locomotive Fuel Expense (a)
12

20

 
79

79

Total Fuel Expense
$
253

$
243

 
$
1,046

$
864

(a) During fourth quarter 2018, an $11 million year-to-date reclassification was made between fuel and materials, supplies and other.


11
CSX Corporation

OPERATING STATISTICS (Estimated)
Operating performance continued to improve in fourth quarter 2018, as train velocity achieved all-time record levels for the fourth consecutive quarter and car dwell improved 13% year-over-year. Revenue ton-miles increased year-over-year while gross ton-miles were flat, demonstrating improved operational routing efficiency for volumes moved. The Company remains focused on delivering further service gains, improving transit times and increasing asset utilization while controlling costs.
From a safety perspective, the FRA reportable personal injury frequency index of 0.83 for the fourth quarter 2018 improved year over year, driven by a significant reduction in the number of personal injuries. The FRA train accident frequency rate of 2.87 for the quarter also improved, as a reduction in train accidents outpaced a decline in train miles. The Company is committed to continuous safety improvement and remains focused on reducing risk and enhancing the overall safety of its employees, customers and communities in which the Company operates.
 
 
Quarters Ended
 
Years Ended
 
 
Dec. 31, 2018 (92 days)
Dec. 31, 2017 (92 days)
Improvement / (Deterioration)
 
Dec. 31, 2018 ( 365 days)
Dec. 31, 2017 (366 days)
Improvement / (Deterioration)
Operations Performance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Train Velocity (Miles per hour) (a)
 
18.9

16.2

17
%
 
17.9

15.1

19
 %
Dwell (Hours) (a)
 
9.3

10.7

13
%
 
9.6

11.3

15
 %
 
 
 
 
 
 
 
 
 
Revenue Ton-Miles   (Billions) (b)
 
 
 
 
 
 
 
 
Merchandise
 
31.9

31.3

2
%
 
128.1

124.0

3
 %
Coal
 
11.4

11.2

2
%
 
45.5

43.3

5
 %
Intermodal
 
7.3

7.3

—
%
 
29.3

28.8

2
 %
Total Revenue Ton-Miles
 
50.6

49.8

2
%
 
202.9

196.1

3
 %
 
 
 
 
 
 
 
 
 
Total Gross Ton-Miles (Billions)
 
100.9

100.6

—
%
 
402.7

400.1

1
 %
On-Time Originations
 
78
%
77
%
1
%
 
82
%
80
%
3
 %
On-Time Arrivals
 
58
%
56
%
4
%
 
60
%
56
%
7
 %
 
 
 
 
 
 
 
 
 
Safety
 
 
 
 
 
 
 
 
FRA Personal Injury Frequency Index
 
0.83

1.30

36
%
 
0.94

1.22

23
 %
FRA Train Accident Rate
 
2.87

3.22

11
%
 
3.46

3.07

(13
)%

Certain operating statistics are estimated and can continue to be updated as actuals settle.

(a) The methodology for calculating train velocity and dwell differs from that prescribed by the Surface Transportation Board. The Company will continue to report train velocity and dwell to the Surface Transportation Board using the prescribed methodology. See additional discussion on the Company's website.
(b) Beginning in first quarter 2018, the calculation of revenue ton-miles was updated to reflect the ton miles for a shipment’s profiled or planned trip, which aligns with the product sold to the customer and recorded as revenue. Prior year has been restated to conform to this change.

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.
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.
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.
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.

12
CSX Corporation

NON-GAAP MEASURES (Unaudited)
The Company reports its financial results in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The Company also uses certain non-GAAP measures that fall within the meaning of Securities and Exchange Commission Regulation G and Regulation S-K Item 10(e), which may provide users of the financial information with additional meaningful comparison to prior reported results. Non-GAAP measures do not have standardized definitions and are not defined by U.S. GAAP. Therefore, the Company’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.
Prior Year Adjusted Operating Results
Management believes that adjusted operating income, adjusted operating ratio, adjusted net earnings and adjusted net earnings per share, assuming dilution are important in evaluating the Company’s operating performance and for planning and forecasting future business operations and future profitability. These non-GAAP measures provide meaningful supplemental information regarding operating results because they exclude certain significant items that are not considered indicative of future financial trends.
The impact of tax reform, the restructuring charge and retrospective impact of adoption of a new accounting standard for the fourth quarter and year ended 2017 are shown in the following tables. There were no adjustments to operating results in 2018. As noted in Footnote (b) to the consolidated financial statements, the Company adopted the provisions of an accounting standard related to the presentation of net pension and other post-retirement benefit costs during the first quarter 2018 and applied them retrospectively.
 
 
Quarter Ended December 31, 2017
(in millions, except operating ratio and net earnings per share, assuming dilution)
 
Operating Income
 
Operating Ratio
 
Net Earnings
 
Net Earnings Per Share, Assuming Dilution
As Previously Reported - GAAP
 
$
1,121

 
60.9
 %
 
$
4,140

 
$
4.62

Reclassification of Net Pension and Other Post-Retirement Expense
 
5

 
(0.2
)
 
—

 
—

As Reclassified - GAAP
 
1,126

 
60.7

 
4,140

 
4.62

Restructuring Charge (a)(b)
 
14

 
(0.5
)
 
10

 
0.01

Tax Reform Benefit (net)
 
(142
)
 
4.9

 
(3,577
)
 
(3.99
)
Adjusted Operating Results (non-GAAP)
 
$
998

 
65.1
 %
 
$
573

 
$
0.64

 
 
Year Ended December 31, 2017
(in millions, except operating ratio and net earnings per share, assuming dilution)
 
Operating Income
 
Operating Ratio
 
Net Earnings
 
Net Earnings Per Share, Assuming Dilution
As Previously Reported - GAAP
 
$
3,667

 
67.9
 %
 
$
5,471

 
$
5.99

Reclassification of Net Pension and Other Post-Retirement Expense
 
53

 
(0.5
)
 
—

 
—

As Reclassified - GAAP
 
3,720

 
67.4

 
5,471

 
5.99

Restructuring Charge (a)(c)
 
240

 
(2.1
)
 
203

 
0.22

Tax Reform Benefit (net)
 
(142
)
 
1.2

 
(3,577
)
 
(3.91
)
Adjusted Operating Results (non-GAAP)
 
$
3,818

 
66.5
 %
 
$
2,097

 
$
2.30

(a) The restructuring charge was tax effected using rates reflective of the applicable tax amounts for each component of the restructuring charge.
(b) For fourth quarter 2017, $15 million of the $29 million restructuring charge was reclassified to non-operating income (expense) as a result of the adoption of an accounting standard update related to the presentation of net pension and other post-retirement benefit costs.
(c) For 2017, $85 million of the $325 million restructuring charge was reclassified to non-operating income (expense).





13
CSX Corporation

NON-GAAP MEASURES (Unaudited) - continued
Adjusted 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 should be considered in addition to, rather than a substitute for, cash provided by operating activities. Free cash flow is calculated by using net cash from operations and adjusting for property additions and certain other investing activities, which includes proceeds from property dispositions.
The following table reconciles cash provided by operating activities (GAAP measure) to adjusted free cash flow after restructuring, before dividends (non-GAAP measure). The restructuring charge impact to free cash flow was tax effected using the Company's applicable tax rate.
 
Years Ended
(Dollars in millions)
Dec. 31, 2018 (365 days)
Dec. 31, 2017 (366 days)
Net Cash Provided by Operating Activities
$
4,641

$
3,472

Property Additions
(1,745
)
(2,040
)
Other Investing Activities
292

134

Free Cash Flow (before payment of dividends)
3,188

1,566

Add back: Cash Payments for Restructuring Charge (after-tax) (a)
11

135

Adjusted Free Cash Flow Before Dividends (non-GAAP)
$
3,199

$
1,701

(a) The Company made cash payments related to the restructuring charge of $15 million and $187 million in 2018 and 2017, respectively. Also in 2017, the Company made $30 million in payments to a former CEO and a former President for previously accrued non-qualified pension benefits that is not included in the restructuring charge.


14