# CSX Corporation (CSX): Business, Risks and Management Discussion

CSX reports on a calendar fiscal year. Annual material below comes from the 2025 Form 10-K (fiscal year ended December 31, 2025; SEC accession 0000277948-26-000006). Current-period material comes from the Form 10-Q for the quarter ended June 30, 2026 (accession 0000277948-26-000032) and the Form 8-K reports cited in each section. All amounts are in US dollars.

## Business

*Source: 2025 Form 10-K, accession 0000277948-26-000006 (Items 1 and 2, Notes 1, 8, 17 and 18).*

CSX is a freight railroad. Its main subsidiary, CSX Transportation (CSXT), runs a network of about 20,000 route miles in 26 states east of the Mississippi River, the District of Columbia and the Canadian provinces of Ontario and Quebec. CSX earns its money by charging shippers to move bulk and manufactured goods. Rates are set per carload, container or ton and depend on length of haul and commodity, and fuel surcharges are added on top. The network reaches more than 70 ocean, river and lake port terminals on the Atlantic and Gulf Coasts, the Mississippi River, the Great Lakes and the St. Lawrence Seaway. It also connects with the other Class I railroads and about 250 short-line and regional railroads. In 2025 the company had $14.1 billion of revenue across four lines of business:

- **Merchandise ($8.8 billion, 62% of revenue; 2.6 million carloads, 41% of volume).** This covers chemicals, agricultural and food products, automotive, minerals, forest products, metals and equipment, and fertilizers. Chemicals is the largest market, at $2.78 billion in 2025.
- **Intermodal ($2.1 billion, 15% of revenue; 3.0 million units, 48% of volume).** Containers, mostly of manufactured consumer goods, move through about 30 terminals that serve every major market east of the Mississippi. CSX sells this as truck-like service with rail economics on longer hauls.
- **Coal ($1.9 billion, 13% of revenue; 718 thousand carloads, 11% of volume).** CSX carries domestic coal, coke and iron ore to power plants, steelmakers and industrial plants, and export coal to deep-water ports. Most of the export coal is metallurgical coal used in steelmaking, while most domestic coal goes to electricity generation.
- **Trucking ($816 million, 6% of revenue).** This is Quality Carriers, which the company describes as the largest bulk liquid chemicals trucking provider in North America.

Other revenue made up the remaining 4%. It includes regional subsidiary railroads and incidental charges such as demurrage, intermodal storage and switching.

CSX has two operating segments, rail and trucking. The railroad is managed as one integrated segment. Trucking (Quality Carriers) is not material enough to report separately and appears only as a reconciling item. Smaller subsidiaries support the railroad:

- CSX Intermodal Terminals runs intermodal terminals and provides drayage.
- TDSI runs automotive distribution centers.
- TRANSFLO transfers products from rail to truck for customers without rail access, mainly chemicals and agricultural products.

CSX also owns about 20% of TTX Company, the industry's shared railcar pool.

**Network and assets.** The railroad is built around four corridors:

- **I-90 "waterlevel route":** Chicago to New York and New England, almost entirely double-tracked.
- **I-95 corridor:** the Southeast to the Mid-Atlantic and Northeast.
- **Southeastern corridor:** the Chicago, St. Louis and Memphis gateways to Nashville, Birmingham and Atlanta.
- **Appalachian and Illinois Basin coal network.**

At December 2025 CSXT had 35,518 track miles and owned 3,470 locomotives (average age 24 years, about 70% in active service). It also owned or long-term leased 43,985 freight cars and 17,630 containers. In 2025 CSXT expanded a long-term locomotive agreement. The agreement covers maintenance running to at least 2035, rebuilds through 2029, and a commitment to buy 100 new locomotives between 2026 and 2028.

**Operating model and people.** CSX runs a scheduled service plan. The aim is reliable service, efficient use of assets and lower costs, which together should generate strong free cash flow. The company had about 23,000 employees at December 2025, and about 16,900 of them were union members. Labor agreements effective January 1, 2025 have been ratified by unions representing nearly 75% of the unionized workforce. Under the Railway Labor Act the remaining contracts stay in force until replaced.

**Competition and industry structure.** Norfolk Southern is CSXT's main rail competitor across much of its territory. During 2025 Norfolk Southern agreed to merge with Union Pacific, which would create the only transcontinental U.S. rail network. That merger needs Surface Transportation Board (STB) approval. Trucks compete with CSX on most routes, and barges, ships and pipelines compete to a lesser degree. The STB regulates routes, fuel surcharges, rates for non-exempt traffic, line abandonments and rail mergers. Safety is regulated by the Federal Railroad Administration (FRA) and the Pipeline and Hazardous Materials Safety Administration (PHMSA), and security by the Transportation Security Administration (TSA).

**Leadership.** The leadership team changed substantially from late 2025:

- **CEO:** Stephen F. Angel, formerly CEO of Linde, became President and CEO on September 28, 2025. He succeeded Joe Hinrichs (8-K, accession 0000950103-25-012355).
- **CFO and commercial chief:** On October 29, 2025, Kevin Boone became CFO in place of Sean Pelkey, and Maryclare Kenney became Chief Commercial Officer (8-K, accession 0000950103-25-013783).
- **Chief Administrative Officer:** Diana Sorfleet's retirement was announced on February 3, 2026 (10-K).
- **Chief Digital and Technology Officer:** Stephen Fortune left on May 14, 2026 (8-K, accession 0000950103-26-007181).

## Risk factors

*Source: 2025 Form 10-K, accession 0000277948-26-000006, Item 1A. The June 2026 Form 10-Q (accession 0000277948-26-000032) adds no new risk factors.*

**Regulation and legal exposure**

- **Economic regulation.** New laws, STB rules or executive actions could limit pricing, change rail-to-rail competition (for example, forced access) or cut access to government funding. The company says new STB rules on competitive access or revenue adequacy could be material.
- **Common-carrier duty to haul hazardous materials.** CSXT must by law carry certain hazardous materials whatever the risk. A hazmat accident could bring personal-injury, property, natural-resource and environmental claims beyond its insurance. City-level bans on hazmat routing could force longer, costlier routes.
- **Litigation and reserves.** Claims over commercial practices, labor matters, personal injury, occupational illness and the environment could exceed insurance or recorded reserves. Note 8 describes the main cases, which are summarised under Current quarter below.

**Operations and safety**

- **Cybersecurity and technology.** CSX is part of critical U.S. infrastructure and faces attacks from increasingly capable actors, including nation-states. An attack on its systems or a key vendor's could stop trains, cause an accident or expose data. Falling behind on technology, including artificial intelligence, is also named as a competitive risk.
- **Network congestion.** Crew or locomotive shortages, demand spikes, weather, passenger-rail activity, forced access and derailments can slow the network and erode service and efficiency. This happened in 2025, when Howard Street tunnel work and winter weather added $53 million of rerouting and congestion costs.
- **Weather and natural events.** Hurricanes and flooding have damaged the network before. After Hurricane Helene, rebuilding the Blue Ridge subdivision cost about $470 million of capital in 2025 and $50 million in 2024. Insurance may not cover a catastrophic outage in full. CSX retains up to $200 million per occurrence for flood and named-windstorm losses and up to $175 million for other property losses.
- **Terrorism, war and pandemics** could disrupt operations and demand, and could raise insurance costs or make cover unavailable.

**Competition, economy and finance**

- **Competition.** Trucks use publicly funded highways, while railroads build and maintain their own track. Automation, autonomy or electrification of trucking, or looser truck size and weight limits, could weaken rail's cost advantage. The company also cites proposed rail-industry consolidation as a factor that could change the regulatory and competitive environment.
- **Macro and trade.** Freight demand follows industrial output, imports and exports. Tariffs, embargoes or slower growth in Asia and Europe hit volumes. Export coal depends on seaborne coal prices and benchmark rates, and in 2025 those drove a 15% fall in coal revenue.
- **Energy transition.** Cheap natural gas, emissions rules and alternative fuels keep reducing coal-fired generation in CSX's territory, which erodes domestic coal volumes.
- **Capital markets.** CSX relies on debt markets. Higher rates or a credit downgrade would raise financing costs.

**Supply and labor**

- **Supplier concentration.** Few companies make locomotives, rail, ties and freight cars, and some critical suppliers are foreign. Trade restrictions or shortages could raise costs or delay equipment.
- **Labor.** Most employees are unionized. If national or local bargaining fails, a strike becomes possible once the Railway Labor Act's mediation and cooling-off steps are exhausted. A shortage of engineers, conductors or skilled staff would limit capacity.

**Climate and environment**

- **Climate regulation.** Rules that cut coal-fired generation or raise fuel and capital costs could reduce shipments.
- **Environmental liability.** CSX was named a potentially responsible party at about 220 environmentally impaired sites at year-end 2025, and about 210 at June 30, 2026. Liability can be joint and several and can extend to former or neighboring properties.

## Management's discussion: fiscal 2025

*Source: 2025 Form 10-K, accession 0000277948-26-000006, Item 7; Q4 2025 earnings release, 8-K accession 0000277948-26-000003.*

**2025 was a down year.** Revenue fell 3% to $14.09 billion and operating income fell 14% to $4.52 billion. Operating margin dropped 400 basis points to 32.1%. Net earnings fell 17% to $2.89 billion, and diluted EPS fell 14% to $1.54 from $1.79. Buybacks lowered the share count, which kept EPS from falling as fast as earnings. Excluding a non-cash goodwill impairment at Quality Carriers ($164 million in 2025, $108 million in 2024), adjusted operating income was $4.69 billion, the adjusted margin was 33.2% (36.8% in 2024) and adjusted EPS was $1.61 ($1.83 in 2024). After the third-quarter 2025 charge, no goodwill remains on the trucking segment. Management linked that charge to an extended trucking-market recession and weaker-than-expected results.

**Revenue drivers.** Coal accounted for most of the decline. Coal revenue fell 15% to $1.90 billion. Lower global benchmark rates cut export coal revenue, outages at customer facilities reduced export shipments, and total coal revenue per unit fell 13%. Merchandise revenue slipped 1% to $8.77 billion as volume fell 2%:

- chemicals were lower on crude oil, plastics and petroleum products;
- automotive was lower on weaker North American vehicle production;
- forest products were lower on building products and pulp and paper mill closures.

Merchandise pricing partly offset the volume decline. Intermodal volume rose 4% on international port traffic and wins with key customers, but revenue grew only 1% to $2.07 billion. Trucking revenue fell $28 million on lower rates and fuel surcharge.

**Costs.** Total expense rose $276 million (3%) to $9.57 billion while revenue fell:

- **Labor and fringe:** up $97 million, including $51 million more in employee separation costs and $67 million of wage inflation.
- **Purchased services and other:** up $172 million. Network disruption added $53 million, trucking casualty and derailment costs $42 million, and advisory and technology-contract restructuring $21 million. The prior year had also included a $35 million favorable legal settlement and insurance recovery.
- **Fuel:** down $73 million as locomotive fuel prices fell 7%.

The fourth-quarter release added that Q4 2025 included about $50 million of severance and technology-rationalization expense.

**Cash flow and capital.** Operating cash flow fell $634 million to $4.61 billion. Part of the drop came from paying $429 million of federal and state taxes that had been postponed from the 2024 tax year, with no new postponement available in 2025. A $96 million locomotive-maintenance prepayment also weighed. Capital spending rose to $2.90 billion from $2.53 billion, including about $470 million to rebuild the Blue Ridge subdivision after Hurricane Helene. Free cash flow before dividends, a company non-GAAP measure, fell to $1.79 billion from $2.78 billion. The company-defined Economic Profit fell to $1.62 billion from $2.34 billion.

CSX bought back $1.4 billion of stock and paid $972 million of dividends ($0.52 per share, its 21st consecutive annual increase). It issued $900 million of debt, all in 5.05% notes due 2035: $600 million on March 10, 2025 and a $300 million reopening on October 23, 2025. It repaid $613 million. Year-end cash and short-term investments were $675 million, and the working-capital deficit was $583 million.

**Operations.** Velocity improved 1% to 18.4 mph and dwell was flat at 10.3 hours. Carload trip-plan compliance eased one point to 78%. Safety improved: the FRA personal injury frequency index fell to 0.94 from 1.23, and the FRA train accident rate fell to 3.08 from 3.56.

**Looking into 2026, as stated in the 10-K:**

- Capital spending is planned below $2.4 billion.
- The 2025 equipment depreciation study should reduce depreciation by about $40 million a year.
- 2026 pension expense is expected to be a $5 million credit.
- No qualified pension contributions are expected.

## Current quarter: second quarter 2026

*Source: Form 10-Q for the quarter ended June 30, 2026, accession 0000277948-26-000032; Q2 2026 earnings release and quarterly financial report, 8-K accession 0000277948-26-000031; Q1 2026 earnings release, 8-K accession 0000277948-26-000013; 8-K accession 0000950103-26-007181.*

**Results recovered strongly from 2025.** Second-quarter revenue rose 10% to $3.94 billion, which the company called a quarterly record. Operating income rose 17% to $1.51 billion, and operating margin widened 240 basis points to 38.3%. Net earnings rose 21% to $1.00 billion ($829 million a year earlier), and diluted EPS rose 23% to $0.54 from $0.44.

This continued an improvement that began in the first quarter. Q1 2026 revenue grew 2% to $3.48 billion, operating income was $1.25 billion against $1.04 billion, and EPS was $0.43 against $0.34. For the first half, revenue was up 6% at $7.42 billion, operating income was up 19% at $2.76 billion, the operating margin was 37.2% against 33.2%, and EPS was $0.97 against $0.78.

**What drove revenue.** Total volume rose 6% to 1.68 million units, with growth in every major business. Management attributed the 10% revenue gain to higher fuel surcharge revenue plus higher volume and pricing in merchandise, intermodal and coal.

- **Intermodal:** volume up 9% and revenue up 26% to $620 million. Domestic shipments grew on customer wins, new services and a tighter truck market, while international volume was flat.
- **Merchandise:** volume up 4% and revenue up 8% to $2.45 billion.
  - Chemicals revenue rose 10%, on plastics, waste, petcoke and sand.
  - Metals and equipment revenue rose 14%, on pipe and scrap.
  - Minerals revenue rose 11%, on cement and aggregates.
  - Automotive volume slipped 1% because of a customer's temporary retooling outage.
  - Forest products volume was flat: lumber gains offset pulp and paper closures.
- **Coal:** volume up 4% and revenue up 9% to $520 million. Export metallurgical and thermal coal shipments grew as mines reopened. Domestic utility coal shipments fell.
- **Trucking:** revenue up $15 million on fuel surcharge.
- **Other revenue:** down $15 million because of a larger reserve for freight in transit.

**Costs.** Expenses rose 6% to $2.43 billion. Fuel accounted for all of the increase and more: fuel cost rose $177 million as locomotive fuel prices climbed 74%, while non-fuel expense fell $39 million.

- **Labor and fringe:** up $40 million. Incentive compensation rose $56 million and inflation added $32 million, while lower headcount cut $48 million. Headcount fell to about 22,200 from about 23,000 at year-end.
- **Purchased services and other:** down $66 million. Efficiency savings contributed $54 million and the absence of the prior year's network disruption $14 million. Property-sale gains were $17 million, mainly from selling the company's last aircraft, against $8 million a year earlier. These were partly offset by $11 million of other increases, which included advisory expenses related to potential industry consolidation, net of an insurance recovery for 2024 Blue Ridge damage.
- **Depreciation:** down $16 million after the equipment depreciation study.

**Service and safety.** Results were mixed. Train velocity improved 3% to 18.0 mph and fuel efficiency improved 4%. However, dwell worsened 6% to 11.0 hours, carload trip-plan compliance fell to 71% from 75%, and intermodal trip-plan compliance fell to 88% from 90%. Safety improved sharply: the FRA personal injury index fell to 0.83 (19% better) and the FRA train accident rate fell to 2.72 (30% better). CEO Steve Angel said the company would "strengthen our service execution" in the second half.

**Cash flow and balance sheet.** Six-month operating cash flow rose $709 million to $2.60 billion. Higher earnings and favorable working capital contributed, and the prior-year period had included the $429 million postponed-tax payment. Capital spending fell to $1.12 billion from $1.50 billion now that the Blue Ridge rebuild is complete; the line reopened in September 2025. Free cash flow before dividends rose to $1.62 billion from $444 million.

Cash and short-term investments reached $1.4 billion at June 30, 2026. CSX issued no long-term debt in the first half and had nothing drawn on its $1.2 billion revolver or $1.0 billion commercial paper program. Total debt was $18.86 billion. Current maturities rose to $1.70 billion after about $1.0 billion of long-term debt was reclassified as due within a year, which widened the working-capital deficit to $746 million. The 2026 capital plan remains below $2.4 billion. The filings give no other numeric outlook for 2026.

**Shareholder returns.** In February 2026 the quarterly dividend rose 8% to $0.14. On May 12, 2026 the board added a new $5 billion buyback authorization on top of the roughly $989 million left under the October 2023 program, for total authority of $5.7 billion at June 30. CSX bought back 12 million shares for $506 million in the first half (average $42.31). Of that, 6 million shares for $284 million (average $45.30) came in the second quarter. Dividends paid in the first half totaled $520 million.

**Legal matters (10-Q Note 5)**

- **Fuel-surcharge antitrust cases.** Shippers' fuel-surcharge antitrust cases against CSXT and other Class I railroads were dismissed on summary judgment on June 24, 2025. Most shippers appealed to the D.C. Circuit; briefing is complete and oral argument has not yet been scheduled.
- **Lower Passaic River.** CSXT indemnifies Pharmacia (formerly Monsanto) for liabilities tied to a property it owns on the Lower Passaic River in New Jersey.
  - A court-approved EPA consent decree resolves 82 other parties' liability for $150 million. It excludes Pharmacia and is under appeal.
  - Occidental's chemical business was sold to Berkshire Hathaway in a deal that closed January 2, 2026, with legacy liabilities left in a separate entity. On February 6, 2026 Pharmacia and others sued to hold the new Occidental chemical company jointly liable.
  - On June 29, 2026 Nokia sued EPA over its exclusion from the consent decree.
  - CSX does not expect its share of Passaic remediation costs to be material.
- **Range of possible loss.** CSX estimates reasonably possible losses beyond its reserves at $3 million to $87 million in aggregate.

## Subsequent events

*Source: Form 10-Q, accession 0000277948-26-000032; 8-K accession 0000277948-26-000034 (October 13, 2026) with Exhibit 99.1.*

The June 2026 Form 10-Q has no separate subsequent-events note. It discloses no acquisition, divestiture, borrowing or debt issuance after June 30, 2026. The company's filings through mid-October 2026 add one material post-period event:

- **Chief Operating Officer retirement (October 12, 2026).** Michael A. Cory, Executive Vice President and Chief Operating Officer since September 2023, stepped down from that role on October 12, 2026 and is retiring.
  - He will provide transition services until May 8, 2027. During that period he keeps his $780,000 annual base salary and his 2026 annual bonus based on actual performance. He is also eligible for a pro-rated 2027 bonus.
  - His equity awards will be treated as a retirement under the plan terms. He agreed to a 24-month non-compete.
  - CSX did not name a new COO. Doug Ryhorchuk, Senior Vice President of Operations and a former CN executive, and Casey Albright, Senior Vice President of Network Operations and Service Design, now report directly to CEO Steve Angel.