CSX CORP

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. Significant estimates using management judgment are made for the following areas:

•personal injury and environmental reserves;

•pension plan accounting; and

•depreciation policies for assets under the group-life method

Personal Injury and Environmental Reserves

Personal Injury

Personal Injury reserves of $154 million and $142 million for 2025 and 2024, respectively, represent liabilities for employee work-related and third-party injuries. CSXT retains an independent actuary to assist management in assessing the value of personal injury claims. 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. Actual results may vary from estimates due to the number, type and severity of the injury, costs of medical treatments and uncertainties in litigation. For additional details, including a description of our related accounting policies, see Note 5, Casualty, Environmental and Other Reserves, in the consolidated financial statements.

Environmental reserves were $156 million and $151 million for 2025 and 2024, 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 220 environmentally impaired sites. The Company reviews its potential liability with respect to each site identified, 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.

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. For additional details, including a description of our related accounting policies, see Note 5, Casualty, Environmental and Other Reserves, in the consolidated financial statements.

CSX 2025 Form 10-K p.43

Pension Plan Accounting

The Company sponsors defined benefit pension plans principally for salaried, management personnel. For employees hired prior to 2003, the plans provide eligible employees with retirement benefits based predominantly on years of service and compensation rates near retirement. For employees hired between 2003 and 2019, benefits are determined based on a cash balance formula, which provides benefits by utilizing interest and pay credits based upon age, service and compensation. Beginning in 2020, the CSX Pension Plan was closed to new participants. As of December 2025, the projected benefit obligation for the Company’s pension plans was $2.2 billion. For information related to the funded status of the Company's pension plans, see Note 9, Employee Benefit Plans.

The accounting for these plans is subject to the guidance provided in the Compensation-Retirement Benefits Topic in the Accounting Standards Codification ("ASC"). This rule requires that management make certain assumptions relating to the following:

•discount rates used to measure future obligations and interest expense;

•long-term rate of return on plan assets; and

•other assumptions.

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.

Discount Rates

Discount rates affect the amount of liability recorded and the service and interest cost components of pension expense. Discount rates reflect the rates at which pension benefits could be effectively settled, or in other words, how much it would cost the Company to buy enough high quality bonds to generate cash flow equal to the Company's expected future benefit payments. The Company determines the discount rate based on the market yield as of year-end for high quality corporate bonds whose maturities match the plans' expected benefit payments.

The Company measures the service and interest cost components of the net pension benefits expense by using individual spot rates matched with separate cash flows for each future year. Under the spot rate approach, individual spot discount rates along the same high quality corporate bonds yield curve used to measure the pension benefit liabilities are applied to the relevant projected cash flows at the relevant maturity.

The weighted average discount rate used by the Company to value its pension obligations was 5.25% and 5.50% as of December 2025, and December 2024, respectively. As of December 2025, the estimated duration of pension benefits is approximately 9 years.

Each year, the discount rate is reevaluated and adjusted using the current market interest rates for high quality corporate bonds to reflect the best estimate of the current effective settlement rates. In general, if interest rates decline or rise, the assumed discount rate will change.

CSX 2025 Form 10-K p.44

Long-term Rate of Return on Plan Assets

The expected long-term average rate of return on plan assets reflects the average rate of earnings expected on the funds invested, or to be invested, to provide for benefits included in the projected benefit obligation. In estimating that rate, the Company gives appropriate consideration to the historical returns earned by the plan assets in the funds, forward-looking economic assumptions, fees and other costs to be paid out of plan assets, and the current and projected asset mix of the funds. Management, with the assistance of an outsourced investment manager, balances market expectations obtained from various investment managers with both market and actual plan historical returns to develop a reasonable estimate of the expected long-term rate of return on assets. As this assumption is long term, the annual review may result in less frequent adjustment than other assumptions used in pension accounting. The long-term rate of return on plan assets used by the Company to value its benefit cost for the subsequent plan year was 6.25% and 6.75% in 2025 and 2024, respectively.

Other Assumptions

The calculations made by the actuaries also include assumptions relating to mortality rates, turnover, retirement age and salary inflation rates. These assumptions are based upon historical data, recent plan experience and industry trends and are determined by management.

2026 Estimated Pension Expense

Net periodic pension benefit expense for 2026 is expected to be a credit of $5 million. Net periodic pension benefit expense for 2026 is expected to include service cost expense of $21 million. Service cost expense is included in labor and fringe on the consolidated income statement and all other components of net pension expense are included in other income - net. Net periodic pension expense in 2025 was a credit of $8 million. The decrease in the expected credit is primarily due to a decrease in the expected return on plan assets.

The following sensitivity analysis illustrates the effects of a 1% change in certain assumptions on the 2026 estimated pension expense:

CSX 2025 Form 10-K p.45

Depreciation Policies for Assets Utilizing the Group-Life Method

The depreciable assets of the Company are depreciated using either the group-life or straight-line method of accounting, which are both acceptable depreciation methods in accordance with GAAP. The Company depreciates its railroad assets, including main-line track, locomotives and freight cars, using the group-life method of accounting. Assets depreciated under the group-life method comprise 86% of total fixed assets of $53.8 billion on a gross basis at December 31, 2025. The remaining depreciable assets of the Company, including non-railroad assets and assets under finance leases, are depreciated using the straight-line method on a per asset basis. Land is not depreciated.

Management performs a review of depreciation expense, including the impacts of service lives and salvage values, on a regular basis. This review includes consideration of the most recent periodic depreciation studies, which are performed for assets depreciated using the group-life method. As part of the depreciation study, an assessment of the recorded amount of accumulated depreciation is made to determine if it is deficient (or in excess) of the appropriate amount indicated by the study. Any such deficiency (or excess), including any deferred gains or losses, is amortized as a component of depreciation expense over the remaining service life of the asset group until the next required depreciation study. There are several factors taken into account during the depreciation study and they include:

•statistical analysis of historical life and salvage data for each group of property;

•statistical analysis of historical retirements for each group of property;

•evaluation of current operations;

•evaluation of technological advances and maintenance schedules;

•previous assessment of the condition of the assets;

•management's outlook on the future use of certain asset groups;

•expected net salvage to be received upon retirement; and

•comparison of assets to the same asset groups with other companies.

The STB requires depreciation studies be performed every three years for equipment assets (e.g., locomotives and freight cars) and every six years for road and track assets (e.g., bridges, signals, rail, ties, and ballast). The Company reviews and evaluates asset service lives and salvage values for appropriateness at least annually, which includes consideration of the most recent depreciation studies or data reviews conducted by a third-party specialist. The most recent depreciation studies for equipment assets and road and track assets were performed in 2025 and 2020, respectively. Changes in the estimated service lives of assets and their related depreciation rates are implemented prospectively.

A 1% change in the average estimated useful life of all group-life assets would result in an approximate $15 million change to the Company’s annual depreciation expense. There were no significant changes to the Company's asset lives as a result of the most recently completed studies prior to 2025. The Company does not expect any significant changes to asset lives as a result of the 2025 study, but does expect a favorable change to depreciation expense of approximately $40 million per year primarily as a result of increases in the remaining service lives of certain equipment assets. For additional details, including a more detailed description of our related accounting policies, see Note 6, Properties, in the consolidated financial statements.

New Accounting Pronouncements and Changes in Accounting Policy

See Note 1, Nature of Operations and Significant Accounting Policies, under the caption “New Accounting Pronouncements.”

CSX 2025 Form 10-K p.46