CSX CORPORATION THIRD QUARTER 2020 HIGHLIGHTS
•Revenue decreased$330 million , or 11% year over year. •Expenses decreased$184 million , or 11% year over year. •Operating income of$1.1 billion decreased$146 million , or 11% year over year. •Operating ratio of 56.9% increased 10 basis points versus last year's quarter. •Earnings per diluted share of$0.96 decreased$0.12 , or 11% year over year. Third Quarters Nine Months Fav / Fav / 2020 2019 (Unfav) % Change 2020 2019 (Unfav) % Change Volume (in thousands) 1,522 1,569 (47) (3)% 4,293 4,681 (388) (8)% (in millions) Revenue$ 2,648 $ 2,978 $ (330) (11)$ 7,758 $ 9,052 $(1,294) (14) Expense 1,507 1,691 184 11 4,611 5,241 630 12 Operating Income$ 1,141 $ 1,287 $ (146) (11)%$ 3,147 $ 3,811 $(664) (17)% Operating Ratio 56.9 % 56.8 % (10) bps 59.4 % 57.9 % (150) bps Earnings Per Diluted Share$ 0.96 $ 1.08 $ (0.12) (11)%$ 2.61 $ 3.18 $(0.57) (18)% CSX Q3 2020 Form 10-Q p.27
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CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Global economic uncertainty, including the effects of the novel coronavirus
("COVID-19") global pandemic, continues to impact the Company's results of
operations. Demand for rail services improved sequentially in third quarter
2020, but the effects of the disruption of global manufacturing, supply chains
and consumer spending as a result of the COVID-19 pandemic are ongoing. While
operating cash flows have also been impacted by these economic conditions, the
Company maintains a strong cash balance and access to committed funding sources
and other sources of external liquidity if required. As this is a dynamic
situation, it is difficult to determine the future impacts of the pandemic. The
full implications of COVID-19, including the extent of its impact on the
Company's financial and operating results, will be determined by the length of
time that the pandemic continues, its effect on the demand for the Company's
transportation services and the supply chain, as well as the effect of
governmental regulations imposed in response to the pandemic.
CSX employees that provide efficient and reliable rail service are essential to
keeping supply chains fluid in response to this challenge. Accordingly, business
operations have been modified to ensure the safety of employees across the
network while continuing to provide a high level of service to customers. A
cross-functional task force monitors and coordinates the Company's response to
COVID-19. Policies and procedures established to protect the health and safety
of employees and customers and to safeguard CSX operations include rigorous
cleaning regimens for equipment and facilities, provision of sanitation
supplies, distribution of disposable face coverings, facilitation of social
distancing measures and administration of temperature testing at certain
facilities. These precautions remain in place despite the easing of pandemic
restrictions by state and local governments across the network. For employees
working remotely, the Company is implementing a phased-in return to facilities.
Going forward, remote work arrangements and alternative locations for key
functions, such as dispatch, can be utilized as needed.
In March 2020 , the Coronavirus Aid, Relief, and Economic Security Act ("CARES
Act") was enacted to provide relief to businesses in response to the COVID-19
pandemic. The most significant remaining impact to the Company is the deferral
of certain payroll tax payments to 2021 and 2022. The provisions of the CARES
Act are not expected to have an impact on CSX's results of operations or
effective tax rate.
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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
2020 2019 % Change 2020 2019 % Change 2020 2019 % Change
Chemicals(a) 165 166 (1) % $ 566 $ 590 (4) % $ 3,430 $ 3,554 (3) %
Agricultural and Food Products 115 119 (3) 335 354 (5) 2,913 2,975 (2)
Automotive 102 110 (7) 271 297 (9) 2,657 2,700 (2)
Minerals(a) 86 90 (4) 144 147 (2) 1,674 1,633 3
Forest Products(a) 67 73 (8) 206 222 (7) 3,075 3,041 1
Metals and Equipment(a) 58 65 (11) 159 195 (18) 2,741 3,000 (9)
Fertilizers 57 60 (5) 96 101 (5) 1,684 1,683 -
Total Merchandise 650 683 (5) 1,777 1,906 (7) 2,734 2,791 (2)
Coal 155 213 (27) 330 516 (36) 2,129 2,423 (12)
Intermodal 717 673 7 445 447 - 621 664 (6)
Other - - - 96 109 (12) - - -
Total 1,522 1,569 (3) % $ 2,648 $ 2,978 (11) % $ 1,740 $ 1,898 (8) %
Nine Months
Volume Revenue Revenue Per Unit
2020 2019 % Change 2020 2019 % Change 2020 2019 % Change
Chemicals(a) 495 506 (2) % $ 1,723 $ 1,770 (3) % $ 3,481 $ 3,498 - %
Agricultural and Food Products 338 351 (4) 1,011 1,056 (4) 2,991 3,009 (1)
Automotive 241 346 (30) 645 937 (31) 2,676 2,708 (1)
Minerals(a) 243 250 (3) 405 419 (3) 1,667 1,676 (1)
Forest Products(a) 202 214 (6) 617 652 (5) 3,054 3,047 -
Metals and Equipment(a) 173 192 (10) 500 572 (13) 2,890 2,979 (3)
Fertilizers 175 183 (4) 311 323 (4) 1,777 1,765 1
Total Merchandise 1,867 2,042 (9) 5,212 5,729 (9) 2,792 2,806 -
Coal 463 651 (29) 1,022 1,611 (37) 2,207 2,475 (11)
Intermodal 1,963 1,988 (1) 1,226 1,311 (6) 625 659 (5)
Other - - - 298 401 (26) - - -
Total 4,293 4,681 (8) % $ 7,758 $ 9,052 (14) % $ 1,807 $ 1,934 (7) %
(a) In first quarter 2020, changes were made in the categorization of certain
lines of business, impacting Chemicals, Minerals, Forest Products, and Metals
and Equipment. The impacts were not material and prior periods have been
reclassified to conform to the current presentation.
CSX Q3 2020 Form 10-Q p.29--------------------------------------------------------------------------------
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CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Third Quarter 2020
Revenue
The COVID-19 pandemic continued to impact volumes during the quarter. Total revenue decreased 11% in third quarter 2020 when compared to third quarter 2019 due to volume declines in merchandise and coal, decreases in fuel recovery and declines in coal pricing resulting from lower global benchmark prices. These decreases were partially offset by pricing gains in merchandise and intermodal as well as intermodal volume growth. Merchandise Volume Chemicals - Declined due to lower shipments of frac sand and other industrial chemicals, partially offset by increases in crude oil and plastics shipments.
Agricultural and Food Products - Declined due to lower shipments of grain and feed, partially offset by increases in ethanol shipments.
Automotive - Declined as a result of lower vehicle production at plants served by CSX.
Minerals - Decreased due to lower shipments of aggregates and other minerals.
Forest Products - Declined due to lower shipments of printing paper, wood pulp and building products.
Metals and Equipment - Declined as a result of reduced equipment shipments as well as reduced sheet steel and pipe shipments.
Fertilizers - Decreased due to lower shipments of phosphate and sulfur.
Coal Volume The decline in domestic coal was driven by lower shipments of utility coal as a result of continued competition from natural gas and reduced electrical demand, as well as lower steel and industrial shipments due to lower industrial production. Export coal declined due to reduced international shipments of thermal and metallurgical coal as a result of lower global benchmark prices. Intermodal Volume Increases in both domestic and international shipments resulted from tightening truck capacity, inventory replenishments and growth in rail volumes from east coast ports. Other Revenue Other revenue decreased$13 million versus prior year primarily due to lower affiliate revenue and declines in demurrage. CSX Q3 2020 Form 10-Q p.30
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CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONSExpenses
Expenses of$1.5 billion decreased$184 million , or 11% in third quarter 2020 when compared to third quarter 2019 primarily driven by efficiency and volume savings as well as lower fuel prices, partially offset by lower gains from real estate sales. Labor and Fringe expense decreased$64 million due to the following: •Efficiency and volume savings of$71 million primarily resulted from reduced crew starts and lower headcount. •Other costs increased$7 million primarily due to inflation. Materials, Supplies and Other expense decreased$29 million due to the following: •Efficiency and volume savings of$58 million primarily resulted from lower operating support costs, lower terminal costs and reduced equipment maintenance expenses. •Other costs decreased$33 million primarily due to a$22 million non-railroad asset impairment in the prior year related to an intermodal terminal sale agreement and other non-significant items. •Partially offsetting these decreases, gains from real estate sales of$3 million in 2020 were lower than gains of$65 million in 2019.
Depreciation expense increased
Fuel expense decreased
Equipment and Other Rents expense increased
Interest Expense
Interest expense increased
Other Income - Net Other income - net decreased$10 million primarily due to lower interest rates, partially offset by higher average cash and short-term investment balances. Income Tax Expense Income tax expense decreased$37 million primarily due to lower earnings before income taxes. CSX Q3 2020 Form 10-Q p.31
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CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONSNine Months Results of Operations
Revenue decreased$1.3 billion due to volume declines in merchandise and coal, decreases in fuel recovery, declines in coal pricing resulting from lower global benchmark prices and lower other revenue. These decreases were partially offset by pricing gains in merchandise and intermodal. Total expense decreased$630 million primarily due to savings from labor, operating support and fuel efficiencies; lower volume-related costs; fuel price savings and decreased incentive compensation costs. These decreases were partially offset by lower gains from real estate and line sales, inflation and increased depreciation.
Interest expense increased
Other income - net decreased$21 million primarily due to lower interest rates associated with changes in asset holdings from short-term investments to cash, partially offset by higher average cash and short-term investment balances.
Income tax expense decreased
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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 certain other investing activities, which includes proceeds 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$845 million is primarily due to lower net cash provided by operating activities and lower proceeds from property dispositions.
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) 2020 2019
Net cash provided by operating activities $ 3,128 $ 3,737
Property Additions (1,209) (1,191)
Other Investing Activities 19 237
Free Cash Flow (before payment of dividends) $ 1,938 $ 2,783
Operating Statistics (Estimated)
The Company strives for continuous improvement in safety and service performance
through training, innovation and investment. Investment in training and
technology also is designed to allow the Company's employees to have an
additional layer of protection that can detect and avoid many types of human
factor incidents. Safety programs are designed to prevent incidents that can
adversely impact employees, customers and communities. Continued capital
investment in the Company's assets, including track, bridges, signals, equipment
and detection technology also supports safety performance.
Train velocity, terminal dwell and cars online in the following table are
calculated using methodologies that differ from those prescribed by the Surface
Transportation Board ("STB") as the Company believes these numbers more
accurately reflect railroad performance. These metrics will continue to be
reported, using the prescribed methodology, to the STB on a weekly basis. See
additional discussion on the Company's website.
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CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
In third quarter 2020, train velocity decreased by 3% and car dwell increased
9% relative to the prior year period. The Company remains focused on executing
the operating plan to deliver improved reliability, faster transit times and
increased asset utilization while continuing to control costs.
From a safety perspective, CSX saw a third quarter record low number of FRA
reportable injuries as well as a third quarter record low number of FRA
reportable train accidents. The personal injury frequency index of 0.77 improved
9% versus the prior year, representing a new third quarter record low level. The
FRA train accident rate of 2.66 increased 12% compared to the third quarter of
2019. Despite a reduction in the number of incident versus third quarter 2019,
the reduction of accidents did not offset the reduction in train miles. The
Company is committed to safety improvement and remains focused on reducing risk
and enhancing the overall safety of its employees, customers and communities in
which the Company operates.
Third Quarters Nine Months
Improvement/ Improvement/
2020 2019 (Deterioration) 2020 2019 (Deterioration)
Operations Performance
Train Velocity (Miles per hour) 19.6 20.3 (3) % 20.7 20.2 2 %
Dwell (Hours) 9.7 8.9 (9) % 9.0 8.7 (3) %
Cars Online 115,823 118,787 2 % 108,437 119,564 9 %
Revenue Ton-Miles (Billions)
Merchandise 31.0 32.1 (3) % 91.9 96.7 (5) %
Coal 7.1 10.3 (31) % 21.7 31.7 (32) %
Intermodal 7.4 6.7 10 % 20.3 20.0 2 %
Total Revenue Ton-Miles 45.5 49.1 (7) % 133.9 148.4 (10) %
Total Gross Ton-Miles (Billions) 90.3 97.1 (7) % 262.6 293.7 (11) %
On-Time Originations 85 % 93 % (9) % 88 % 88 % - %
On-Time Arrivals 71 % 79 % (10) % 80 % 77 % 4 %
Safety
FRA Personal Injury Frequency
Index 0.77 0.85 9 % 0.82 0.82 - %
FRA Train Accident Rate 2.66 2.37 (12) % 2.47 2.43 (2) %
Certain operating statistics are estimated and can continue to be updated as actuals settle.
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.
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 to within two hours of scheduled arrival.
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.
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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 components of the net increases of $1.9
billion and $663 million in cash and cash equivalents for operating, investing
and financing activities for nine months ended 2020 and 2019, respectively.
[[Image Removed: csx-20200930_g2.jpg]] [[Image Removed: csx-20200930_g3.jpg]]
[[Image Removed: csx-20200930_g4.jpg]]
•Cash provided by operating activities decreased $609 million primarily driven
by lower cash-generating income and lower net favorable working capital
activities.
•Cash used in investing activities decreased
•Cash used in financing activities decreased$350 million driven by lower share repurchases, partially offset by lower proceeds from debt issuances and higher debt repayments. Sources of Cash and Liquidity and Uses of Cash As of the end of third quarter 2020, CSX had$2.9 billion of cash, cash equivalents and short-term investments. CSX uses current cash balances for general corporate purposes, which may include reduction or refinancing of outstanding indebtedness, capital expenditures, working capital requirements, contributions to the Company's qualified pension plan, redemptions and repurchases of CSX common stock and dividends to shareholders. See Note 7, Debt and Credit Agreements. 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 12, 2019 , which is unlimited as to amount and 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 nine months ended 2020, CSX issued a total of$500 million of new long-term debt. CSX Q3 2020 Form 10-Q p.35
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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, 2020 , 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,
2020 , the Company had no outstanding debt under the commercial paper program.
Planned capital investments for 2020 are expected to be between $1.6 billion
and $1.7 billion . Of the total 2020 investment, over half will be used to
sustain the core infrastructure and the remaining amounts will be allocated to
projects supporting service enhancements, productivity initiatives and
profitable growth. CSX intends to fund capital investments through cash
generated from operations.
Of the total 2020 investment, approximately $50 million is planned to fund
Positive Train Control ("PTC") implementation. PTC implementation is essentially
complete at a total cost of $2.4 billion which included installing the new
system along tracks, upgrading locomotives, adding communication equipment and
developing new technologies. While the Company expects ongoing PTC costs, future
PTC implementation costs are not expected to be material.
Material Changes in the Consolidated Balance Sheets and Working Capital Consolidated Balance Sheets
Total assets increased$1.2 billion from year end primarily due to the net increase of$945 million in cash and short-term investments and net property additions of$213 million . The increase in cash and short-term investments was driven by cash from operations of$3.1 billion and proceeds from the issuance of$500 million of long-term debt, partially offset by capital expenditures of$1.2 billion , share repurchases of$664 million , dividends paid of$599 million and debt repayment of$245 million . Total liabilities increased$322 million from year end primarily due to the issuance of$500 million of long-term debt and a$126 million increase in deferred tax liabilities, partially offset by debt repayments of$245 million . Total shareholders' equity increased$864 million from year end primarily driven by net earnings of$2 billion , partially offset by share repurchases of$664 million and dividends paid of$599 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$1.9 billion and$1.1 billion as ofSeptember 30, 2020 andDecember 31, 2019 , respectively. The increase in working capital since year end of$807 million is primarily due to the net increase of$945 million in cash and short-term investments described above, partially offset by an increase in current maturities of long-term debt of$126 million . 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 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. CSX Q3 2020 Form 10-Q p.36
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CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Guaranteed Notes Issued By CSXT
In March 2020 , the SEC adopted amendments to reduce and simplify the financial
disclosure requirements for guarantors and issuers of guaranteed registered
securities effective January 4, 2021 , with early voluntary compliance permitted.
CSX elected to comply with these amendments effective second quarter 2020. As a
result, separate condensed consolidating financial information for wholly-owned
subsidiaries who issued or guaranteed notes is no longer included in the
footnotes to the financial statements in Quarterly and Annual Reports on Form
10-Q and Form 10-K. Also in accordance with the amendments, CSX is not required
to present combined summary financial information regarding such subsidiary
issuers and guarantors 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.
In 2007, CSXT, a wholly-owned subsidiary of CSX Corporation , issued $381 million
of secured equipment notes maturing in 2023 in a registered public offering. 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 of CSX Corporation and will be effectively
subordinated to all future secured indebtedness of CSX 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.
At September 30, 2020 , the principal balance of these secured equipment notes
was $160 million .
LABOR AGREEMENTS
Approximately 16,000 of the Company's approximately 19,000 employees are
members of a labor union. In November 2019 , notices were served to the 13 rail
unions that participate in national bargaining to begin negotiations for
benefits, wages and work rules for the 2020 labor bargaining round. Current
agreements remain in place until modified by these negotiations. Typically, such
negotiations take several years before agreements are reached.
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, environmental and legal reserves; •pension and post-retirement medical plan accounting; and •depreciation policies for assets under the group-life method.
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CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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.
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;
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CSX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
•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 recent 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
(including those associated with PTC implementation) 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;
•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;
•the impact of conditions in the real estate market on the Company's ability to
sell assets;
•changes in operating conditions and costs or commodity concentrations; 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 other SEC reports, which are accessible on
the SEC'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 2020 Form 10-Q p.39--------------------------------------------------------------------------------
Table of Contents
CSX CORPORATION
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