10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

OR

( )    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

    For the transition period from __________ to __________

Commission File Number 1-8022

CSX CORPORATION
(Exact name of registrant as specified in its charter)
Virginia			62-1051971
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
500 Water Street, 15th Floor, Jacksonville, FL		32202	(904) 359-3200
(Address of principal executive offices)		(Zip Code)	(Telephone number, including area code)
	No Change
(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes (X) No ( )

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes (X) No ( )

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer", "accelerated filer” and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (check one)

Large Accelerated Filer (X)    Accelerated Filer ( )    Non-accelerated Filer ( )    Smaller Reporting Company ( ) 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. ( )

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ( ) No (X)

There were 893,723,083 shares of common stock outstanding on September 30, 2017 (the latest practicable date that is closest to the filing date).

CSX Q3 2017 Form 10-Q p.1

CSX CORPORATION

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017

INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Income Statements (Unaudited) - Quarters Ended September 30, 2017 and September 23, 2016	3
	Consolidated Comprehensive Income Statements (Unaudited) - Quarters Ended September 30, 2017 and September 23, 2016	3
	Consolidated Balance Sheets - At September 30, 2017 (Unaudited) and December 30, 2016	4
	Consolidated Cash Flow Statements (Unaudited) - Nine Months Ended September 30, 2017 and September 23, 2016	5
	Notes to Consolidated Financial Statements (Unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	43
Item 4.	Controls and Procedures	43
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	CSX Purchases of Equity Securities	44
Item 3.	Defaults upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	45
Signature		46

CSX Q3 2017 Form 10-Q p.2

CSX CORPORATION

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENTS (Unaudited)

(Dollars in millions, except per share amounts)

	Third Quarters						Nine Months
	2017			2016			2017			2016
Revenue	$	2,743		$	2,710		$	8,545		$	8,032
Expense
Labor and Fringe	717			762			2,249			2,307
Materials, Supplies and Other	516			507			1,573			1,576
Depreciation	331			321			978			953
Fuel	205			174			621			496
Equipment and Other Rents	97			105			282			315
Restructuring Charge (Note 1)	1			—			296			—
Total Expense	1,867			1,869			5,999			5,647
Operating Income	876			841			2,546			2,385
Interest Expense	(132		)	(139		)	(406		)	(423		)
Other Income - Net	6			13			19			28
Earnings Before Income Taxes	750			715			2,159			1,990
Income Tax Expense	(291		)	(260		)	(828		)	(734		)
Net Earnings	$	459		$	455		$	1,331		$	1,256
Per Common Share (Note 2)
Net Earnings Per Share, Basic	$	0.51		$	0.48		$	1.45		$	1.32
Net Earnings Per Share, Assuming Dilution	$	0.51		$	0.48		$	1.45		$	1.32
Average Shares Outstanding (In millions)	902			942			916			952
Average Shares Outstanding, Assuming Dilution (In millions)	906			943			919			953
Cash Dividends Paid Per Common Share	$	0.20		$	0.18		$	0.58		$	0.54

CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS (Unaudited)

(Dollars in millions, except per share amounts)

	Third Quarters				Nine Months
	2017		2016		2017		2016
Total Comprehensive Earnings (Note 10)	$	467	$	465	$	1,410	$	1,282

See accompanying notes to consolidated financial statements.

CSX Q3 2017 Form 10-Q p.3

CSX CORPORATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

	(Unaudited)
	September 30, 2017			December 30, 2016
ASSETS
Current Assets:
Cash and Cash Equivalents	$	591		$	603
Short-term Investments	113			417
Accounts Receivable - Net (Note 1)	981			938
Materials and Supplies	392			407
Other Current Assets	95			122
Total Current Assets	2,172			2,487
Properties	44,105			43,227
Accumulated Depreciation	(12,526		)	(12,077		)
Properties - Net	31,579			31,150
Investment in Conrail	864			840
Affiliates and Other Companies	642			619
Other Long-term Assets	316			318
Total Assets	$	35,573		$	35,414
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable	$	905		$	806
Labor and Fringe Benefits Payable	601			545
Casualty, Environmental and Other Reserves (Note 4)	122			115
Current Maturities of Long-term Debt (Note 7)	19			331
Income and Other Taxes Payable	322			129
Other Current Liabilities	106			114
Total Current Liabilities	2,075			2,040
Casualty, Environmental and Other Reserves (Note 4)	253			259
Long-term Debt (Note 7)	11,788			10,962
Deferred Income Taxes - Net	9,789			9,596
Other Long-term Liabilities	766			863
Total Liabilities	24,671			23,720
Shareholders' Equity:
Common Stock, $1 Par Value	894			928
Other Capital	227			138
Retained Earnings	10,327			11,253
Accumulated Other Comprehensive Loss (Note 10)	(561		)	(640		)
Noncontrolling Interest	15			15
Total Shareholders' Equity	10,902			11,694
Total Liabilities and Shareholders' Equity	$	35,573		$	35,414

See accompanying notes to consolidated financial statements.

CSX Q3 2017 Form 10-Q p.4

CSX CORPORATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED CASH FLOW STATEMENTS (Unaudited)

(Dollars in millions)

	Nine Months
	2017			2016
OPERATING ACTIVITIES
Net Earnings	$	1,331		$	1,256
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities:
Depreciation	978			953
Restructuring Charge	296			—
Cash Payments for Restructuring Charge	(147		)	—
Deferred Income Taxes	161			312
Other Operating Activities	(13		)	(51		)
Changes in Operating Assets and Liabilities:
Accounts Receivable	(78		)	68
Other Current Assets	47			(58		)
Accounts Payable	102			94
Income and Other Taxes Payable	180			(25		)
Other Current Liabilities	4			(61		)
Net Cash Provided by Operating Activities	2,861			2,488
INVESTING ACTIVITIES
Property Additions	(1,462		)	(1,590		)
Purchase of Short-term Investments	(645		)	(410		)
Proceeds from Sales of Short-term Investments	957			1,070
Other Investing Activities	71			37
Net Cash Used In Investing Activities	(1,079		)	(893		)
FINANCING ACTIVITIES
Long-term Debt Issued (Note 7)	850			—
Long-term Debt Repaid (Note 7)	(332		)	(19		)
Dividends Paid	(530		)	(513		)
Shares Repurchased	(1,763		)	(778		)
Other Financing Activities	(19		)	(310		)
Net Cash Used in Financing Activities	(1,794		)	(1,620		)
Net Decrease in Cash and Cash Equivalents	(12		)	(25		)
CASH AND CASH EQUIVALENTS
Cash and Cash Equivalents at Beginning of Period	603			628
Cash and Cash Equivalents at End of Period	$	591		$	603

See accompanying notes to consolidated financial statements.

CSX Q3 2017 Form 10-Q p.5

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. Nature of Operations and Significant Accounting Policies

Background

CSX Corporation (“CSX”), together with its subsidiaries (the “Company”), based in Jacksonville, Florida, is one of the nation's leading transportation companies. The Company provides rail-based transportation services including traditional rail service and the transport of intermodal containers and trailers.

CSX's principal operating subsidiary, CSX Transportation, Inc. (“CSXT”), provides an important link to the transportation supply chain through its approximately 21,000 route mile rail network, which serves major population centers in 23 states east of the Mississippi River, the District of Columbia and the Canadian provinces of Ontario and Quebec. The Company's intermodal business links customers to railroads via trucks and terminals.

After a merger on July 1, 2017 with CSX Real Property, Inc., a former wholly-owned CSX subsidiary, CSXT is now responsible for the Company's real estate sales, leasing, acquisition and management and development activities. In addition, as substantially all real estate sales, leasing, acquisition and management and development activities are focused on supporting railroad operations, all results of these activities are included in operating income beginning in 2017. Previously, the results of these activities were classified as operating or non-operating based on the nature of the activity and were not material for any periods presented.

Other entities

In addition to CSXT, the Company’s subsidiaries include CSX Intermodal Terminals, Inc. (“CSX Intermodal Terminals”), Total Distribution Services, Inc. (“TDSI”), Transflo Terminal Services, Inc. (“Transflo”), CSX Technology, Inc. (“CSX Technology”) and other subsidiaries. CSX Intermodal Terminals owns and operates a system of intermodal terminals, predominantly in the eastern United States and also performs drayage services (the pickup and delivery of intermodal shipments) for certain customers and trucking dispatch operations. TDSI serves the automotive industry with distribution centers and storage locations. Transflo connects non-rail served customers to the many benefits of rail by transferring products from rail to trucks. The biggest Transflo markets are chemicals and agriculture, which include shipments of plastics and ethanol. CSX Technology and other subsidiaries provide support services for the Company.

Basis of Presentation

In the opinion of management, the accompanying consolidated financial statements contain all normal, recurring adjustments necessary to fairly present the following:

• Consolidated income statements for the nine months ended September 30, 2017 and September 23, 2016;

• Consolidated comprehensive income statements for the nine months ended September 30, 2017 and September 23, 2016;

• Consolidated balance sheets at September 30, 2017 and December 30, 2016; and

• Consolidated cash flow statements for the nine months ended September 30, 2017 and September 23, 2016.

Pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been omitted from these interim financial statements. CSX suggests that these financial statements be read in conjunction with the audited financial statements and the notes included in CSX's most recent annual report on Form 10-K and any subsequently filed current reports on Form 8-K.

CSX Q3 2017 Form 10-Q p.6

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1.    Nature of Operations and Significant Accounting Policies, continued

Fiscal Year

Through the second quarter 2017, CSX followed a 52/53 week fiscal reporting calendar with the last day of each reporting period ending on a Friday. On July 7, 2017 the Board of Directors of CSX approved a change in the fiscal reporting calendar from a 52/53 week year ending on the last Friday of December to a calendar year ending on December 31 each year, effective beginning with fiscal third quarter 2017. Related to the change in the fiscal calendar:

• Fiscal year 2017 commenced on December 31, 2016, as the fiscal year 2016 ended on December 30, 2016 under the 52/53 week fiscal calendar.

• The third quarter 2017 commenced on July 1, 2017, as the second quarter 2017 ended on June 30, 2017 under the 52/53 week fiscal calendar, and ended on September 30, 2017. Third quarter 2017 includes one more day of business results than third quarter 2016.

• The fourth quarter 2017 will commence on October 1, 2017 and end on December 31, 2017. Fourth quarter 2017 will include six fewer days of business results than fourth quarter 2016, which contained an extra week under the 52/53 week fiscal calendar.

• Fiscal year 2017 will include 366 days of activity, five fewer days than fiscal year 2016, which was a 53 week fiscal year that began on December 26, 2015 and ended December 30, 2016.

The Company does not expect that this change will materially impact comparability of the Company’s financial results for fiscal year 2016 and fiscal year 2017. Accordingly, the change to a calendar fiscal year will be made on a prospective basis and operating results for prior periods will not be adjusted. The Company will not be required to file a transition report because this change is not deemed a change in fiscal year for purposes of reporting subject to Rule 13a-10 or Rule 15d-10 of the Securities Exchange Act of 1934 as the new fiscal year commences with the end of the prior fiscal year end and within seven days of the prior fiscal year end.

Except as otherwise specified, references to “third quarter(s)” or “nine months” indicate CSX's fiscal periods ending September 30, 2017 and September 23, 2016, and references to "year-end" indicate the fiscal year ended December 30, 2016.

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts on uncollectible amounts related to freight receivables, government reimbursement receivables, claims for damages and other various receivables. The allowance is based upon the creditworthiness of customers, historical experience, the age of the receivable and current market and economic conditions. Uncollectible amounts are charged against the allowance account. Allowance for doubtful accounts of $24 million and $33 million is included in the consolidated balance sheets as of September 30, 2017 and December 30, 2016, respectively.

CSX Q3 2017 Form 10-Q p.7

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1.    Nature of Operations and Significant Accounting Policies, continued

New Accounting Pronouncements

In May 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") Compensation - Stock Compensation: Scope of Modification Accounting, which provides clarity on what changes to share-based awards are considered substantive and require modification accounting to be applied. This update is required beginning with first quarter 2018 and should be applied prospectively to award modifications after the effective date. The Company early adopted this standard update in second quarter 2017 and will apply it prospectively to any award modifications after the adoption date. The Company does not regularly modify the terms and conditions of share-based awards and does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity.

In March 2017, the FASB issued ASU Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, whichrequires that only the service cost component of net periodic benefit costs be recorded as compensation cost in the operating expense section of the income statement. All other components of net periodic benefit cost (interest cost, expected return on plan assets and amortization of net loss) will be presented in other income - net. This standard update is effective beginning with the first quarter 2018 and must be applied retrospectively. The Company does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity.

In March 2017, the FASB issued ASU Simplifying the Test for Goodwill Impairment, which eliminates step two, the calculation of the implied fair value of goodwill, from the goodwill impairment test. Impairment will be quantified in step one of the test as the amount by which the carrying amount exceeds the fair value. This standard update is effective beginning first quarter 2020 and must be applied prospectively. The Company does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity.

In May 2014, the FASB issued ASU Revenue from Contracts with Customers, which supersedes previous revenue recognition guidance. The new standard requires that a company recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. Companies will need to use more judgment and estimates than under the guidance currently in effect, including estimating the amount of variable revenue to recognize over each identified performance obligation. Additional disclosures will be required to help users of financial statements understand the nature, amount and timing of revenue and cash flows arising from contracts. CSX will adopt this standard update in first quarter 2018 and plans to use a modified retrospective method of adoption.

The FASB has also issued several amendments to the revenue standard, including clarification on accounting for principal versus agent considerations (i.e., reporting gross versus net), licenses of intellectual property and identifying performance obligations. These amendments do not change the core principle of the standard, but provide clarity and implementation guidance.

CSX Q3 2017 Form 10-Q p.8

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1.    Nature of Operations and Significant Accounting Policies, continued

The Company is currently finalizing its review of the impact of adopting this new guidance and has developed a comprehensive implementation plan. In-depth reviews of commercial contracts have been completed and changes to processes and internal controls to meet the standard’s reporting and disclosure requirements have been identified and are being implemented. At this time, the Company does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity. Freight revenue will continue to be recognized ratably over transit time. Additionally, the disaggregated revenue information required to be disclosed under this standard update is similar to the information currently included in the Results of Operations section of Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

In February 2016, the FASB issued ASU, Leases, which will require lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease liability, and lessors to recognize a net lease investment. Additional qualitative and quantitative disclosures will also be required. This standard update is effective for CSX beginning with the first quarter 2019 and will be adopted using a modified retrospective method. Changes to processes and internal controls to meet the standard’s reporting and disclosure requirements have been identified and are being implemented. Software has been implemented that will assist in the recognition of additional assets and liabilities to be included on the balance sheet related to leases currently classified as operating leases with durations greater than twelve months, with certain allowable exceptions. The Company continues to evaluate the expected impact of this standard update on disclosures, but does not anticipate any material changes to operating results or liquidity.

Other Items

Management Workforce Reduction

Through an involuntary separation program with enhanced benefits to further its strategic objectives, CSX reduced its management workforce by approximately 950employees during 2017. The Company has been focused on driving efficiencies through process improvement and responding to business mix shifts. These management reductions were designed to further streamline general and administrative and operating support functions to speed decision making and further control costs. In April 2017, the involuntary separation program was essentially completed. This program extends separation benefits for certain members of management that could result in additional charges through first quarter 2018. The majority of separation benefits are paid from general corporate funds while certain benefits are paid through CSX’s qualified pension plans.

Reimbursement Arrangements

In June 2017, the Company and the Company's President and Chief Executive Officer, E. Hunter Harrison, executed a letter agreement providing for certain reimbursement arrangements. Pursuant to the letter agreement, the Company made a reimbursement payment to MR Argent Advisor LLC ("Mantle Ridge") of $55 million for funds previously paid to Mr. Harrison by Mantle Ridge. Further, the Company assumed Mantle Ridge’s obligation to pay Mr. Harrison, prior to March 15, 2018, a lump sum cash amount of $29 million in respect of other forfeited compensation from his previous employer, Canadian Pacific Railway Limited (“CP”). The Company also assumed Mantle Ridge’s tax indemnification obligations to Mr. Harrison, which enables him to remain in the same after-tax position as if he had not: (i) forfeited such compensation and benefits earned from CP; and (ii) received $55 million from Mantle Ridge.

CSX Q3 2017 Form 10-Q p.9

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1.    Nature of Operations and Significant Accounting Policies, continued

The ownership position of Mantle Ridge, a CSX shareholder, is detailed in the Company's Proxy Statement on Schedule 14A filed on April 20, 2017 and subsequent Form 4 filings with the SEC. The Vice-Chairman of CSX's Board of Directors, Paul C. Hilal, founded and controls Mantle Ridge and each of its related entities. At the Company's 2017 annual meeting of shareholders held on June 5, 2017, the Company's shareholders approved, on an advisory basis, with approximately 93 percent of the vote, the Company undertaking such reimbursement arrangements.

Restructuring Charge

In first quarter 2017, the former CEO and President of the Company announced their retirements, and the terms of their unvested equity awards were modified to permit prorated vesting through May 31, 2018. The total restructuring charge includes costs related to the management workforce reduction, reimbursement arrangements, the proration of equity awards and other advisory costs related to the leadership transition. Future charges related to this restructuring are not expected to be material. Expenses related to the management workforce reduction and other costs are shown in the following table.

	2017
(Dollars in millions)	First Quarter		Second Quarter		Third Quarter		Year-to-Date
Severance	$	81	$	10	$	—	$	91
Pension, Other Post-retirement Benefit and Other Non-cash Charges	68		10		—		78
Relocation	6		2		—		8
Subtotal Management Workforce Reduction	$	155	$	22	$	—	$	177
Reimbursement Arrangements	—		84		—		84
Non-cash Executive Equity Awards Proration	8		16		—		24
Other Charges Including Fees Related to Shareholder Matters	10		—		1		11
Total Restructuring Charge	$	173	$	122	$	1	$	296

Charges and payments related to the management workforce reduction and other costs are shown in the following table.

(Dollars in millions)	2017 Charges		2017 Payments			Non-cash Items			Liability 9/30/2017
Severance	$	91	$	(77	)	—			$	14
Pension, Other Post-retirement Benefit and Other Non-cash Charges (a)	78		—			(78		)	—
Relocation	8		(4		)	—			4
Subtotal Management Workforce Reduction	$	177	$	(81	)	$	(78	)	$	18
Reimbursement Arrangements	84		(55		)	—			29
Non-cash Executive Equity Awards Proration	24		—			(24		)	—
Other Charges Including Fees Related to Shareholder Matters	11		(11		)	—			—
Total Restructuring Charge	$	296	$	(147	)	$	(102	)	$	47

^(a)The majority of non-cash items are related to certain benefits paid through CSX's qualified pension plans.

CSX Q3 2017 Form 10-Q p.10

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 2.    Earnings Per Share

The following table sets forth the computation of basic earnings per share and earnings per share, assuming dilution:

	Third Quarters				Nine Months
	2017		2016		2017			2016
Numerator (Dollars in millions):
Net Earnings	$	459	$	455	$	1,331		$	1,256
Dividend Equivalents on Restricted Stock	—		—		(1		)	(1		)
Net Earnings, Attributable to Common Shareholders	$	459	455		$	1,330		1,255
Denominator (Units in millions):
Average Common Shares Outstanding	902		942		916			952
Other Potentially Dilutive Common Shares	4		1		3			1
Average Common Shares Outstanding, Assuming Dilution	906		943		919			953
Net Earnings Per Share, Basic	$	0.51	$	0.48	$	1.45		$	1.32
Net Earnings Per Share, Assuming Dilution	$	0.51	$	0.48	$	1.45		$	1.32

Basic earnings per share is based on the weighted-average number of shares of common stock outstanding. Earnings per share, assuming dilution, is based on the weighted-average number of shares of common stock equivalents outstanding adjusted for the effects of common stock that may be issued as a result of potentially dilutive instruments. CSX's potentially dilutive instruments are made up of equity awards, which include long-term incentive awards, and employee stock options.

The Earnings Per Share Topic in the FASB's ASC requires CSX to include additional shares in the computation of earnings per share, assuming dilution. The additional shares included in diluted earnings per share represent the number of shares that would be issued if all of the above potentially dilutive instruments were converted into CSX common stock.

When calculating diluted earnings per share, this rule requires CSX to include the potential shares that would be outstanding if all outstanding stock options were exercised. This number is different from outstanding stock options, which is included in Note 3, Share-Based Compensation, because it is offset by shares CSX could repurchase using the proceeds from these hypothetical exercises to obtain the common stock equivalent. Approximately 10 millionand2.4 million of total average outstanding stock options for the third quarters ended September 30, 2017 and September 23, 2016, respectively, were excluded from the diluted earnings per share calculation because their effect was antidilutive.

Share Repurchases

In July 2017, the Board of Directors approved an additional $500 million of share repurchase authority under the share repurchase program announced in April 2017, bringing the total program size to $1.5 billion. As of October 2, 2017, the Company had completed all share repurchases under this program.

During the third quartersof 2017 and 2016, the Company repurchased approximately $1 billion, or 20 million shares, and $263 million, or 10 million shares, respectively. During the nine months of 2017 and 2016, the Company repurchased $1.8 billion, or 35 million shares, and $778 million, or 30 million shares, respectively.

CSX Q3 2017 Form 10-Q p.11

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 2.    Earnings Per Share, continued

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. Shares are retired immediately upon repurchase. In accordance with the Equity Topic in the ASC, the excess of repurchase price over par value is recorded in retained earnings. Generally, retained earnings is only impacted by net earnings and dividends.

NOTE 3.     Share-Based Compensation

Under CSX's share-based compensation plans, awards consist of performance units, restricted stock awards, restricted stock units and stock options for management and stock grants for directors. Awards granted under the various programs are determined and approved by the Compensation Committee of the Board of Directors or, in certain circumstances, by the Chief Executive Officer for awards to management employees other than senior executives. The Board of Directors approves awards granted to the Company's non-management directors upon recommendation of the Governance Committee.

Share-based compensation expense is measured using the fair value of the award on the grant date and is recognized on a straight-line basis over the service period of the respective award. Total pre-tax expense associated with share-based compensation and its related income tax benefit is shown in the table below. The year over year increase in expense related to performance units and stock options is primarily due to modifications to the terms of awards (see Equity Award Modificationsbelow) and higher expected award payouts.

	Third Quarters				Nine Months
(Dollars in millions)	2017		2016		2017		2016
Share-Based Compensation Expense
Performance Units	$	3	$	5	$	41	$	9
Stock Options	14		2		47		5
Restricted Stock Units and Awards	2		2		11		8
Stock Awards for Directors	—		—		2		2
Total Share-Based Compensation Expense	$	19	$	9	$	101	$	24
Income Tax Benefit	$	7	$	3	$	32	$	9

Long-term Incentive Plan

In February 2017, the Company granted approximately 600 thousand performance units to certain employees under a new long-term incentive plan ("LTIP") for the years 2017 through 2019, which was adopted under the CSX Stock and Incentive Award Plan. Payouts of performance units for the cycle ending with fiscal year 2019 will be based on the achievement of goals related to both operating ratio and return on assets in each case excluding non-recurring items as disclosed in the Company's financial statements. The cumulative operating ratio and average return on assets over the plan period will each comprise 50% of the payout and will be measured independently of the other.

Grants were made in performance units, with each unit representing the right to receive one share of CSX common stock, and payouts will be made in CSX common stock. The payout range for participants will be between 0% and 200% of the target awards depending on Company performance against predetermined goals. Payouts for certain executive officers are subject to downward adjustment by up to 30% based upon total shareholder return relative to specified comparable groups.

CSX Q3 2017 Form 10-Q p.12

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3.     Share-Based Compensation, continued

Stock Options

Also, in February 2017, the Company granted approximately 1.3 million stock options along with the corresponding LTIP. The fair value of stock options on the date of grant was $12.54 per option which was calculated using the Black-Scholes valuation model. Stock options have been granted with ten-year terms and vest three years after the date of grant. The exercise price for stock options granted equals the closing market price of the underlying stock on the date of grant. These awards are time-based and are not based upon attainment of performance goals.

Restricted Stock Units

Finally, in February 2017, the Company granted approximately 300 thousand restricted stock units along with the corresponding LTIP. The restricted stock units vest three years after the date of grant. Participants receive cash dividend equivalents on the unvested shares during the restriction period. These awards are time-based and are not based upon attainment of performance goals. For information related to the Company's other outstanding long-term incentive compensation, see CSX's most recent annual report on Form 10-K.

CEO Stock Option Award

In March 2017, the Company granted 9 million stock options to the incoming CEO at a fair value of $12.88 per option calculated using the Black-Scholes valuation model. These options were granted with a ten-year term and an exercise price equal to the closing market price of the underlying stock on the date of grant. Half of the options, or 4.5 million, will vest on the CEO's service anniversary in equal annual installments over four years. The other half will vest based on achievement of performance targets related to both operating ratio and earnings before interest, taxes, depreciation and amortization adjusted for certain items.

Fair Value of All Stock Option Awards

No stock option awards were granted during third quarters 2017 and 2016. The fair values of all stock option awards during the nine months ended September 30, 2017, including those granted along with 2017 - 2019 LTIP and the CEO stock option award, were estimated at the grant date with the following weighted average assumptions:

	Nine Months
	2017			2016
Weighted-average grant date fair value	$	12.83		$	4.68
Stock options valuation assumptions:
Annual dividend yield	1.5		%	3.0		%
Risk-free interest rate	2.2		%	1.4		%
Annualized volatility	27.1		%	27.3		%
Expected life (in years)	6.3			6.5
Other pricing model inputs:
Weighted-average grant-date market price of CSX stock (strike price)	$	49.60		$	24.13

CSX Q3 2017 Form 10-Q p.13

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3.     Share-Based Compensation, continued

Equity Award Modifications    

The terms of performance units, restricted stock units and stock options granted as part of the Company's long-term share-based compensation plans typically require participants to be employed through the final day of the respective performance or vesting period as applicable, except in the case of death, disability or retirement. As part of an enhanced severance benefit under the management streamlining and realignment initiative discussed in Note 1, unvested performance units, restricted stock units and stock options for separated employees not eligible for retirement were permitted to vest on a pro-rata basis.

    Additionally, the terms of unvested equity awards for the former CEO and President were modified prior to their retirements on March 6, 2017 to permit prorated vesting through May 31, 2018. The terms were modified in exchange for each agreeing to serve in an advisory capacity upon request until May 31, 2017, and waiving various rights and claims, including the cancellation of their respective change of control agreements with the Company.

Award modifications impacted approximately 70 employees and resulted in an increase to share-based compensation expense for revaluation of the affected awards of $31 million for the nine months ended September 30, 2017. No significant award modifications took place in third quarter 2017.

NOTE 4.    Casualty, Environmental and Other Reserves

Casualty, environmental and other reserves are considered critical accounting estimates due to the need for significant management judgment. They are provided for in the consolidated balance sheets as shown in the table below:

	September 30, 2017						December 30, 2016
(Dollars in millions)	Current		Long-term		Total		Current		Long-term		Total
Casualty:
Personal Injury	$	45	$	120	$	165	$	46	$	124	$	170
Occupational(a)	4		55		59		7		52		59
Total Casualty	49		175		224		53		176		229
Environmental	43		46		89		42		53		95
Other	30		32		62		20		30		50
Total	$	122	$	253	$	375	$	115	$	259	$	374

^(a)  Occupational reserves include asbestos-related diseases and occupational injuries.

These liabilities are accrued when reasonably estimable and probable in accordance with the Contingencies Topic in the ASC. Actual settlements and claims received could differ, and final outcomes of these matters cannot be predicted with certainty. Considering the legal defenses currently available, the liabilities that have been recorded and other factors, it is the opinion of management that none of these items individually, when finally resolved, will have a material adverse effect on the Company's financial condition, results of operations or liquidity. Should a number of these items occur in the same period, however, their combined effect could be material in that particular period.

CSX Q3 2017 Form 10-Q p.14

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 4.    Casualty, Environmental and Other Reserves, continued

Casualty

Casualty reserves of $224 million and $229 million as of September 30, 2017 and December 30, 2016, respectively, represent accruals for personal injury, occupational disease and occupational injury claims. The Company's self-insured retention amount for these claims is $50 million per occurrence. Currently, no individual claim is expected to exceed the self-insured retention amount. In accordance with the Contingencies Topic in the ASC, to the extent the value of an individual claim exceeds the self-insured retention amount, the Company would present the liability on a gross basis with a corresponding receivable for insurance recoveries. These reserves fluctuate based upon the timing of payments as well as changes in estimate. Actual results may vary from estimates due to the number, type and severity of the injury, costs of medical treatments and uncertainties in litigation. Most of the Company's casualty claims relate to CSXT unless otherwise noted below. Defense and processing costs, which historically have been insignificant and are anticipated to be insignificant in the future, are not included in the recorded liabilities.

Personal Injury

    Personal injury reserves represent liabilities for employee work-related and third-party injuries. Work-related injuries for CSXT employees are primarily subject to the Federal Employers’ Liability Act (“FELA”). In addition to FELA liabilities, employees of other current or former CSX subsidiaries are covered by various state workers’ compensation laws, the Federal Longshore and Harbor Workers’ Compensation Program or the Maritime Jones Act.

CSXT retains an independent actuary to assist management in assessing the value of personal injury claims. An analysis is performed by the actuary quarterly and is reviewed by management. This analysis for the quarter resulted in an immaterial adjustment to the personal injury reserve. The methodology used by the actuary includes a development factor to reflect growth or reduction in the value of these personal injury claims. It is based largely on CSXT's historical claims and settlement experience.

Occupational

Occupational reserves represent liabilities for occupational disease and injury claims. Occupational disease claims arise primarily from allegations of exposure to asbestos in the workplace. Occupational injury claims arise from allegations of exposure to certain other materials in the workplace, such as solvents, soaps, chemicals (collectively referred to as “irritants”) and diesel fuels (like exhaust fumes) or allegations of chronic physical injuries resulting from work conditions, such as repetitive stress injuries.

The greatest possible exposure to asbestos for employees resulted from work conducted in and around steam locomotive engines that were largely phased out beginning around the 1950s. Other types of exposures, however, including exposure from locomotive component parts and building materials, continued until these exposures were substantially eliminated by 1985. Diseases associated with asbestos typically have long latency periods (amount of time between exposure to asbestos and the onset of the disease) which can range from 10 to 40 years after exposure.

Management reviews asserted asbestos claims quarterly. Unasserted or incurred but not reported ("IBNR") asbestos claims are analyzed by a third-party specialist and reviewed by management annually. CSXT’s historical claim filings, settlement amounts, and dismissal rates are analyzed to determine future anticipated claim filing rates and average settlement values for asbestos claims reserves. The potentially exposed population is estimated by using CSXT’s employment records and industry data. From this analysis, the specialist estimates the IBNR claims liabilities.

CSX Q3 2017 Form 10-Q p.15

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 4.    Casualty, Environmental and Other Reserves, continued

Environmental

Environmental reserves were $89 million and $95 million as of September 30, 2017 and December 30, 2016, respectively. The Company is a party to various proceedings related to environmental issues, including administrative and judicial proceedings involving private parties and regulatory agencies. The Company has been identified as a potentially responsible party at approximately 219 environmentally impaired sites. Many of these are, or may be, subject to remedial action under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), also known as the Superfund Law, or similar state statutes. Most of these proceedings arose from environmental conditions on properties used for ongoing or discontinued railroad operations. A number of these proceedings, however, are based on allegations that the Company, or its predecessors, sent hazardous substances to facilities owned or operated by others for treatment, recycling or disposal. In addition, some of the Company's land holdings were leased to others for commercial or industrial uses that may have resulted in releases of hazardous substances or other regulated materials onto the property and could give rise to proceedings against the Company.

In any such proceedings, the Company is subject to environmental clean-up and enforcement actions under the Superfund Law, as well as similar state laws that may impose joint and several liability for clean-up and enforcement costs on current and former owners and operators of a site without regard to fault or the legality of the original conduct. These costs could be substantial.

In accordance with the Asset Retirement and Environmental Obligations Topic in the ASC, the Company reviews its role with respect to each site identified at least quarterly, giving consideration to a number of factors such as:

• type of clean-up required;

• nature of the Company's alleged connection to the location (e.g., generator of waste sent to the site or owner or operator of the site);

• extent of the Company's alleged connection (e.g., volume of waste sent to the location and other relevant factors); and

• number, connection and financial viability of other named and unnamed potentially responsible parties at the location.

Based on the review process, the Company has recorded amounts to cover contingent anticipated future environmental remediation costs with respect to each site to the extent such costs are reasonably estimable and probable. The recorded liabilities for estimated future environmental costs are undiscounted. The liability includes future costs for remediation and restoration of sites as well as any significant ongoing monitoring costs, but excludes any anticipated insurance recoveries. Payments related to these liabilities are expected to be made over the next several years. Environmental remediation costs are included in materials, supplies and other on the consolidated income statement.

Currently, the Company does not possess sufficient information to reasonably estimate the amounts of additional liabilities, if any, on some sites until completion of future environmental studies. In addition, conditions that are currently unknown could, at any given location, result in additional exposure, the amount and materiality of which cannot presently be reasonably estimated. Based upon information currently available, however, the Company believes its environmental reserves accurately reflect the estimated cost of remedial actions currently required.

CSX Q3 2017 Form 10-Q p.16

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 4.    Casualty, Environmental and Other Reserves, continued

Other

Other reserves of $62 million and $50 million as of September 30, 2017 and December 30, 2016, respectively, include liabilities for various claims, such as property, automobile and general liability. Also included in other reserves are longshoremen disability claims related to a previously owned international shipping business (these claims are in runoff) as well as claims for current port employees.

NOTE 5.    Commitments and Contingencies

Purchase Commitments

CSXT has a commitment under a long-term maintenance program agreement that covers a portion of CSXT’s fleet of locomotives. The program costs are based on the maintenance cycle for each covered locomotive, which is determined by the asset's age and type. Expected future costs may change as required maintenance schedules are revised and locomotives are placed into or removed from service. Under CSXT’s current obligations, the agreement will expire no earlier than 2031. On August 9, 2017, the Company exercised certain rights under the agreement, which resulted in a reduction of the locomotive fleet covered from 50% as of December 30, 2016 to an estimated 34% of locomotives beginning August 2018. As a result, the total remaining payments decreased from approximately $5.0 billion at December 30, 2016 to an estimated $1.7 billion at September 30, 2017.

Insurance

The Company maintains numerous insurance programs with substantial limits for property damage (which includes business interruption) and third-party liability.  A certain amount of risk is retained by the Company on each of the property and liability programs. The Company has a $25 million retention per occurrence for the non-catastrophic property program (such as a derailment) and a $50 million retention per occurrence for the liability and catastrophic property programs (such as hurricanes and floods). While the Company believes its insurance coverage is adequate, future claims could exceed existing insurance coverage or insurance may not continue to be available at commercially reasonable rates.

Legal

    The Company is involved in litigation incidental to its business and is a party to a number of legal actions and claims, various governmental proceedings and private civil lawsuits, including, but not limited to, those related to fuel surcharge practices, tax matters, environmental and hazardous material exposure matters, FELA and labor claims by current or former employees, other personal injury or property claims and disputes and complaints involving certain transportation rates and charges. Some of the legal proceedings include claims for compensatory as well as punitive damages and others are, or are purported to be, class actions. While the final outcome of these matters cannot be reasonably determined, considering, among other things, the legal defenses available and liabilities that have been recorded along with applicable insurance, it is currently the opinion of management that none of these pending items is likely to have a material adverse effect on the Company's financial condition, results of operations or liquidity. An unexpected adverse resolution of one or more of these items, however, could have a material adverse effect on the Company's financial condition, results of operations or liquidity in that particular period.

The Company is able to estimate a range of possible loss for certain legal proceedings for which a loss is reasonably possible in excess of reserves established. The Company has estimated this range to be $2 million to $116 million in aggregate at September 30, 2017. This estimated aggregate range is based upon currently available information and is subject to significant judgment and a variety of assumptions. Accordingly, the Company's estimate will change from time to time, and actual losses may vary significantly from the current estimate.

CSX Q3 2017 Form 10-Q p.17

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 5.    Commitments and Contingencies, continued

Fuel Surcharge Antitrust Litigation

In May 2007, class action lawsuits were filed against CSXT and three other U.S.-based Class I railroads alleging that the defendants' fuel surcharge practices relating to contract and unregulated traffic resulted from an illegal conspiracy in violation of antitrust laws. In November 2007, the class action lawsuits were consolidated in federal court in the District of Columbia, where they are now pending. The suit seeks treble damages allegedly sustained by purported class members as well as attorneys' fees and other relief. Plaintiffs are expected to allege damages at least equal to the fuel surcharges at issue.

In June 2012, the District Court certified the case as a class action. The decision was not a ruling on the merits of plaintiffs' claims, but rather a decision to allow the plaintiffs to seek to prove the case as a class. The defendant railroads petitioned the U.S. Court of Appeals for the D.C. Circuit for permission to appeal the District Court's class certification decision. In August 2013, the D.C. Circuit issued a decision vacating the class certification decision and remanded the case to the District Court to reconsider its class certification decision. On October 10, 2017, the District Court issued an order denying class certification. The District Court had delayed proceedings on the merits of the case pending the outcome of the class certification remand proceedings, and has not yet issued a further schedule in light of the order denying class certification.

CSXT believes that its fuel surcharge practices were arrived at and applied lawfully and that the case is without merit. Accordingly, the Company intends to defend itself vigorously. However, penalties for violating antitrust laws can be severe, and resolution of this matter or an unexpected adverse decision on the merits could have a material adverse effect on the Company's financial condition, results of operations or liquidity in that particular period.

Environmental

CSXT is indemnifying Pharmacia LLC (formerly known as Monsanto Company) for certain liabilities associated with real estate located in Kearny, New Jersey along the Lower Passaic River (the “Property”). The Property, which was formerly owned by Pharmacia, is now owned by CSXT. CSXT's indemnification and defense duties arise with respect to several matters. The U.S. Environmental Protection Agency ("EPA"), using its CERCLA authority, seeks cleanup and removal costs and other damages associated with the presence of hazardous substances in the 17-mile Lower Passaic River Study Area (the "Study Area”). CSXT, on behalf of Pharmacia, and a significant number of other potentially responsible parties are together conducting a Remedial Investigation and Feasibility Study of the Study Area pursuant to an Administrative Settlement Agreement and Order on Consent with the EPA.

In March 2016, EPA issued its Record of Decision detailing the agency’s mandated remedial process for the lower 8 miles of the Study Area, which was based on a Focused Feasibility Study. EPA has estimated that it will take the potentially responsible parties approximately ten years to complete the work. At a later date, EPA will select a remedy for the remainder of the Study Area and is expected to again seek the participation of private parties to implement the selected remedy using EPA’s CERCLA authority to compel such participation, if necessary.

CSXT is also defending and indemnifying Pharmacia in a cooperative natural resource damages assessment process related to the Property. Based on currently available information, the Company does not believe any indemnification or remediation costs potentially allocable to CSXT with respect to the Property and the Study Area would be material to the Company's financial condition, results of operations or liquidity.

CSX Q3 2017 Form 10-Q p.18

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 6.    Employee Benefit Plans

The Company sponsors defined benefit pension plans principally for salaried, management personnel.  For employees hired prior to January 1, 2003, the plans provide eligible employees with retirement benefits based predominantly on years of service and compensation rates near retirement. For employees hired in 2003 or thereafter, benefits are determined based on a cash balance formula, which provides benefits by utilizing interest and pay credits based upon age, service and compensation.

In addition to these plans, the Company sponsors a post-retirement medical plan and a life insurance plan that provide certain benefits to full-time, salaried, management employees, hired prior to January 1, 2003, upon their retirement if certain eligibility requirements are met. Eligible retirees who are age 65 years or older (Medicare-eligible) are covered by a health reimbursement arrangement, which is an employer-funded account that can be used for reimbursement of eligible medical expenses. Eligible retirees younger than 65 years (non-Medicare eligible) are covered by a self-insured program partially funded by participating retirees. The life insurance plan is non-contributory.

The Company engages independent actuaries to compute the amounts of liabilities and expenses relating to these plans subject to the assumptions that the Company determines are appropriate based on historical trends, current market rates and future projections. These amounts are reviewed by management. The following table describes the components of expense / (income) related to net benefit expense recorded in labor and fringe on the income statement.

	Pension Benefits
(Dollars in millions)	Third Quarters						Nine Months
	2017			2016			2017			2016
Service Cost	$	8		$	12		$	28		$	36
Interest Cost	23			29			69			89
Expected Return on Plan Assets	(43		)	(39		)	(128		)	(118		)
Amortization of Net Loss	10			12			31			36
Net Periodic Benefit Cost	$	(2	)	$	14		$	—		$	43
Special Termination Benefits - Management Workforce Reduction/Curtailment	—			—			57			—
Total Expense	$	(2	)	$	14		$	57		$	43
	Other Post-retirement Benefits
(Dollars in millions)	Third Quarters						Nine Months
	2017			2016			2017			2016
Service Cost	$	—		$	—		$	1		$	1
Interest Cost	2			3			6			9
Amortization of Net Loss	—			1			—			2
Net Periodic Benefit Cost	$	2		$	4		$	7		$	12
Special Termination Benefits - Management Workforce Reduction/Curtailment	—			—			13			—
Total Expense	$	2		$	4		$	20		$	12

CSX Q3 2017 Form 10-Q p.19

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 6.    Employee Benefit Plans, continued

As a result of the management workforce reductions in 2017, charges were incurred related to special termination benefits and curtailment costs. (For additional information regarding the management workforce reductions, see Note 1, Nature of Operations and Significant Accounting Policies.) In first quarter 2017, the Company remeasured the other post-retirement benefits obligation and recorded a curtailment loss of $13 million in restructuring charge on the income statement. The remeasurement did not have a material impact on the other post-retirement benefits obligation. In connection with this remeasurement, the effective discount rate assumption was updated to 3.59% from 3.71%.

In the second quarter of 2017, the Company remeasured the pension benefits obligation and pension plan assets and recorded a curtailment loss of $4 million in restructuring charge on the income statement. This remeasurement resulted in a decrease to the liabilities for pension benefits of approximately $86 million and a corresponding decrease to accumulated other comprehensive loss. In connection with this remeasurement, the effective discount rate assumption was updated to 3.94% from 4.08%. There were no other changes to assumptions used to value pension benefits obligation and expense.

Qualified pension plan obligations are funded in accordance with regulatory requirements and with an objective of meeting or exceeding minimum funding requirements necessary to avoid restrictions on flexibility of plan operation and benefit payments. No contributions to the Company's qualified pension plans are expected in 2017.

NOTE 7.    Debt and Credit Agreements

Total activity related to long-term debt as of the end of third quarter 2017 is shown in the table below. For fair value information related to the Company's long-term debt, see Note 9, Fair Value Measurements.

(Dollars in millions)	Current Portion			Long-term Portion			Total
Long-term debt as of December 30, 2016	$	331		$	10,962		$	11,293
2017 activity:
Long-term debt issued	—			850			850
Long-term debt repaid	(332		)	—			(332		)
Reclassifications	20			(20		)	—
Discount, premium and other activity				(4		)	(4		)
Long-term debt as of September 30, 2017	$	19		$	11,788		$	11,807

Debt Issuance

    In May 2017, CSX issued $850 million of 3.25% notes due 2027. These notes are included in the consolidated balance sheets under long-term debt and may be redeemed by the Company at any time. The net proceeds will be used for general corporate purposes, which may include repurchases of CSX's common stock, capital investment, working capital requirements, improvement in productivity and other cost reductions at CSX’s major transportation units.

CSX Q3 2017 Form 10-Q p.20

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 7.    Debt and Credit Agreements, continued

Credit Facility

CSX has a $1 billion unsecured, revolving credit facility backed by a diverse syndicate of banks. This facility expires in May 2020, and as of the date of this filing, the Company has no outstanding balances under this facility. The facility allows borrowings at floating (LIBOR-based) interest rates, plus a spread, depending upon CSX's senior unsecured debt ratings. LIBOR is the London Interbank Offered Rate which is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds.

Commitment fees and interest rates payable under the facility were similar to fees and rates available to comparably rated investment-grade borrowers. As of third quarter 2017, CSX was in compliance with all covenant requirements under this facility.

Receivables Securitization Facility

The Company has a receivables securitization facility with a three-year term scheduled to expire in September 2019. The purpose of this facility is to provide an alternative to commercial paper and a low cost source of short-term liquidity of up to $200 million, depending on eligible receivables balances. As of the date of this filing, the Company has no outstanding balances under this facility.

NOTE 8.    Income Taxes

There have been no material changes to the balance of unrecognized tax benefits reported at December 30, 2016.

NOTE 9.    Fair Value Measurements

The Financial Instruments Topic in the ASC requiresdisclosures about fair value of financial instruments in annual reports as well as in quarterly reports. For CSX, this statement applies to certain investments and long-term debt. Disclosure of the fair value of pension plan assets is only required annually. Also, this rule clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements.

Various inputs are considered when determining the value of the Company's investments, pension plan assets and long-term debt. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in these securities. These inputs are summarized in the three broad levels listed below.

• Level 1 - observable market inputs that are unadjusted quoted prices for identical assets or liabilities in active markets;

• Level 2 - other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.); and

• Level 3 - significant unobservable inputs (including the Company's own assumptions about the assumptions market participants would use in determining the fair value of investments).

CSX Q3 2017 Form 10-Q p.21

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 9.    Fair Value Measurements, continued

The valuation methods described below may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Investments

The Company's investment assets, valued with assistance from a third-party trustee, consist of certificates of deposits, commercial paper, corporate bonds and government securities and are carried at fair value on the consolidated balance sheet per the Fair Value Measurements and Disclosures Topic in theASC. There are several valuation methodologies used for those assets as described below.

• Certificates of Deposit and Commercial Paper (Level 2): Valued at amortized cost, which approximates fair value; and

• Corporate Bonds and Government Securities (Level 2): Valued using broker quotes that utilize observable market inputs.

The Company's investment assets are carried at fair value on the consolidated balance sheets as summarized in the following table. All of the inputs used to determine the fair value of the Company's investments are Level 2 inputs. The amortized cost basis of these investments was $186 million and $500 million as of September 30, 2017 and December 30, 2016, respectively.

(Dollars in Millions)	September 30, 2017		December 30, 2016
Certificates of Deposit and Commercial Paper	$	100	$	415
Corporate Bonds	60		63
Government Securities	29		22
Total investments at fair value	$	189	$	500

These investments have the following maturities:

(Dollars in millions)	September 30, 2017		December 30, 2016
Less than 1 year	$	113	$	417
1 - 2 years	5		12
2 - 5 years	10		4
Greater than 5 years	61		67
Total investments at fair value	$	189	$	500

CSX Q3 2017 Form 10-Q p.22

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 9.    Fair Value Measurements, continued

Long-term Debt

Long-term debt is reported at carrying amount on the consolidated balance sheets and is the Company's only financial instrument with fair values significantly different from their carrying amounts. The majority of the Company's long-term debt is valued with assistance from an independent third party adviser that utilizes closing transactions, market quotes or market values of comparable debt. For those instruments not valued by the independent adviser, the fair value has been estimated by applying market rates of similar instruments to the scheduled contractual debt payments and maturities. These market rates are provided by the same independent adviser. All of the inputs used to determine the fair value of the Company's long-term debt are Level 2 inputs.

The fair value of outstanding debt fluctuates with changes in a number of factors. Such factors include, but are not limited to, interest rates, market conditions, credit ratings, values of similar financial instruments, size of the transaction, cash flow projections and comparable trades. Fair value will exceed carrying value when the current market interest rate is lower than the interest rate at which the debt was originally issued. The fair value of a company's debt is a measure of its current value under present market conditions. It does not impact the financial statements under current accounting rules.

The fair value and carrying value of the Company's long-term debt is as follows:

(Dollars in millions)	September 30, 2017		December 30, 2016
Long-term Debt (Including Current Maturities):
Fair Value	$	13,082	$	12,096
Carrying Value	11,807		11,293

NOTE 10.     Other Comprehensive Income (Loss)

CSX reports comprehensive earnings or loss in accordance with the Comprehensive Income Topic in the ASC in the Consolidated Comprehensive Income Statement. Total comprehensive earnings are defined as all changes in shareholders' equity during a period, other than those resulting from investments by and distributions to shareholders (e.g. issuance of equity securities and dividends). Generally, for CSX, total comprehensive earnings equal net earnings plus or minus adjustments for pension and other post-retirement liabilities. Total comprehensive earnings represent the activity for a period net of tax and were $467 million and $465 million for third quarters and $1.4 billion and $1.3 billion for nine months 2017 and 2016, respectively.

While total comprehensive earnings is the activity in a period and is largely driven by net earnings in that period, accumulated other comprehensive income or loss (“AOCI”) represents the cumulative balance of other comprehensive income, net of tax, as of the balance sheet date. For CSX, AOCI is primarily the cumulative balance related to pension and other post-retirement benefit adjustments and CSX's share of AOCI of equity method investees.

CSX Q3 2017 Form 10-Q p.23

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 10.     Other Comprehensive Income (Loss), continued

Changes in the AOCI balance by component are shown in the table below. Amounts reclassified in pension and other post-employment benefits to net earnings relate to the amortization of actuarial losses and are included in labor and fringe on the consolidated income statements. See Note 6, Employee Benefit Plans, for further information. Other primarily represents CSX's share of AOCI of equity method investees. Amounts reclassified in other to net earnings are included in materials, supplies and other on the consolidated income statements.

	Pension and Other Post-Employment Benefits			Other			Accumulated Other Comprehensive Income (Loss)
(Dollars in millions)
Balance December 30, 2016, Net of Tax	$	(580	)	$	(60	)	$	(640	)
Other Comprehensive Income (Loss)
Income Before Reclassifications	86			2			88
Amounts Reclassified to Net Earnings	33			2			35
Tax Expense	(43		)	(1		)	(44		)
Total Other Comprehensive Income	76			3			79
Balance September 30, 2017, Net of Tax	$	(504	)	$	(57	)	$	(561	)

NOTE 11.    Summarized Consolidating Financial Data

In 2007, CSXT, a wholly-owned subsidiary of CSX Corporation, sold secured equipment notes maturing in 2023 in a registered public offering. CSX has fully and unconditionally guaranteed the notes. In connection with the notes, the Company is providing the following condensed consolidating financial information in accordance with SEC disclosure requirements. Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements, except for the use of the equity method of accounting to reflect ownership interests in subsidiaries which are eliminated upon consolidation and the allocation of certain expenses of CSX incurred for the benefit of its subsidiaries. Condensed consolidating financial information for the obligor, CSXT, and parent guarantor, CSX, is shown in the following tables.

CSX Q3 2017 Form 10-Q p.24

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 11.Summarized Consolidating Financial Data, continued

Consolidating Income Statements
(Dollars in millions)
Third Quarter 2017	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Revenue	$	—		$	2,725		$	18		$	2,743
Expense	(129		)	2,025			(29		)	1,867
Operating Income	129			700			47			876
Equity in Earnings of Subsidiaries	472			—			(472		)	—
Interest (Expense) / Benefit	(147		)	(3		)	18			(132		)
Other Income / (Expense) - Net	1			13			(8		)	6
Earnings Before Income Taxes	455			710			(415		)	750
Income Tax Benefit / (Expense)	4			(277		)	(18		)	(291		)
Net Earnings	$	459		$	433		$	(433	)	$	459
Total Comprehensive Earnings	$	467		$	433		$	(433	)	$	467
Third Quarter 2016	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Revenue	$	—		$	2,691		$	19		$	2,710
Expense	(63		)	1,960			(28		)	1,869
Operating Income	63			731			47			841
Equity in Earnings of Subsidiaries	505			1			(506		)	—
Interest (Expense) / Benefit	(141		)	(7		)	9			(139		)
Other Income / (Expense) - Net	—			9			4			13
Earnings Before Income Taxes	427			734			(446		)	715
Income Tax (Expense) / Benefit	28			(268		)	(20		)	(260		)
Net Earnings	$	455		$	466		$	(466	)	$	455
Total Comprehensive Earnings	$	465		$	467		$	(467	)	$	465

CSX Q3 2017 Form 10-Q p.25

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 11.Summarized Consolidating Financial Data, continued

Consolidating Income Statements
(Dollars in millions)
Nine Months 2017	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Revenue	$	—		$	8,490		$	55		$	8,545
Expense	(171		)	6,278			(108		)	5,999
Operating Income	171			2,212			163			2,546
Equity in Earnings of Subsidiaries	1,506			—			(1,506		)	—
Interest (Expense) / Benefit	(432		)	(21		)	47			(406		)
Other Income / (Expense) - Net	6			32			(19		)	19
Earnings Before Income Taxes	1,251			2,223			(1,315		)	2,159
Income Tax (Expense) / Benefit	80			(844		)	(64		)	(828		)
Net Earnings	$	1,331		$	1,379		$	(1,379	)	$	1,331
Total Comprehensive Earnings	$	1,410		$	1,378		$	(1,378	)	$	1,410
Nine Months 2016	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Revenue	$	—		$	7,974		$	58		$	8,032
Expense	(202		)	5,985			(136		)	5,647
Operating Income	202			1,989			194			2,385
Equity in Earnings of Subsidiaries	1,399			1			(1,400		)	—
Interest (Expense) / Benefit	(425		)	(27		)	29			(423		)
Other Income / (Expense) - Net	1			24			3			28
Earnings Before Income Taxes	1,177			1,987			(1,174		)	1,990
Income Tax (Expense) / Benefit	79			(735		)	(78		)	(734		)
Net Earnings	$	1,256		$	1,252		$	(1,252	)	$	1,256
Total Comprehensive Earnings	$	1,282		$	1,253		$	(1,253	)	$	1,282

CSX Q3 2017 Form 10-Q p.26

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 11.Summarized Consolidating Financial Data, continued

Consolidating Balance Sheet
(Dollars in millions)
September 30, 2017	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
ASSETS
Current Assets
Cash and Cash Equivalents	$	433		$	147		$	11		$	591
Short-term Investments	100			—			13			113
Accounts Receivable - Net	(1		)	277			705			981
Receivable from Affiliates	1,012			3,004			(4,016		)	—
Materials and Supplies	—			392			—			392
Other Current Assets	2			76			17			95
Total Current Assets	1,546			3,896			(3,270		)	2,172
Properties	1			41,292			2,812			44,105
Accumulated Depreciation	(1		)	(11,014		)	(1,511		)	(12,526		)
Properties - Net	—			30,278			1,301			31,579
Investments in Conrail	—			—			864			864
Affiliates and Other Companies	(39		)	667			14			642
Investments in Consolidated Subsidiaries	25,221			—			(25,221		)	—
Other Long-term Assets	9			592			(285		)	316
Total Assets	$	26,737		$	35,433		$	(26,597	)	$	35,573
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable	$	178		$	695		$	32		$	905
Labor and Fringe Benefits Payable	76			483			42			601
Payable to Affiliates	4,148			382			(4,530		)	—
Casualty, Environmental and Other Reserves	—			109			13			122
Current Maturities of Long-term Debt	—			19			—			19
Income and Other Taxes Payable	(115		)	418			19			322
Other Current Liabilities	—			103			3			106
Total Current Liabilities	4,287			2,209			(4,421		)	2,075
Casualty, Environmental and Other Reserves	—			207			46			253
Long-term Debt	11,053			735			—			11,788
Deferred Income Taxes - Net	(198		)	9,697			290			9,789
Other Long-term Liabilities	708			375			(317		)	766
Total Liabilities	$	15,850		$	13,223		$	(4,402	)	$	24,671
Shareholders' Equity
Common Stock, $1 Par Value	$	894		$	181		$	(181	)	$	894
Other Capital	227			5,096			(5,096		)	227
Retained Earnings	10,327			16,938			(16,938		)	10,327
Accumulated Other Comprehensive Loss	(561		)	(20		)	20			(561		)
Noncontrolling Interest	—			15			—			15
Total Shareholders' Equity	$	10,887		$	22,210		$	(22,195	)	$	10,902
Total Liabilities and Shareholders' Equity	$	26,737		$	35,433		$	(26,597	)	$	35,573

CSX Q3 2017 Form 10-Q p.27

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 11.Summarized Consolidating Financial Data, continued

Consolidating Balance Sheet (Dollars in millions)
December 30, 2016	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
ASSETS
Current Assets
Cash and Cash Equivalents	$	305		$	281		$	17		$	603
Short-term Investments	415			—			2			417
Accounts Receivable - Net	2			215			721			938
Receivable from Affiliates	1,157			2,351			(3,508		)	—
Materials and Supplies	—			407			—			407
Other Current Assets	—			106			16			122
Total Current Assets	1,879			3,360			(2,752		)	2,487
Properties	1			40,518			2,708			43,227
Accumulated Depreciation	(1		)	(10,634		)	(1,442		)	(12,077		)
Properties - Net	—			29,884			1,266			31,150
Investments in Conrail	—			—			840			840
Affiliates and Other Companies	(39		)	643			15			619
Investment in Consolidated Subsidiaries	24,179			—			(24,179		)	—
Other Long-term Assets	2			607			(291		)	318
Total Assets	$	26,021		$	34,494		$	(25,101	)	$	35,414
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable	$	95		$	678		$	33		$	806
Labor and Fringe Benefits Payable	40			440			65			545
Payable to Affiliates	3,457			500			(3,957		)	—
Casualty, Environmental and Other Reserves	—			102			13			115
Current Maturities of Long-term Debt	313			19			(1		)	331
Income and Other Taxes Payable	(346		)	459			16			129
Other Current Liabilities	—			112			2			114
Total Current Liabilities	3,559			2,310			(3,829		)	2,040
Casualty, Environmental and Other Reserves	—			208			51			259
Long-term Debt	10,203			759			—			10,962
Deferred Income Taxes - Net	(203		)	9,541			258			9,596
Other Long-term Liabilities	783			410			(330		)	863
Total Liabilities	$	14,342		$	13,228		$	(3,850	)	$	23,720
Shareholders' Equity
Common Stock, $1 Par Value	$	928		$	181		$	(181	)	$	928
Other Capital	138			5,095			(5,095		)	138
Retained Earnings	11,253			15,994			(15,994		)	11,253
Accumulated Other Comprehensive Loss	(640		)	(19		)	19			(640		)
Noncontrolling Minority Interest	—			15			—			15
Total Shareholders' Equity	$	11,679		$	21,266		$	(21,251	)	$	11,694
Total Liabilities and Shareholders' Equity	$	26,021		$	34,494		$	(25,101	)	$	35,414

CSX Q3 2017 Form 10-Q p.28

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 11.Summarized Consolidating Financial Data, continued

Consolidating Cash Flow Statements
(Dollars in millions)
Nine Months 2017	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Operating Activities
Net Cash Provided by (Used in) Operating Activities	$	1,590		$	1,544		$	(273	)	$	2,861
Investing Activities
Property Additions	—			(1,311		)	(151		)	(1,462		)
Purchases of Short-term Investments	(639		)	—			(6		)	(645		)
Proceeds from Sales of Short-term Investments	955			—			2			957
Other Investing Activities	(2		)	98			(25		)	71
Net Cash Provided by (Used in) Investing Activities	314			(1,213		)	(180		)	(1,079		)
Financing Activities
Long-term Debt Issued	850			—			—			850
Long-term Debt Repaid	(312		)	(20		)	—			(332		)
Dividends Paid	(530		)	(450		)	450			(530		)
Shares Repurchased	(1,763		)	—			—			(1,763		)
Other Financing Activities	(21		)	5			(3		)	(19		)
Net Cash Provided by (Used in) Financing Activities	(1,776		)	(465		)	447			(1,794		)
Net Increase (Decrease) in Cash and Cash Equivalents	128			(134		)	(6		)	(12		)
Cash and Cash Equivalents at Beginning of Period	305			281			17			603
Cash and Cash Equivalents at End of Period	$	433		$	147		$	11		$	591

CSX Q3 2017 Form 10-Q p.29

CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 11.Summarized Consolidating Financial Data, continued

Consolidating Cash Flow Statements
(Dollars in millions)
Nine Months 2016	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Operating Activities
Net Cash Provided by (Used in) Operating Activities	$	644		$	2,089		$	(245	)	$	2,488
Investing Activities
Property Additions	—			(1,469		)	(121		)	(1,590		)
Purchases of Short-term Investments	(410		)	—			—			(410		)
Proceeds from Sales of Short-term Investments	1,070			—			—			1,070
Other Investing Activities	(3		)	107			(67		)	37
Net Cash Provided by (Used in) Investing Activities	657			(1,362		)	(188		)	(893		)
Financing Activities
Long-term Debt Issued	—			—			—			—
Long-term Debt Repaid	—			(18		)	(1		)	(19		)
Dividends Paid	(513		)	(450		)	450			(513		)
Shares Repurchased	(778		)	—			—			(778		)
Other Financing Activities	(6		)	(304		)	—			(310		)
Net Cash Provided by (Used in) Financing Activities	(1,297		)	(772		)	449			(1,620		)
Net Increase (Decrease) in Cash and Cash Equivalents	4			(45		)	16			(25		)
Cash and Cash Equivalents at Beginning of Period	444			175			9			628
Cash and Cash Equivalents at End of Period	$	448		$	130		$	25		$	603

CSX Q3 2017 Form 10-Q p.30

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THIRD QUARTER 2017 HIGHLIGHTS

• Revenue increased$33 million to $2.7 billion, or 1 percent year over year.

• Expenses decreased$2 million to $1.9 billion.

• Operating income of $876 millionincreased$35 million, or 4 percent year over year.

• Operating ratio of 68.1%improved90 basis points versus last year's quarter.

• Earnings per share of $0.51increased$0.03, or 6 percent year over year.

	Third Quarters									Nine Months
	2017			2016			Fav / (Unfav)		% Change	2017			2016			Fav / (Unfav)			% Change
Volume (in thousands)	1,587			1,574			13		1%	4,799			4,720			79			2%
(in millions)
Revenue	$	2,743		$	2,710		$	33	1%	$	8,545		$	8,032		$	513		6%
Expense	1,867			1,869			2		—%	5,999			5,647			(352		)	(6)%
Operating Income	$	876		$	841		$	35	4%	$	2,546		$	2,385		$	161		7%
Operating Ratio	68.1		%	69.0		%	90		bps	70.2		%	70.3		%	10			bps
Earnings Per Diluted Share	$	0.51		$	0.48		$	0.03	6%	$	1.45		$	1.32		$	0.13		10%

In third quarter 2017, the Company continued implementation of Precision Scheduled Railroading. As a result, CSX is adjusting its strategy to successfully execute this new plan, relentlessly focusing on improving customer service, controlling costs, optimizing asset utilization, operating safely, and developing and valuing employees.

The restructuring charge was $1 million in third quarter 2017 and $296 million year-to-date, which includes costs related to the management workforce reduction program announced earlier this year. The Company expects estimated pre-tax savings on both future earnings and cash flows resulting from this program to be approximately $200 million per year.

CSX Q3 2017 Form 10-Q p.31

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Volume and Revenue(Unaudited)
Volume (Thousands of units); Revenue (Dollars in Millions); Revenue Per Unit (Dollars)
Third Quarters
	Volume				Revenue						Revenue Per Unit
	2017	2016	% Change		2017		2016		% Change		2017		2016		% Change
Agricultural
Agricultural and Food Products	106	109	(3	)%	$	288	$	295	(2	)%	$	2,717	$	2,706	—	%
Fertilizers	68	72	(6	)	106		104		2		1,559		1,444		8
Industrial
Chemicals	164	173	(5	)	546		542		1		3,329		3,133		6
Automotive	105	115	(9	)	269		304		(12	)	2,562		2,643		(3	)
Metals and Equipment	64	63	2		178		180		(1	)	2,781		2,857		(3	)
Housing and Construction
Minerals	80	86	(7	)	120		125		(4	)	1,500		1,453		3
Forest Products	64	68	(6	)	181		191		(5	)	2,828		2,809		1
Total Merchandise	651	686	(5	)	1,688		1,741		(3	)	2,593		2,538		2
Coal	218	207	5		514		467		10		2,358		2,256		5
Intermodal	718	681	5		446		425		5		621		624		—
Other	—	—	—		95		77		23		—		—		—
Total	1,587	1,574	1	%	$	2,743	$	2,710	1	%	$	1,728	$	1,722	—	%
Nine Months
	Volume				Revenue						Revenue Per Unit
	2017	2016	% Change		2017		2016		% Change		2017		2016		% Change
Agricultural
Agricultural and Food Products	341	346	(1	)%	$	941	$	925	2	%	$	2,760	$	2,673	3	%
Fertilizers	223	220	1		353		345		2		1,583		1,568		1
Industrial
Chemicals	508	520	(2	)	1,664		1,622		3		3,276		3,119		5
Automotive	340	349	(3	)	892		907		(2	)	2,624		2,599		1
Metals and Equipment	201	196	3		546		531		3		2,716		2,709		—
Housing and Construction
Minerals	233	230	1		362		345		5		1,554		1,500		4
Forest Products	198	204	(3	)	567		572		(1	)	2,864		2,804		2
Total Merchandise	2,044	2,065	(1	)	5,325		5,247		1		2,605		2,541		3
Coal	631	602	5		1,566		1,282		22		2,482		2,130		17
Intermodal	2,124	2,053	3		1,328		1,249		6		625		608		3
Other	—	—	—		326		254		28		—		—		—
Total	4,799	4,720	2	%	$	8,545	$	8,032	6	%	$	1,781	$	1,702	5	%

CSX Q3 2017 Form 10-Q p.32

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Third Quarter 2017

Revenue

Revenue for the third quarter increased$33 million or one percent when compared to the previous year. This growth was primarily driven by gains in coal and intermodal, partially offset by declines in the majority of the merchandise markets.

Merchandise

Agricultural Sector

Agricultural and Food Products - Volume declined due to challenges in the export market as well as a large southeastern grain crop leading to local truck sourcing to feed mills. These declines were partially offset by gains in ethanol driven by higher production levels and new business wins.

Fertilizers - Volume declined predominantly due to Hurricane Irma's impact on Central Florida phosphate operations causing reduced production levels and supply chain disruptions.

Industrial Sector

Chemicals - Volume fell, primarily reflecting sustained challenges in the Eastern crude-by-rail market. This decline offset an increase in shipments of frac sand and petroleum gases due to growth in drilling activity.

Automotive - Volume declined as North American vehicle production fell. Dealership inventory ended the quarter consistent with the prior four-year average.

Metals and Equipment - Volume increased slightly as an increase in equipment moves more than offset declines in steel sheet and scrap.

Housing and Construction Sector

Minerals - Volume fell, reflecting short-term competitive losses to other modes as the Company transitions its customers to the new operating plan.

Forest Products - Volume declined as mill closures and truck competition negatively impacted shipments of paper products. Additionally, lumber shipments were challenged due to the enforcement of duties on Canadian lumber.

Coal

Domestic Utility Coal - Volume declined reflecting the competitive loss of short-haul interchange traffic and challenges from Hurricane Irma, which caused outages at southeastern customer facilities.

Domestic Coke, Iron Ore and Other - Volume was down, primarily driven by iron ore shipments, as a large customer continued to idle its production.

Export Coal - Volume increased as global supply levels and pricing conditions supported strong growth in U.S. coal exports.

CSX Q3 2017 Form 10-Q p.33

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Intermodal

Domestic - Volume increased one percent as growth with existing customers and ongoing success of CSX’s highway-to-rail conversion initiative more than offset a prior year short-haul competitive loss which cycled mid-quarter and other competitive losses as the Company transitions its customers to the new operating plan.

International - Volume was up 11 percent driven by new customers and strong performance with existing customers as eastern port volumes increased.

Other

Other revenue increased $18 million versus the prior year primarily due to higher incidental charges and lower volume-based refunds.

Expenses

Expenses of approximately $1.9 billion remained relatively consistent, decreasing $2 million year over year. This decrease was due to efficiency savings of $95 million and lower volume related costs of $13 million due to a decrease in gross ton-miles, nearly offset by inflation of $53 million, fuel price increases of $32 million and other items.

Labor and Fringe expense decreased$45 million due to the following:

• Inflation of $43 million was driven primarily by increased health and welfare and wage increases.

• Efficiency savings of $73 million were driven by reduced management headcount as a result of the 2017 restructuring initiative, as well as lower operating support costs.

• Volume-related costs decreased by $4 million.

• Other costs decreased by $11 million primarily due to a decrease in pension expense partially offset by other items, none of which were individually significant.

Materials, Supplies and Other expense increased$9 million due to the following:

• Additional expense of $13 million resulted from train accidents during the quarter.

• Inflation resulted in $8 million of additional cost.

• Technology-related asset impairment charges were $5 million.

• Efficiency savings of $30 million were primarily related to lower maintenance costs from the reduction in the active locomotive fleet and a reduction in contingent workers.

• Volume-related costs decreased by $4 million.

• Other costs increased $17 million due to relocation costs and other items, none of which were individually significant.

Depreciation expense increased $10 million primarily due to a larger asset base.

Fuel expense increased$31 million due to the following:

• A 19 percent price increase drove $32 million in additional fuel expense.

• Efficiency savings were $1 million.

CSX Q3 2017 Form 10-Q p.34

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Equipment and Other Rents expense decreased$8 million due to the following:

• Efficiency losses of $9 million were due to increased days per load for automotive and merchandise markets.

• Inflation resulted in $2 million of additional cost due to higher rates across most car types.

• Volume-related costs were $5 million lower.

• Other costs decreased $14 million primarily due to rental income that was previously classified as other income in the prior years being reclassified to operating expense in the current year as well as other items, none of which were individually significant.

Restructuring charge of $1 million was incurred during the quarter.

Interest expensedecreased$7 million primarily due to lower average interest rates partially offset by higher average debt balances.

Other income - netdecreased$7 million primarily due to prior quarter income from non-operating real estate transactions, which are now included in operating income.

Income tax expenseincreased$31 million primarily due to increased earnings before income taxes, state legislative changes and non-deductible executive compensation.

Nine Months Results of Operations

Revenueincreased$513 million reflecting pricing gains, volume growth, higher fuel recoveries and a $58 million settlement in 2017 related to a customer that did not meet historical volume commitments.

Expenses were higher by $352 million driven primarily by a restructuring charge of $296 million, inflation of $153 million and fuel price increases of $127 million, partially offset by efficiency savings of $308 million.

Operating incomeincreased$161 million primarily due to pricing gains, volume growth and efficiency savings, partially offset by restructuring charges, inflation and increases in fuel price.

Interest expensedecreased$17 million primarily due to lower average interest rates partially offset by higher average debt balances.

Other income - netdecreased$9 million primarily due to prior quarter income from non-operating real estate transactions, which are now included in operating income, and other non-operating items, none of which were individually significant.

Income tax expenseincreased$94 million primarily due to increased earnings before income taxes, non-deductible executive compensation, and state legislative changes.

CSX Q3 2017 Form 10-Q p.35

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Non-GAAP Measures - Unaudited

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 below.

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 restructuring charge was tax effected using rates reflective of the applicable tax amounts for each component of the restructuring charge, including an adjustment for the non-deductibility of executive compensation.

	For the Quarter ended September 30, 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
GAAP Operating Results	$	876	68.1	%	$	459	$	0.51
Restructuring Charge (a)	1		(0.1	)%	4		—
Adjusted Operating Results (non-GAAP)	$	877	68.0	%	$	463	$	0.51

	For the Nine Months Ended September 30, 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
GAAP Operating Results	$	2,546	70.2	%	$	1,331	$	1.45
Restructuring Charge(a)	296		(3.5	)%	193		0.21
Adjusted Operating Results (non-GAAP)	$	2,842	66.7	%	$	1,524	$	1.66

(a) See Note 1, Nature of Operations and Significant Accounting Policies - Other Items - Restructuring Charge, for additional information.

CSX Q3 2017 Form 10-Q p.36

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

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 applicable tax rate of the charge.

	Nine Months
(Dollars in millions)	2017			2016
Net cash provided by operating activities	$	2,861		$	2,488
Property additions	(1,462		)	(1,590		)
Other investing activities	71			37
Free Cash Flow (before payment of dividends)	1,470			935
Add back: Cash Payments for Restructuring Charge (after-tax) (a)	96			—
Adjusted Free Cash Flow Before Dividends (non-GAAP)	$	1,566		$	935

(a) During the nine months ended September 30, 2017, the Company made cash payments of $147 million related to the restructuring charge. The Company also made $7 million in payments to the former CEO and President for previously accrued non-qualified pension benefits that are not included in the restructuring charge.

Operating Statistics (Estimated)

The Company measures and reports safety and service performance. The Company strives for continuous improvement in these measures through training, innovation and investment. Investment in training and technology also is designed to allow CSX employees to have an additional layer of protection that can detect and avoid many types of human factor incidents. The Company's 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.

In order to more accurately represent the Company’s operating performance, CSX has revised the way it calculates train velocity and terminal dwell effective third quarter 2017. These revisions are consistent with the principles of Precision Scheduled Railroading. Updated definitions for each key performance measure are included beneath the Operating Statistics table. Prior periods have been restated to conform to the current methodology. Details of the changes are as follows:

• Train velocity has been expanded to include intermediate dwell, now measuring end-to-end transit time.

• Dwell has been expanded to include car dwell time at terminals on through trains, now measuring all car dwell time on an end-to-end trip.

These revisions differ from the methodology prescribed by the Surface Transportation Board ("STB") for reporting train velocity and dwell. CSX will continue to report train velocity and dwell, using the prescribed methodology, to the STB on a weekly basis. At the STB's request, CSX is providing additional operating measures on a weekly basis that are available on the Company's website. CSX participated in a public listening session on October 11, 2017 at the STB regarding CSX's rail service. Information related to this session is available at the STB under matter E.P. 742.

CSX Q3 2017 Form 10-Q p.37

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CSX’s operating performance declined in the third quarter of 2017 compared to 2016 due to network fluidity challenges, train accidents and the impacts from Hurricane Irma. Network fluidity was unfavorably impacted early in the quarter as the Company's operations adjusted to the implementation of a new, balanced train plan. The Company expects to improve its level of performance through increased efficiency within terminals and refinement of the operating plan.

CSX’s FRA reportable personal injury frequency index of 1.41 for the third quarter of 2017 was 11 percent unfavorable to the prior year as a decline in overall injuries was offset by a significant decline in man-hours from fewer employees. The FRA train accident frequency rate of 3.82 for the quarter was 46 percent unfavorable to the prior year. CSX remains committed to ongoing safety improvement, with a focus on reducing injury severity and avoiding catastrophic events.

	Third Quarters						Nine Months
	2017		2016		Improvement/ (Deterioration)		2017		2016		Improvement/ (Deterioration)
Operations Performance
Train Velocity (Miles per hour)(a)	14.0		14.9		(6	)%	14.7		15.2		(3	)%
Dwell (Hours)(a)	12.1		11.2		(8	)%	11.5		11.2		(3	)%
On-Time Originations	74	%	84	%	(12	)%	81	%	84	%	(4	)%
On-Time Arrivals	48	%	54	%	(11	)%	57	%	56	%	2	%
Safety
FRA Personal Injury Frequency Index	1.41		1.27		(11	)%	1.17		1.04		(13	)%
FRA Train Accident Rate	3.82		2.61		(46	)%	2.99		2.69		(11	)%

(a) The methodology for calculating train velocity and dwell differ from that prescribed by the STB. CSX will continue to report train velocity and dwell, using the prescribed methodology, to the STB on a weekly basis.

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).

Dwell - Average amount of time in hours between car arrival to and departure from the yard.

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.

CSX Q3 2017 Form 10-Q p.38

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 consolidated balance sheets and sources of liquidity and capital, which provide an update to the discussion included in CSX's most recent annual report on Form 10-K.

Material Changes in Consolidated Balance Sheets and Significant Cash Flows

Consolidated Balance Sheets

Total assets increased$159 million from year end primarily due to an increase in net properties of $429 million, partially offset by a decrease in cash and short-term investment activity of $316 million. Total liabilities and shareholders' equity combined increased$159 million from year end primarily due to net earnings of $1.3 billion, an increase in net debt of $514 million and an increase in taxes payable of $193 million mostly due to a temporary tax payment extension for companies in areas affected by Hurricane Irma. These increases were partially offset by share repurchases of $1.8 billion.

Significant Cash Flows

The following chart highlights the net decrease in cash and cash equivalents of $12 million as compared to a net decrease of $25 million for operating, investing and financing activities for nine months ended 2017 and 2016, respectively.

• Cash provided by operating activities increased $373 million primarily driven by a temporary tax payment extension for companies in areas affected by Hurricane Irma, higher working capital and other activities, and higher net earnings. These increases were partially offset by payments related to restructuring activities.

• Cash used in investing activities increased $186 million primarily driven by higher net purchases of short-term investments partially offset by lower property additions.

• Cash used in financing activities increased $174 million primarily due to higher share repurchases, partially offset by higher net debt issued and a prior year repayment of seller-financed assets that did not repeat in the current year.

Projected capital investments for 2017 are expected to be $2.1 billion, including approximately $270 million for Positive Train Control ("PTC"). Of the 2017 investment, over half will be used to sustain the core infrastructure. The remaining amounts will be allocated to projects supporting productivity initiatives, service enhancements and profitable growth. CSX intends to fund capital investments through cash generated from operations.

CSX Q3 2017 Form 10-Q p.39

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company has incurred significant capital costs in connection with the implementation of PTC and has substantial work ahead. CSX estimates that the total multi-year cost of PTC implementation will be approximately $2.4 billion. This estimate includes costs for installing the new system along tracks, upgrading locomotives, adding communication equipment and developing new technologies. Total PTC spending through September 2017 was $2.0 billion.

Liquidity and Working Capital

As of the end of third quarter 2017, CSX had $704 million of cash, cash equivalents and short-term investments. CSX has a $1.0 billion unsecured revolving credit facility backed by a diverse syndicate of banks. This facility expires in May 2020 and as of the date of this filing, the Company has no outstanding balances under this facility. 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 a receivables securitization facility with a three-year term scheduled to expire in September 2019. The purpose of this facility is to provide an alternative to commercial paper and a low cost source of short-term liquidity of up to $200 million, depending on eligible receivables balances. As of the date of this filing, the Company has no outstanding balances under this facility.

Working capital can also be considered a measure of a company's ability to meet its short-term needs. CSX had a working capital surplus of $97 million and $447 million as of September 30, 2017 and December 30, 2016, respectively. The decrease in working capital since year end of $350 million is primarily due to share repurchases of $1.8 billion, property additions of $1.5 billion and dividends paid of $530 million. These decreases were partially offset by cash provided from operations of $2.9 billion and net debt issued of $518 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, trade receivable facility 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 currently reviewing its cash deployment strategy with respect to capital structure and shareholder distributions and is committed to an investment grade credit profile.

Contractual Obligations and Commercial Commitments

CSXT has a commitment under a long-term maintenance program agreement that covers a portion of CSXT’s fleet of locomotives. The program costs are based on the maintenance cycle for each covered locomotive, which is determined by the asset's age and type. Expected future costs may change as required maintenance schedules are revised and locomotives are placed into or removed from service. Under CSXT’s current obligations, the agreement will expire no earlier than 2031. On August 9, 2017, the Company exercised certain rights under the agreement, which resulted in a reduction of the locomotive fleet covered from 50% as of December 30, 2016 to an estimated 34% of locomotives beginning August 2018. As a result, the total remaining payments decreased from approximately $5.0 billion at December 30, 2016 to an estimated $1.7 billion at September 30, 2017.

CSX Q3 2017 Form 10-Q p.40

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires that management make estimates in reporting the amounts of certain assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and certain revenues and expenses during the reporting period. Actual results may differ from those estimates. These estimates and assumptions are discussed with the Audit Committee of the Board of Directors on a regular basis. Consistent with the prior year, significant estimates using management judgment are made for the areas below. For further discussion of CSX's critical accounting estimates, see the Company's most recent annual report on Form 10-K.

• casualty, environmental and legal reserves;

• pension and post-retirement medical plan accounting;

• depreciation policies for assets under the group-life method; and

• income taxes.

FORWARD-LOOKING STATEMENTS

Certain statements in this report and in other materials filed with the SEC, 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, dividends, share repurchases, safety and service performance, proposed new services and other matters that are not historical facts, and management's expectations as to future performance and operations and the time by which objectives will be achieved; and

• future economic, industry or market conditions or performance and their effect on the Company's financial condition, results of operations or liquidity.

Forward-looking statements are typically identified by words or phrases such as "will," "should," “believe,” “expect,” “anticipate,” “project,” “estimate,” “preliminary” and similar expressions. The Company cautions against placing undue reliance on forward-looking statements, which reflect its good faith beliefs with respect to future events and are based on information currently available to it as of the date the forward-looking statement is made. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the timing when, or by which, such performance or results will be achieved.

CSX Q3 2017 Form 10-Q p.41

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking statements are subject to a number of risks and uncertainties and actual performance or results could differ materially from those anticipated by any forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statement. If the Company does update any forward-looking statement, no inference should be drawn that the Company will make additional updates with respect to that statement or any other forward-looking statements. The following important factors, in addition to those discussed in Part II, 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 and initiatives to further regulate the rail industry;

• the outcome of litigation, claims and other contingent liabilities, including, but not limited to, those related to fuel surcharge, environmental matters, taxes, shipper and rate claims subject to adjudication, personal injuries and occupational illnesses;

• changes in domestic or international economic, political or business conditions, including those affecting the transportation industry (such as the impact of industry competition, conditions, performance and consolidation) and the level of demand for products carried by CSXT;

• natural events such as severe weather conditions, including floods, fire, hurricanes and earthquakes, a pandemic crisis 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 or equipment;

• 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;

• 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;

CSX Q3 2017 Form 10-Q p.42

CSX CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• adverse economic or operational effects from actual or threatened war or terrorist activities and any governmental response;

• loss of key personnel or the inability to hire and retain qualified employees;

• labor and benefit costs and labor difficulties, including stoppages affecting either the Company's operations or customers' ability to deliver goods to the Company for shipment;

• the Company's success in implementing its strategic, financial and operational initiatives, including Precision Scheduled Railroading;

• 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risk from the information provided under Part II, Item 7A (Quantitative and Qualitative Disclosures about Market Risk) of CSX's most recent annual report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

As of September 30, 2017, under the supervision and with the participation of CSX's Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), management has evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the CEO and CFO concluded that, as of September 30, 2017, the Company's disclosure controls and procedures were effective at the reasonable assurance level in timely alerting them to material information required to be included in CSX's periodic SEC reports. There were no changes in the Company's internal controls over financial reporting during the third quarter of 2017 that have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

For further details, please refer to Note 5. Commitments and Contingencies of this quarterly report on Form 10-Q. Also refer to Part I, Item 3. Legal Proceedings in CSX's most recent annual report on Form 10-K.

Item 1A. Risk Factors

For information regarding factors that could affect the Company's results of operations, financial condition and liquidity, see the risk factors discussed under Part II, Item 7 (Management's Discussion and Analysis of Financial Condition and Results of Operations) of CSX's most recent annual report on Form 10-K. See also Part I, Item 2 (Forward-Looking Statements) of this quarterly report on Form 10-Q.

CSX Q3 2017 Form 10-Q p.43

CSX CORPORATION

PART II

Item 2. CSX Purchases of Equity Securities

CSX purchases its own shares for two primary reasons: (1) to further its goals under its share repurchase program and (2) to fund the Company’s contribution required to be paid in CSX common stock under a 401(k) plan that covers certain union employees.     

In July 2017, the Board of Directors approved an additional $500 million of share repurchase authority under the share repurchase program announced in April 2017, bringing the total program size to $1.5 billion. As of October 2, 2017, the Company had completed all share repurchases under this program. During the third quartersof 2017 and 2016, the Company repurchased approximately $1 billion, or 20 million shares, and $263 million, or 10 million shares, respectively.

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. Shares are retired immediately upon repurchase. In accordance with the Equity Topic in the ASC, the excess of repurchase price over par value is recorded in retained earnings. Generally, retained earnings is only impacted by net earnings and dividends.

Share repurchase activity for the third quarter 2017 was as follows:

	CSX Purchases of Equity Securities for the Quarter
Third Quarter	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Beginning Balance					$	512,661,389
July 1 - July 31, 2017	9,920,229	$	52.24	9,805,644	500,360,263
August 1 - August 31, 2017	6,642,545	49.85		6,642,545	169,256,400
September 1 - September 30, 2017	3,129,053	51.64		3,128,708	7,696,097
Ending Balance	19,691,827	$	51.34	19,576,897	$	7,696,097

(a) The difference of 114,930 shares between the "Total Number of Shares Purchased" and the "Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs" for the quarter represents shares purchased to fund the Company's contribution to a 401(k) plan that covers certain union employees.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

    None

CSX Q3 2017 Form 10-Q p.44

CSX CORPORATION

PART II

Item 6. Exhibits

Exhibit designation	Nature of exhibit	Previously filed as exhibit to
Officer certifications:
31*	Rule13a-14(a) Certifications
32*	Section 1350 Certifications
Interactive data files:
101*	The following financial information from CSX Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 filed with the SEC on October 18, 2017, formatted in XBRL includes: (i) consolidated income statements for the fiscal periods ended September 30, 2017 and September 23, 2016, (ii) consolidated comprehensive income statements for the fiscal periods ended September 30, 2017 and September 23, 2016 (iii) consolidated balance sheets at September 30, 2017 and December 30, 2016, (iv) consolidated cash flow statements for the fiscal periods ended September 30, 2017 and September 23, 2016, and (v) the notes to consolidated financial statements.
* Filed herewith

CSX Q3 2017 Form 10-Q p.45

CSX CORPORATION

PART II

SIGNATURE

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

CSX CORPORATION

(Registrant)

By:/s/ ANDREW L. GLASSMAN

Andrew L. Glassman

Vice President and Controller

(Principal Accounting Officer)

Dated: October 18, 2017

CSX Q3 2017 Form 10-Q p.46

EX-31

Exhibit 31

CERTIFICATION OF CEO AND CFO PURSUANT TO EXCHANGE ACT RULE

13a - 14(a) OR RULE 15d-14(a)

I, E. Hunter Harrison, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of CSX Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: October 18, 2017

/s/ E. HUNTER HARRISON        

E. Hunter Harrison

President and Chief Executive Officer

I, Frank A. Lonegro, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of CSX Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: October 18, 2017

/s/ FRANK A. LONEGRO                

Frank A. Lonegro

Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION OF CEO AND CFO REQUIRED BY RULE 13a-14(b) OR RULE 15d-14(b) AND SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE U.S. CODE

In connection with the Quarterly Report of CSX Corporation on Form 10-Q for the period ending September 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, E. Hunter Harrison, Chief Executive Officer of the registrant, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant.

Date: October 18, 2017

/s/ E. HUNTER HARRISON

E. Hunter Harrison

President and Chief Executive Officer

In connection with the Quarterly Report of CSX Corporation on Form 10-Q for the period ending September 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Frank A. Lonegro, Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant.

Date: October 18, 2017

/s/ FRANK A. LONEGRO                

Frank A. Lonegro

Executive Vice President and Chief Financial Officer

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Document And Entity Information	9 Months Ended
	Sep. 30, 2017 shares
Document and Entity Information [Abstract]
Entity Registrant Name	CSX CORP
Entity Central Index Key	0000277948
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	893,723,083
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2017

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CONSOLIDATED INCOME STATEMENTS (Unaudited) - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 23, 2016	Sep. 30, 2017	Sep. 23, 2016
Income Statement
Revenue	$ 2,743	$ 2,710	$ 8,545	$ 8,032
Expense
Labor and Fringe	717	762	2,249	2,307
Materials, Supplies and Other	516	507	1,573	1,576
Depreciation	331	321	978	953
Fuel	205	174	621	496
Equipment and Other Rents	97	105	282	315
Restructuring Charge (Note 1)	1	0	296	0
Total Expense	1,867	1,869	5,999	5,647
Operating Income	876	841	2,546	2,385
Interest Expense	(132)	(139)	(406)	(423)
Other Income - Net	6	13	19	28
Earnings Before Income Taxes	750	715	2,159	1,990
Income Tax Expense	(291)	(260)	(828)	(734)
Net Earnings	$ 459	$ 455	$ 1,331	$ 1,256
Per Common Share
Net Earnings Per Share, Basic (in dollars per share)	$ 0.51	$ 0.48	$ 1.45	$ 1.32
Net Earnings Per Share, Assuming Dilution (in dollars per share)	$ 0.51	$ 0.48	$ 1.45	$ 1.32
Average Shares Outstanding (in shares)	902	942	916	952
Average Shares Outstanding, Assuming Dilution (in shares)	906	943	919	953
Cash Dividends Paid Per Common Share (in dollars per share)	$ 0.20	$ 0.18	$ 0.58	$ 0.54

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CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS (Unaudited) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 23, 2016	Sep. 30, 2017	Sep. 23, 2016
Statement of Comprehensive Income [Abstract]
Total Comprehensive Earnings	$ 467	$ 465	$ 1,410	$ 1,282

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Sep. 30, 2017	Dec. 30, 2016	Sep. 23, 2016	Dec. 25, 2015
Current Assets:
Cash and Cash Equivalents	$ 591	$ 603	$ 603	$ 628
Short-term Investments	113	417
Accounts Receivable - Net	981	938
Materials and Supplies	392	407
Other Current Assets	95	122
Total Current Assets	2,172	2,487
Properties	44,105	43,227
Accumulated Depreciation	(12,526)	(12,077)
Properties - Net	31,579	31,150
Other Long-term Assets	316	318
Total Assets	35,573	35,414
Current Liabilities:
Accounts Payable	905	806
Labor and Fringe Benefits Payable	601	545
Casualty, Environmental and Other Reserves (Note 4)	122	115
Current Maturities of Long-term Debt (Note 7)	19	331
Income and Other Taxes Payable	322	129
Other Current Liabilities	106	114
Total Current Liabilities	2,075	2,040
Casualty, Environmental and Other Reserves	253	259
Long-term Debt	11,788	10,962
Deferred Income Taxes - Net	9,789	9,596
Other Long-term Liabilities	766	863
Total Liabilities	24,671	23,720
Shareholders' Equity:
Common Stock, $1 Par Value	894	928
Other Capital	227	138
Retained Earnings	10,327	11,253
Accumulated Other Comprehensive Loss	(561)	(640)
Noncontrolling Interest	15	15
Total Shareholders' Equity	10,902	11,694
Total Liabilities and Shareholders' Equity	35,573	35,414
Investments in Conrail
Current Assets:
Investment in Affiliates and Other Companies	864	840
Affiliates and Other Companies
Current Assets:
Investment in Affiliates and Other Companies	$ 642	$ 619

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 30, 2016
Shareholders' Equity:
Common stock, par value (in dollars per share)	$ 1	$ 1

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CONSOLIDATED CASH FLOW STATEMENTS (Unaudited) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2017	Sep. 23, 2016
OPERATING ACTIVITIES
Net Earnings	$ 1,331	$ 1,256
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities:
Depreciation	978	953
Restructuring Charge	296	0
Cash Payments for Restructuring Charge	(147)	0
Deferred Income Taxes	161	312
Other Operating Activities	(13)	(51)
Changes in Operating Assets and Liabilities:
Accounts Receivable	(78)	68
Other Current Assets	47	(58)
Accounts Payable	102	94
Income and Other Taxes Payable	180	(25)
Other Current Liabilities	4	(61)
Net Cash Provided by Operating Activities	2,861	2,488
INVESTING ACTIVITIES
Property Additions	(1,462)	(1,590)
Purchase of Short-term Investments	(645)	(410)
Proceeds from Sales of Short-term Investments	957	1,070
Other Investing Activities	71	37
Net Cash Used In Investing Activities	(1,079)	(893)
FINANCING ACTIVITIES
Long-term Debt Issued	850	0
Long-term Debt Repaid (Note 7)	(332)	(19)
Dividends Paid	(530)	(513)
Shares Repurchased	(1,763)	(778)
Other Financing Activities	(19)	(310)
Net Cash Used in Financing Activities	(1,794)	(1,620)
Net Decrease in Cash and Cash Equivalents	(12)	(25)
CASH AND CASH EQUIVALENTS
Cash and Cash Equivalents at Beginning of Period	603	628
Cash and Cash Equivalents at End of Period	$ 591	$ 603

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Nature of Operations and Significant Accounting Policies

9 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations and Significant Accounting Policies

Nature of Operations and Significant Accounting Policies

Background

CSX Corporation (“CSX”), together with its subsidiaries (the “Company”), based in Jacksonville, Florida, is one of the nation's leading transportation companies. The Company provides rail-based transportation services including traditional rail service and the transport of intermodal containers and trailers.

CSX's principal operating subsidiary, CSX Transportation, Inc. (“CSXT”), provides an important link to the transportation supply chain through its approximately 21,000 route mile rail network, which serves major population centers in 23 states east of the Mississippi River, the District of Columbia and the Canadian provinces of Ontario and Quebec. The Company's intermodal business links customers to railroads via trucks and terminals.

After a merger on July 1, 2017 with CSX Real Property, Inc., a former wholly-owned CSX subsidiary, CSXT is now responsible for the Company's real estate sales, leasing, acquisition and management and development activities. In addition, as substantially all real estate sales, leasing, acquisition and management and development activities are focused on supporting railroad operations, all results of these activities are included in operating income beginning in 2017. Previously, the results of these activities were classified as operating or non-operating based on the nature of the activity and were not material for any periods presented.

Other entities

In addition to CSXT, the Company’s subsidiaries include CSX Intermodal Terminals, Inc. (“CSX Intermodal Terminals”), Total Distribution Services, Inc. (“TDSI”), Transflo Terminal Services, Inc. (“Transflo”), CSX Technology, Inc. (“CSX Technology”) and other subsidiaries. CSX Intermodal Terminals owns and operates a system of intermodal terminals, predominantly in the eastern United States and also performs drayage services (the pickup and delivery of intermodal shipments) for certain customers and trucking dispatch operations. TDSI serves the automotive industry with distribution centers and storage locations. Transflo connects non-rail served customers to the many benefits of rail by transferring products from rail to trucks. The biggest Transflo markets are chemicals and agriculture, which include shipments of plastics and ethanol. CSX Technology and other subsidiaries provide support services for the Company.

Basis of Presentation

In the opinion of management, the accompanying consolidated financial statements contain all normal, recurring adjustments necessary to fairly present the following:

• Consolidated income statements for the nine months ended September 30, 2017 and September 23, 2016;

• Consolidated comprehensive income statements for the nine months ended September 30, 2017 and September 23, 2016;

• Consolidated balance sheets at September 30, 2017 and December 30, 2016; and

• Consolidated cash flow statements for the nine months ended September 30, 2017 and September 23, 2016.

Pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been omitted from these interim financial statements. CSX suggests that these financial statements be read in conjunction with the audited financial statements and the notes included in CSX's most recent annual report on Form 10-K and any subsequently filed current reports on Form 8-K.

NOTE 1.    Nature of Operations and Significant Accounting Policies, continued

Fiscal Year

Through the second quarter 2017, CSX followed a 52/53 week fiscal reporting calendar with the last day of each reporting period ending on a Friday. On July 7, 2017 the Board of Directors of CSX approved a change in the fiscal reporting calendar from a 52/53 week year ending on the last Friday of December to a calendar year ending on December 31 each year, effective beginning with fiscal third quarter 2017. Related to the change in the fiscal calendar:

• Fiscal year 2017 commenced on December 31, 2016, as the fiscal year 2016 ended on December 30, 2016 under the 52/53 week fiscal calendar.

• The third quarter 2017 commenced on July 1, 2017, as the second quarter 2017 ended on June 30, 2017 under the 52/53 week fiscal calendar, and ended on September 30, 2017. Third quarter 2017 includes one more day of business results than third quarter 2016.

• The fourth quarter 2017 will commence on October 1, 2017 and end on December 31, 2017. Fourth quarter 2017 will include six fewer days of business results than fourth quarter 2016, which contained an extra week under the 52/53 week fiscal calendar.

• Fiscal year 2017 will include 366 days of activity, five fewer days than fiscal year 2016, which was a 53 week fiscal year that began on December 26, 2015 and ended December 30, 2016.

The Company does not expect that this change will materially impact comparability of the Company’s financial results for fiscal year 2016 and fiscal year 2017. Accordingly, the change to a calendar fiscal year will be made on a prospective basis and operating results for prior periods will not be adjusted. The Company will not be required to file a transition report because this change is not deemed a change in fiscal year for purposes of reporting subject to Rule 13a-10 or Rule 15d-10 of the Securities Exchange Act of 1934 as the new fiscal year commences with the end of the prior fiscal year end and within seven days of the prior fiscal year end.

Except as otherwise specified, references to “third quarter(s)” or “nine months” indicate CSX's fiscal periods ending September 30, 2017 and September 23, 2016, and references to "year-end" indicate the fiscal year ended December 30, 2016.

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts on uncollectible amounts related to freight receivables, government reimbursement receivables, claims for damages and other various receivables. The allowance is based upon the creditworthiness of customers, historical experience, the age of the receivable and current market and economic conditions. Uncollectible amounts are charged against the allowance account. Allowance for doubtful accounts of $24 million and $33 million is included in the consolidated balance sheets as of September 30, 2017 and December 30, 2016, respectively.

NOTE 1.    Nature of Operations and Significant Accounting Policies, continued

New Accounting Pronouncements

In May 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") Compensation - Stock Compensation: Scope of Modification Accounting, which provides clarity on what changes to share-based awards are considered substantive and require modification accounting to be applied. This update is required beginning with first quarter 2018 and should be applied prospectively to award modifications after the effective date. The Company early adopted this standard update in second quarter 2017 and will apply it prospectively to any award modifications after the adoption date. The Company does not regularly modify the terms and conditions of share-based awards and does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity.

In March 2017, the FASB issued ASU Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, whichrequires that only the service cost component of net periodic benefit costs be recorded as compensation cost in the operating expense section of the income statement. All other components of net periodic benefit cost (interest cost, expected return on plan assets and amortization of net loss) will be presented in other income - net. This standard update is effective beginning with the first quarter 2018 and must be applied retrospectively. The Company does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity.

In March 2017, the FASB issued ASU Simplifying the Test for Goodwill Impairment, which eliminates step two, the calculation of the implied fair value of goodwill, from the goodwill impairment test. Impairment will be quantified in step one of the test as the amount by which the carrying amount exceeds the fair value. This standard update is effective beginning first quarter 2020 and must be applied prospectively. The Company does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity.

In May 2014, the FASB issued ASU Revenue from Contracts with Customers, which supersedes previous revenue recognition guidance. The new standard requires that a company recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. Companies will need to use more judgment and estimates than under the guidance currently in effect, including estimating the amount of variable revenue to recognize over each identified performance obligation. Additional disclosures will be required to help users of financial statements understand the nature, amount and timing of revenue and cash flows arising from contracts. CSX will adopt this standard update in first quarter 2018 and plans to use a modified retrospective method of adoption.

The FASB has also issued several amendments to the revenue standard, including clarification on accounting for principal versus agent considerations (i.e., reporting gross versus net), licenses of intellectual property and identifying performance obligations. These amendments do not change the core principle of the standard, but provide clarity and implementation guidance.

NOTE 1.    Nature of Operations and Significant Accounting Policies, continued

The Company is currently finalizing its review of the impact of adopting this new guidance and has developed a comprehensive implementation plan. In-depth reviews of commercial contracts have been completed and changes to processes and internal controls to meet the standard’s reporting and disclosure requirements have been identified and are being implemented. At this time, the Company does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity. Freight revenue will continue to be recognized ratably over transit time. Additionally, the disaggregated revenue information required to be disclosed under this standard update is similar to the information currently included in the Results of Operations section of Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

In February 2016, the FASB issued ASU, Leases, which will require lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease liability, and lessors to recognize a net lease investment. Additional qualitative and quantitative disclosures will also be required. This standard update is effective for CSX beginning with the first quarter 2019 and will be adopted using a modified retrospective method. Changes to processes and internal controls to meet the standard’s reporting and disclosure requirements have been identified and are being implemented. Software has been implemented that will assist in the recognition of additional assets and liabilities to be included on the balance sheet related to leases currently classified as operating leases with durations greater than twelve months, with certain allowable exceptions. The Company continues to evaluate the expected impact of this standard update on disclosures, but does not anticipate any material changes to operating results or liquidity.

Other Items

Management Workforce Reduction

Through an involuntary separation program with enhanced benefits to further its strategic objectives, CSX reduced its management workforce by approximately 950employees during 2017. The Company has been focused on driving efficiencies through process improvement and responding to business mix shifts. These management reductions were designed to further streamline general and administrative and operating support functions to speed decision making and further control costs. In April 2017, the involuntary separation program was essentially completed. This program extends separation benefits for certain members of management that could result in additional charges through first quarter 2018. The majority of separation benefits are paid from general corporate funds while certain benefits are paid through CSX’s qualified pension plans.

Reimbursement Arrangements

In June 2017, the Company and the Company's President and Chief Executive Officer, E. Hunter Harrison, executed a letter agreement providing for certain reimbursement arrangements. Pursuant to the letter agreement, the Company made a reimbursement payment to MR Argent Advisor LLC ("Mantle Ridge") of $55 million for funds previously paid to Mr. Harrison by Mantle Ridge. Further, the Company assumed Mantle Ridge’s obligation to pay Mr. Harrison, prior to March 15, 2018, a lump sum cash amount of $29 million in respect of other forfeited compensation from his previous employer, Canadian Pacific Railway Limited (“CP”). The Company also assumed Mantle Ridge’s tax indemnification obligations to Mr. Harrison, which enables him to remain in the same after-tax position as if he had not: (i) forfeited such compensation and benefits earned from CP; and (ii) received $55 million from Mantle Ridge.

NOTE 1.    Nature of Operations and Significant Accounting Policies, continued

The ownership position of Mantle Ridge, a CSX shareholder, is detailed in the Company's Proxy Statement on Schedule 14A filed on April 20, 2017 and subsequent Form 4 filings with the SEC. The Vice-Chairman of CSX's Board of Directors, Paul C. Hilal, founded and controls Mantle Ridge and each of its related entities. At the Company's 2017 annual meeting of shareholders held on June 5, 2017, the Company's shareholders approved, on an advisory basis, with approximately 93 percent of the vote, the Company undertaking such reimbursement arrangements.

Restructuring Charge

In first quarter 2017, the former CEO and President of the Company announced their retirements, and the terms of their unvested equity awards were modified to permit prorated vesting through May 31, 2018. The total restructuring charge includes costs related to the management workforce reduction, reimbursement arrangements, the proration of equity awards and other advisory costs related to the leadership transition. Future charges related to this restructuring are not expected to be material. Expenses related to the management workforce reduction and other costs are shown in the following table.

	2017
(Dollars in millions)	First Quarter		Second Quarter		Third Quarter		Year-to-Date
Severance	$	81	$	10	$	—	$	91
Pension, Other Post-retirement Benefit and Other Non-cash Charges	68		10		—		78
Relocation	6		2		—		8
Subtotal Management Workforce Reduction	$	155	$	22	$	—	$	177
Reimbursement Arrangements	—		84		—		84
Non-cash Executive Equity Awards Proration	8		16		—		24
Other Charges Including Fees Related to Shareholder Matters	10		—		1		11
Total Restructuring Charge	$	173	$	122	$	1	$	296

Charges and payments related to the management workforce reduction and other costs are shown in the following table.

(Dollars in millions)	2017 Charges		2017 Payments			Non-cash Items			Liability 9/30/2017
Severance	$	91	$	(77	)	—			$	14
Pension, Other Post-retirement Benefit and Other Non-cash Charges (a)	78		—			(78		)	—
Relocation	8		(4		)	—			4
Subtotal Management Workforce Reduction	$	177	$	(81	)	$	(78	)	$	18
Reimbursement Arrangements	84		(55		)	—			29
Non-cash Executive Equity Awards Proration	24		—			(24		)	—
Other Charges Including Fees Related to Shareholder Matters	11		(11		)	—			—
Total Restructuring Charge	$	296	$	(147	)	$	(102	)	$	47

^(a)The majority of non-cash items are related to certain benefits paid through CSX's qualified pension plans.

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Earnings Per Share

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

The following table sets forth the computation of basic earnings per share and earnings per share, assuming dilution:

	Third Quarters				Nine Months
	2017		2016		2017			2016
Numerator (Dollars in millions):
Net Earnings	$	459	$	455	$	1,331		$	1,256
Dividend Equivalents on Restricted Stock	—		—		(1		)	(1		)
Net Earnings, Attributable to Common Shareholders	$	459	455		$	1,330		1,255
Denominator (Units in millions):
Average Common Shares Outstanding	902		942		916			952
Other Potentially Dilutive Common Shares	4		1		3			1
Average Common Shares Outstanding, Assuming Dilution	906		943		919			953
Net Earnings Per Share, Basic	$	0.51	$	0.48	$	1.45		$	1.32
Net Earnings Per Share, Assuming Dilution	$	0.51	$	0.48	$	1.45		$	1.32

Basic earnings per share is based on the weighted-average number of shares of common stock outstanding. Earnings per share, assuming dilution, is based on the weighted-average number of shares of common stock equivalents outstanding adjusted for the effects of common stock that may be issued as a result of potentially dilutive instruments. CSX's potentially dilutive instruments are made up of equity awards, which include long-term incentive awards, and employee stock options.

The Earnings Per Share Topic in the FASB's ASC requires CSX to include additional shares in the computation of earnings per share, assuming dilution. The additional shares included in diluted earnings per share represent the number of shares that would be issued if all of the above potentially dilutive instruments were converted into CSX common stock.

When calculating diluted earnings per share, this rule requires CSX to include the potential shares that would be outstanding if all outstanding stock options were exercised. This number is different from outstanding stock options, which is included in Note 3, Share-Based Compensation, because it is offset by shares CSX could repurchase using the proceeds from these hypothetical exercises to obtain the common stock equivalent. Approximately 10 millionand2.4 million of total average outstanding stock options for the third quarters ended September 30, 2017 and September 23, 2016, respectively, were excluded from the diluted earnings per share calculation because their effect was antidilutive.

Share Repurchases

In July 2017, the Board of Directors approved an additional $500 million of share repurchase authority under the share repurchase program announced in April 2017, bringing the total program size to $1.5 billion. As of October 2, 2017, the Company had completed all share repurchases under this program.

During the third quartersof 2017 and 2016, the Company repurchased approximately $1 billion, or 20 million shares, and $263 million, or 10 million shares, respectively. During the nine months of 2017 and 2016, the Company repurchased $1.8 billion, or 35 million shares, and $778 million, or 30 million shares, respectively.

NOTE 2.    Earnings Per Share, continued

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. Shares are retired immediately upon repurchase. In accordance with the Equity Topic in the ASC, the excess of repurchase price over par value is recorded in retained earnings. Generally, retained earnings is only impacted by net earnings and dividends.

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Share-Based Compensation

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-Based Compensation

Under CSX's share-based compensation plans, awards consist of performance units, restricted stock awards, restricted stock units and stock options for management and stock grants for directors. Awards granted under the various programs are determined and approved by the Compensation Committee of the Board of Directors or, in certain circumstances, by the Chief Executive Officer for awards to management employees other than senior executives. The Board of Directors approves awards granted to the Company's non-management directors upon recommendation of the Governance Committee.

Share-based compensation expense is measured using the fair value of the award on the grant date and is recognized on a straight-line basis over the service period of the respective award. Total pre-tax expense associated with share-based compensation and its related income tax benefit is shown in the table below. The year over year increase in expense related to performance units and stock options is primarily due to modifications to the terms of awards (see Equity Award Modificationsbelow) and higher expected award payouts.

	Third Quarters				Nine Months
(Dollars in millions)	2017		2016		2017		2016
Share-Based Compensation Expense
Performance Units	$	3	$	5	$	41	$	9
Stock Options	14		2		47		5
Restricted Stock Units and Awards	2		2		11		8
Stock Awards for Directors	—		—		2		2
Total Share-Based Compensation Expense	$	19	$	9	$	101	$	24
Income Tax Benefit	$	7	$	3	$	32	$	9

Long-term Incentive Plan

In February 2017, the Company granted approximately 600 thousand performance units to certain employees under a new long-term incentive plan ("LTIP") for the years 2017 through 2019, which was adopted under the CSX Stock and Incentive Award Plan. Payouts of performance units for the cycle ending with fiscal year 2019 will be based on the achievement of goals related to both operating ratio and return on assets in each case excluding non-recurring items as disclosed in the Company's financial statements. The cumulative operating ratio and average return on assets over the plan period will each comprise 50% of the payout and will be measured independently of the other.

Grants were made in performance units, with each unit representing the right to receive one share of CSX common stock, and payouts will be made in CSX common stock. The payout range for participants will be between 0% and 200% of the target awards depending on Company performance against predetermined goals. Payouts for certain executive officers are subject to downward adjustment by up to 30% based upon total shareholder return relative to specified comparable groups.

NOTE 3.     Share-Based Compensation, continued

Stock Options

Also, in February 2017, the Company granted approximately 1.3 million stock options along with the corresponding LTIP. The fair value of stock options on the date of grant was $12.54 per option which was calculated using the Black-Scholes valuation model. Stock options have been granted with ten-year terms and vest three years after the date of grant. The exercise price for stock options granted equals the closing market price of the underlying stock on the date of grant. These awards are time-based and are not based upon attainment of performance goals.

Restricted Stock Units

Finally, in February 2017, the Company granted approximately 300 thousand restricted stock units along with the corresponding LTIP. The restricted stock units vest three years after the date of grant. Participants receive cash dividend equivalents on the unvested shares during the restriction period. These awards are time-based and are not based upon attainment of performance goals. For information related to the Company's other outstanding long-term incentive compensation, see CSX's most recent annual report on Form 10-K.

CEO Stock Option Award

In March 2017, the Company granted 9 million stock options to the incoming CEO at a fair value of $12.88 per option calculated using the Black-Scholes valuation model. These options were granted with a ten-year term and an exercise price equal to the closing market price of the underlying stock on the date of grant. Half of the options, or 4.5 million, will vest on the CEO's service anniversary in equal annual installments over four years. The other half will vest based on achievement of performance targets related to both operating ratio and earnings before interest, taxes, depreciation and amortization adjusted for certain items.

Fair Value of All Stock Option Awards

No stock option awards were granted during third quarters 2017 and 2016. The fair values of all stock option awards during the nine months ended September 30, 2017, including those granted along with 2017 - 2019 LTIP and the CEO stock option award, were estimated at the grant date with the following weighted average assumptions:

	Nine Months
	2017			2016
Weighted-average grant date fair value	$	12.83		$	4.68
Stock options valuation assumptions:
Annual dividend yield	1.5		%	3.0		%
Risk-free interest rate	2.2		%	1.4		%
Annualized volatility	27.1		%	27.3		%
Expected life (in years)	6.3			6.5
Other pricing model inputs:
Weighted-average grant-date market price of CSX stock (strike price)	$	49.60		$	24.13

NOTE 3.     Share-Based Compensation, continued

Equity Award Modifications    

The terms of performance units, restricted stock units and stock options granted as part of the Company's long-term share-based compensation plans typically require participants to be employed through the final day of the respective performance or vesting period as applicable, except in the case of death, disability or retirement. As part of an enhanced severance benefit under the management streamlining and realignment initiative discussed in Note 1, unvested performance units, restricted stock units and stock options for separated employees not eligible for retirement were permitted to vest on a pro-rata basis.

    Additionally, the terms of unvested equity awards for the former CEO and President were modified prior to their retirements on March 6, 2017 to permit prorated vesting through May 31, 2018. The terms were modified in exchange for each agreeing to serve in an advisory capacity upon request until May 31, 2017, and waiving various rights and claims, including the cancellation of their respective change of control agreements with the Company.

Award modifications impacted approximately 70 employees and resulted in an increase to share-based compensation expense for revaluation of the affected awards of $31 million for the nine months ended September 30, 2017. No significant award modifications took place in third quarter 2017.

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Casualty, Environmental and Other Reserves

9 Months Ended

Sep. 30, 2017

Casualty, Environmental and Other Reserves [Abstract]

Casualty, Environmental and Other Reserves

Casualty, Environmental and Other Reserves

Casualty, environmental and other reserves are considered critical accounting estimates due to the need for significant management judgment. They are provided for in the consolidated balance sheets as shown in the table below:

	September 30, 2017						December 30, 2016
(Dollars in millions)	Current		Long-term		Total		Current		Long-term		Total
Casualty:
Personal Injury	$	45	$	120	$	165	$	46	$	124	$	170
Occupational(a)	4		55		59		7		52		59
Total Casualty	49		175		224		53		176		229
Environmental	43		46		89		42		53		95
Other	30		32		62		20		30		50
Total	$	122	$	253	$	375	$	115	$	259	$	374

^(a)  Occupational reserves include asbestos-related diseases and occupational injuries.

These liabilities are accrued when reasonably estimable and probable in accordance with the Contingencies Topic in the ASC. Actual settlements and claims received could differ, and final outcomes of these matters cannot be predicted with certainty. Considering the legal defenses currently available, the liabilities that have been recorded and other factors, it is the opinion of management that none of these items individually, when finally resolved, will have a material adverse effect on the Company's financial condition, results of operations or liquidity. Should a number of these items occur in the same period, however, their combined effect could be material in that particular period.

NOTE 4.    Casualty, Environmental and Other Reserves, continued

Casualty

Casualty reserves of $224 million and $229 million as of September 30, 2017 and December 30, 2016, respectively, represent accruals for personal injury, occupational disease and occupational injury claims. The Company's self-insured retention amount for these claims is $50 million per occurrence. Currently, no individual claim is expected to exceed the self-insured retention amount. In accordance with the Contingencies Topic in the ASC, to the extent the value of an individual claim exceeds the self-insured retention amount, the Company would present the liability on a gross basis with a corresponding receivable for insurance recoveries. These reserves fluctuate based upon the timing of payments as well as changes in estimate. Actual results may vary from estimates due to the number, type and severity of the injury, costs of medical treatments and uncertainties in litigation. Most of the Company's casualty claims relate to CSXT unless otherwise noted below. Defense and processing costs, which historically have been insignificant and are anticipated to be insignificant in the future, are not included in the recorded liabilities.

Personal Injury

    Personal injury reserves represent liabilities for employee work-related and third-party injuries. Work-related injuries for CSXT employees are primarily subject to the Federal Employers’ Liability Act (“FELA”). In addition to FELA liabilities, employees of other current or former CSX subsidiaries are covered by various state workers’ compensation laws, the Federal Longshore and Harbor Workers’ Compensation Program or the Maritime Jones Act.

CSXT retains an independent actuary to assist management in assessing the value of personal injury claims. An analysis is performed by the actuary quarterly and is reviewed by management. This analysis for the quarter resulted in an immaterial adjustment to the personal injury reserve. The methodology used by the actuary includes a development factor to reflect growth or reduction in the value of these personal injury claims. It is based largely on CSXT's historical claims and settlement experience.

Occupational

Occupational reserves represent liabilities for occupational disease and injury claims. Occupational disease claims arise primarily from allegations of exposure to asbestos in the workplace. Occupational injury claims arise from allegations of exposure to certain other materials in the workplace, such as solvents, soaps, chemicals (collectively referred to as “irritants”) and diesel fuels (like exhaust fumes) or allegations of chronic physical injuries resulting from work conditions, such as repetitive stress injuries.

The greatest possible exposure to asbestos for employees resulted from work conducted in and around steam locomotive engines that were largely phased out beginning around the 1950s. Other types of exposures, however, including exposure from locomotive component parts and building materials, continued until these exposures were substantially eliminated by 1985. Diseases associated with asbestos typically have long latency periods (amount of time between exposure to asbestos and the onset of the disease) which can range from 10 to 40 years after exposure.

Management reviews asserted asbestos claims quarterly. Unasserted or incurred but not reported ("IBNR") asbestos claims are analyzed by a third-party specialist and reviewed by management annually. CSXT’s historical claim filings, settlement amounts, and dismissal rates are analyzed to determine future anticipated claim filing rates and average settlement values for asbestos claims reserves. The potentially exposed population is estimated by using CSXT’s employment records and industry data. From this analysis, the specialist estimates the IBNR claims liabilities.

NOTE 4.    Casualty, Environmental and Other Reserves, continued

Environmental

Environmental reserves were $89 million and $95 million as of September 30, 2017 and December 30, 2016, respectively. The Company is a party to various proceedings related to environmental issues, including administrative and judicial proceedings involving private parties and regulatory agencies. The Company has been identified as a potentially responsible party at approximately 219 environmentally impaired sites. Many of these are, or may be, subject to remedial action under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), also known as the Superfund Law, or similar state statutes. Most of these proceedings arose from environmental conditions on properties used for ongoing or discontinued railroad operations. A number of these proceedings, however, are based on allegations that the Company, or its predecessors, sent hazardous substances to facilities owned or operated by others for treatment, recycling or disposal. In addition, some of the Company's land holdings were leased to others for commercial or industrial uses that may have resulted in releases of hazardous substances or other regulated materials onto the property and could give rise to proceedings against the Company.

In any such proceedings, the Company is subject to environmental clean-up and enforcement actions under the Superfund Law, as well as similar state laws that may impose joint and several liability for clean-up and enforcement costs on current and former owners and operators of a site without regard to fault or the legality of the original conduct. These costs could be substantial.

In accordance with the Asset Retirement and Environmental Obligations Topic in the ASC, the Company reviews its role with respect to each site identified at least quarterly, giving consideration to a number of factors such as:

• type of clean-up required;

• nature of the Company's alleged connection to the location (e.g., generator of waste sent to the site or owner or operator of the site);

• extent of the Company's alleged connection (e.g., volume of waste sent to the location and other relevant factors); and

• number, connection and financial viability of other named and unnamed potentially responsible parties at the location.

Based on the review process, the Company has recorded amounts to cover contingent anticipated future environmental remediation costs with respect to each site to the extent such costs are reasonably estimable and probable. The recorded liabilities for estimated future environmental costs are undiscounted. The liability includes future costs for remediation and restoration of sites as well as any significant ongoing monitoring costs, but excludes any anticipated insurance recoveries. Payments related to these liabilities are expected to be made over the next several years. Environmental remediation costs are included in materials, supplies and other on the consolidated income statement.

Currently, the Company does not possess sufficient information to reasonably estimate the amounts of additional liabilities, if any, on some sites until completion of future environmental studies. In addition, conditions that are currently unknown could, at any given location, result in additional exposure, the amount and materiality of which cannot presently be reasonably estimated. Based upon information currently available, however, the Company believes its environmental reserves accurately reflect the estimated cost of remedial actions currently required.

NOTE 4.    Casualty, Environmental and Other Reserves, continued

Other

Other reserves of $62 million and $50 million as of September 30, 2017 and December 30, 2016, respectively, include liabilities for various claims, such as property, automobile and general liability. Also included in other reserves are longshoremen disability claims related to a previously owned international shipping business (these claims are in runoff) as well as claims for current port employees.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Purchase Commitments

CSXT has a commitment under a long-term maintenance program agreement that covers a portion of CSXT’s fleet of locomotives. The program costs are based on the maintenance cycle for each covered locomotive, which is determined by the asset's age and type. Expected future costs may change as required maintenance schedules are revised and locomotives are placed into or removed from service. Under CSXT’s current obligations, the agreement will expire no earlier than 2031. On August 9, 2017, the Company exercised certain rights under the agreement, which resulted in a reduction of the locomotive fleet covered from 50% as of December 30, 2016 to an estimated 34% of locomotives beginning August 2018. As a result, the total remaining payments decreased from approximately $5.0 billion at December 30, 2016 to an estimated $1.7 billion at September 30, 2017.

Insurance

The Company maintains numerous insurance programs with substantial limits for property damage (which includes business interruption) and third-party liability.  A certain amount of risk is retained by the Company on each of the property and liability programs. The Company has a $25 million retention per occurrence for the non-catastrophic property program (such as a derailment) and a $50 million retention per occurrence for the liability and catastrophic property programs (such as hurricanes and floods). While the Company believes its insurance coverage is adequate, future claims could exceed existing insurance coverage or insurance may not continue to be available at commercially reasonable rates.

Legal

    The Company is involved in litigation incidental to its business and is a party to a number of legal actions and claims, various governmental proceedings and private civil lawsuits, including, but not limited to, those related to fuel surcharge practices, tax matters, environmental and hazardous material exposure matters, FELA and labor claims by current or former employees, other personal injury or property claims and disputes and complaints involving certain transportation rates and charges. Some of the legal proceedings include claims for compensatory as well as punitive damages and others are, or are purported to be, class actions. While the final outcome of these matters cannot be reasonably determined, considering, among other things, the legal defenses available and liabilities that have been recorded along with applicable insurance, it is currently the opinion of management that none of these pending items is likely to have a material adverse effect on the Company's financial condition, results of operations or liquidity. An unexpected adverse resolution of one or more of these items, however, could have a material adverse effect on the Company's financial condition, results of operations or liquidity in that particular period.

The Company is able to estimate a range of possible loss for certain legal proceedings for which a loss is reasonably possible in excess of reserves established. The Company has estimated this range to be $2 million to $116 million in aggregate at September 30, 2017. This estimated aggregate range is based upon currently available information and is subject to significant judgment and a variety of assumptions. Accordingly, the Company's estimate will change from time to time, and actual losses may vary significantly from the current estimate.

NOTE 5.    Commitments and Contingencies, continued

Fuel Surcharge Antitrust Litigation

In May 2007, class action lawsuits were filed against CSXT and three other U.S.-based Class I railroads alleging that the defendants' fuel surcharge practices relating to contract and unregulated traffic resulted from an illegal conspiracy in violation of antitrust laws. In November 2007, the class action lawsuits were consolidated in federal court in the District of Columbia, where they are now pending. The suit seeks treble damages allegedly sustained by purported class members as well as attorneys' fees and other relief. Plaintiffs are expected to allege damages at least equal to the fuel surcharges at issue.

In June 2012, the District Court certified the case as a class action. The decision was not a ruling on the merits of plaintiffs' claims, but rather a decision to allow the plaintiffs to seek to prove the case as a class. The defendant railroads petitioned the U.S. Court of Appeals for the D.C. Circuit for permission to appeal the District Court's class certification decision. In August 2013, the D.C. Circuit issued a decision vacating the class certification decision and remanded the case to the District Court to reconsider its class certification decision. On October 10, 2017, the District Court issued an order denying class certification. The District Court had delayed proceedings on the merits of the case pending the outcome of the class certification remand proceedings, and has not yet issued a further schedule in light of the order denying class certification.

CSXT believes that its fuel surcharge practices were arrived at and applied lawfully and that the case is without merit. Accordingly, the Company intends to defend itself vigorously. However, penalties for violating antitrust laws can be severe, and resolution of this matter or an unexpected adverse decision on the merits could have a material adverse effect on the Company's financial condition, results of operations or liquidity in that particular period.

Environmental

CSXT is indemnifying Pharmacia LLC (formerly known as Monsanto Company) for certain liabilities associated with real estate located in Kearny, New Jersey along the Lower Passaic River (the “Property”). The Property, which was formerly owned by Pharmacia, is now owned by CSXT. CSXT's indemnification and defense duties arise with respect to several matters. The U.S. Environmental Protection Agency ("EPA"), using its CERCLA authority, seeks cleanup and removal costs and other damages associated with the presence of hazardous substances in the 17-mile Lower Passaic River Study Area (the "Study Area”). CSXT, on behalf of Pharmacia, and a significant number of other potentially responsible parties are together conducting a Remedial Investigation and Feasibility Study of the Study Area pursuant to an Administrative Settlement Agreement and Order on Consent with the EPA.

In March 2016, EPA issued its Record of Decision detailing the agency’s mandated remedial process for the lower 8 miles of the Study Area, which was based on a Focused Feasibility Study. EPA has estimated that it will take the potentially responsible parties approximately ten years to complete the work. At a later date, EPA will select a remedy for the remainder of the Study Area and is expected to again seek the participation of private parties to implement the selected remedy using EPA’s CERCLA authority to compel such participation, if necessary.

CSXT is also defending and indemnifying Pharmacia in a cooperative natural resource damages assessment process related to the Property. Based on currently available information, the Company does not believe any indemnification or remediation costs potentially allocable to CSXT with respect to the Property and the Study Area would be material to the Company's financial condition, results of operations or liquidity.

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Employee Benefit Plans

9 Months Ended

Sep. 30, 2017

Retirement Benefits [Abstract]

Employee Benefit Plans

Employee Benefit Plans

The Company sponsors defined benefit pension plans principally for salaried, management personnel.  For employees hired prior to January 1, 2003, the plans provide eligible employees with retirement benefits based predominantly on years of service and compensation rates near retirement. For employees hired in 2003 or thereafter, benefits are determined based on a cash balance formula, which provides benefits by utilizing interest and pay credits based upon age, service and compensation.

In addition to these plans, the Company sponsors a post-retirement medical plan and a life insurance plan that provide certain benefits to full-time, salaried, management employees, hired prior to January 1, 2003, upon their retirement if certain eligibility requirements are met. Eligible retirees who are age 65 years or older (Medicare-eligible) are covered by a health reimbursement arrangement, which is an employer-funded account that can be used for reimbursement of eligible medical expenses. Eligible retirees younger than 65 years (non-Medicare eligible) are covered by a self-insured program partially funded by participating retirees. The life insurance plan is non-contributory.

The Company engages independent actuaries to compute the amounts of liabilities and expenses relating to these plans subject to the assumptions that the Company determines are appropriate based on historical trends, current market rates and future projections. These amounts are reviewed by management. The following table describes the components of expense / (income) related to net benefit expense recorded in labor and fringe on the income statement.

	Pension Benefits
(Dollars in millions)	Third Quarters						Nine Months
	2017			2016			2017			2016
Service Cost	$	8		$	12		$	28		$	36
Interest Cost	23			29			69			89
Expected Return on Plan Assets	(43		)	(39		)	(128		)	(118		)
Amortization of Net Loss	10			12			31			36
Net Periodic Benefit Cost	$	(2	)	$	14		$	—		$	43
Special Termination Benefits - Management Workforce Reduction/Curtailment	—			—			57			—
Total Expense	$	(2	)	$	14		$	57		$	43
	Other Post-retirement Benefits
(Dollars in millions)	Third Quarters						Nine Months
	2017			2016			2017			2016
Service Cost	$	—		$	—		$	1		$	1
Interest Cost	2			3			6			9
Amortization of Net Loss	—			1			—			2
Net Periodic Benefit Cost	$	2		$	4		$	7		$	12
Special Termination Benefits - Management Workforce Reduction/Curtailment	—			—			13			—
Total Expense	$	2		$	4		$	20		$	12

NOTE 6.    Employee Benefit Plans, continued

As a result of the management workforce reductions in 2017, charges were incurred related to special termination benefits and curtailment costs. (For additional information regarding the management workforce reductions, see Note 1, Nature of Operations and Significant Accounting Policies.) In first quarter 2017, the Company remeasured the other post-retirement benefits obligation and recorded a curtailment loss of $13 million in restructuring charge on the income statement. The remeasurement did not have a material impact on the other post-retirement benefits obligation. In connection with this remeasurement, the effective discount rate assumption was updated to 3.59% from 3.71%.

In the second quarter of 2017, the Company remeasured the pension benefits obligation and pension plan assets and recorded a curtailment loss of $4 million in restructuring charge on the income statement. This remeasurement resulted in a decrease to the liabilities for pension benefits of approximately $86 million and a corresponding decrease to accumulated other comprehensive loss. In connection with this remeasurement, the effective discount rate assumption was updated to 3.94% from 4.08%. There were no other changes to assumptions used to value pension benefits obligation and expense.

Qualified pension plan obligations are funded in accordance with regulatory requirements and with an objective of meeting or exceeding minimum funding requirements necessary to avoid restrictions on flexibility of plan operation and benefit payments. No contributions to the Company's qualified pension plans are expected in 2017.

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Debt and Credit Agreements

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Debt and Credit Agreements

Debt and Credit Agreements

Total activity related to long-term debt as of the end of third quarter 2017 is shown in the table below. For fair value information related to the Company's long-term debt, see Note 9, Fair Value Measurements.

(Dollars in millions)	Current Portion			Long-term Portion			Total
Long-term debt as of December 30, 2016	$	331		$	10,962		$	11,293
2017 activity:
Long-term debt issued	—			850			850
Long-term debt repaid	(332		)	—			(332		)
Reclassifications	20			(20		)	—
Discount, premium and other activity				(4		)	(4		)
Long-term debt as of September 30, 2017	$	19		$	11,788		$	11,807

Debt Issuance

    In May 2017, CSX issued $850 million of 3.25% notes due 2027. These notes are included in the consolidated balance sheets under long-term debt and may be redeemed by the Company at any time. The net proceeds will be used for general corporate purposes, which may include repurchases of CSX's common stock, capital investment, working capital requirements, improvement in productivity and other cost reductions at CSX’s major transportation units.

NOTE 7.    Debt and Credit Agreements, continued

Credit Facility

CSX has a $1 billion unsecured, revolving credit facility backed by a diverse syndicate of banks. This facility expires in May 2020, and as of the date of this filing, the Company has no outstanding balances under this facility. The facility allows borrowings at floating (LIBOR-based) interest rates, plus a spread, depending upon CSX's senior unsecured debt ratings. LIBOR is the London Interbank Offered Rate which is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds.

Commitment fees and interest rates payable under the facility were similar to fees and rates available to comparably rated investment-grade borrowers. As of third quarter 2017, CSX was in compliance with all covenant requirements under this facility.

Receivables Securitization Facility

The Company has a receivables securitization facility with a three-year term scheduled to expire in September 2019. The purpose of this facility is to provide an alternative to commercial paper and a low cost source of short-term liquidity of up to $200 million, depending on eligible receivables balances. As of the date of this filing, the Company has no outstanding balances under this facility.

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Income Taxes

9 Months Ended

Sep. 30, 2017

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

There have been no material changes to the balance of unrecognized tax benefits reported at December 30, 2016.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The Financial Instruments Topic in the ASC requiresdisclosures about fair value of financial instruments in annual reports as well as in quarterly reports. For CSX, this statement applies to certain investments and long-term debt. Disclosure of the fair value of pension plan assets is only required annually. Also, this rule clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements.

Various inputs are considered when determining the value of the Company's investments, pension plan assets and long-term debt. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in these securities. These inputs are summarized in the three broad levels listed below.

• Level 1 - observable market inputs that are unadjusted quoted prices for identical assets or liabilities in active markets;

• Level 2 - other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.); and

• Level 3 - significant unobservable inputs (including the Company's own assumptions about the assumptions market participants would use in determining the fair value of investments).

NOTE 9.    Fair Value Measurements, continued

The valuation methods described below may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Investments

The Company's investment assets, valued with assistance from a third-party trustee, consist of certificates of deposits, commercial paper, corporate bonds and government securities and are carried at fair value on the consolidated balance sheet per the Fair Value Measurements and Disclosures Topic in theASC. There are several valuation methodologies used for those assets as described below.

• Certificates of Deposit and Commercial Paper (Level 2): Valued at amortized cost, which approximates fair value; and

• Corporate Bonds and Government Securities (Level 2): Valued using broker quotes that utilize observable market inputs.

The Company's investment assets are carried at fair value on the consolidated balance sheets as summarized in the following table. All of the inputs used to determine the fair value of the Company's investments are Level 2 inputs. The amortized cost basis of these investments was $186 million and $500 million as of September 30, 2017 and December 30, 2016, respectively.

(Dollars in Millions)	September 30, 2017		December 30, 2016
Certificates of Deposit and Commercial Paper	$	100	$	415
Corporate Bonds	60		63
Government Securities	29		22
Total investments at fair value	$	189	$	500

These investments have the following maturities:

(Dollars in millions)	September 30, 2017		December 30, 2016
Less than 1 year	$	113	$	417
1 - 2 years	5		12
2 - 5 years	10		4
Greater than 5 years	61		67
Total investments at fair value	$	189	$	500

NOTE 9.    Fair Value Measurements, continued

Long-term Debt

Long-term debt is reported at carrying amount on the consolidated balance sheets and is the Company's only financial instrument with fair values significantly different from their carrying amounts. The majority of the Company's long-term debt is valued with assistance from an independent third party adviser that utilizes closing transactions, market quotes or market values of comparable debt. For those instruments not valued by the independent adviser, the fair value has been estimated by applying market rates of similar instruments to the scheduled contractual debt payments and maturities. These market rates are provided by the same independent adviser. All of the inputs used to determine the fair value of the Company's long-term debt are Level 2 inputs.

The fair value of outstanding debt fluctuates with changes in a number of factors. Such factors include, but are not limited to, interest rates, market conditions, credit ratings, values of similar financial instruments, size of the transaction, cash flow projections and comparable trades. Fair value will exceed carrying value when the current market interest rate is lower than the interest rate at which the debt was originally issued. The fair value of a company's debt is a measure of its current value under present market conditions. It does not impact the financial statements under current accounting rules.

The fair value and carrying value of the Company's long-term debt is as follows:

(Dollars in millions)	September 30, 2017		December 30, 2016
Long-term Debt (Including Current Maturities):
Fair Value	$	13,082	$	12,096
Carrying Value	11,807		11,293

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Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Other Comprehensive Income (Loss)

Other Comprehensive Income (Loss)

CSX reports comprehensive earnings or loss in accordance with the Comprehensive Income Topic in the ASC in the Consolidated Comprehensive Income Statement. Total comprehensive earnings are defined as all changes in shareholders' equity during a period, other than those resulting from investments by and distributions to shareholders (e.g. issuance of equity securities and dividends). Generally, for CSX, total comprehensive earnings equal net earnings plus or minus adjustments for pension and other post-retirement liabilities. Total comprehensive earnings represent the activity for a period net of tax and were $467 million and $465 million for third quarters and $1.4 billion and $1.3 billion for nine months 2017 and 2016, respectively.

While total comprehensive earnings is the activity in a period and is largely driven by net earnings in that period, accumulated other comprehensive income or loss (“AOCI”) represents the cumulative balance of other comprehensive income, net of tax, as of the balance sheet date. For CSX, AOCI is primarily the cumulative balance related to pension and other post-retirement benefit adjustments and CSX's share of AOCI of equity method investees.

NOTE 10.     Other Comprehensive Income (Loss), continued

Changes in the AOCI balance by component are shown in the table below. Amounts reclassified in pension and other post-employment benefits to net earnings relate to the amortization of actuarial losses and are included in labor and fringe on the consolidated income statements. See Note 6, Employee Benefit Plans, for further information. Other primarily represents CSX's share of AOCI of equity method investees. Amounts reclassified in other to net earnings are included in materials, supplies and other on the consolidated income statements.

	Pension and Other Post-Employment Benefits			Other			Accumulated Other Comprehensive Income (Loss)
(Dollars in millions)
Balance December 30, 2016, Net of Tax	$	(580	)	$	(60	)	$	(640	)
Other Comprehensive Income (Loss)
Income Before Reclassifications	86			2			88
Amounts Reclassified to Net Earnings	33			2			35
Tax Expense	(43		)	(1		)	(44		)
Total Other Comprehensive Income	76			3			79
Balance September 30, 2017, Net of Tax	$	(504	)	$	(57	)	$	(561	)

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Summarized Consolidating Financial Data

9 Months Ended

Sep. 30, 2017

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Summarized Consolidating Financial Data

Summarized Consolidating Financial Data

In 2007, CSXT, a wholly-owned subsidiary of CSX Corporation, sold secured equipment notes maturing in 2023 in a registered public offering. CSX has fully and unconditionally guaranteed the notes. In connection with the notes, the Company is providing the following condensed consolidating financial information in accordance with SEC disclosure requirements. Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements, except for the use of the equity method of accounting to reflect ownership interests in subsidiaries which are eliminated upon consolidation and the allocation of certain expenses of CSX incurred for the benefit of its subsidiaries. Condensed consolidating financial information for the obligor, CSXT, and parent guarantor, CSX, is shown in the following tables.

Consolidating Income Statements
(Dollars in millions)
Third Quarter 2017	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Revenue	$	—		$	2,725		$	18		$	2,743
Expense	(129		)	2,025			(29		)	1,867
Operating Income	129			700			47			876
Equity in Earnings of Subsidiaries	472			—			(472		)	—
Interest (Expense) / Benefit	(147		)	(3		)	18			(132		)
Other Income / (Expense) - Net	1			13			(8		)	6
Earnings Before Income Taxes	455			710			(415		)	750
Income Tax Benefit / (Expense)	4			(277		)	(18		)	(291		)
Net Earnings	$	459		$	433		$	(433	)	$	459
Total Comprehensive Earnings	$	467		$	433		$	(433	)	$	467
Third Quarter 2016	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Revenue	$	—		$	2,691		$	19		$	2,710
Expense	(63		)	1,960			(28		)	1,869
Operating Income	63			731			47			841
Equity in Earnings of Subsidiaries	505			1			(506		)	—
Interest (Expense) / Benefit	(141		)	(7		)	9			(139		)
Other Income / (Expense) - Net	—			9			4			13
Earnings Before Income Taxes	427			734			(446		)	715
Income Tax (Expense) / Benefit	28			(268		)	(20		)	(260		)
Net Earnings	$	455		$	466		$	(466	)	$	455
Total Comprehensive Earnings	$	465		$	467		$	(467	)	$	465

Consolidating Income Statements
(Dollars in millions)
Nine Months 2017	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Revenue	$	—		$	8,490		$	55		$	8,545
Expense	(171		)	6,278			(108		)	5,999
Operating Income	171			2,212			163			2,546
Equity in Earnings of Subsidiaries	1,506			—			(1,506		)	—
Interest (Expense) / Benefit	(432		)	(21		)	47			(406		)
Other Income / (Expense) - Net	6			32			(19		)	19
Earnings Before Income Taxes	1,251			2,223			(1,315		)	2,159
Income Tax (Expense) / Benefit	80			(844		)	(64		)	(828		)
Net Earnings	$	1,331		$	1,379		$	(1,379	)	$	1,331
Total Comprehensive Earnings	$	1,410		$	1,378		$	(1,378	)	$	1,410
Nine Months 2016	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Revenue	$	—		$	7,974		$	58		$	8,032
Expense	(202		)	5,985			(136		)	5,647
Operating Income	202			1,989			194			2,385
Equity in Earnings of Subsidiaries	1,399			1			(1,400		)	—
Interest (Expense) / Benefit	(425		)	(27		)	29			(423		)
Other Income / (Expense) - Net	1			24			3			28
Earnings Before Income Taxes	1,177			1,987			(1,174		)	1,990
Income Tax (Expense) / Benefit	79			(735		)	(78		)	(734		)
Net Earnings	$	1,256		$	1,252		$	(1,252	)	$	1,256
Total Comprehensive Earnings	$	1,282		$	1,253		$	(1,253	)	$	1,282

Summarized Consolidating Financial Data, continued

Consolidating Balance Sheet
(Dollars in millions)
September 30, 2017	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
ASSETS
Current Assets
Cash and Cash Equivalents	$	433		$	147		$	11		$	591
Short-term Investments	100			—			13			113
Accounts Receivable - Net	(1		)	277			705			981
Receivable from Affiliates	1,012			3,004			(4,016		)	—
Materials and Supplies	—			392			—			392
Other Current Assets	2			76			17			95
Total Current Assets	1,546			3,896			(3,270		)	2,172
Properties	1			41,292			2,812			44,105
Accumulated Depreciation	(1		)	(11,014		)	(1,511		)	(12,526		)
Properties - Net	—			30,278			1,301			31,579
Investments in Conrail	—			—			864			864
Affiliates and Other Companies	(39		)	667			14			642
Investments in Consolidated Subsidiaries	25,221			—			(25,221		)	—
Other Long-term Assets	9			592			(285		)	316
Total Assets	$	26,737		$	35,433		$	(26,597	)	$	35,573
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable	$	178		$	695		$	32		$	905
Labor and Fringe Benefits Payable	76			483			42			601
Payable to Affiliates	4,148			382			(4,530		)	—
Casualty, Environmental and Other Reserves	—			109			13			122
Current Maturities of Long-term Debt	—			19			—			19
Income and Other Taxes Payable	(115		)	418			19			322
Other Current Liabilities	—			103			3			106
Total Current Liabilities	4,287			2,209			(4,421		)	2,075
Casualty, Environmental and Other Reserves	—			207			46			253
Long-term Debt	11,053			735			—			11,788
Deferred Income Taxes - Net	(198		)	9,697			290			9,789
Other Long-term Liabilities	708			375			(317		)	766
Total Liabilities	$	15,850		$	13,223		$	(4,402	)	$	24,671
Shareholders' Equity
Common Stock, $1 Par Value	$	894		$	181		$	(181	)	$	894
Other Capital	227			5,096			(5,096		)	227
Retained Earnings	10,327			16,938			(16,938		)	10,327
Accumulated Other Comprehensive Loss	(561		)	(20		)	20			(561		)
Noncontrolling Interest	—			15			—			15
Total Shareholders' Equity	$	10,887		$	22,210		$	(22,195	)	$	10,902
Total Liabilities and Shareholders' Equity	$	26,737		$	35,433		$	(26,597	)	$	35,573

Summarized Consolidating Financial Data, continued

Consolidating Balance Sheet (Dollars in millions)
December 30, 2016	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
ASSETS
Current Assets
Cash and Cash Equivalents	$	305		$	281		$	17		$	603
Short-term Investments	415			—			2			417
Accounts Receivable - Net	2			215			721			938
Receivable from Affiliates	1,157			2,351			(3,508		)	—
Materials and Supplies	—			407			—			407
Other Current Assets	—			106			16			122
Total Current Assets	1,879			3,360			(2,752		)	2,487
Properties	1			40,518			2,708			43,227
Accumulated Depreciation	(1		)	(10,634		)	(1,442		)	(12,077		)
Properties - Net	—			29,884			1,266			31,150
Investments in Conrail	—			—			840			840
Affiliates and Other Companies	(39		)	643			15			619
Investment in Consolidated Subsidiaries	24,179			—			(24,179		)	—
Other Long-term Assets	2			607			(291		)	318
Total Assets	$	26,021		$	34,494		$	(25,101	)	$	35,414
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable	$	95		$	678		$	33		$	806
Labor and Fringe Benefits Payable	40			440			65			545
Payable to Affiliates	3,457			500			(3,957		)	—
Casualty, Environmental and Other Reserves	—			102			13			115
Current Maturities of Long-term Debt	313			19			(1		)	331
Income and Other Taxes Payable	(346		)	459			16			129
Other Current Liabilities	—			112			2			114
Total Current Liabilities	3,559			2,310			(3,829		)	2,040
Casualty, Environmental and Other Reserves	—			208			51			259
Long-term Debt	10,203			759			—			10,962
Deferred Income Taxes - Net	(203		)	9,541			258			9,596
Other Long-term Liabilities	783			410			(330		)	863
Total Liabilities	$	14,342		$	13,228		$	(3,850	)	$	23,720
Shareholders' Equity
Common Stock, $1 Par Value	$	928		$	181		$	(181	)	$	928
Other Capital	138			5,095			(5,095		)	138
Retained Earnings	11,253			15,994			(15,994		)	11,253
Accumulated Other Comprehensive Loss	(640		)	(19		)	19			(640		)
Noncontrolling Minority Interest	—			15			—			15
Total Shareholders' Equity	$	11,679		$	21,266		$	(21,251	)	$	11,694
Total Liabilities and Shareholders' Equity	$	26,021		$	34,494		$	(25,101	)	$	35,414

Summarized Consolidating Financial Data, continued

Consolidating Cash Flow Statements
(Dollars in millions)
Nine Months 2017	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Operating Activities
Net Cash Provided by (Used in) Operating Activities	$	1,590		$	1,544		$	(273	)	$	2,861
Investing Activities
Property Additions	—			(1,311		)	(151		)	(1,462		)
Purchases of Short-term Investments	(639		)	—			(6		)	(645		)
Proceeds from Sales of Short-term Investments	955			—			2			957
Other Investing Activities	(2		)	98			(25		)	71
Net Cash Provided by (Used in) Investing Activities	314			(1,213		)	(180		)	(1,079		)
Financing Activities
Long-term Debt Issued	850			—			—			850
Long-term Debt Repaid	(312		)	(20		)	—			(332		)
Dividends Paid	(530		)	(450		)	450			(530		)
Shares Repurchased	(1,763		)	—			—			(1,763		)
Other Financing Activities	(21		)	5			(3		)	(19		)
Net Cash Provided by (Used in) Financing Activities	(1,776		)	(465		)	447			(1,794		)
Net Increase (Decrease) in Cash and Cash Equivalents	128			(134		)	(6		)	(12		)
Cash and Cash Equivalents at Beginning of Period	305			281			17			603
Cash and Cash Equivalents at End of Period	$	433		$	147		$	11		$	591

NOTE 11.Summarized Consolidating Financial Data, continued

Consolidating Cash Flow Statements
(Dollars in millions)
Nine Months 2016	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Operating Activities
Net Cash Provided by (Used in) Operating Activities	$	644		$	2,089		$	(245	)	$	2,488
Investing Activities
Property Additions	—			(1,469		)	(121		)	(1,590		)
Purchases of Short-term Investments	(410		)	—			—			(410		)
Proceeds from Sales of Short-term Investments	1,070			—			—			1,070
Other Investing Activities	(3		)	107			(67		)	37
Net Cash Provided by (Used in) Investing Activities	657			(1,362		)	(188		)	(893		)
Financing Activities
Long-term Debt Issued	—			—			—			—
Long-term Debt Repaid	—			(18		)	(1		)	(19		)
Dividends Paid	(513		)	(450		)	450			(513		)
Shares Repurchased	(778		)	—			—			(778		)
Other Financing Activities	(6		)	(304		)	—			(310		)
Net Cash Provided by (Used in) Financing Activities	(1,297		)	(772		)	449			(1,620		)
Net Increase (Decrease) in Cash and Cash Equivalents	4			(45		)	16			(25		)
Cash and Cash Equivalents at Beginning of Period	444			175			9			628
Cash and Cash Equivalents at End of Period	$	448		$	130		$	25		$	603

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Nature of Operations and Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

In the opinion of management, the accompanying consolidated financial statements contain all normal, recurring adjustments necessary to fairly present the following:

• Consolidated income statements for the nine months ended September 30, 2017 and September 23, 2016;

• Consolidated comprehensive income statements for the nine months ended September 30, 2017 and September 23, 2016;

• Consolidated balance sheets at September 30, 2017 and December 30, 2016; and

• Consolidated cash flow statements for the nine months ended September 30, 2017 and September 23, 2016.

Pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been omitted from these interim financial statements. CSX suggests that these financial statements be read in conjunction with the audited financial statements and the notes included in CSX's most recent annual report on Form 10-K and any subsequently filed current reports on Form 8-K.

Fiscal Year

Through the second quarter 2017, CSX followed a 52/53 week fiscal reporting calendar with the last day of each reporting period ending on a Friday. On July 7, 2017 the Board of Directors of CSX approved a change in the fiscal reporting calendar from a 52/53 week year ending on the last Friday of December to a calendar year ending on December 31 each year, effective beginning with fiscal third quarter 2017. Related to the change in the fiscal calendar:

• Fiscal year 2017 commenced on December 31, 2016, as the fiscal year 2016 ended on December 30, 2016 under the 52/53 week fiscal calendar.

• The third quarter 2017 commenced on July 1, 2017, as the second quarter 2017 ended on June 30, 2017 under the 52/53 week fiscal calendar, and ended on September 30, 2017. Third quarter 2017 includes one more day of business results than third quarter 2016.

• The fourth quarter 2017 will commence on October 1, 2017 and end on December 31, 2017. Fourth quarter 2017 will include six fewer days of business results than fourth quarter 2016, which contained an extra week under the 52/53 week fiscal calendar.

• Fiscal year 2017 will include 366 days of activity, five fewer days than fiscal year 2016, which was a 53 week fiscal year that began on December 26, 2015 and ended December 30, 2016.

The Company does not expect that this change will materially impact comparability of the Company’s financial results for fiscal year 2016 and fiscal year 2017. Accordingly, the change to a calendar fiscal year will be made on a prospective basis and operating results for prior periods will not be adjusted. The Company will not be required to file a transition report because this change is not deemed a change in fiscal year for purposes of reporting subject to Rule 13a-10 or Rule 15d-10 of the Securities Exchange Act of 1934 as the new fiscal year commences with the end of the prior fiscal year end and within seven days of the prior fiscal year end.

Except as otherwise specified, references to “third quarter(s)” or “nine months” indicate CSX's fiscal periods ending September 30, 2017 and September 23, 2016, and references to "year-end" indicate the fiscal year ended December 30, 2016.

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts on uncollectible amounts related to freight receivables, government reimbursement receivables, claims for damages and other various receivables. The allowance is based upon the creditworthiness of customers, historical experience, the age of the receivable and current market and economic conditions. Uncollectible amounts are charged against the allowance account.

New Accounting Pronouncements

In May 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") Compensation - Stock Compensation: Scope of Modification Accounting, which provides clarity on what changes to share-based awards are considered substantive and require modification accounting to be applied. This update is required beginning with first quarter 2018 and should be applied prospectively to award modifications after the effective date. The Company early adopted this standard update in second quarter 2017 and will apply it prospectively to any award modifications after the adoption date. The Company does not regularly modify the terms and conditions of share-based awards and does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity.

In March 2017, the FASB issued ASU Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, whichrequires that only the service cost component of net periodic benefit costs be recorded as compensation cost in the operating expense section of the income statement. All other components of net periodic benefit cost (interest cost, expected return on plan assets and amortization of net loss) will be presented in other income - net. This standard update is effective beginning with the first quarter 2018 and must be applied retrospectively. The Company does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity.

In March 2017, the FASB issued ASU Simplifying the Test for Goodwill Impairment, which eliminates step two, the calculation of the implied fair value of goodwill, from the goodwill impairment test. Impairment will be quantified in step one of the test as the amount by which the carrying amount exceeds the fair value. This standard update is effective beginning first quarter 2020 and must be applied prospectively. The Company does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity.

In May 2014, the FASB issued ASU Revenue from Contracts with Customers, which supersedes previous revenue recognition guidance. The new standard requires that a company recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. Companies will need to use more judgment and estimates than under the guidance currently in effect, including estimating the amount of variable revenue to recognize over each identified performance obligation. Additional disclosures will be required to help users of financial statements understand the nature, amount and timing of revenue and cash flows arising from contracts. CSX will adopt this standard update in first quarter 2018 and plans to use a modified retrospective method of adoption.

The FASB has also issued several amendments to the revenue standard, including clarification on accounting for principal versus agent considerations (i.e., reporting gross versus net), licenses of intellectual property and identifying performance obligations. These amendments do not change the core principle of the standard, but provide clarity and implementation guidance.

NOTE 1.    Nature of Operations and Significant Accounting Policies, continued

The Company is currently finalizing its review of the impact of adopting this new guidance and has developed a comprehensive implementation plan. In-depth reviews of commercial contracts have been completed and changes to processes and internal controls to meet the standard’s reporting and disclosure requirements have been identified and are being implemented. At this time, the Company does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity. Freight revenue will continue to be recognized ratably over transit time. Additionally, the disaggregated revenue information required to be disclosed under this standard update is similar to the information currently included in the Results of Operations section of Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

In February 2016, the FASB issued ASU, Leases, which will require lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease liability, and lessors to recognize a net lease investment. Additional qualitative and quantitative disclosures will also be required. This standard update is effective for CSX beginning with the first quarter 2019 and will be adopted using a modified retrospective method. Changes to processes and internal controls to meet the standard’s reporting and disclosure requirements have been identified and are being implemented. Software has been implemented that will assist in the recognition of additional assets and liabilities to be included on the balance sheet related to leases currently classified as operating leases with durations greater than twelve months, with certain allowable exceptions. The Company continues to evaluate the expected impact of this standard update on disclosures, but does not anticipate any material changes to operating results or liquidity.

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Nature of Operations and Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Restructuring Charges

Expenses related to the management workforce reduction and other costs are shown in the following table.

	2017
(Dollars in millions)	First Quarter		Second Quarter		Third Quarter		Year-to-Date
Severance	$	81	$	10	$	—	$	91
Pension, Other Post-retirement Benefit and Other Non-cash Charges	68		10		—		78
Relocation	6		2		—		8
Subtotal Management Workforce Reduction	$	155	$	22	$	—	$	177
Reimbursement Arrangements	—		84		—		84
Non-cash Executive Equity Awards Proration	8		16		—		24
Other Charges Including Fees Related to Shareholder Matters	10		—		1		11
Total Restructuring Charge	$	173	$	122	$	1	$	296

Charges and payments related to the management workforce reduction and other costs are shown in the following table.

(Dollars in millions)	2017 Charges		2017 Payments			Non-cash Items			Liability 9/30/2017
Severance	$	91	$	(77	)	—			$	14
Pension, Other Post-retirement Benefit and Other Non-cash Charges (a)	78		—			(78		)	—
Relocation	8		(4		)	—			4
Subtotal Management Workforce Reduction	$	177	$	(81	)	$	(78	)	$	18
Reimbursement Arrangements	84		(55		)	—			29
Non-cash Executive Equity Awards Proration	24		—			(24		)	—
Other Charges Including Fees Related to Shareholder Matters	11		(11		)	—			—
Total Restructuring Charge	$	296	$	(147	)	$	(102	)	$	47

^(a)The majority of non-cash items are related to certain benefits paid through CSX's qualified pension plans.

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Computation of Basic Earnings Per Share, Assuming Dilution

The following table sets forth the computation of basic earnings per share and earnings per share, assuming dilution:

	Third Quarters				Nine Months
	2017		2016		2017			2016
Numerator (Dollars in millions):
Net Earnings	$	459	$	455	$	1,331		$	1,256
Dividend Equivalents on Restricted Stock	—		—		(1		)	(1		)
Net Earnings, Attributable to Common Shareholders	$	459	455		$	1,330		1,255
Denominator (Units in millions):
Average Common Shares Outstanding	902		942		916			952
Other Potentially Dilutive Common Shares	4		1		3			1
Average Common Shares Outstanding, Assuming Dilution	906		943		919			953
Net Earnings Per Share, Basic	$	0.51	$	0.48	$	1.45		$	1.32
Net Earnings Per Share, Assuming Dilution	$	0.51	$	0.48	$	1.45		$	1.32

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Share-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation and Related Income Tax Benefit

Total pre-tax expense associated with share-based compensation and its related income tax benefit is shown in the table below. The year over year increase in expense related to performance units and stock options is primarily due to modifications to the terms of awards (see Equity Award Modificationsbelow) and higher expected award payouts.

	Third Quarters				Nine Months
(Dollars in millions)	2017		2016		2017		2016
Share-Based Compensation Expense
Performance Units	$	3	$	5	$	41	$	9
Stock Options	14		2		47		5
Restricted Stock Units and Awards	2		2		11		8
Stock Awards for Directors	—		—		2		2
Total Share-Based Compensation Expense	$	19	$	9	$	101	$	24
Income Tax Benefit	$	7	$	3	$	32	$	9

Summary of Fair Value Assumptions for Stock Option Awards

The fair values of all stock option awards during the nine months ended September 30, 2017, including those granted along with 2017 - 2019 LTIP and the CEO stock option award, were estimated at the grant date with the following weighted average assumptions:

	Nine Months
	2017			2016
Weighted-average grant date fair value	$	12.83		$	4.68
Stock options valuation assumptions:
Annual dividend yield	1.5		%	3.0		%
Risk-free interest rate	2.2		%	1.4		%
Annualized volatility	27.1		%	27.3		%
Expected life (in years)	6.3			6.5
Other pricing model inputs:
Weighted-average grant-date market price of CSX stock (strike price)	$	49.60		$	24.13

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Casualty, Environmental and Other Reserves (Tables)

9 Months Ended

Sep. 30, 2017

Casualty, Environmental and Other Reserves [Abstract]

Schedule of Casualty, Environmental and Other Reserves

Casualty, environmental and other reserves are considered critical accounting estimates due to the need for significant management judgment. They are provided for in the consolidated balance sheets as shown in the table below:

	September 30, 2017						December 30, 2016
(Dollars in millions)	Current		Long-term		Total		Current		Long-term		Total
Casualty:
Personal Injury	$	45	$	120	$	165	$	46	$	124	$	170
Occupational(a)	4		55		59		7		52		59
Total Casualty	49		175		224		53		176		229
Environmental	43		46		89		42		53		95
Other	30		32		62		20		30		50
Total	$	122	$	253	$	375	$	115	$	259	$	374

^(a)  Occupational reserves include asbestos-related diseases and occupational injuries.

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Employee Benefit Plans (Tables)

9 Months Ended

Sep. 30, 2017

Retirement Benefits [Abstract]

Components of Expense/(Income) Related to Net Benefit Expense

The following table describes the components of expense / (income) related to net benefit expense recorded in labor and fringe on the income statement.

	Pension Benefits
(Dollars in millions)	Third Quarters						Nine Months
	2017			2016			2017			2016
Service Cost	$	8		$	12		$	28		$	36
Interest Cost	23			29			69			89
Expected Return on Plan Assets	(43		)	(39		)	(128		)	(118		)
Amortization of Net Loss	10			12			31			36
Net Periodic Benefit Cost	$	(2	)	$	14		$	—		$	43
Special Termination Benefits - Management Workforce Reduction/Curtailment	—			—			57			—
Total Expense	$	(2	)	$	14		$	57		$	43
	Other Post-retirement Benefits
(Dollars in millions)	Third Quarters						Nine Months
	2017			2016			2017			2016
Service Cost	$	—		$	—		$	1		$	1
Interest Cost	2			3			6			9
Amortization of Net Loss	—			1			—			2
Net Periodic Benefit Cost	$	2		$	4		$	7		$	12
Special Termination Benefits - Management Workforce Reduction/Curtailment	—			—			13			—
Total Expense	$	2		$	4		$	20		$	12

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Debt and Credit Agreements (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Activity Related to Long-Term Debt

Total activity related to long-term debt as of the end of third quarter 2017 is shown in the table below. For fair value information related to the Company's long-term debt, see Note 9, Fair Value Measurements.

(Dollars in millions)	Current Portion			Long-term Portion			Total
Long-term debt as of December 30, 2016	$	331		$	10,962		$	11,293
2017 activity:
Long-term debt issued	—			850			850
Long-term debt repaid	(332		)	—			(332		)
Reclassifications	20			(20		)	—
Discount, premium and other activity				(4		)	(4		)
Long-term debt as of September 30, 2017	$	19		$	11,788		$	11,807

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Schedule of Fair Value of Investment Assets

(Dollars in Millions)	September 30, 2017		December 30, 2016
Certificates of Deposit and Commercial Paper	$	100	$	415
Corporate Bonds	60		63
Government Securities	29		22
Total investments at fair value	$	189	$	500

Schedule of Investment Maturities

These investments have the following maturities:

(Dollars in millions)	September 30, 2017		December 30, 2016
Less than 1 year	$	113	$	417
1 - 2 years	5		12
2 - 5 years	10		4
Greater than 5 years	61		67
Total investments at fair value	$	189	$	500

Schedule of Fair Value and Carrying Value of Long-Term Debt

The fair value and carrying value of the Company's long-term debt is as follows:

(Dollars in millions)	September 30, 2017		December 30, 2016
Long-term Debt (Including Current Maturities):
Fair Value	$	13,082	$	12,096
Carrying Value	11,807		11,293

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Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Changes in AOCI balance by Component

Changes in the AOCI balance by component are shown in the table below. Amounts reclassified in pension and other post-employment benefits to net earnings relate to the amortization of actuarial losses and are included in labor and fringe on the consolidated income statements. See Note 6, Employee Benefit Plans, for further information. Other primarily represents CSX's share of AOCI of equity method investees. Amounts reclassified in other to net earnings are included in materials, supplies and other on the consolidated income statements.

	Pension and Other Post-Employment Benefits			Other			Accumulated Other Comprehensive Income (Loss)
(Dollars in millions)
Balance December 30, 2016, Net of Tax	$	(580	)	$	(60	)	$	(640	)
Other Comprehensive Income (Loss)
Income Before Reclassifications	86			2			88
Amounts Reclassified to Net Earnings	33			2			35
Tax Expense	(43		)	(1		)	(44		)
Total Other Comprehensive Income	76			3			79
Balance September 30, 2017, Net of Tax	$	(504	)	$	(57	)	$	(561	)

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Summarized Consolidating Financial Data (Tables)

9 Months Ended

Sep. 30, 2017

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Consolidating Income Statements

Consolidating Income Statements
(Dollars in millions)
Third Quarter 2017	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Revenue	$	—		$	2,725		$	18		$	2,743
Expense	(129		)	2,025			(29		)	1,867
Operating Income	129			700			47			876
Equity in Earnings of Subsidiaries	472			—			(472		)	—
Interest (Expense) / Benefit	(147		)	(3		)	18			(132		)
Other Income / (Expense) - Net	1			13			(8		)	6
Earnings Before Income Taxes	455			710			(415		)	750
Income Tax Benefit / (Expense)	4			(277		)	(18		)	(291		)
Net Earnings	$	459		$	433		$	(433	)	$	459
Total Comprehensive Earnings	$	467		$	433		$	(433	)	$	467
Third Quarter 2016	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Revenue	$	—		$	2,691		$	19		$	2,710
Expense	(63		)	1,960			(28		)	1,869
Operating Income	63			731			47			841
Equity in Earnings of Subsidiaries	505			1			(506		)	—
Interest (Expense) / Benefit	(141		)	(7		)	9			(139		)
Other Income / (Expense) - Net	—			9			4			13
Earnings Before Income Taxes	427			734			(446		)	715
Income Tax (Expense) / Benefit	28			(268		)	(20		)	(260		)
Net Earnings	$	455		$	466		$	(466	)	$	455
Total Comprehensive Earnings	$	465		$	467		$	(467	)	$	465

Consolidating Income Statements
(Dollars in millions)
Nine Months 2017	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Revenue	$	—		$	8,490		$	55		$	8,545
Expense	(171		)	6,278			(108		)	5,999
Operating Income	171			2,212			163			2,546
Equity in Earnings of Subsidiaries	1,506			—			(1,506		)	—
Interest (Expense) / Benefit	(432		)	(21		)	47			(406		)
Other Income / (Expense) - Net	6			32			(19		)	19
Earnings Before Income Taxes	1,251			2,223			(1,315		)	2,159
Income Tax (Expense) / Benefit	80			(844		)	(64		)	(828		)
Net Earnings	$	1,331		$	1,379		$	(1,379	)	$	1,331
Total Comprehensive Earnings	$	1,410		$	1,378		$	(1,378	)	$	1,410
Nine Months 2016	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Revenue	$	—		$	7,974		$	58		$	8,032
Expense	(202		)	5,985			(136		)	5,647
Operating Income	202			1,989			194			2,385
Equity in Earnings of Subsidiaries	1,399			1			(1,400		)	—
Interest (Expense) / Benefit	(425		)	(27		)	29			(423		)
Other Income / (Expense) - Net	1			24			3			28
Earnings Before Income Taxes	1,177			1,987			(1,174		)	1,990
Income Tax (Expense) / Benefit	79			(735		)	(78		)	(734		)
Net Earnings	$	1,256		$	1,252		$	(1,252	)	$	1,256
Total Comprehensive Earnings	$	1,282		$	1,253		$	(1,253	)	$	1,282

Consolidating Balance Sheet

Consolidating Balance Sheet
(Dollars in millions)
September 30, 2017	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
ASSETS
Current Assets
Cash and Cash Equivalents	$	433		$	147		$	11		$	591
Short-term Investments	100			—			13			113
Accounts Receivable - Net	(1		)	277			705			981
Receivable from Affiliates	1,012			3,004			(4,016		)	—
Materials and Supplies	—			392			—			392
Other Current Assets	2			76			17			95
Total Current Assets	1,546			3,896			(3,270		)	2,172
Properties	1			41,292			2,812			44,105
Accumulated Depreciation	(1		)	(11,014		)	(1,511		)	(12,526		)
Properties - Net	—			30,278			1,301			31,579
Investments in Conrail	—			—			864			864
Affiliates and Other Companies	(39		)	667			14			642
Investments in Consolidated Subsidiaries	25,221			—			(25,221		)	—
Other Long-term Assets	9			592			(285		)	316
Total Assets	$	26,737		$	35,433		$	(26,597	)	$	35,573
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable	$	178		$	695		$	32		$	905
Labor and Fringe Benefits Payable	76			483			42			601
Payable to Affiliates	4,148			382			(4,530		)	—
Casualty, Environmental and Other Reserves	—			109			13			122
Current Maturities of Long-term Debt	—			19			—			19
Income and Other Taxes Payable	(115		)	418			19			322
Other Current Liabilities	—			103			3			106
Total Current Liabilities	4,287			2,209			(4,421		)	2,075
Casualty, Environmental and Other Reserves	—			207			46			253
Long-term Debt	11,053			735			—			11,788
Deferred Income Taxes - Net	(198		)	9,697			290			9,789
Other Long-term Liabilities	708			375			(317		)	766
Total Liabilities	$	15,850		$	13,223		$	(4,402	)	$	24,671
Shareholders' Equity
Common Stock, $1 Par Value	$	894		$	181		$	(181	)	$	894
Other Capital	227			5,096			(5,096		)	227
Retained Earnings	10,327			16,938			(16,938		)	10,327
Accumulated Other Comprehensive Loss	(561		)	(20		)	20			(561		)
Noncontrolling Interest	—			15			—			15
Total Shareholders' Equity	$	10,887		$	22,210		$	(22,195	)	$	10,902
Total Liabilities and Shareholders' Equity	$	26,737		$	35,433		$	(26,597	)	$	35,573

Consolidating Balance Sheet (Dollars in millions)
December 30, 2016	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
ASSETS
Current Assets
Cash and Cash Equivalents	$	305		$	281		$	17		$	603
Short-term Investments	415			—			2			417
Accounts Receivable - Net	2			215			721			938
Receivable from Affiliates	1,157			2,351			(3,508		)	—
Materials and Supplies	—			407			—			407
Other Current Assets	—			106			16			122
Total Current Assets	1,879			3,360			(2,752		)	2,487
Properties	1			40,518			2,708			43,227
Accumulated Depreciation	(1		)	(10,634		)	(1,442		)	(12,077		)
Properties - Net	—			29,884			1,266			31,150
Investments in Conrail	—			—			840			840
Affiliates and Other Companies	(39		)	643			15			619
Investment in Consolidated Subsidiaries	24,179			—			(24,179		)	—
Other Long-term Assets	2			607			(291		)	318
Total Assets	$	26,021		$	34,494		$	(25,101	)	$	35,414
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable	$	95		$	678		$	33		$	806
Labor and Fringe Benefits Payable	40			440			65			545
Payable to Affiliates	3,457			500			(3,957		)	—
Casualty, Environmental and Other Reserves	—			102			13			115
Current Maturities of Long-term Debt	313			19			(1		)	331
Income and Other Taxes Payable	(346		)	459			16			129
Other Current Liabilities	—			112			2			114
Total Current Liabilities	3,559			2,310			(3,829		)	2,040
Casualty, Environmental and Other Reserves	—			208			51			259
Long-term Debt	10,203			759			—			10,962
Deferred Income Taxes - Net	(203		)	9,541			258			9,596
Other Long-term Liabilities	783			410			(330		)	863
Total Liabilities	$	14,342		$	13,228		$	(3,850	)	$	23,720
Shareholders' Equity
Common Stock, $1 Par Value	$	928		$	181		$	(181	)	$	928
Other Capital	138			5,095			(5,095		)	138
Retained Earnings	11,253			15,994			(15,994		)	11,253
Accumulated Other Comprehensive Loss	(640		)	(19		)	19			(640		)
Noncontrolling Minority Interest	—			15			—			15
Total Shareholders' Equity	$	11,679		$	21,266		$	(21,251	)	$	11,694
Total Liabilities and Shareholders' Equity	$	26,021		$	34,494		$	(25,101	)	$	35,414

Consolidating Cash Flow Statements

Consolidating Cash Flow Statements
(Dollars in millions)
Nine Months 2017	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Operating Activities
Net Cash Provided by (Used in) Operating Activities	$	1,590		$	1,544		$	(273	)	$	2,861
Investing Activities
Property Additions	—			(1,311		)	(151		)	(1,462		)
Purchases of Short-term Investments	(639		)	—			(6		)	(645		)
Proceeds from Sales of Short-term Investments	955			—			2			957
Other Investing Activities	(2		)	98			(25		)	71
Net Cash Provided by (Used in) Investing Activities	314			(1,213		)	(180		)	(1,079		)
Financing Activities
Long-term Debt Issued	850			—			—			850
Long-term Debt Repaid	(312		)	(20		)	—			(332		)
Dividends Paid	(530		)	(450		)	450			(530		)
Shares Repurchased	(1,763		)	—			—			(1,763		)
Other Financing Activities	(21		)	5			(3		)	(19		)
Net Cash Provided by (Used in) Financing Activities	(1,776		)	(465		)	447			(1,794		)
Net Increase (Decrease) in Cash and Cash Equivalents	128			(134		)	(6		)	(12		)
Cash and Cash Equivalents at Beginning of Period	305			281			17			603
Cash and Cash Equivalents at End of Period	$	433		$	147		$	11		$	591

NOTE 11.Summarized Consolidating Financial Data, continued

Consolidating Cash Flow Statements
(Dollars in millions)
Nine Months 2016	CSX Corporation			CSX Transportation			Eliminations and Other			Consolidated
Operating Activities
Net Cash Provided by (Used in) Operating Activities	$	644		$	2,089		$	(245	)	$	2,488
Investing Activities
Property Additions	—			(1,469		)	(121		)	(1,590		)
Purchases of Short-term Investments	(410		)	—			—			(410		)
Proceeds from Sales of Short-term Investments	1,070			—			—			1,070
Other Investing Activities	(3		)	107			(67		)	37
Net Cash Provided by (Used in) Investing Activities	657			(1,362		)	(188		)	(893		)
Financing Activities
Long-term Debt Issued	—			—			—			—
Long-term Debt Repaid	—			(18		)	(1		)	(19		)
Dividends Paid	(513		)	(450		)	450			(513		)
Shares Repurchased	(778		)	—			—			(778		)
Other Financing Activities	(6		)	(304		)	—			(310		)
Net Cash Provided by (Used in) Financing Activities	(1,297		)	(772		)	449			(1,620		)
Net Increase (Decrease) in Cash and Cash Equivalents	4			(45		)	16			(25		)
Cash and Cash Equivalents at Beginning of Period	444			175			9			628
Cash and Cash Equivalents at End of Period	$	448		$	130		$	25		$	603

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Nature of Operations and Significant Accounting Policies - Narrative (Details) mi in Thousands, $ in Millions		1 Months Ended	6 Months Ended	9 Months Ended
	Jun. 05, 2017	Jun. 30, 2017 USD ($)	Jun. 30, 2017 employee	Sep. 30, 2017 USD ($) state mi	Sep. 23, 2016 USD ($)	Dec. 30, 2016 USD ($)
Background
Total number of rail route miles | mi				21
Number of states rail network serves | state				23
Allowance for Doubtful Accounts
Allowance for doubtful accounts				$ 24		$ 33
Other Items [Abstract]
Payments for restructuring				147	$ 0
Shareholder vote percent	93.00%
Chief Executive Officer
Other Items [Abstract]
Reimbursement payment		$ 55
Lump sum cash payment owed				29
Management Streamlining Initiative
Other Items [Abstract]
Workforce reduction (number of employees) | employee			950
Payments for restructuring				147
Management Streamlining Initiative | Severance
Other Items [Abstract]
Payments for restructuring				$ 77

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Nature of Operations and Significant Accounting Policies - Restructuring Charges (Details) - USD ($) $ in Millions	3 Months Ended				9 Months Ended
	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Sep. 23, 2016	Sep. 30, 2017	Sep. 23, 2016
Restructuring Cost and Reserve [Line Items]
Restructuring Charge	$ 1			$ 0	$ 296	$ 0
Payments					(147)	$ 0
Management Streamlining Initiative
Restructuring Cost and Reserve [Line Items]
Restructuring Charge	1	$ 122	$ 173		296
Payments					(147)
Non-cash Items					(102)
Balance	47				47
Management Streamlining Initiative | Subtotal Management Workforce Reduction
Restructuring Cost and Reserve [Line Items]
Restructuring Charge	0	22	155		177
Payments					(81)
Non-cash Items					(78)
Balance	18				18
Management Streamlining Initiative | Severance
Restructuring Cost and Reserve [Line Items]
Restructuring Charge	0	10	81		91
Payments					(77)
Non-cash Items					0
Balance	14				14
Management Streamlining Initiative | Pension, Other Post-retirement Benefit and Other Non-cash Charges
Restructuring Cost and Reserve [Line Items]
Restructuring Charge	0	10	68		78
Payments					0
Non-cash Items					(78)
Balance	0				0
Management Streamlining Initiative | Relocation
Restructuring Cost and Reserve [Line Items]
Restructuring Charge	0	2	6		8
Payments					(4)
Non-cash Items					0
Balance	4				4
Management Streamlining Initiative | Reimbursement Arrangements
Restructuring Cost and Reserve [Line Items]
Restructuring Charge	0	84	0		84
Payments					(55)
Non-cash Items					0
Balance	29				29
Management Streamlining Initiative | Non-cash Executive Equity Awards Proration
Restructuring Cost and Reserve [Line Items]
Restructuring Charge	0	16	8		24
Payments					0
Non-cash Items					(24)
Balance	0				0
Management Streamlining Initiative | Other Charges Including Fees Related to Shareholder Matters
Restructuring Cost and Reserve [Line Items]
Restructuring Charge	1	$ 0	$ 10		11
Payments					(11)
Non-cash Items					0
Balance	$ 0				$ 0

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Earnings Per Share - Computation of Basic Earnings Per Share, Assuming Dilution (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 23, 2016	Sep. 30, 2017	Sep. 23, 2016
Numerator:
Net Earnings	$ 459	$ 455	$ 1,331	$ 1,256
Dividend Equivalents on Restricted Stock	0	0	(1)	(1)
Net Earnings, Attributable to Common Shareholders	$ 459	$ 455	$ 1,330	$ 1,255
Denominator:
Average Common Shares Outstanding (in shares)	902	942	916	952
Other Potentially Dilutive Common Shares (in shares)	4	1	3	1
Average Common Shares Outstanding, Assuming Dilution (in shares)	906	943	919	953
Net Earnings Per Share, Basic (in dollars per share)	$ 0.51	$ 0.48	$ 1.45	$ 1.32
Net Earnings Per Share, Assuming Dilution (in dollars per share)	$ 0.51	$ 0.48	$ 1.45	$ 1.32

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Earnings Per Share - Narrative (Details) - USD ($) shares in Millions, $ in Millions	1 Months Ended	3 Months Ended		9 Months Ended
	Jul. 31, 2017	Sep. 30, 2017	Sep. 23, 2016	Sep. 30, 2017	Sep. 23, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Share repurchase program	$ 1,500
Share repurchase program, additional amount authorized	$ 500
Shares repurchased value		$ 1,000	$ 263	$ 1,763	$ 778
Shares repurchased during the period (in shares)		20.0	10.0	35.0	30.0
Employee Stock Option
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities		10.0	2.4

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Share-Based Compensation - Share-Based Compensation and Related Income Tax Benefit (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 23, 2016	Sep. 30, 2017	Sep. 23, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total Share-Based Compensation Expense	$ 19	$ 9	$ 101	$ 24
Income Tax Benefit	7	3	32	9
Performance Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total Share-Based Compensation Expense	3	5	41	9
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total Share-Based Compensation Expense	14	2	47	5
Restricted Stock Units and Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total Share-Based Compensation Expense	2	2	11	8
Stock Awards for Directors
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total Share-Based Compensation Expense	$ 0	$ 0	$ 2	$ 2

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Share-Based Compensation - Narrative (Details) $ / shares in Units, $ in Millions		1 Months Ended		3 Months Ended		9 Months Ended
	Mar. 06, 2017 employee shares	Mar. 31, 2017 $ / shares shares	Feb. 28, 2017 $ / shares shares	Sep. 30, 2017 shares	Sep. 23, 2016 shares	Sep. 30, 2017 USD ($) $ / shares shares	Sep. 23, 2016 $ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options granted (in shares)			1,300,000	0	0
Fair value of stock options (in dollars per share) | $ / shares			$ 12.54			$ 12.83	$ 4.68
Chief Executive Officer
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options granted (in shares)		9,000,000
Fair value of stock options (in dollars per share) | $ / shares		$ 12.88
Chief Executive Officer | Vesting Upon Service Anniversary
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of vesting options (in shares)		4,500,000
Award vesting period (in years)		4 years
Chief Executive Officer | Vesting Upon Achievement of Performance Targets
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of vesting options (in shares)	4,500,000
Award vesting period (in years)	4 years
2017 - 2019 LTIP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of payout subject to downward adjustment (up to)						30.00%
2017 - 2019 LTIP | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Payout range for participants (as a percent)						0.00%
2017 - 2019 LTIP | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Payout range for participants (as a percent)						200.00%
Equity Award Modifications
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of employees impacted (employees) | employee	70
Share-based compensation expense revaluation of awards | $						$ 31
Performance Units | 2017 - 2019 LTIP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (in shares)			600,000
Percentage of grants with performance vesting, operating ratio (as a percent)						50.00%
Percentage of grants with performance vesting, return on assets (as a percent)						50.00%
Performance unit equivalent of CSX common stock (in shares)						1
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period (in years)			3 years
Restricted Stock Units (RSUs) | 2017 - 2019 LTIP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (in shares)			300,000
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Term of stock options (in years)			10 years
Award vesting period (in years)			3 years
Employee Stock Option | Chief Executive Officer
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Term of stock options (in years)		10 years

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Share-Based Compensation - Summary of Fair Value Assumptions for Stock Option Awards (Details) - $ / shares	1 Months Ended	3 Months Ended	9 Months Ended
	Feb. 28, 2017	Sep. 23, 2016	Sep. 30, 2017	Sep. 23, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Weighted-average grant date fair value (in dollars per share)	$ 12.54		$ 12.83	$ 4.68
Stock options valuation assumptions:
Annual dividend yield (as a percent)			1.50%	3.00%
Risk-free interest rate (as a percent)			2.20%	1.40%
Annualized volatility (as a percent)			27.10%	27.30%
Expected life (in years)		0 years	6 years 3 months	6 years 6 months
Other pricing model inputs:
Weighted-average grant-date market price of CSX stock (in dollars per share)			$ 49.60	$ 24.13

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Casualty, Environmental and Other Reserves - Schedule of Casualty, Environmental and Other Reserves (Details) - USD ($) $ in Millions	Sep. 30, 2017	Dec. 30, 2016
Loss Contingencies [Line Items]
Current	$ 122	$ 115
Long-term	253	259
Total	375	374
Total Casualty
Loss Contingencies [Line Items]
Current	49	53
Long-term	175	176
Total	224	229
Personal Injury
Loss Contingencies [Line Items]
Current	45	46
Long-term	120	124
Total	165	170
Occupational
Loss Contingencies [Line Items]
Current	4	7
Long-term	55	52
Total	59	59
Environmental
Loss Contingencies [Line Items]
Current	43	42
Long-term	46	53
Total	89	95
Other
Loss Contingencies [Line Items]
Current	30	20
Long-term	32	30
Total	$ 62	$ 50

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Casualty, Environmental and Other Reserves - Narrative (Details)	9 Months Ended
	Sep. 30, 2017 USD ($) claim site	Dec. 30, 2016 USD ($)
All Contingencies Reserves [Line Items]
Total reserves	$ 375,000,000	$ 374,000,000
Minimum
All Contingencies Reserves [Line Items]
Loss contingency, latency period (in years)	10 years
Maximum
All Contingencies Reserves [Line Items]
Loss contingency, latency period (in years)	40 years
Casualty
All Contingencies Reserves [Line Items]
Total reserves	$ 224,000,000	229,000,000
Self-insured retention amount, per occurrence	$ 50,000,000
Number of individual claims expected to exceed self insured retention amount | claim	0
Environmental
All Contingencies Reserves [Line Items]
Total reserves	$ 89,000,000	95,000,000
Environmental impaired sites | site	219
Other
All Contingencies Reserves [Line Items]
Total reserves	$ 62,000,000	$ 50,000,000

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Commitments and Contingencies (Details)	1 Months Ended		9 Months Ended
	Mar. 31, 2016 mi	May 31, 2007 entity	Sep. 30, 2017 USD ($) claim mi	Aug. 09, 2017	Dec. 30, 2016 USD ($)
Loss Contingencies [Line Items]
Locomotive fleet covered by maintenance program (as a percent)				34.00%	50.00%
Estimated obligation under maintenance program			$ 1,700,000,000		$ 5,000,000,000
Casualty and non catastrophic property deductible			25,000,000
Casualty and catastrophic property deductible			$ 50,000,000
Environmental
Loss Contingencies [Line Items]
Number of miles pertaining to Passaic River tidal reach required to be studied by EPA | mi			17
Pending Litigation
Loss Contingencies [Line Items]
Claims with potential material impact (number of claims) | claim			1
Pending Litigation | Fuel Surcharge Antitrust Litigation
Loss Contingencies [Line Items]
Class action lawsuits filed against U.S.-based Class I railroads, excluding CSXT (number of entities) | entity		3
Pending Litigation | Minimum
Loss Contingencies [Line Items]
Possible loss for certain legal proceedings			$ 2,000,000
Pending Litigation | Maximum
Loss Contingencies [Line Items]
Possible loss for certain legal proceedings			$ 116,000,000
Settled Litigation | Environmental
Loss Contingencies [Line Items]
Number of miles subject to remediation | mi	8
Years required for site cleanup	10 years

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Employee Benefit Plans - Components of Expense/(Income) Related to Net Benefit Expense (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 23, 2016	Sep. 30, 2017	Sep. 23, 2016
Pension Benefits
Components of expense/ (income) related to net benefit expense:
Service Cost	$ 8	$ 12	$ 28	$ 36
Interest Cost	23	29	69	89
Expected Return on Plan Assets	(43)	(39)	(128)	(118)
Amortization of Net Loss	10	12	31	36
Net Periodic Benefit Cost	(2)	14	0	43
Special Termination Benefits - Management Workforce Reduction/Curtailment	0	0	57	0
Total Expense	(2)	14	57	43
Other Post-retirement Benefits
Components of expense/ (income) related to net benefit expense:
Service Cost	0	0	1	1
Interest Cost	2	3	6	9
Amortization of Net Loss	0	1	0	2
Net Periodic Benefit Cost	2	4	7	12
Special Termination Benefits - Management Workforce Reduction/Curtailment	0	0	13	0
Total Expense	$ 2	$ 4	$ 20	$ 12

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Employee Benefit Plans - Narrative (Details) - USD ($)	3 Months Ended
	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 30, 2016
Defined Benefit Plan Disclosure [Line Items]
Contributions expected to plan	$ 0
Other Post-retirement Benefits
Defined Benefit Plan Disclosure [Line Items]
Curtailment loss			$ 13,000,000
Discount rate (as a percent)			3.59%	3.71%
Pension Benefits
Defined Benefit Plan Disclosure [Line Items]
Curtailment loss		$ 4,000,000
Discount rate (as a percent)		3.94%	4.08%
Decrease to pension liabilities		$ 86,000,000
Decrease to other comprehensive loss	$ 86,000,000

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Debt and Credit Agreements - Activity Related to Long-Term Debt (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2017	Sep. 23, 2016
Movement, Debt Instruments [Roll Forward]
Beginning balance, current portion	$ 331
Beginning balance, long-term portion	10,962
Beginning balance, total	11,293
Long-term debt issued	850	$ 0
Long-term debt repaid	(332)
Discount, premium and other activity	(4)
Ending balance, current portion	19
Ending balance, long-term portion	11,788
Ending balance, total	11,807
Current Portion
Movement, Debt Instruments [Roll Forward]
Beginning balance, current portion	331
Long-term debt issued	0
Long-term debt repaid	(332)
Reclassifications	20
Discount, premium and other activity
Ending balance, current portion	19
Long-term Portion
Movement, Debt Instruments [Roll Forward]
Beginning balance, long-term portion	10,962
Long-term debt issued	850
Long-term debt repaid	0
Reclassifications	(20)
Discount, premium and other activity	(4)
Ending balance, long-term portion	$ 11,788

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Debt and Credit Agreements - Narrative (Details) - USD ($)	1 Months Ended	9 Months Ended
	May 31, 2017	Sep. 30, 2017	Sep. 23, 2016
Line of Credit Facility
Long-term debt issued		$ 850,000,000	$ 0
Credit Facility
Line of Credit Facility
Borrowing capacity		$ 1,000,000,000
Facility expiration date		May 21, 2020
Amount outstanding		$ 0
Receivables Securitization Facility
Line of Credit Facility
Borrowing capacity		$ 200,000,000
Facility expiration date		Sep. 01, 2019
Facility expiration period		3 years
Outstanding balance		$ 0
Notes due 2027
Line of Credit Facility
Long-term debt issued	$ 850,000,000
Interest rate (as a percent)	3.25%

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Income Taxes (Details) $ in Millions	12 Months Ended
	Dec. 30, 2016 USD ($)
Income Tax Disclosure [Abstract]
Unrecognized tax benefits increase	$ 0
Unrecognized tax benefits decrease	$ 0

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Fair Value Measurements - Schedule of Fair Value of Investment Assets (Details) - USD ($) $ in Millions	Sep. 30, 2017	Dec. 30, 2016
Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Amortized cost basis of investments	$ 186	$ 500
Fair Value | Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments fair value disclosure	189	500
Fair Value | Level 2 | Certificates of Deposit and Commercial Paper
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments fair value disclosure	100	415
Fair Value | Level 2 | Corporate Bonds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments fair value disclosure	60	63
Fair Value | Level 2 | Government Securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments fair value disclosure	$ 29	$ 22

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Fair Value Measurements - Schedule of Investment Maturities (Details) - Fair Value - USD ($) $ in Millions	Sep. 30, 2017	Dec. 30, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Less than 1 year	$ 113	$ 417
1 - 2 years	5	12
2 - 5 years	10	4
Greater than 5 years	61	67
Total investments at fair value	$ 189	$ 500

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Fair Value Measurements - Schedule of Fair Value and Carrying Value of Long-Term Debt (Details) - Level 2 - USD ($) $ in Millions	Sep. 30, 2017	Dec. 30, 2016
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt (Including Current Maturities):	$ 13,082	$ 12,096
Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt (Including Current Maturities):	$ 11,807	$ 11,293

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Other Comprehensive Income (Loss) - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 23, 2016	Sep. 30, 2017	Sep. 23, 2016
Equity [Abstract]
Total comprehensive earnings, net of tax	$ 467	$ 465	$ 1,410	$ 1,282

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Other Comprehensive Income (Loss) - Changes in AOCI balance by Component (Details) $ in Millions	9 Months Ended
	Sep. 30, 2017 USD ($)
Pension and Other Post-Employment Benefits
Other Comprehensive Income (Loss)
Beginning balance	$ (580)
Income Before Reclassifications	86
Amounts Reclassified to Net Earnings	33
Tax Expense	(43)
Total Other Comprehensive Income	76
Ending balance	(504)
Other
Other Comprehensive Income (Loss)
Beginning balance	(60)
Income Before Reclassifications	2
Amounts Reclassified to Net Earnings	2
Tax Expense	(1)
Total Other Comprehensive Income	3
Ending balance	(57)
Accumulated Other Comprehensive Income (Loss)
Other Comprehensive Income (Loss)
Beginning balance	(640)
Income Before Reclassifications	88
Amounts Reclassified to Net Earnings	35
Tax Expense	(44)
Total Other Comprehensive Income	79
Ending balance	$ (561)

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Summarized Consolidating Financial Data - Consolidating Income Statements (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 23, 2016	Sep. 30, 2017	Sep. 23, 2016
Consolidated Income Statement
Revenue	$ 2,743	$ 2,710	$ 8,545	$ 8,032
Expense	1,867	1,869	5,999	5,647
Operating Income	876	841	2,546	2,385
Equity in Earnings of Subsidiaries	0	0	0	0
Interest (Expense) / Benefit	(132)	(139)	(406)	(423)
Other Income / (Expense) - Net	6	13	19	28
Earnings Before Income Taxes	750	715	2,159	1,990
Income Tax Benefit / (Expense)	(291)	(260)	(828)	(734)
Net Earnings	459	455	1,331	1,256
Total Comprehensive Earnings	467	465	1,410	1,282
Eliminations and Other
Consolidated Income Statement
Revenue	18	19	55	58
Expense	(29)	(28)	(108)	(136)
Operating Income	47	47	163	194
Equity in Earnings of Subsidiaries	(472)	(506)	(1,506)	(1,400)
Interest (Expense) / Benefit	18	9	47	29
Other Income / (Expense) - Net	(8)	4	(19)	3
Earnings Before Income Taxes	(415)	(446)	(1,315)	(1,174)
Income Tax Benefit / (Expense)	(18)	(20)	(64)	(78)
Net Earnings	(433)	(466)	(1,379)	(1,252)
Total Comprehensive Earnings	(433)	(467)	(1,378)	(1,253)
CSX Corporation
Consolidated Income Statement
Revenue	0	0	0	0
Expense	(129)	(63)	(171)	(202)
Operating Income	129	63	171	202
Equity in Earnings of Subsidiaries	472	505	1,506	1,399
Interest (Expense) / Benefit	(147)	(141)	(432)	(425)
Other Income / (Expense) - Net	1	0	6	1
Earnings Before Income Taxes	455	427	1,251	1,177
Income Tax Benefit / (Expense)	4	28	80	79
Net Earnings	459	455	1,331	1,256
Total Comprehensive Earnings	467	465	1,410	1,282
CSX Transportation
Consolidated Income Statement
Revenue	2,725	2,691	8,490	7,974
Expense	2,025	1,960	6,278	5,985
Operating Income	700	731	2,212	1,989
Equity in Earnings of Subsidiaries	0	1	0	1
Interest (Expense) / Benefit	(3)	(7)	(21)	(27)
Other Income / (Expense) - Net	13	9	32	24
Earnings Before Income Taxes	710	734	2,223	1,987
Income Tax Benefit / (Expense)	(277)	(268)	(844)	(735)
Net Earnings	433	466	1,379	1,252
Total Comprehensive Earnings	$ 433	$ 467	$ 1,378	$ 1,253

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Summarized Consolidating Financial Data - Consolidating Balance Sheet (Details) - USD ($) $ / shares in Units, $ in Millions	Sep. 30, 2017	Dec. 30, 2016	Sep. 23, 2016	Dec. 25, 2015
Current Assets:
Cash and Cash Equivalents	$ 591	$ 603	$ 603	$ 628
Short-term Investments	113	417
Accounts Receivable - Net	981	938
Receivable from Affiliates	0	0
Materials and Supplies	392	407
Other Current Assets	95	122
Total Current Assets	2,172	2,487
Properties	44,105	43,227
Accumulated Depreciation	(12,526)	(12,077)
Properties - Net	31,579	31,150
Other Long-term Assets	316	318
Total Assets	35,573	35,414
Current Liabilities:
Accounts Payable	905	806
Labor and Fringe Benefits Payable	601	545
Payable to Affiliates	0	0
Casualty, Environmental and Other Reserves	122	115
Current Maturities of Long-term Debt	19	331
Income and Other Taxes Payable	322	129
Other Current Liabilities	106	114
Total Current Liabilities	2,075	2,040
Casualty, Environmental and Other Reserves	253	259
Long-term Debt	11,788	10,962
Deferred Income Taxes - Net	9,789	9,596
Other Long-term Liabilities	766	863
Total Liabilities	24,671	23,720
Shareholders' Equity
Common Stock, $1 Par Value	894	928
Other Capital	227	138
Retained Earnings	10,327	11,253
Accumulated Other Comprehensive Loss	(561)	(640)
Noncontrolling Interest	15	15
Total Shareholders' Equity	10,902	11,694
Total Liabilities and Shareholders' Equity	$ 35,573	$ 35,414
Common stock, par value (in dollars per share)	$ 1	$ 1
Investments in Conrail
Current Assets:
Investment in Affiliates and Other Companies	$ 864	$ 840
Affiliates and Other Companies
Current Assets:
Investment in Affiliates and Other Companies	642	619
Investments in Consolidated Subsidiaries
Current Assets:
Investment in Affiliates and Other Companies	0	0
Eliminations and Other
Current Assets:
Cash and Cash Equivalents	11	17	25	9
Short-term Investments	13	2
Accounts Receivable - Net	705	721
Receivable from Affiliates	(4,016)	(3,508)
Materials and Supplies	0	0
Other Current Assets	17	16
Total Current Assets	(3,270)	(2,752)
Properties	2,812	2,708
Accumulated Depreciation	(1,511)	(1,442)
Properties - Net	1,301	1,266
Other Long-term Assets	(285)	(291)
Total Assets	(26,597)	(25,101)
Current Liabilities:
Accounts Payable	32	33
Labor and Fringe Benefits Payable	42	65
Payable to Affiliates	(4,530)	(3,957)
Casualty, Environmental and Other Reserves	13	13
Current Maturities of Long-term Debt	0	(1)
Income and Other Taxes Payable	19	16
Other Current Liabilities	3	2
Total Current Liabilities	(4,421)	(3,829)
Casualty, Environmental and Other Reserves	46	51
Long-term Debt	0	0
Deferred Income Taxes - Net	290	258
Other Long-term Liabilities	(317)	(330)
Total Liabilities	(4,402)	(3,850)
Shareholders' Equity
Common Stock, $1 Par Value	(181)	(181)
Other Capital	(5,096)	(5,095)
Retained Earnings	(16,938)	(15,994)
Accumulated Other Comprehensive Loss	20	19
Noncontrolling Interest	0	0
Total Shareholders' Equity	(22,195)	(21,251)
Total Liabilities and Shareholders' Equity	(26,597)	(25,101)
Eliminations and Other | Investments in Conrail
Current Assets:
Investment in Affiliates and Other Companies	864	840
Eliminations and Other | Affiliates and Other Companies
Current Assets:
Investment in Affiliates and Other Companies	14	15
Eliminations and Other | Investments in Consolidated Subsidiaries
Current Assets:
Investment in Affiliates and Other Companies	(25,221)	(24,179)
CSX Corporation
Current Assets:
Cash and Cash Equivalents	433	305	448	444
Short-term Investments	100	415
Accounts Receivable - Net	(1)	2
Receivable from Affiliates	1,012	1,157
Materials and Supplies	0	0
Other Current Assets	2	0
Total Current Assets	1,546	1,879
Properties	1	1
Accumulated Depreciation	(1)	(1)
Properties - Net	0	0
Other Long-term Assets	9	2
Total Assets	26,737	26,021
Current Liabilities:
Accounts Payable	178	95
Labor and Fringe Benefits Payable	76	40
Payable to Affiliates	4,148	3,457
Casualty, Environmental and Other Reserves	0	0
Current Maturities of Long-term Debt	0	313
Income and Other Taxes Payable	(115)	(346)
Other Current Liabilities	0	0
Total Current Liabilities	4,287	3,559
Casualty, Environmental and Other Reserves	0	0
Long-term Debt	11,053	10,203
Deferred Income Taxes - Net	(198)	(203)
Other Long-term Liabilities	708	783
Total Liabilities	15,850	14,342
Shareholders' Equity
Common Stock, $1 Par Value	894	928
Other Capital	227	138
Retained Earnings	10,327	11,253
Accumulated Other Comprehensive Loss	(561)	(640)
Noncontrolling Interest	0	0
Total Shareholders' Equity	10,887	11,679
Total Liabilities and Shareholders' Equity	26,737	26,021
CSX Corporation | Investments in Conrail
Current Assets:
Investment in Affiliates and Other Companies	0	0
CSX Corporation | Affiliates and Other Companies
Current Assets:
Investment in Affiliates and Other Companies	(39)	(39)
CSX Corporation | Investments in Consolidated Subsidiaries
Current Assets:
Investment in Affiliates and Other Companies	25,221	24,179
CSX Transportation
Current Assets:
Cash and Cash Equivalents	147	281	$ 130	$ 175
Short-term Investments	0	0
Accounts Receivable - Net	277	215
Receivable from Affiliates	3,004	2,351
Materials and Supplies	392	407
Other Current Assets	76	106
Total Current Assets	3,896	3,360
Properties	41,292	40,518
Accumulated Depreciation	(11,014)	(10,634)
Properties - Net	30,278	29,884
Other Long-term Assets	592	607
Total Assets	35,433	34,494
Current Liabilities:
Accounts Payable	695	678
Labor and Fringe Benefits Payable	483	440
Payable to Affiliates	382	500
Casualty, Environmental and Other Reserves	109	102
Current Maturities of Long-term Debt	19	19
Income and Other Taxes Payable	418	459
Other Current Liabilities	103	112
Total Current Liabilities	2,209	2,310
Casualty, Environmental and Other Reserves	207	208
Long-term Debt	735	759
Deferred Income Taxes - Net	9,697	9,541
Other Long-term Liabilities	375	410
Total Liabilities	13,223	13,228
Shareholders' Equity
Common Stock, $1 Par Value	181	181
Other Capital	5,096	5,095
Retained Earnings	16,938	15,994
Accumulated Other Comprehensive Loss	(20)	(19)
Noncontrolling Interest	15	15
Total Shareholders' Equity	22,210	21,266
Total Liabilities and Shareholders' Equity	35,433	34,494
CSX Transportation | Investments in Conrail
Current Assets:
Investment in Affiliates and Other Companies	0	0
CSX Transportation | Affiliates and Other Companies
Current Assets:
Investment in Affiliates and Other Companies	667	643
CSX Transportation | Investments in Consolidated Subsidiaries
Current Assets:
Investment in Affiliates and Other Companies	$ 0	$ 0

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Summarized Consolidating Financial Data - Consolidating Cash Flow Statements (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 23, 2016	Sep. 30, 2017	Sep. 23, 2016
Operating Activities
Net Cash Provided by (Used in) Operating Activities			$ 2,861	$ 2,488
Investing Activities
Property Additions			(1,462)	(1,590)
Purchase of Short-term Investments			(645)	(410)
Proceeds from Sales of Short-term Investments			957	1,070
Other Investing Activities			71	37
Net Cash Used In Investing Activities			(1,079)	(893)
Financing Activities
Long-term Debt Issued			850	0
Long-term Debt Repaid			(332)	(19)
Dividends Paid			(530)	(513)
Shares Repurchased	$ (1,000)	$ (263)	(1,763)	(778)
Other Financing Activities			(19)	(310)
Net Cash Used in Financing Activities			(1,794)	(1,620)
Net Decrease in Cash and Cash Equivalents			(12)	(25)
Cash and Cash Equivalents at Beginning of Period			603	628
Cash and Cash Equivalents at End of Period	591	603	591	603
Eliminations and Other
Operating Activities
Net Cash Provided by (Used in) Operating Activities			(273)	(245)
Investing Activities
Property Additions			(151)	(121)
Purchase of Short-term Investments			(6)	0
Proceeds from Sales of Short-term Investments			2	0
Other Investing Activities			(25)	(67)
Net Cash Used In Investing Activities			(180)	(188)
Financing Activities
Long-term Debt Issued			0	0
Long-term Debt Repaid			0	(1)
Dividends Paid			450	450
Shares Repurchased			0	0
Other Financing Activities			(3)	0
Net Cash Used in Financing Activities			447	449
Net Decrease in Cash and Cash Equivalents			(6)	16
Cash and Cash Equivalents at Beginning of Period			17	9
Cash and Cash Equivalents at End of Period	11	25	11	25
CSX Corporation
Operating Activities
Net Cash Provided by (Used in) Operating Activities			1,590	644
Investing Activities
Property Additions			0	0
Purchase of Short-term Investments			(639)	(410)
Proceeds from Sales of Short-term Investments			955	1,070
Other Investing Activities			(2)	(3)
Net Cash Used In Investing Activities			314	657
Financing Activities
Long-term Debt Issued			850	0
Long-term Debt Repaid			(312)	0
Dividends Paid			(530)	(513)
Shares Repurchased			(1,763)	(778)
Other Financing Activities			(21)	(6)
Net Cash Used in Financing Activities			(1,776)	(1,297)
Net Decrease in Cash and Cash Equivalents			128	4
Cash and Cash Equivalents at Beginning of Period			305	444
Cash and Cash Equivalents at End of Period	433	448	433	448
CSX Transportation
Operating Activities
Net Cash Provided by (Used in) Operating Activities			1,544	2,089
Investing Activities
Property Additions			(1,311)	(1,469)
Purchase of Short-term Investments			0	0
Proceeds from Sales of Short-term Investments			0	0
Other Investing Activities			98	107
Net Cash Used In Investing Activities			(1,213)	(1,362)
Financing Activities
Long-term Debt Issued			0	0
Long-term Debt Repaid			(20)	(18)
Dividends Paid			(450)	(450)
Shares Repurchased			0	0
Other Financing Activities			5	(304)
Net Cash Used in Financing Activities			(465)	(772)
Net Decrease in Cash and Cash Equivalents			(134)	(45)
Cash and Cash Equivalents at Beginning of Period			281	175
Cash and Cash Equivalents at End of Period	$ 147	$ 130	$ 147	$ 130